INTO THE FUTURE
INTO THE FUTURE a The transformation of grassland into the Makati Central Business District was led by Col. Joseph McMicking after World War II. AYALA CORPORATION IS MOVING INTO THE FUTURE
To transform our businesses and harness disruptive innovation, so we can create more shared value.
The faster we keep moving, the sooner we can generate more opportunities, reach other markets, and help improve lives.
Integrated Report 2017
2017 Integrated Report
INTO THE FUTURE 1 ABOUT THIS INTEGRATED REPORT Ayala remains committed to sustainability and integrated thinking with the publication of this Integrated Report. To further improve the quality of our reporting, we re-evaluated our capitals, value creation, risks, strategy, and performance for a more cohesive presentation. We provide a more in-depth look at our organization’s strategy, governance, performance, and outlook, in the context of our external environment. Finally, this report also allows us to present the alignment and contributions of our businesses to the United Nations Sustainable Development Goals.
The development of this year’s 179. Furthermore, the table on pages Learn more about the IIRC and Integrated Report was a more 176-177 outlines the companies and integrated reporting at rigorous process, enabling us to better the scope of data that is included in www.integratedreporting.org and the understand and apply the principles this report. GRI at www.globalreporting.org. of materiality towards improving data collection. We undertook an Our previous integrated report Our approach to external assessment of how our diverse published in 2017 and additional assurance (102-56) businesses create and deliver value to references for targeted stakeholders Our Board’s Audit Committee oversees society, while meeting our financial are all available online at the performance of external and targets. Financial and non-financial www.ayala.com.ph. internal auditors. It is mandated performance analysis conducted for to review and approve the audit, this report allowed us to take better Reporting standards (102-54) audit-related, and non-audit services stock of our accomplishments, as Ayala Corporation adopted global best rendered by the company’s external well as identify opportunities for practices in reporting non-financial auditor. Our senior management scaled impact moving forward. All information. This report has been is involved in the decision and information presented was reviewed prepared according to the integrated appointment of the independent by the group’s Investor Relations and reporting
2 2017 Ayala Corporation Integrated Report A copy of our 2017 Statement From The Board (102-32) financial statements The Board acknowledges its The integrated report contains responsibility in ensuring the certain forward-looking statements can be accessed at integrity of this report, which which, by their nature, involve risk www.ayala.com.ph. includes the fair representation of and uncertainty because they relate performance and impact on key to future events and circumstances material topics. The Board was that may be beyond Ayala’s control. In supported by Ayala management, addition, regulations of the Philippine which convened internal teams with Stock Exchange prohibit making the relevant skills and experience price sensitive forecasts without On our sustainability to undertake the reporting process. considerable independent review and performance Internal parties have devoted process. The directors therefore advise Senior management appointed significant effort to ensure that the readers to use caution regarding DNV GL, an independent Ayala story is presented the best interpreting any forward-looking organization and global provider of way possible. Ayala also engaged statements in this report. certification, assurance assessment, external parties to validate and and training services, for the assure financial and non-financial The Board unanimously approved third consecutive year to validate disclosures to improve accuracy, this report on 9 March 2018, and the figures and information we objectivity, and overall report quality. authorized its release on 20 April presented pertaining to our The report was prepared under the 2018. sustainability performance and supervision of the Chief Finance,
INTO THE FUTURE 3 VISION We will be the most relevant, innovative, and enduring Philippine-based business group, enabling shared value and prosperity for the many stakeholders we serve.
MISSION Anchored on values of integrity, long-term vision, empowering leadership, and with a strong commitment to national development, Ayala fulfills its mission to ensure long-term profitability and value creation. Ayala creates synergies as it builds mutually-beneficial partnerships and alliances with those who share its philosophy and values.
Ayala continues to develop Makati to enable connectivity and mobility.
4 2017 Ayala Corporation Integrated Report TABLE OF CONTENTS
19 OUR LEADERSHIP
37 OUR VALUE CREATION
111 BUSINESS REVIEW
157 OUR CORPORATE GOVERNANCE
171 ANNEXES
INTO THE FUTURE 5 AYALA AT A GLANCE (102-2, 102-3, 102-6)
Ayala Corporation is one of the largest and most diversified business groups in the Philippines, with business interests in real estate, banking, telecommunications, water, power, industrial technologies, infrastructure, healthcare, and education. Its social commitment arm, Ayala Foundation, has programs that focus on education, youth leadership, sustainable livelihood, and the promotion of arts and culture. With headquarters in Makati City and operations mainly in the Philippines, it continues to grow its regional and global footprint, serving millions of customers across all market segments.
NET INCOME (IN BILLION PESOS)
30.3 26 22.3 18.6
12.8
2013 2014 2015 2016 2017
13.2 12.6 12.2 12.1
9.8
2013 2014 2015 2016 2017
6 2017 Ayala Corporation Integrated Report 22% 11.5% 22% Six-year net Six-year average Six-year TSR income CAGR return on CAGR common equity
P266.8B P64.3B P1 T Revenues Cash and cash Total assets equivalents
1.31 23.2% P46.67 Current ratio Six-year market Earnings per capitalization share (in pesos) CAGR
63.4M 410.3 GWH 139,074 Globe customers Renewable energy Jobs generated generated across the group
P201.8B 65,102 570M in loans provided FamilyDOC Cubic meters for sustainable unique patients water supplied in development the Philippines projects
INTO THE FUTURE 7 OUR 2017 MILESTONES
JANUARY Globe becomes the first Philippine Ayala releases its annual report under BPI Asset Management and Trust telecommunications operator to the Integrated Report Framework– Group receives from the Bangko commercially deploy LTE-Advanced the first Integrated Report in the Sentral ng Pilipinas a license to operate 4 component carrier (4cc) spectrum Philippines–which captures in greater as a standalone trust corporation aggregation using the 2600MHz band detail its alignment with the UN SDGs, its ESG performance along with Ayala Foundation signs a Globe launches the Globe Advanced its financial and operational results memorandum of understanding with Security Operations Center, which against GRI-G4, and its commitment the Marawi City local government houses the infrastructure that delivers to the 10 Principles of the UN Global to establish Siyapen, a 70-bed drug cybersecurity and related services for Compact rehabilitation center its network and customers MAY AC Energy signs investment Ayala consolidates electronics Ayala Land launches Evo City, a agreements with UPC Renewables manufacturing and automotive 200-hectare sustainable estate in Indonesia for the development, businesses into AC Industrials Cavite construction, and operation of a wind farm project in Sidrap, South Sulawesi, AC Energy acquires 100 percent BPI acquires a 10 percent stake in Indonesia ownership of Bronzeoak’s Rizal Bank of CARD MRI, a leading development platform, for renewable microfinance institution serving over FEBRUARY energy development, management, 260,000 customers Ayala Land announces plan to be and operations carbon neutral by 2022 JUNE AC Infrastructure partners with Manila Water increased its stake in Ayala, Ayala Land, BPI Capital SM Investments for a P25 billion Vietnam-based Saigon Water from 31 Corporation, and Globe’s Kickstart unsolicited proposal for an to 38 percent Ventures Inc., acquire ownership 8.6-kilometer toll road linking Sta. stakes in Zalora Philippines Mesa, Manila to the Mall of Asia Ayala Museum launches the first fully Complex in Pasay City via the Central immersive virtual reality experience of Ayala and Alibaba’s Ant Financial sign Business District to be named C3X Philippine history an investment agreement to subscribe to new shares of Mynt APRIL AC Industrials acquires 94.9 percent IMI acquires an 80 percent stake in UK- of Germany-based, MT Technologies, Manila Water launches its pilot based STI Enterprises, which provides a niche Tier 1 supplier that provides Waste-to-Energy project at the South electronics design and manufacturing tooling, moulding, and specialized Septage Treatment Plant in Taguig City solutions in both printed circuit parts manufacturing services board assembly and full box-build AC Health invests in MedGrocer, an manufacturing for high-reliability AC Industrials begins domestic FDA-licensed ePharmacy and health industries production of KTM motorcycles in IMI’s benefits management service facility in Laguna AC Energy, as part of a consortium, MARCH completes the acquisition of Salak JULY Ayala Land launches Clock In, its first and Darajat Geothermal asset in Ayala Land launches The Flats serviced office and co-working space Indonesia Amorsolo in Makati, its first co-living development designed for young professionals
8 2017 Ayala Corporation Integrated Report BPI relaunches BPI Direct BanKo, which implement water projects primarily in NOVEMBER is aimed at serving small business loans Southeast Asia and in Asia-Pacific BPI opens a refurbished flagship to self-employed micro-entrepreneurs branch in Makati City that features SEPTEMBER a bright and modern look and Globe launches MIMO (multiple Jaime Augusto Zobel de Ayala is specialized services for customers input, multiple output) technology to recognized as one of ten 2017 UN SDG enhance mobile internet connectivity Pioneers by the UN Global Compact FamilyDOC launches FamilyDoc for its customers in high-density areas Express, a new store format that BPI partners with UK-based remittance features a doctor’s clinic inside a AC Energy enters into a development giant WorldRemit to expand its Generika branch funding arrangement with UPC international fund transfer service Renewables for the development offerings Project Kasibulan continues, with this of small island power projects in year’s first batch of volunteers planting Indonesia Globe partners with EMQ, a remittance- 750 seedlings in Pagudpud, Ilocos Norte focused financial technology startup AUGUST based in Hong Kong DECEMBER Ayala land launches the 25-hectare Manila Water partners with the Leyte Azuela Cove in Davao, in partnership Manila Water signs contract for the Metropolitan Water District for the with the Alcantara group P5.3 billion landmark Novaliches-Balara water supply and sanitation facilities Aqueduct 4 project and services of the province Globe’s GCash launches the nation’s first QR payment via smartphone Generika receives the first ASEAN AC Energy achieves financial close for Inclusive Business Award, a new the second unit of GNPower Dinginin, Globe launches a $250-million category introduced during the 10th a 2 x 668MW super-critical coal-fired submarine fiber cable system in Davao, ASEAN Business Awards power plant in Dinginin, Bataan which directly links Asia to the US and allows faster data transmission, more APEC Schools record a student AC Infrastructure announces the efficient connectivity, and greater population of approximately over formation of a consortium with network resiliency 16,200 Aboitiz InfraCapital, Alliance Global Group, AEDC, Filinvest, JG Summit, Manila Water signs 25-year concession AC Energy enters into a retail electricity and Metro Pacific that will submit an agreement with the Obando Water supply agreement with Manila Water unsolicited bid for the redevelopment District for the construction, operation, and upgrading of the Ninoy Aquino and maintenance of the water and OCTOBER International Airport sanitation services in Obando, Bulacan Ayala Malls and Globe launch the GCash scan-to-pay service for the FamilyDOC reaches 65,000 in unique Manila Water wins the project to benefit of consumers and business patients served develop the water supply system in owners Calasiao, Pangasinan for a 25-year Project Kasibulan’s biggest and last concession period Ayala holds the 3rd annual group- batch of volunteers for the year plants wide Investor Relations Summit 1,214 seedlings, resulting in a total Manila Water Asia Pacific signs a of 3,498 trees planted in Pagudpud, memorandum of understanding with Ayala holds the 7th annual group-wide Ilocos Norte throughout the duration the International Finance Corporation Sustainability Summit of the project to identify, evaluate, develop, and
INTO THE FUTURE 9 OUR GEOGRAPHIC PRESENCE (102-4, 102-6)
Europe Middle East
Norway Israel
United Kingdom Kuwait
Germany Czech Bahrain Republic Qatar Dubai (UAE) France Saudi Arabia Switzerland
Serbia Oman Italy Bulgaria
Canada
USA Korea Japan China Cyprus
Mexico India Guam
Australia Chile Taiwan Palau Hong Kong
Myanmar New Zealand Thailand
Cambodia Vietnam “This sustained earnings momentum validates our long-term growth strategy, which is largely focused on expanding into new Malaysia Brunei markets and customer segments, diversifying Singapore geographically, strengthening our core markets, and entering new businesses to create a platform for future growth.” Indonesia Fernando Zobel de Ayala Southeast Asia
10 2017 Ayala Corporation Integrated Report
Legend
Ayala Land MWC AC Energy BPI AC Industrials AC Health Globe AC Infrastructure AC Education NCR
Caloocan Ilocos Norte
Cagayan
Abra Valenzuela Kalinga Quezon Malabon City Ilocos Sur Mountain Navotas Province Marikina Isabela
La Union Benguet San Juan Nueva Manila Vizcaya Quirino Mandaluyong Pasig Pangasinan Pateros Pasay Makati Aurora Nueva Tarlac Ecija Taguig Zambales Parañaque Pampanga Bulacan
Bataan Rizal Las Pinas Camarines Cavite Laguna Norte Muntinlupa Quezon Batangas Camarines Sur
Albay Occidental Mindoro Oriental Mindoro Sorsogon
Masbate Samar
Aklan Biliran Capiz
Antique Leyte Iloilo
Negros Guimaras Occidental Cebu Southern Leyte
Palawan Bohol Surigao del Norte Negros Oriental
Surigao Siquijor Agusan del Sur del Norte Misamis Oriental Misamis Occidental Agusan Zamboanga del Sur del Norte Lanao del Norte Bukidnon Philippines Zamboanga del Sur Zamboanga Lanao Sibugay del Sur Davao del Norte
North Cotabato Zamboanga Maguindanao City Davao del Sur Sultan Kudarat South Cotabato Legend Sarangani
Ayala Land MWC AC Energy AC Ventures BPI AC Industrials AC Health Globe AC Infrastructure AC Education
INTO THE FUTURE 11 FIVE-YEAR FINANCIAL HIGHLIGHTS
AYALA CORPORATION AYALA LAND
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
FOR THE YEAR (IN MILLION PESOS) Revenues 159,412 184,276 207,667 237,286 266,786 81,523 95,197 107,183 124,629 142,297 Net Income Attributable to 12,778 18,609 22,279 26,011 30,264 11,742 14,803 17,630 20,908 25,305 Equity Holders Cash Dividends to Common 2,877 2,928 3,569 3,572 4,299 4,067 5,871 6,094 6,999 7,065 Shareholders Cash Dividends to Equity 529 1,281 1,281 1,285 1,285 62 62 62 62 62 Preferred Shareholders
AT YEAR-END (IN MILLION PESOS) Total Assets 599,664 726,048 794,075 911,705 1,021,546 325,474 388,944 442,342 536,433 573,992 Cash and Cash Equivalents 65,655 90,770 82,154 60,223 64,259 40,761 34,586 19,540 20,904 20,998 Short-Term Investments 119 1,103 2,052 1,009 5,400 17 301 164 208 4,740 Total Borrowings 205,681 258,845 263,341 295,854 350,612 101,902 124,666 130,996 159,801 174,386 Equity Attributable to Equity 143,476 185,664 208,657 230,993 256,348 98,470 106,940 133,731 147,705 166,755 Holders
PER SHARE (IN PESOS)
Earnings - Basic 20.53 29.83 33.89 39.88 46.67 0.84 1.05 1.20 1.43 1.71 Earnings - Diluted 20.39 29.35 33.38 39.31 45.99 0.83 1.05 1.20 1.43 1.71 Book Value of Common 230.68 261.63 298.80 334.40 374.75 6.86 7.44 9.01 11.70 12.97 Shareholders Cash Dividend to Common 4.80 4.80 5.76 5.76 6.92 0.29 0.41 0.42 0.48 0.48 Shareholders
FINANCIAL RATIOS
Current Ratio 1.46 1.50 1.28 1.22 1.31 1.45 1.23 1.14 1.12 1.18 Debt-to-Attributable Equity 1.43 1.39 1.26 1.28 1.37 0.91 1.02 0.87 0.93 0.91 Ratio
12 2017 Ayala Corporation Integrated Report BANK OF THE PHILIPPINE ISLANDS GLOBE TELECOM MANILA WATER
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
52,498 55,787 59,359 66,551 71,020 90,500 99,025 113,679 119,990 127,906 15,926 16,357 16,936 17,712 18,516 18,811 18,039 18,234 22,050 22,416 4,960 13,372 16,484 15,888 15,084 5,752 5,813 5,958 6,065 6,147
6,401 7,077 7,078 7,086 7,091 8,877 9,953 11,017 11,682 12,092 1,560 1,611 1,669 1,712 1,744
- - - - - 24 286 553 552 554 346 323 326 333 339
1,195,364 1,450,197 1,516,356 1,725,696 1,903,905 159,079 179,507 195,680 249,863 277,766 72,858 74,860 80,608 85,479 102,482 270,179 250,373 250,641 275,206 291,081 7,421 16,757 11,814 8,633 11,222 6,780 6,052 6,850 4,066 9,021 92,153 67,171 50,371 38,904 28,645 - - - - - 94 400 - - - 28,230 33,680 21,372 62,643 84,735 69,301 65,276 72,229 105,729 131,529 26,252 25,471 26,220 27,619 39,724 104,535 144,063 150,284 165,134 180,689 41,639 54,542 59,392 63,440 66,515 30,477 34,508 38,825 43,384 47,555
5.19 4.62 4.64 5.60 5.69 37.25 98.64 120.11 115.45 109.22 2.34 2.36 2.41 2.45 2.49 5.19 4.62 4.64 5.60 5.69 37.22 98.41 119.92 115.27 109.01 2.34 2.36 2.41 2.44 2.49 29.37 36.64 38.22 41.94 45.87 308.05 330.03 366.62 397.30 420.01 14.92 16.66 18.96 20.93 22.96
1.80 1.80 1.80 1.80 1.80 67.00 75.00 83.00 88.00 91.00 0.76 0.81 0.82 0.83 0.85
- - - - - 0.65 0.77 0.72 0.64 0.72 1.12 1.16 0.80 1.10 1.20 - - - - - 1.66 1.20 1.22 1.67 1.98 0.86 0.74 0.68 0.64 0.84
INTO THE FUTURE 13 14 2017 Ayala Corporation Integrated Report “Ignoring the challenges faced by both global and national communities today threatens our ability to create long- term value and jeopardizes enterprises, markets, and entire societies. In the Philippines, our need to address economic inclusivity and build on sustainable business practices remains of paramount importance.” - Jaime Augusto Zobel de Ayala in his New Year letter to the Ayala group
Beginning in 2016, the United Nations From hundreds of nominations received Ayala’s commitment to shared value, Global Compact embarked on an around the world, Ayala Chairman and businesses across the entire group have initiative designed to both raise CEO Jaime Augusto Zobel de Ayala sought to reach a wider segment of the awareness on the Sustainable was chosen as a 2017 SDG Pioneer market—entering sectors with critical Development Goals, and to for Sustainable Business Strategy and gaps in affordability, access, and scale, identify SDG Pioneers— Operations. He is the first Pioneer from and that are crucial to the development individuals who are doing an Southeast Asia, and the first Filipino to of the country. This includes our exceptional job of acting on be given this distinction. investments in energy, industrial sustainable development technologies, infrastructure, healthcare, issues within their own His leadership drove Ayala’s group- and education. companies, or by wide efforts to adopt a more mobilizing other inclusive approach to capitalism, Adopting a mindset that prioritizes long- businesses. by implementing strategies and term sustainability has changed how business models that help to address Ayala works. Recognizing the breadth the Philippines’ economic and and depth of the impact that our group development challenges. As part of of businesses has on the Philippine landscape, we are determined to work even harder to build better businesses and have a stronger, positive impact on the lives of more Filipinos.
Ayala Corporation is a founding member of the UN Global Compact Network Philippines.
INTO THE FUTURE 15 OUR CONTRIBUTION TO THE UNITED NATIONS
BPI Direct BanKo provided Ayala companies distributed P422.5 MILLION P445.5 in community investments MILLION for various poverty alleviation of microfinance loans for and social welfare projects self-employed micro- in livelihood, education, and entrepreneurs healthcare among others
FamilyDoc provided affordable primary care services to more than 65,000 unique patients through its 21 community-based clinics in Luzon BPI provided P156 BILLION Generika had worth of agribusiness loans 41.7 MILLION to support agriculture and sales transactions, 32.8 million of which were generic medicine food security sales, through its 750 drugstores nationwide
Ayala Foundation and Globe provided ICT education facilities to 11 public schools through Global Manila Water delivered Filipino Schools 570 MILLION Program, benefitting cubic meters of water to over 1 10,896 students million billed connections in its nationwide service areas APEC provides affordable Manila Water treated quality secondary University of Nueva 1:1.33 education to OVER Caceres produced male : female 56.4 MILLION 16,000 students, 60 employee ratio for percent of which are from cubic meters of used water the D & E market, across 647 the Ayala group from more than 147,000 sewer 23 schools college graduates connections in its service areas
With over 37,000 base stations, Globe served AC Energy through its operating 63.4 MILLION companies generated customers and enabled the exchange of Ayala companies spent 6,552.1 GWh 600 petabytes of information of power P173.5 BILLION in capital expenditures IMI manufactured more than AC Energy’s renewable energy generation assets generated Ayala companies generated a total of 31 MILLION units of automotive, connectivity, and 410.3 GWh 139,074 JOBS smart energy technology components of power
16 2017 Ayala Corporation Integrated Report Muntinlupa-Cavite Expressway served Ayala group provides equal opportunities and fosters 29,000 vehicles per day, generating non-discrimination savings of P519 million in fuel consumption in the workplace. and man-hours
Ayala Land has developed a total of 25 masterplanned IMI and Globe diverted 98 estates that are resilient, pedestrian-friendly, percent and 9 percent of waste public-transport connected, and eco-efficient from landfill, respectively
Globe through Project 1 Phone Light Rail Manila Corporation served hauled 157 million 216,816 kg passengers in LRT 1 with 99.39 percent train of e-waste punctuality
Manila Water generates Ayala Malls provide space for terminals for 1.3kWh of electricity per 9 Point-to-Point day from 0.67 cubic meters of bus routes to encourage commuters to use septage through its waste-to- public transportation energy facility
Ayala Land maintains Manila Water removed 450 hectares 9,087 tonnes of carbon forest of organic pollutants from used water
Ayala companies planted Light Rail Manila Corporation planted 3,498 seedlings through Project Kasibulan 2,000 mangrove propagules in Lobo, Batangas
AC Energy’s renewable energy assets Ayala Land protects 9 threatened aquatic avoided 196,224 tonnes of CO2e emissions animals in El Nido Resorts, Lio Estate, and Anvaya Cove
Ayala Land protects 5 threatened plants and 20 threathened land animals in El Nido Resorts and Lio Estate
North Luzon Renewables’ biodiversity study yielded 29 to 60 bird species, 14 to 21 of which are endemic, year-round BPI disbursed in Pagudpud, Ilocos Norte P201.8 BILLION Ayala continues worth of loans for sustainable Manila Water planted to uphold good development projects in food and governance and agriculture, sustainable energy, 15,800 seedlings education, nutrition, and other sectors in 79 hectares of land in La Mesa respects human Watershed and 1,700 trees in 4.3 hectares rights Ayala sustained its partnership with of land in Ipo Watershed the UN Global Compact Network Philippines
INTO THE FUTURE 17 Ayala Corporation is headquartered in Tower One, Ayala Triangle, Makati.
18 2017 Ayala Corporation IntegratedIntegrated Report OUR LEADERSHIP
INTO THE FUTURE 19 20 2017 Ayala Corporation Integrated Report MESSAGE FROM THE CHAIRMAN (102-14)
Fellow shareholders,
Let me start with a broad overview of the external economic environment to put our review of the past year into perspective.
The improving trajectory for the global economy continued in 2017, with a recovery in trade, investment, and manufacturing recorded in a majority of economies across the world. However, economists cited the need for productivity-enhancing structural reforms in both advanced and developing economies to sustain this level of growth. Aging populations, most evident in advanced economies, are expected to depress the expansion of employment. In the case of developing economies, the challenge lies in improving physical infrastructure and human capital, aggravated by the fast pace at which disruptive technologies are changing the business landscape.
INTO THE FUTURE 21 Strong domestic consumption, continued investor confidence, and the government’s aggressive infrastructure plan have created significant potential for sustained growth.
In ASEAN, despite worries of a have emerged as a result of rising slowdown brought about by commodity prices arising from higher protectionist initiatives in the US and global energy prices and a weaker geopolitical tensions in the Asia- peso. Pacific and the Middle East nations, the region continued to perform Ayala has been a beneficiary of strongly in 2017, bolstered by strong the country’s significant economic “ In recent years, we private consumption and exports. growth. This has served as a catalyst have made it a strategic for us to unlock many opportunities Here at home, we continue to be and push us to develop new ideas imperative to search for optimistic about the Philippine to incubate new businesses, and opportunities beyond our economic environment. Even with the to explore prospects for disruptive shores, particularly across absence of election-driven economic innovation. We took advantage of this growth from the previous year, our encouraging domestic environment Southeast Asia. In our economy continued to perform to create a portfolio that creates country, our businesses are strongly, recording a 6.7 percent some hedges against specific expansion in 2017. The Philippines macroeconomic and socio-political recognized leaders that remains a top performer in ASEAN, trends and balances our two major have established important trailing Vietnam, which registered 6.8 pillars—our publicly-listed industry presence in their respective percent economic growth. leaders in real estate, banking, telecom, and water; and our wholly- industries with advanced Many anticipate the momentum owned emerging businesses in power, skills and capabilities that to continue this year as the industrial technologies, infrastructure, government’s aggressive healthcare, and education. can be deployed globally.” infrastructure spending plans move to an execution phase and disposable We are happy to report that our incomes rise as a result of tax reforms. portfolio has sustained its robust However, concerns around inflation growth trajectory in the last six years
22 2017 Ayala Corporation Integrated Report despite some economic volatility and driver of our earnings stream and addition to their existing operations political changes. Our profitability has value creation. in China, Singapore, the US, Mexico, seen consistent double-digit growth Bulgaria, and Czech Republic. Since since 2012, with compounded annual Furthermore, across the Ayala group, its formation in 2016, the team has growth rate and total shareholder we have made significant progress made progress in taking advantage return both at 22 percent. In parallel, in expanding our international of opportunities around disruptive our market capitalization reached presence in new economies where trends in global manufacturing P630.5 billion at the end of 2017, we have the ability to bring our by assembling a portfolio of reflecting a compounded annual expertise and capital to address complementary assets in emerging growth rate of 23 percent. opportunities. In recent years, we technologies to deepen its presence have made it a strategic imperative to in the automotive industry. Overall, the steady improvement search for opportunities beyond our in our financial performance puts shores, particularly across Southeast Already the largest foreign investor in us on track to achieve our strategic Asia. In our country, our businesses Vietnam’s water sector, Manila Water aspirations for 2020 of improving are recognized leaders that have now services half of the consumer our profitability and shareholder established important presence and industrial demand in Ho Chi return while diversifying our earnings in their respective industries with Minh and has expanded to other stream. As you know, in 2016, we set advanced skills and capabilities parts of the country. As part of its out a target to double our net income that can be deployed globally. AC ongoing expansion in Southeast Asia, to P50 billion by 2020 with a return on Industrials, Manila Water, AC Energy, Manila Water has entered the Thai common equity of 15 percent, as well and Ayala Land are natural players market with the acquisition of an 18 as generate earnings contribution on this front and have all started percent stake in East Water, a publicly- of 20 percent from our emerging to develop regional and global listed water supply and distribution businesses and 10 percent from our businesses. company. Moreover, it is establishing international portfolio. a footprint in Indonesia with the AC Industrials is our most global purchase of a 20 percent stake in PT We are pleased to report the business in the Ayala group and now Sarana Tirta Ungaran, a bulk water significant progress we have made counts Germany, the UK, Serbia, supply company. in our diversification strategy by and Thailand as new markets in establishing new pillars of growth and moving into new geographies. In particular, the investments we made to develop a significant presence in the energy sector have started to bear fruit. Over the past five years, AC Energy has grown rapidly ---starting with only 80 megawatts of attributable generating capacity from its inception in 2011 and achieving 1,600 megawatts in its pipeline in 2017. With its sizeable portfolio of reliable and affordable thermal and renewable energy platforms, AC Energy is becoming a meaningful
KTM’s facility in IMI Laguna started production in June 2017.
INTO THE FUTURE 23 BPI BanKo helps to bring underserved and unbanked Filipinos into the formal economy, through access to critical services.
In support of its diversification Moving forward, we remain optimistic strategy, AC Energy is laying the about our growth trajectory as we foundation to be a regional player adjust to monitor major global, following its first overseas investment domestic, and industry trends that in acquiring a stake in Salak and affect our businesses and open new Darajat Geothermal, which was part of opportunities. Chevron’s energy assets in Indonesia. Since then, AC Energy has been More importantly, beyond our exploring other opportunities in the financial metrics and aspirations, region, and is currently developing we measure ourselves against the a wind farm also in Indonesia and a broader progressive contributions solar project in Vietnam. that we make to society through our businesses. In the Philippines, Finally, Ayala Land is leveraging its economic inclusivity remains a 6 YEAR CAPITAL EXPENDITURES widely recognized leadership in challenge. We have made great (IN BILLION PESOS) large-scale, masterplanned estate improvements on this front and have, development in Malaysia through over time, readjusted our business MCT Berhad, a real estate company it models to cater to underserved 173.5 164.3 acquired in 2015. Ayala Land has over Filipinos. 152.2 149.3 time increased its stake in MCT and in 127.9 130.4 early 2018, raised its interest to hold a Our business lines in real estate, majority ownership of the company. banking, telecom, water, power, This investment allows Ayala Land to industrial technologies, infrastructure, participate in the growth prospects healthcare, and education have all for Malaysia’s real estate market and developed new, innovative ways affirm its role as a growing investor in to provide products and services Southeast Asia. that bridge gaps in capacity, quality, 2012 2013 2014 2015 2016 2017 accessibility, and affordability.
24 2017 Ayala Corporation Integrated Report As an example, both our banking to harness our sustainable our communities in progressive and and telecom businesses have business practices and find new sustainable ways. Finally, I thank made financial inclusion a priority and improved ways to broaden our business partners, shareholders, in business plans. Bank of the economic inclusivity and remain and all our stakeholders for their Philippine Islands and Globe Telecom relevant to our specific markets. continued trust and support to the have created ancillary businesses Ayala group. focused on servicing unbanked I want to thank you all for sharing Filipinos, which today account for this commitment we have to align 50 percent of our adult population. our business strategies to broader Our bank runs BPI Direct BanKo, sustainability imperatives as defined focused on delivering affordable by the United Nations Sustainable financing solutions to self-employed Development Goals framework. microentrepreneurs. Meanwhile, Globe operates Mynt, a financial As a final note, I thank our Board technology joint venture with Ant of Directors for providing active JAIME AUGUSTO ZOBEL DE AYALA Financial, that leverages mobile management oversight and CHAIRMAN AND CHIEF technology to provide payments and engagement as we address EXECUTIVE OFFICER lending solutions to the underserved. challenges and market opportunities. With diversity in thinking and a useful The investments we have made combination of knowledge, business across our group are all in support of experience, and expertise, our the country’s development agenda. Board encourages a culture of trust, We have deployed P898 billion in openness, and constructive dissent. combined capital expenditure over In particular, with their breadth of the last six years, which is equivalent business experience and focus on to approximately 50 percent of the our long term interests, they have all Philippines’ foreign direct investments provided guidance to many of our over the same period. major strategic decisions.
We will continue to put the resources, I also thank our management team knowledge, expertise, and talent and staff for their spirit of corporate that we have across our group engagement and creativity to serve
In October 2017, Jack Ma joined the Ayala group in launching GCash’s scan-to-pay system in the Ayala Malls.
INTO THE FUTURE 25 REPORT OF THE PRESIDENT
Fellow shareholders,
Underpinned by the strong fundamental drivers of our economy that continued to be in place, we are pleased to report that 2017 was another year of strong earnings growth. The aggressive growth agenda we embarked on several years ago bolstered the sixth year of Ayala’s strong performance.
Our net profit climbed 16 percent to P30.3 billion, boosted by the solid performance of our real estate and power units. This sustained earnings momentum validates our long-term growth strategy, which is largely focused on expanding into new markets and customer segments, diversifying geographically, strengthening our core markets, and entering new businesses to create a platform for future growth.
This brings us closer to our strategic aspirations for 2020. On our profitability targets, we ended the year with a return on common equity of 13.2 percent against our target of 15 percent for 2020. Our diversification strategy is also increasingly coming to fruition. Our emerging businesses, primarily AC Energy and AC Industrials, contributed 16 percent to our equity earnings in 2017, versus our target of 20 percent at the end of the decade. Meanwhile, international platforms contributed 7 percent to our equity earnings during the year, against our goal of 10 percent in 2020.
26 2017 Ayala Corporation Integrated Report INTO THE FUTURE 27 percent of its service revenues in 2017, which reached P127.9 billion, six percent higher from a year ago.
Globe continued to expand its data network nationwide to meet the growing customer preference for content-rich offerings. It deployed P42.5 billion in capital expenditure in 2017 for network infrastructure enhancement in support of its vision to deliver first world internet connectivity in the country.
This increased investment in network infrastructure resulted in higher operating and non-operating expenses and depreciation charges, which weighed down on Globe’s In April 2017, as part of a consortium, AC Energy completed its acquisition of Chevron’s assets in Indonesia, including the Salak and Darajat geothermal fields in West Java. profitability. Its net earnings dropped five percent to P15.1 billion in 2017.
Our businesses continue to make Bank of the Philippine Islands Globe is ramping up its financial significant progress in support of our continues to strengthen its market- technology platform, Mynt, to strategic aspirations. leading businesses and core accelerate financial inclusion and franchises through the expansion upgrade the electronic payment Ayala Land continued to work of lending activities, particularly in systems in the country. Together towards achieving a more resilient the consumer, small and medium with Ayala, Globe partnered with portfolio by rebalancing its income enterprises, and microfinance Ant Financial through Ant’s equity mix across geographies and segments. investment in Mynt. Leveraging business lines. on Ant’s experience and expertise It has created a business banking in digital financial services will In terms of location, established segment, a new client group focused enable Mynt to ramp up its vision of estates such as Makati, Nuvali, on the needs of small and medium becoming a world-class online and Bonifacio Global City, Alabang, and scale enterprises. To help augment offline payment provider, scale its Cebu accounted for 54 percent, financial inclusion in the country, the mobile wallet services, and provide while new estates and growth bank expanded the footprint of its a wider range of digital financial centers made up for 46 percent of microfinance unit, BPI Direct BanKo, services to its customers. Ayala Land’s net earnings in 2017. from nine to 103 branches and In terms of business line, Ayala microbanking offices. This platform Manila Water continued to make Land’s recurring income, namely provides small business loans to self- progress in establishing a significant mall and office leasing, hotels and employed microentrepreneurs. presence in various parts of the resorts, and property management Philippines and in ASEAN. In the segments accounted for 35 BPI’s net income in 2017 was Philippines, it was given Notices of percent. Meanwhile, development tempered by the absence of one-off Award by the Leyte Metropolitan income such as property sales and gains realized in the previous year. It Water District and the City of Ilagan construction contributed 65 percent recorded net profits of P22.4 billion, in Isabela for the construction and of Ayala Land’s net income during up 1.7 percent from a year ago. operation of water supply and the year. Excluding one-off gains from the sale sanitation facilities and services in of securities in 2016, its net income those areas. This is in addition to its All in all, the resurgence of property actually grew 30 percent in 2017. operations in Clark, Laguna, Cebu, sales combined with a solid leasing Boracay, Bulacan, Zamboanga, business drove Ayala Land’s net Globe Telecom continued to benefit and Tagum. earnings during the year, jumping 21 from the high demand for data- percent to P25.3 billion. related services. It accounted for 54
28 2017 Ayala Corporation Integrated Report Furthermore, Manila Water is deepening its footprint in the “The past years have seen Ayala building businesses that region. In early 2018, it successfully meet some of the most basic needs of the Filipino people, as entered the Thailand market with the acquisition of an 18.7 percent well as critical requirements to national development.” stake in East Water, a publicly-listed water supply and distribution company. East Water operations AC Energy sustained its positive Similarly, AC Energy is boosting are strategically located along the momentum as it scales up its its conventional energy portfolio. Eastern Economic Corridor, which is portfolio of renewable and thermal In December 2017, the project targeted to be a leading economic energy platforms and executes on its financing for the second unit of its zone in the region. diversification strategy. 2 x 668 MW super-critical coal fired power plant in Bataan, GNPower Shortly after, Manila Water acquired In particular, its acquisition of a stake Dinginin, achieved financial close. AC a 20 percent stake in PT Sarana in Indonesia-based Salak and Darajat Energy has a stake of approximately Tirta Ungaran, a bulk water supply Geothermal, the asset previously 50 percent in the project. This will company in Indonesia. Sarana has owned by Chevron, has started to support the increasing electricity a capacity of 21.5 million liters boost AC Energy’s earnings capacity. demand of Luzon and Visayas. per day, servicing the water utility Its net income jumped 31 percent to PDAM Kabupaten Semarang in the P3.5 billion in 2017, primarily driven Finally, AC Energy is transitioning Regency of Semarang and industrial by fresh equity earnings contribution into a full-fledged energy platform customers in Central Java Province. from SD Geothermal. This was further with development, operation, and lifted by solid contributions from its retail capabilities. It acquired the Manila Water’s active business wind energy assets as well as services Bronzeoak development platform, development initiatives resulted income derived from the financial which has a strong track record in in higher operating expenses, close of a new power plant. renewable development. moderating its earnings growth in 2017. It recorded a net income of Following the acquisition of SD In the area of industrial technologies, P6.2 billion, a modest improvement Geothermal, AC Energy continues AC Industrials is building a portfolio of one percent despite higher billed to pursue investments overseas as of businesses to capture the volume across all its business lines. it establishes itself as an emerging disruptions taking place in the global player in the region. manufacturing space.
With automotive as its key business line, it has anchored its strategy around key megatrends in the sector, such as the increasing percentage of electronic components in the car, the advent of autonomous vehicles, and the accelerating adoption of cleaner forms of alternative power, such as electricity.
In anticipation of these megatrends, AC Industrials has made a series of strategic acquisitions in various platforms since its formation in 2016. First, it partnered with KTM AG, the largest motorcycle manufacturer in Europe. The partnership covers the full motorcycle value chain – from parts manufacturing, vehicle assembly, local and international distribution, and dealership. Globe’s Iconic store offers customers a dynamic and interactive retail experience.
INTO THE FUTURE 29 Second, it acquired 76 percent of VIA Optronics, a display solutions provider headquartered in Germany with production facilities in China. Third, it acquired 95 percent of German-based MT Technologies, a 139,000 P239.4B niche Tier 1 supplier which provides tooling, moulding, and specialized parts manufacturing services to leading European car manufacturers. JOBS PROVIDED TAXES PAID TO THE Most recently, it acquired a IN THE AYALA GOVERNMENT OVER controlling stake in Merlin Solar, an GROUP SIX YEARS emerging company that develops differentiated solar solutions applied Ninoy Aquino International Airport. In primary care, FamilyDOC, our in transportation and infrastructure. The consortium is prepared to chain of community-based clinics, spend P102 billion over the next served over 65,000 unique patients While these platforms are still five years to improve and expand from its 21 locations in Cavite, in their early stages, our long- the airport’s capacity to serve Laguna, Las Piñas, Parañaque, Taguig, held businesses in electronics passenger traffic, which has grown Pateros, Pasig, and Quezon City. manufacturing and vehicle significantly and will continue to AC Health targets to open 50 new dealership serve as the foundation grow in the coming years. FamilyDOC clinics in 2018. for AC Industrials’ growth. In 2017, it registered a net income of P1.2 Finally, in partnership with the Meanwhile, AC Education is ramping billion, up four percent from its year- Global Fashion Group, our partners up its investments in the education ago level, on better performance of in Zalora Philippines, AC Infra is space. In January 2018, it announced both business segments. entering the logistics space with the signing of a non-binding term the acquisition of up to 60 percent sheet for a potential merger with AC Infrastructure continues to in a fulfillment solutions services iPeople, the listed holding company execute on the three public-private company. This investment forms for the education sector of the partnership projects in its portfolio. part of Ayala’s strategy to develop Yuchengco-led House of Investments. Similarly, it is pursuing opportunities infrastructure that will result in iPeople’s education portfolio to expand its presence in the better efficiencies and improve includes Mapua University, Malayan transport and infrastructure the fulfillment processes of its Colleges Laguna, and Malayan network space. existing businesses in real estate, Colleges Mindanao, with a combined banking, telecommunications, and population of approximately 17,000 In partnership with SM Investments, e-commerce. students. Mapua is one of the leading AC Infra submitted an unsolicited private engineering and technical proposal to the Department of AC Health and AC Education universities in the country. We are Public Works and Highways for the continue to scale up their platforms targeting to close this merger in 2018. construction and operation of an to provide quality and affordable 8.6-kilometer elevated toll road that basic services to a broader segment Also in early 2018, AC Education would link Sta. Mesa, Manila to the of Filipinos. signed a share purchase agreement Mall of Asia Complex in Pasay City to acquire National Teachers via the Central Business District. The Generika, AC Health’s retail College, which has a 90-year track proposal is currently under review pharmacy network for affordable record in teacher education with by the Department of Public Works quality generic medicines, recorded approximately 10,000 students. and Highways. P3.3 billion in revenues, up 15 percent from a year ago on higher Our value creation model Moreover, as part of a consortium retail sales and store expansion. It Recognizing the impact that our with Aboitiz InfraCapital, Alliance opened 100 stores in 2017, bringing businesses have across the country, Global Group, Asia’s Emerging total store count to 750. AC Health we strive to create value beyond Dragon, Filinvest, JG Summit is targeting to ramp up Generika’s success in financial and operating Holdings, and Metro Pacific, AC Infra total store count to 850 by the end metrics. A commitment to national submitted an unsolicited proposal of 2018. development has always been a to rehabilitate and operate the defining pillar of the Ayala group.
30 2017 Ayala Corporation Integrated Report In 2017, our Chairman and CEO was improve the operating efficiencies communities in the Philippines and recognized by the United Nations of the LRT-1, Muntinlupa-Cavite in the region. Global Compact for steering Ayala’s Expressway, and the beep™ card deep commitment to bringing in order to provide a safer, more Beyond the operational success of sustainability at the forefront of our efficient commuting experience to our companies, Ayala helps to drive business strategy and operations. hundreds of thousands of Filipinos equitable and inclusive economic Anchoring our shared value creation daily. AC Education and AC Health growth by creating employment process and sustainability framework have likewise ramped-up their opportunities for over 139,000 on the United Nations Sustainable operations, for the benefit of over people and remitting P239.4 billion Development Goals has allowed 24,000 students and 65,000 patients. in taxes to the national government us to clearly define, measure, and over the past six years. A shared report the different ways by which Our core businesses continue to drive for excellence ensures that we contribute to the development provide best-in-class products and we build critical infrastructure to of the Philippines. The SDGs will services that empower Filipinos. support our operations, innovate in also guide us in designing a set of Ayala Land has 25 masterplanned, various sectors, and do our part in concrete sustainability targets, which sustainable estates around the building world-class industries for will formally become part of our country, and has put in place a the Philippines. companies’ and management’s key target of net-zero carbon emissions result areas. by 2022. The success we have had in creating shared value is due to the hard work In addition, Ayala remains committed As a pillar of the banking community, of our board, management, and to the UN Global Compact and its 10 BPI continues to support employees, all of whom work to principles, as these reflect our drive economic growth by providing optimize our value creation through to institutionalize sustainability in our critical financial services to the sound strategies and responsible group of companies. underserved. Globe caters to operations. This has long been a the telecommunications and hallmark of Ayala’s culture, and we The past years have seen Ayala lifestyle needs of over 63.4 million are fortunate that our employees building businesses that meet customers, while harnessing share our determination to have a some of the most basic needs digital and mobile technologies positive impact on the Philippines. of the Filipino people, as well as to empower startups and small critical requirements to national businesses. Moreover, Manila Water In closing, we thank all our development. In 2017, AC Energy supplies water to 6.3 million people stakeholders for their strong generated approximately over in the eastern part of Metro Manila engagement. We invite you to 6,500 GWh for the national grid. and has widened its reach to bring continue investing in us as we set Our infrastructure arm continued to world-class water services to more new tracks for Ayala.
FERNANDO ZOBEL DE AYALA PRESIDENT AND CHIEF OPERATING OFFICER
Through LRMC, AC Infrastructure has improved the operations of the LRT-1, the oldest rail line in the Philippines .
INTO THE FUTURE 31 XAVIER P. FERNANDO DELFIN L. LOINAZ ZOBEL DE AYALA LAZARO RAMON R. KEIICHI DEL ROSARIO, JR. MATSUNAGA JAIME AUGUSTO ANTONIO JOSE U. ZOBEL DE AYALA PERIQUET
32 2017 Ayala Corporation Integrated Report BOARD OF DIRECTORS JAIME AUGUSTO ZOBEL DE AYALA Eton Property Development Corporation, Aurora Director of BPI Family Savings Bank, Inc., and BPI/ Filipino, 58, Director of Ayala Corporation since Properties Incorporated, Vesta Property Holdings, MS Insurance Corporation; Trustee of E. Zobel May 1987. He has been the Chairman and CEO of Inc., Ceci Realty Inc., Fort Bonifacio Development Foundation; Chairman of Alay Kapwa Kilusan Ayala Corporation since April 2006. He holds the Corporation, Bonifacio Land Corporation, Pangkalusugan and XPL Manitou Properties, Inc.; following positions in publicly-listed companies: Emerging City Holdings, Inc., Columbus Holdings, and Vice Chairman of XPL MTJL Properties, Inc. Chairman of Globe Telecom, Inc., Integrated Micro- Inc., Berkshires Holdings, Inc., and Bonifacio Art He was formerly the President of the Bank of the Electronics, Inc. and Bank of the Philippine Islands; Foundation, Inc.; Director of LiveIt Investments, Philippine Islands from 1982 to 2004. He was and Vice Chairman of Ayala Land, Inc. and Manila Ltd., AG Holdings Ltd., AC Infrastructure Holdings also the President of Bankers Association of the Water Company, Inc. He is also the Chairman of AC Corporation, Asiacom Philippines, Inc., Ayala Philippines from 1989 to 1991. He graduated with Education, Inc., Ayala Retirement Fund Holdings, Retirement Fund Holdings, Inc., AC Education, an AB Economics degree at Ateneo de Manila Inc., AC Industrial Technology Holdings, Inc., AC Inc., and AC Ventures Holding Corp., Honda Cars University in 1963 and took his MBA-Finance at Ventures Holding Corp., AC Infrastructure Holdings Philippines, Inc., Isuzu Philippines Corporation, Wharton School, University of Pennsylvania in Corporation, and Asiacom Philippines, Inc.; Co- and Manila Peninsula; Member of the Philippine- 1965. Chairman of Ayala Foundation, Inc. and Ayala Singapore Business Council, INSEAD East Asia Group Club, Inc.; Director of Alabang Commercial Council, World Presidents’ Organization, and Chief RAMON R. DEL ROSARIO, JR. Corporation, Ayala International Pte. Ltd., AC Executives Organization; Chairman of Habitat for Filipino, 73, Independent Director of Ayala since Energy, Inc., Ayala Healthcare Holdings, Inc., Humanity’s Asia-Pacific Capital Campaign Steering April 2010. He holds the following positions Light Rail Manila Holdings, Inc., and AG Holdings Committee; and Member of the Board of Trustees in publicly-listed companies: President and Limited; Chairman of Harvard Business School Asia- of Caritas Manila, Pilipinas Shell Foundation, and Chief Executive Officer of Phinma Corporation; Pacific Advisory Board and Endeavor Philippines; the National Museum. He graduated with a B.A. in and Chairman of PHINMA Energy Corp. and and member of the Harvard Global Advisory Liberal Arts at Harvard College in 1982 and holds a PHINMA Petroleum and Geothermal, Inc. He Council, Mitsubishi Corporation International CIM from INSEAD, France. is the President and Chief Executive Officer Advisory Committee, JP Morgan International of Philippine Investment Management, Inc.; Council, Global Board of Advisors of the Council DELFIN L. LAZARO Chairman of Araullo University, University of Iloilo, on Foreign Relations, Asia Society International Filipino, 71, Non-Executive Director of Ayala University of Pangasinan, Cagayan de Oro College, Council, University of Tokyo Global Advisory Corporation since January 2007. He holds the Southwestern University, United Pulp and Paper Board, Singapore Management University Board following positions in publicly-listed companies: Co., Inc., PHINMA Power Generation Corporation, of Trustees, and Eisenhower Fellowships Board of Director of Ayala Land, Inc., Integrated Micro- PHINMA Renewable Energy Corp., One Subic Power Trustees. He was the Philippine Representative to Electronics, Inc., Manila Water Company, Inc., Generation Corp., PHINMA Microtel Hotels, Inc. the Asia Pacific Economic Cooperation Business and Globe Telecom, Inc. His other significant and PHINMA Hospitality, Inc. He is Vice-Chairman Advisory Council from 2010 to December 2015. positions include: Chairman of Atlas Fertilizer of Phinma Foundation, Inc. and Phinma Property In 2007, he received the Harvard Business School & Chemicals Inc., Chairman and President of Holdings Corp., Director of Union Galvasteel Corp. Alumni Achievement Award, the school’s highest A.C.S.T. Business Holdings, Inc.; Vice Chairman and and other PHINMA managed companies; Chairman recognition. He was a recipient of the Presidential President of Asiacom Philippines, Inc.; Director of the National Museum of the Philippines and Medal of Merit in 2009 for enhancing the prestige of AC Industrial Technology Holdings, Inc., AYC Philippine Business for Education; and Vice- and honor of the Philippines both at home and Holdings, Ltd., Purefoods International Limited, Chairman of Caritas Manila and Philippine Business abroad. In 2010, he was bestowed the Philippine and Probe Productions, Inc. He graduated with a for Social Progress. He is a former chairman of the Legion of Honor, with rank of Grand Commander, BS in Metallurgical Engineering at the University Ramon Magsaysay Award Foundation and Makati by the President of the Philippines in recognition of of the Philippines in 1967 and took his MBA (with Business Club, where he remains a Trustee. Mr. his outstanding public service. In 2015, he received Distinction) at Harvard Graduate School of Business del Rosario graduated from De La Salle College the Order of Mabini, with rank of Commander, in 1971. in 1967 with degrees in BSC-Accounting and AB for his vital contributions during the Philippines’ Social Sciences (Magna cum Laude) and from hosting of the APEC Summit. In 2017, he was KEIICHI MATSUNAGA Harvard Business School in 1969 with a Master in recognized as a United Nations SDG Pioneer for Japanese, 53, has been a Director of Ayala Business Administration degree. He has managed his work in sustainable business strategy and Corporation since April 2017. He is the General Phinma since 2002 and brings with him a wealth of operations. He graduated with a B.A. in Economics Manager of Mitsubishi Corporation Manila Branch. experience in leading a diversified conglomerate. (Cum Laude) at Harvard College in 1981 and Currently, he is also the Chairman of International obtained an MBA at the Harvard Graduate School Elevator & Equipment Inc.; President of MC ANTONIO JOSE U. PERIQUET of Business Administration in 1987. Diamond Realty Investment Phils., MC Oranbo Filipino, 56, Independent Director of Ayala Investment, MC Cavite Holdings, Inc., FMT Kalayaan, Corporation since September 2010. He is Chairman FERNANDO ZOBEL DE AYALA Inc.; and Director of Century City Development II of BPI Asset Management and Trust Corporation, Filipino, 57, Director of Ayala Corporation since Corporation, Isuzu Philippines Corporation, Kepco the Campden Hill Group, and Campden Hill May 1994. He has been the President and Chief Ilijan Corporation, Trans World Agro-Products Advisors, Inc. He also sits as an independent Operating Officer of Ayala Corporation since April Corp., Japanese Chamber of Commerce & Industry director of the Bank of the Philippine Islands, ABS- 2006. He holds the following positions in publicly- of the Philippines, and the Japanese Association CBN Corporation, DMCI Holdings, The Max’s Group listed companies: Chairman of Ayala Land, Inc. and Manila, Inc. He is not a director of any publicly- of Companies, The Philippine Seven Corporation, Manila Water Company, Inc.; and Director of Bank listed company in the Philippines other than Ayala and the Albizia ASEAN Tenggara Fund. Mr. Periquet of the Philippine Islands, Globe Telecom, Inc., and Corporation. He entered Mitsubishi Corporation is a trustee of Lyceum of the Philippines University Integrated Micro-Electronics, Inc.; and Independent after graduating from the Faculty of Law at Waseda and a member of the Dean’s Global Advisory Director of Pilipinas Shell Petroleum Corporation. University in 1988 and has since held various Council at the University of Virginia’s Darden School He is the Chairman of AC International Finance leadership positions. of Business. He graduated with an AB Economics Ltd., Liontide Holdings, Inc., AC Energy, Inc., Ayala degree from the Ateneo de Manila University in Healthcare Holdings, Inc., Automobile Central XAVIER P. LOINAZ 1982 and took his Masters of Science in Economics Enterprise, Inc., Alabang Commercial Corporation, Filipino, 74, Independent Director since April 2009. at the Oxford University, UK in 1988 and Masters in Accendo Commercial Corp., and Hero Foundation, He is also an Independent Director of the Bank of Business Administration at University of Virginia, Inc.; Co-Chairman of Ayala Foundation, Inc. and the Philippine Islands, a publicly-listed company. USA in 1990. Ayala Group Club, Inc.; Vice-Chairman of ALI He also holds the following positions: Independent
INTO THE FUTURE 33 MANAGEMENTBOARD OF DIRECTORSCOMMITTEE
ALFREDO I. JOHN PHILIP S. RUEL T. AYALA ORBETA MARANAN JOSE TEODORO K. ARTHUR R. TAN President and CEO, Chief Human Resource President, LIMCAOCO President and CEO, AC Education Officer and Group Head, Ayala Foundation Chief Finance Officer, AC Industrials , and Corporate Resources Chief Risk Officer, Chief CEO, Integrated Micro- CEZAR P. Sustainability Officer, Electronics, Inc. CONSING and Group Head, President and CEO, Finance (102-20) Bank of the ERNEST JAIME AUGUSTO Philippine Islands LAWRENCE L. CU ZOBEL DE AYALA President and CEO, Chairman and Globe Telecom Chief Executive Officer
34 2017 Ayala Corporation Integrated Report JOSE RENE GREGORY D. ALMENDRAS President and CEO, AC Infrastructure, and JOHN ERIC T. FRANCIA BERNARD Group Head, Public Affairs President and CEO, VINCENT O. DY AC Energy President and CEO, FERNANDO ZOBEL Ayala Land SOLOMON M. HERMOSURA DE AYALA FERDINAND M. Chief Legal Officer, Chief PAOLO MAXIMO F. President and DELA CRUZ Compliance Officer, Corporate BORROMEO Chief Operating Officer President and CEO, Secretary, Data Protection President and CEO, Manila Water Officer, and Group AC Health, and Group Head, Corporate Governance Head, Corporate Strategy and Development
INTO THE FUTURE 35 AC Energy has two wind farms in Ilocos Norte—the 81MW North Luzon Renewables and the 52MW NorthWind Power.
36 2017 Ayala Corporation Integrated Report VALUE CREATION
INTO THE FUTURE 37 OUR PORTFOLIO
47.1%* 48.2%* 31%* 51.6%*
Leading and most Pioneering financial Purveyor of the Filipino Regional player in water diversified property institution and one of the digital lifestyle, supported infrastructure services and developer in the country most profitable banks in by a robust telecom development with the largest landbank the country infrastructure
(approx. $12B market cap) (approx. $8B market cap) (approx. $6B market cap) (approx. $1.3B market cap)
100%* 100%* 100%* 100%*
A fast-growing regional Industrial technologies Growing portfolio of key Developing an integrated energy platform with investments focused on infrastructure projects ecosystem focused on investments in renewable electronics manufacturing, and businesses to affordable medicine and conventional power vehicle retail, and enabling support the growing and access to assets and development, technologies needs of the Philippines healthcare services operations and retail supply capabilities
100%* 100%*
Investing in educational Holding company for The conglomerate’s social institutions to deliver Ayala’s investments in development arm, with affordable high quality international real estate, key program areas in education that improves as well as opportunities education, youth leadership, employability of students in disruptive sectors and sustainable livelihood, and emerging business models the promotion of arts and ACCELERATING culture THE FUTURE
*Economic stake
38 2017 Ayala Corporation Integrated Report OUR FINANCIAL MANAGEMENT STRATEGY
Ayala sees itself as a steward of our core businesses and a builder of new enterprises. Our core businesses are those we have developed over the past decades, which have grown to be market leaders. These businesses provide us a steady stream of earnings and dividends that fund our operating expenses, allow us to meet Ayala’s Board of Directors and senior management participate in a thorough gating process when evaluating potential investments. our interest and dividend obligations, and enable us to raise capital to fund Evaluating Opportunities scenarios. While the Corporate our new endeavors. As a company we are always open Strategy and Corporate Finance to new areas of investment. When teams are responsible for building Ayala prides itself on being a builder presented with opportunities or as the business case and financial of businesses. We seek to grow investment ideas are developed, the model, the Comptrollership and sustainable businesses of scale Corporate Strategy group is tasked Treasury teams model the proposed that meet the needs of society, or with evaluating these. We examine businesses effect on Ayala’s overall that conform to our view of the whether Ayala can bring its unique performance – balance sheet, future. We look for areas where we advantages to these opportunities income statement and cash flows. can innovate, disrupt traditional and disrupt or innovate existing This dual review ensures not only business models, or build on business models. We study the business viability but also an opportunities where capital has industry carefully, mapping out understanding of the potential risks been scarce. Moreover, we pursue its structure, major players, and to Ayala’s strong and conservative opportunities where we can make a potential competition in the areas balance sheet. difference through our experience we are contemplating. Assessments and existing businesses, and where are conducted to determine if the Gating Process we may have a strategic advantage proposed business can fill a need and All investment proposals that through our partners and our ability if the business model conforms with progress beyond the Corporate to raise capital. our view of the future. For example, Strategy and Finance groups in 2015, we decided to develop are presented to the Investment As a company, we allocate capital AC Industrials largely due to IMI’s Committee. The Investment to investments that we believe can position among the 10 largest auto Committee is made up of Ayala’s key deliver significant value over time. EMS companies in the world, which senior officers and may invite other We follow a process that evaluates gave us a unique vantage point senior group executives to provide opportunities; tests for business for the automotive manufacturing insight. The Investment Committee and financial viability; identifies landscape—which we believe will then reviews the business plan and risk; designates business owners change dramatically, as electric strategy for execution. A thorough and a responsible management vehicles and self-driving cars become discussion on risks is carried out and team; provides capital over a period the norm, rather than the exception. responsible persons are identified of time, allowing management to to execute the business plan. If the execute a defined plan; and reviews Testing for Viability Investment Committee approves performance regularly. Our gating Following the evaluation, Corporate the proposed investment, it is then process involves many groups within Strategy and Finance work together endorsed to the Finance Committee the company, including Corporate to build a business plan and test for of the Board. Strategy and Development; Finance; viability. Assumptions are tested the Board’s Investment Committee and challenged and financial models Capital Allocation and Finance Committee; and the are built and stressed. Economic The Finance Committee of the Board of Directors. returns are measured under different Board is currently composed of
INTO THE FUTURE 39 the CEO, the COO, and two non- necessary as we did in November flow adequacy ratio, which ensures executive directors, one of whom 2014 when we raised $275 million that the cash we receive at Ayala is an independent director. The of equity capital through the sale of is sufficient to meet all our cash Finance Committee is responsible 18.78 million common shares. We obligations arising from expenses, for all finance matters of Ayala, also raised a total of P23.5 billion in interest and dividends. including allocating capital to preferred shares in 2013 and 2014. our different business ventures. 2. Maintaining a maximum loan The Finance Committee reviews Capital Raising to value ratio, which measures the investment proposals as endorsed Our strategy as regards debt is ratio of our net debt to the total by the Investment Committee and if to raise debt opportunistically in value of our assets. Tracking this it sees fit, will determine an amount the public markets and rely on ratio daily provides management of capital to assign to the proposed strong and transparent banking and the Board a measure as to how business. Capital is allocated and relationships in the loan markets. In much of our value was funded by committed over a set time frame October 2016 we raised P10 billion debt. It also acts as a tool to use in a (usually 3-5 years), which ensures through a seven year peso bond market downturn, as it helps frame that management has the funds to that bears a coupon of 3.92 percent a decision as to whether we should execute their proposed business and followed this in January 2017 sell assets to prune our debt levels plan. The Finance Committee with another P10 billion eight year or take on additional debt to buy endorses the recommended capital peso bond with a coupon of 4.82 undervalued assets. allocation to the Board of Directors percent. Both bonds set record which has final approval over all lows for coupons for those tenors. 3. Maintaining a maximum amount investments. In September 2017, we raised $400 of debt due each year. We spread out million through a groundbreaking debt maturities across many years Performance Review perpetual bond with a fixed for and avoid concentrating maturities The Investment and Finance life coupon of 5.125 percent. This in a single year. This ensure that Committees review the performance perpetual, which as it name implies, an external event that might affect of each business unit at least twice a has no maturity, was the first bond refinancing in any given year does year: a general review, which covers of its kind to be issued by an ASEAN not cause significant problems. Ayala’s portfolio of businesses; and corporation. We maintain lines and a specific business unit review. committed lines from both local and 4. That foreign currency In the latter, the business unit’s foreign banks that ensure we have denominated debt is used to finance performance is measured against sources of funds available when foreign currency denominated several metrics including the current opportunities arise. investments or that if non-peso debt budget (How are we doing this year?), is used to fund peso investments, the latest medium-term plan (Is In February of 2017, we went back that such debt be hedged. execution in line with our goals?), and to the local capital markets to raise often, against competitors (How P10 billion, eight year bond with a 5. We maintain a minimum ratio do we measure against others?). coupon of 4.82 percent, which also for fixed rate loans to floating rate The objective of the review is to achieved the tightest spread versus loans. This ensures that our cost of refine capital allocation depending benchmark. The proceeds were used capital carries a similar characteristic on performance, and if needed, to pay off our P10 billion, 7.2 percent to the investments we make as our suggest changes to business plans or bond maturing in April 2017, which investments are long term in nature. strategies. resulted in lower interest expenses for the company and smoothened Balance Sheet Funding Strategy our maturity profile. Our balance sheet continues to be Since 2011, the parent has invested strong with significant debt capacity over P119.6 billion in our different Debt Policies and a well spread out maturity business units. While we have relied Our debt policies ensure that we can profile. This is also augmented by on debt to fund much of these comfortably service our interest and an optimal foreign exchange and investments, we have maintained operating expenses; meet maturing interest rate mix and a healthy cash our policy of ensuring that we obligations; and have the confidence flow adequacy ratio. have a strong balance sheet and a to face or take advantage of market conservative stance towards our debt downturns. These policies include: levels. We raise equity capital when 1. Maintaining a pre-defined cash
40 2017 Ayala Corporation Integrated Report Loan to Value Ratio LOAN-TO-VALUE (in million pesos) 2015 2016 2017 Parent Debt 94,797 76,002 83,313 Parent Cash 47,284 16,422 18,644 Net Debt 47,513 59,580 64,669 Gross Asset Value 539,962 538,288 702,480 Parent Net Debt to Equity 0.44 0.56 0.59 Ratio Loan to Value 8.8% 11.1% 6.4% Cost of Debt 4.10% 4.31% 4.23%
Ayala’s loan to value ratio, which of Ayala Land. compares our net debt to the market 2015 2016 2017 value of our investments, is a good Our fixed to floating rate mix of 93/7 measure of our relative indebtedness last year puts Ayala in a favorable and our capacity to take on, or position in a rising interest rate service these obligations. At the environment. Peso obligations end of 2017, our loan to value ratio decreased to 58 percent of our decreased to 6.4 percent from 11.1 total obligations, resulting from the percent in 2016. The LTV does not issuance of US dollar-denominated include the impact of the fixed-for- fixed-for-life senior perpetual life perpetual bonds, as these are notes in September. Our US dollar- perpetual securities and do not have denominated obligations are to be repaid. Gross debt increased to more than offset by US dollar cash P83.3 billion, offset by a higher end- and long term foreign currency 2017 cash balance, which brought investments. net debt to P64.7 billion. At the parent level, net debt to equity ratio stood at 0.59 to 1. Share Price Performance 2017 was an overall positive We continue to manage our year for the Philippine equities obligations to ensure that we are not market, despite some headwinds overly exposed to market liquidity, 2015 2016 2017 foreign exchange, and interest rate risks. Our average cost of debt dropped slightly to 4.23 percent per annum during the year as a consequence of expensive fixed 15,042 rate obligations that have already matured.
At the end of 2017, our debt 10,030 10,000 10,000 10,000 maturities are well-spread out and in compliance with our internal policy of not having maturities exceeding 20 percent of total debt on a yearly 4,368 basis. The 2019 maturity tower 2,880 1,873 is accounted for by our US$300 million exchangeable bond, which is currently in-the-money with US$7 million already converted into shares 17 18 19 20 21 22 23 24 25 26 27 28
INTO THE FUTURE 41 OUTSTANDING LISTED BONDS AND PREFERRED SHARES Issuer Type Amount Coupon Issuance Maturity Details Ayala Preferred shares P13.5 billion 5.575% November 5, Perpetual 5th year repricing: 5-year PDST R2 + Pref B Series 2 (ACPB 2) 2014 175bps 10th year repricing: 10-year PDST R2 + 300bps Preferred shares P10 billion 5.250% November 15, Perpetual 10th year repricing: 5-year PDST R2 + Pref B Series 1 (ACPB 1) 2013 150bps 15th year repricing: 10-year PDST R2 + 300bps Voting preferred P200 million 3.695% May 20, 2010 Perpetual Every 3rd year repricing: 3-year PDST shares (non-listed) R2 10-year multiple P10 billion 6.800% May 12, 2011 May 12, 2021 First put option: May 12, 2016 putable bond, fixed (up to 20% of outstanding) coupon Second put option: May 12, 2019 (up to 100% of outstanding) 15-year callable bond, P10 billion 6.875% May 11, 2012 May 11, 2027 May 11, 2022 (at 101.000%) fixed coupon May 11, 2023 (at 100.750%) May 11, 2024 (at 100.500%) May 11, 2025 (at 100.375%) May 11, 2026 (at 100.250%) AYCFL Exchangeable bond to US$300 0.500% May 2, 2014 May 2, 2019 Put option on May 2, 2017 (Guaranteed ALI shares million Call option by issuer anytime after by Ayala) May 2, 2017 if ALI price exceeds 130% of prevailing exchange price Ayala 7-year callable bond, P10 billion 3.920% July 7, 2016 July 7, 2023 January 7, 2022 (at 100.250%) fixed coupon 8-year callable bond, P10 billion 4.820% February 10, February 10, August 10, 2023 (at 100.250%) fixed coupon 2017 2025 AYCFL Perpetual bond, fixed US$400 5.125% September 13, Perpetual Callable on September 13, 2022 (at (Guaranteed coupon million 2027 100.000%) by Ayala)
brought by global and domestic announcement of China A shares performance, closing at 7,843.16 at geopolitical concerns. The local inclusion in the MSCI’s Emerging the end of the second quarter—14.7 stock barometer began 2017 in Markets index beginning June 2018, percent higher than its year-ago high spirits, riding on a global which will have the effect of China level. Ayala’s year-to-date gain share price recovery following shares displacing other emerging reached 16.4 percent in the same the sell-off late in 2016. At the market shares. Despite this, the period, still outperforming the PSEi. end of the first quarter, the PSEi PSEi managed to extend its strong gained 6.89 percent year-to-date, while Ayala surged 15.7 percent, Share Price Performance outperforming the bellwether index by a wide margin.
In the second quarter, the Marawi crisis erupted, prompting the declaration of Martial Law in Mindanao. However, investors seemed to focus on positive developments, such as Congress’ approval of the landmark tax reform program of the Duterte administration. The PSEi breached the 8,000 level in early June, but gains were tempered following the
42 2017 Ayala Corporation Integrated Report The group nurtures its relationships with its banking partners, recognizing their contributions to our growth.
The index’s gains were briefly source of both income and capital derailed by geopolitical concerns returns, and strive to maintain from rising tension between North consistent distributions from Korea and the US in the second half. year to year. Moving forward, we The local market eventually regained will continue to revisit potential its trajectory, reaching new highs sustainable increases in the regular as investors gained in optimism dividend rate, with the continued the implementation of tax reform capacity to make new or additional by 2018. President Duterte signed investments as the primary into law the first tax reform package consideration. in mid-December of 2017, further boosting investor confidence. The PSEi ended the year on a high note, snapping two consecutive years of losses to close at a high of 8,558.42. Ayala tracked the market’s trajectory, but posted a solid outperformance in 2017, gaining 38.9 percent versus the Dividends from Subsidiaries/ 2015 2016 2017 PSEi’s 25.1 percent. Associates (in million pesos) ALI 2,935 3,358 3,385 DIVIDENDS Ayala’s policy is to provide a regular BPI 5,128 3,418 3,419 fixed semi-annual cash dividend Globe 3,349 3,575 3,745 to common shares. For voting MWC 1,005 1,096 1,113 preferred shares, the dividend rate IMI/ACI 167 209 215 is 1.875 percent per annum. For non-voting Preferred B Series 1 and Others 76 241 201 Series 2 shares, the dividends are Total 12,660 11,897 12,078 given at 5.25 percent and 5.575 percent per annum, respectively. Dividends Payout Ratio 19% 16% 17% It is the company’s policy to treat all shareholders equally, ensuring Cash dividends to common 3,568 3,572 4,299 payment of dividends in an equitable Net income for prior year 18,609 22,279 26,011 and timely manner—within 30 days Dividend Yield - Common 0.80% 0.80% 1.00% after being declared and finally cleared. Cash dividend per share P5.76 P5.76 P6.92 Market price per share, start of year P694 P756 P727 In 2017, we declared total dividends per common share of P6.92. We understand that our shareholders view our dividends as a regular
INTO THE FUTURE 43 OUR BUSINESS MODEL
OUR PURPOSE OUR INPUTS
A singular purpose drives us at Ayala: making Financial Capital people’s lives better. Through our businesses Strong financial position (reliable cash and investments, we harness today’s disruptive flow and affordable access to debt), trends to generate far-reaching impact in the markets where we operate. This drives supported by a robust capital allocation everything we do as a company – from strategic process development, financial management, talent management, and deployment of synergies.
We live out this purpose by building and Human Capital managing a portfolio of long-term strategic High-performing employees and holdings in key industries. We select sectors management, who share the ripe for disruption and where our resources, company’s values and vision expertise, and reputation can help unlock stakeholder value in a sustainable and risk- adjusted manner. By deploying and converting our various forms of capital into businesses and investments that are not only profitable but resilient, we believe we can consistently deliver Intellectual Capital returns above our cost of capital. Established brands, industry-specific expertise, OUR VALUES and sustainability Integrity
Long-term vision Social and Relationship Capital Empowering leadership Strong stakeholder relationships bolstered by consistent engagement, Commitment to good governance, sustainability, and national development innovation
OUR PORTFOLIO
44 2017 Ayala Corporation Integrated Report OUR VALUE CREATION AS A HOLDING COMPANY
Our major listed businesses: As mature businesses, Ayala Land, BPI, Globe, and Manila Water no longer require constant operational attention and resources from the parent company. However, we continue to provide senior management talent and/or technical expertise. As of end-2017, for example, 24 Ayala employees in senior executive roles, have been seconded to our business units. Other advantages include access to growth platforms and networks housed at the conglomerate level. These include, for example, academic studies and key relationships with other business groups that can be leveraged into market entry and Chairman and CEO Jaime Augusto Zobel de Ayala keynotes the creation of new products and services. the government-organized Manufacturing Summit in November 2017. Our wholly-owned emerging businesses: Our wholly-owned companies which include our investments OUR STAKEHOLDERS into energy, industrial technologies, infrastructure, healthcare, • Investors and other education, and other emerging sectors also receive the above benefits. However, as they are in various stages of starting capital market up, they receive greater attention and resources from the participants parent. We actively influence their strategic direction, allocate • Creditors and suppliers new capital, implement proper governance, and help them • Business partners and operationalize by lending our corporate infrastructure. affiliates The Ayala brand is also usually of immense help as these • Government agencies startups attempt to secure key partnerships and complete and regulators crucial transactions. Finally, key talents are assigned to these • Employees business units early in their operating history, ensuring that • Customers the companies are infused from the beginning with Ayala’s • Industry associations corporate culture and values. and other stakeholders
Refer to pages 59-61 for more details.
INTO THE FUTURE 45 ENABLING ACCESS TO HEALTHCARE Value creation case study
Investing in human capital savings on primary care, with development is necessary discounted rates for FamilyDOC to achieve inclusive growth. members. Healthcare is an important part of the Philippine national agenda. One of these patients is Nina, However, the sector has a number an 86-year-old from Taguig. She of critical issues. For example, visited a FamilyDOC clinic near her it is estimated that six out of 10 home because her blood pressure Filipinos die without ever seeing a had shot up to dangerous doctor. London-based Economist levels and could no longer be Intelligence Unit likewise ranked managed by her usual medicine. the Philippines 78th out of 80 FamilyDOC physicians assessed countries in its Quality of Death her condition, and prescribed index, which measures the quality her the appropriate medication of palliative care given to patients.
AC Health was established in 2015, as Ayala’s way of disrupting the sector to meet Filipinos’ basic need for quality and affordable healthcare. After conducting medicine they industry research, focus group need, and that they discussions, and consumer studies, are well-informed AC Health found persistent gaps in regarding its use. affordability and access, including in medicines. The studies AC Health conducted While generic medicine had also revealed that become more widely available around 45 percent in the Philippines, branded of middle-income Filipinos often to alleviate her symptoms. pharmaceutical products are go a year without visiting a primary Her doctor also took the time in some cases 30 times more care doctor. Those that do avail of to conduct a comprehensive expensive than in other developing health services often go to barangay assessment, which revealed an countries. AC Health acquired a health centers that are not well- underlying Urinary Tract Infection 50 percent stake in Generika, a equipped to treat patients properly. as a trigger to her increased blood nationwide leader in affordable Other patients, meanwhile, have to pressure. She now visits the clinic medicines with the third-largest travel long distances to visit a public regularly to monitor her blood footprint in the pharmacy industry. hospital. pressure. Generika offers quality, affordable generic medicines that allow AC Health launched FamilyDOC— Nina’s case highlights the impact patients as much as 85 percent community-based clinics with a that FamilyDOC strives to have: savings on medicines. Apart from three-in-one model that combines efficient and affordable medical this, it also offers value-added primary care consultation, laboratory care that ensures the well-being services. One example is a Gamot services, and a pharmacy. Clinics are of patients, while heightening (Medicine) Guide: a print-out located in high-density, residential their awarenes of the importance that provides information about communities, and are staffed of primary healthcare. the dosage, administration, and by Primary Care Physicians with side effects of the medicine they specialists in Internal Medicine, take. Generika helps to ensure Pediatrics, and Obstetrics on call that Filipinos can purchase the for referrals. It offers 10-40 percent
46 2017 Ayala Corporation Integrated Report HOW WE MANAGE OUR CAPITALS Ayala has maintained its strong position in the market in large part due to proactive and strategic management of its financial, intellectual, human, and relationship capital. Moving forward, the company shall continue to monitor these capitals, to ensure they are harnessed in a way that creates the best possible value for all our stakeholders.
Indicators 2017 2016 How we manage our capitals Financial Capital P16.1 billion P10.3 billion Our main sources of funding are through expenditures regular cash dividends from our operating units, Capital (at parent) strategic divestments, and value realization opportunities, issuances of high-quality Average cost of 4.23% 4.31% corporate debt, and equity that has historically debt met with keen demand from long-term shareholders. Using quantitative and qualitative criteria and a multi-step management approach, we allocate financial resources to those we believe provide the best risk-adjusted stakeholder returns over the long term.
Intellectual Industry awards Ayala Land is Most BPI is Best Bank in The strong and trusted Ayala brand, our deep *Not comprehensive Socially Responsible the Philippines (The expertise in key industries, as well as Philippine Capital Company of the Corporate Treasurer) business experience borne out of 184 years Year (Asia Corporate of existence, allow us to create and grow Excellence and Globe Telecom is businesses positioned for leadership in their Sustainability Awards) Mobile Service Provider sectors both locally and globally. We also apply of the Year (Frost and a transformative approach to any sector we Manila Water is No. 1 Sullivan) enter and empower synergies across our group Best Managed Utilities of businesses. Companies in Asia AC Energy named the (FinanceAsia) fastest growing energy platform (International Finance Magazine)
Human Ayala employee 88%, two points We recruit, develop, and deploy high engagement above the global high performing, motivated employees and leaders Capital score performing norm who not only have global mindsets, but also *conducted every possess deep knowledge of regional and local two years markets. The diversity of this experience is further strengthened by regular training and focus on safety and health. In recent years, we have also begun to transform our talent base to not only ensure that we can compete in the industries of the future, but also take advantage of ongoing shifts in the nature of work—such as flexible working arrangements and the growing prevalence of freelancing.
Relationship Strategic Our businesses maintain strong We maintain close linkages and strive to partnerships partnerships with over 40 leading balance the individual needs of our many Capital companies in the Philippines and from stakeholders – investors, partners, suppliers, across the globe customers, employees, and the public sector. We aspire to build mutually beneficial Group-wide P50.5 billion P44.5 billion strategic relationships that remain strong over taxes paid to generations, geographies, and through the government economic cycle. We enhance and protect our collective interests and maintain transparency by adhering to the highest standards of corporate governance and risk management; this grants us the license to operate continually.
INTO THE FUTURE 47 OUR OUTLOOK Ayala defines its strategy in the context of key global, regional, and local trends that we believe will impact the markets, sectors, and businesses in which we choose to invest and operate. We monitor the evolving macro-political environment and adapt our strategic posture and investment decisions to ensure we remain in the best position to leverage and mitigate the impact of these forces.
Description How our strategy addresses this The Philippines is currently in the midst of We continue to prioritize the Philippines Rising a demographic dividend as the country’s with most of our businesses and young and growing population gradually investments in sectors that are well- Consumer enters the workforce. This has resulted in positioned and aligned with the country’s an expanding base of urbanized, middle- growth. Across the group, we have created Class income consumers with discretionary income many products and services that benefit the that continues to unlock demand for not country’s expanding middle class: Globe only fast-moving items like food, clothes, Telecom, for example, has over 63 million and personal technology, but also for large mobile subscribers. Catering to growing purchases like homes and vehicles. Following motorization in the country, AC Industrials’ global trends, this consumer base is also more automotive retail arm sold over 28,000 empowered and informed than any in history, vehicles in 2017. owing largely to the transparency and access enabled by the Internet and social media.
Description How our strategy addresses this Our businesses, at varying degrees, are We regularly adapt our portfolio, which exposed to risks associated with political includes managing our exposure to Challenging transitions, shifts in laws and regulations, prevailing macro-political winds. While we and populist views. Some of our businesses remain supportive and continue to deploy Regulatory that support the country’s physical resources to these sectors, we manage infrastructure development, such as water, this potential risk by expanding outside Environment transport infrastructure, telecommunications, highly-regulated spaces as in the examples and power, operate in highly-regulated of Manila Water and AC Infrastructure. In environments. 2015, we created a Regulatory Council as a platform to collaborate, exchange insights, and be more proactive in tackling regulatory issues and enhancing our government relations mechanisms.
Description How our strategy addresses this Southeast Asia, which has exhibited While the Philippines remains our primary relatively stable growth over the last decade, base of operations, our current five-year continues to retain untapped economic strategic plan includes an emphasis on potential. Aggregate GDP as of 2016 stood expanding our presence outside the home Regional at $2.6 trillion, making ASEAN the world’s market. We have targeted growing the fifth-largest economic bloc. The Philippines’s contribution of overseas operations to Economic demographic advantages remain reflective Ayala’s equity earnings to 10 percent by of the region as well. ASEAN’s 630 million- 2020. Progress has been solid to date with Growth strong population could result in as many international businesses now accounting as 230 million additional workers – and by for seven percent of total equity earnings extension, consumers – in Southeast Asia by in 2017, primarily from Ayala Land, 2030. Longer-term projections continue to Manila Water, AC Energy, AC Industrials, be positive, with studies projecting that the and selected investments by the parent region could be the world’s fourth largest company. economy by 2050.
48 2017 Ayala Corporation Integrated Report Description How our strategy addresses this Many sectors and industries in the world We have made disruptive innovation a Exponential are facing disruption. Freer flows of capital, guiding principle across the group. Our technology, and information have enabled Innovation unit constantly searches for Pace of bold, entrepreneurial endeavors, hastened trends and operating models that may the development of transformative business benefit or threaten our business units. Disruption models, and resulted in the market leaders disappearing in the span of just a few Our acquisitions of stakes in Zalora years. Traditionally stable sectors such Philippines and Mynt have exposed us as manufacturing and financial services to the growing sectors of e-commerce have been challenged by unconventional and fintech—creating opportunities for competitors and business models making synergies across our group of businesses. the most of technological advancement—for example, artificial intelligence, automation, In support of our strategic initiatives, we and fintech. Incumbents will increasingly be have institutionalized several platforms forced to reinvent their business models to to reinforce innovation in our corporate remain relevant, much less retain leadership, culture, such as our annual Spark in their respective spaces. conference.
Description How our strategy addresses this The pace, breadth, and depth of disruption in In 2016, we brought together our Disruptive the automotive sector has been particularly automotive and manufacturing assets under profound. Driven by shifts in technology, AC Industrials, forming a platform for Ayala’s Trends in policy, and customer preferences, the vehicles entry into the industrial technology space as of the future are rapidly moving toward a strategic new sector and source of growth Automotive alternative powertrains, autonomous driving, for the group. Since then, AC Industrials has and shared mobility. Sales of electric vehicles, committed or deployed a total of nearly for example, are expected to surpass their $100 million in capital to build its portfolio in internal combustion engine counterparts automotive and other industrial sectors. by 2038, enabled by rapidly declining component prices (a battery costing $1000 today is projected to fall to $73 by 2030) and an average assembly time of 40 percent less. The evolution of the automotive sector is not only expected to generate robust employment multiplier effects (4-7x), and also impact relatively unrelated sectors such as retail, media, and healthcare.
Description How our strategy addresses this Disruption has also come in the form of We have adapted our offerings over the Growing rising social tension globally. Recent years last five to seven years to cater to a broader have seen shifts in political landscapes, as a base of the Filipino population. For example, Social result of public dissatisfaction with inequity, Ayala Land has expanded its offerings to corruption, and the failure of established include different price points, including Tension institutions to spur equitable growth. socialized housing. BPI continues to drive Unconventional leaders have been elected financial inclusion, while our entry into the across the world—from the United States, health and education sectors allows our to the Philippines. In addition, the rise of businesses to provide quality healthcare and populism and anti-globalization sentiment, education at affordable price points. most seen for now in advanced economies, reflects the acute need for more inclusive business models that create jobs.
INTO THE FUTURE 49 OUR STRATEGY FIVE VISION PILLARS
STRATEGIC 2017 KEY PERFORMANCE OBJECTIVES PERFORMANCE INDICATORS
Build a strong, growing, and • Increased earnings capacity • Net income grew 16% to diversified portfolio that can and quality exponentially for P30.3 billion withstand and take advantage of the 6th straight year • ROCE improved from 12.6% economic cycles • Increasingly diversified returns to 13.2% through exposure in varied • Total shareholder return of industries 39.9%
Positively disrupt, transform, and Rising earnings contribution of • Equity earnings impact the markets we serve emerging businesses as we scale contribution from emerging up AC Energy and AC Industrials businesses grew to 15.9% from 12.4% • Invested P16.1 billion in new growth platforms versus P10.3 billion in 2016
Strategically expand our • Unlocked new markets in • Equity earnings presence and relevance globally, Thailand and Indonesia and contribution from overseas with focus on Southeast Asia deepened foothold in Vietnam operations grew to 7% • Expanded foothold in the US from 5.4% and in Europe through UK, • Group-wide international Germany, and Serbia revenues reached P61.6 billion from P43.1 billion in 2016
• Align our strategy to national • Recognized efforts on • Our Chairman and CEO development integrating sustainability with was recognized as a UN SDG • Partner with respected local strategy Pioneer (refer to pages 14-15) and global institutions • Built a culture that attracts the • Ranked 18th best employer • Attract the best possible best employees in the world by Forbes talents magazine • Robust stakeholder engagement (refer to pages 59-61)
Create and support clear • Listed businesses are leaders • Awarded CFO of the Year industry-leading businesses in their industries • Ayala Corporation, Ayala that show sustainable growth • Recognized as among the Land, Globe Telecom, and potential best in the Philippines for Manila Water ranked in management excellence, the Top 50 Publicly Listed corporate governance, Companies in ASEAN (ACGR sustainability, and investor 2016) relations • Recognized as best Risk Management Program in the region
50 2017 Ayala Corporation Integrated Report AYALA BEYOND THE PHILIPPINES: EXPORTING HOMEGROWN EXPERTISE The expansion of Ayala’s footprint outside our shores is driven largely through our business units, several of whom have mature, exportable strengths that allow them to add meaningful value in other geographies. Once a subsidiary has accessed a new market via their individual industry networks, we gradually bring to bear Ayala’s resources, synergies, good governance, and broad array of complex technical skills. MCT Berhad’s 417-acre Cybersouth township in the Cyberjaya-Putrajaya-Kuala Lumpur International 2017 saw significant progress Airport Corridor in Malaysia. towards achieving our group- Since then, Ayala Land has raised took its first steps outside the wide goal of increasing the its stake in MCT multiple times, and Philippines via a management equity earnings contribution today holds 72.3 percent of the contract with Vietnam’s Saigon of overseas operations to 10 company. Water Company for a leakage percent. At year-end, equity reduction project. Today, Manila earnings sourced from outside Taking advantage of strategic Water is one of the largest foreign the Philippines stood at seven opportunities: AC Energy direct investors in Vietnam, percent of the total amount. When the rare window to acquire supplying almost 50 percent of Strategic investments made already-operating assets in the Ho Chi Minh City’s treated water over the last few years began power generation space – made requirements via multiple entities. to bear fruit, while additional possible by the exit of a global Manila Water continues to explore pieces were added for the future. leader in exploration & production opportunities actively within While we faced the challenges – became available, AC Energy and Southeast Asia, entering Indonesia that naturally arise with going its partners seized the opportunity. and Thailand in early 2018. beyond Philippine borders, last The acquisition at the end of 2016 of year’s successes followed four a 19.8 percent stake in the Salak and Leveraging sector trends: AC major themes. Dajarat geothermal plants – totaling Industrials 637MW – in West Java, Indonesia, As it continues to work toward Riding favorable macro- was immediately accretive, adding its aspiration of becoming a political environments: over P500 million in earnings in 2017 globally competitive industrial Ayala Land and representing nine months of group, AC Industrials rode the Malaysia’s stable political attributable income. emerging trend of “nearshoring”, environment and strong or locating close to one’s market, economic growth – averaging Playing to business unit strengths: to lower costs, enable faster five percent over the last five Manila Water transfer of information, and years – provided a positive As one of the most successful unlock synergies. VIA Optronics, backdrop for Ayala Land’s public-private partnerships in the a company it acquired in 2016, decision to take a 9.2 percent Philippines, Manila Water Company posted record revenues in 2017 stake in then-publicly listed spent two decades optimizing the to help IMI cross $1 billion in property developer MCT Berhad water supply and distribution system topline for the first time in 2017. in April 2015. Management in the eastern part of Metro Manila. The additions of STI Enterprises, believed that MCT, with a Since it took over the concession in which further strengthens IMI, mixed-use development 1997, Manila Water reduced non- and MT Technologies, a platform strategy comparable to Ayala revenue water to 11 percent from 63 for directly participating in Land’s, would be a platform to percent and enabled a 24/7 supply Europe’s automotive industry, bring its industry leadership in of water for its customers. It has position AC Industrials well for large-scale estate developments developed a track record of deep continued growth. In early 2018, and expand its exposure and operational expertise deployable in AC Industrials acquired a solar knowledge into one of Southeast other emerging markets. In 2008, technology company based in Asia’s most vibrant economies. Ayala’s water infrastructure arm California.
INTO THE FUTURE 51 RISK MANAGEMENT AT AYALA: FROM MITIGATION AND AVOIDANCE TO VALUE CREATION (102-11, 102-15)
Risks and Opportunities have a framework that has the right and the implementation of suitable Risk management is an increasingly architecture, strategy, and protocols responses are at the core of risk important business driver and that support the risk management management. When done correctly, part of successful corporate process. The risk architecture sets the maximum sustainable value governance. Ayala believes that out the roles and responsibilities from all the organization’s activities effective corporate governance of concerned individuals and can be achieved and delivered to all entails risk intelligence: a philosophy committees, as well as the structure stakeholders. Furthermore, with the that does not discourage risk- for communicating and reporting right approach, risks can be turned taking, and embeds appropriate on risks and opportunities. into opportunities. risk management into the whole The risk strategy specifies the organization. This way, risk-taking objectives of the risk management Risk Architecture (102-19,102-30) for reward and growth becomes activities in the organization, For this reporting period and under as significant as risk mitigation for while the risk protocol describes the supervision of the Chief Risk protecting value. the methodologies, tools, and Officer, the Group Risk Management techniques by which the strategy will & Sustainability Unit continued to To realize the value proposition of be implemented and risks managed. align Ayala’s risk governance with risk management, it is essential to The assessment of significant risks that of global risk consultant Deloitte,
RISK INTELLIGENT ENTERPRISE* VS. AYALA CORPORATION’S RISK GOVERNANCE FRAMEWORK
NINE FUNDAMENTAL PRINCIPLES OF A AYALA CORPORATION’S RISK GOVERNANCE FRAMEWORK RISK INTELLIGENT ENTERPRISE
1. Common risk definition RISK 2. Common risk framework GOVERNANCE Board of Directors 3. Key roles, responsibilities, and Risk Management and Related Party authority Mandate & Transactions Committee 4. Governing bodies’ oversight commitment of Top management
CONTINUOUS PROCESS 5. Common risk management COMMON RISK Management Committees infrastructure INFRASTRUCTURE AND Ayala Corporation Management Committee 6. Executive management MANAGEMENT Investment Committee responsibility Chief Risk Officer 7. Objective assurance and Group Risk Management & Sustainability Unit monitoring People Process Technology Ayala Group ERM CouncilTop Risk Reporting by Business Units
STRATEGY DEVELOPMENT & EXECUTION RISK OWNERSHIP Business Functions – 8. Business units Transactional Risk Management responsibility Analyze & Design, Corporate Strategy and Development Identify Integrate Respond Monitor & 9. Support of Evaluate Implement & Corporate Resources Risks Risks to Risks Escalate pervasive Risks Test Controls Public Affairs functions Corporate Governance Strategy & Operations/ Finance Governance Compliance Reporting Planning Infrastructure
Internal Audit Assurance on the adequacy, effectiveness and efficiency of the system *Deloitte’s Risk Intelligent Enterprise model 52 2017 Ayala Corporation Integrated Report which espouses a best practice that As risk owners, the business unit From 2013 to 2016, Ayala moved goes beyond risk avoidance and leaders are responsible for managing from mere compliance in Phase mitigation, to utilize calculated risk- the risks they face in the day-to-day 1, to integration in Phase 2. This taking as a means to create value. operations within the established involves a shift from the old view risk framework. They have the of risks as distinct and separate, Similar to a risk intelligent enterprise, responsibility to identify, measure, towards a mindset that understands Ayala’s risk governance is at the monitor, control, and report on risks the interconnectedness of risk, apex of the system. The Board of to management. Finally, the Internal which can be directly linked to Directors is provided appropriate Audit Unit provides independent strategy and profitability. This was transparency and visibility into the assurance of the adequacy, achieved by redefining Ayala’s ERM organization’s and the group’s risk effectiveness, and efficiency of the policy, particularly to strengthen management practices. Through risk management process. the oversight role of the Board on the Risk Management and Related risk management. Through a more Party Transactions Committee, the Risk Management Strategy vigilant Board, and the sharing Board ensures the company has an Our risk management practices of best practices and resources, effective risk management process are now among the most mature the Group Risk Management and and its risk appetite remains relevant and extensive in the Philippines. Sustainability Unit cascaded key risk to achieve its goals. Ayala has designed an enterprise strategies from the holding company risk management roadmap, which down to all business units, where a As the advocate for the company highlights milestones in the linking comprehensive understanding of risk and the group, the CRO has the of risk management to strategy, and is needed most as the business units primary responsibility of designing, integration of risk management serve on the frontlines. implementing, and maintaining an into sustainability. Ayala has effective risk program. The Group successfully completed the first Beginning in 2016, Ayala has pursued Risk Management & Sustainability major phase of the roadmap and is the most number of risk-related Unit supports the CRO by designing currently aligning risk management activities compared to previous activities that enhance the with business strategy and daily years in linking risk management to organization and the group’s risk operations. strategy. In 2017, Ayala picked up the intelligent culture, formulating risk management strategies, evaluating tools and techniques for risk assessment, and monitoring and 2020 ENTERPRISE RISK MANAGEMENT ROADMAP reporting on key principal risks. It 2013 - 2015 2016 - 2018 2019 - 2020 also convenes the ERM Council, a group comprising the risk officers Risk Link to of all Ayala’s business units, for risk Refresh framework alignment, continuous Interdependence Strategy risk process improvement, and Financial other group-wide projects. On Strength a semi-annual basis, the ERM Reinvention Council provides the top risks of & Growth their respective organizations to Geographic the Group Risk Management & Expansion Sustainability Unit, for reporting Business Stakeholder Strategy to both the CRO and the Risk Empowerment
Management and RPT Committee. Business Management committees also Leadership provide support to the CRO by ensuring the existence of a structure at the operating level that will communicate and monitor key 1 2 3 principal and emerging risks. They also ensure that risks are discussed Linking risk Refreshing management to key risk during project and investment corporate strategy activities meetings.
INTO THE FUTURE 53 pace by mounting more intensive wider coverage, as well as enhanced As an example, management set activities to further strengthen policy wording, administration, and their risk appetite for workplace and embed the practice of risk employee benefits. The program is safety and ethics--one of the three management at all levels of the believed to be the first of its kind in key drivers of people impact--at risk- organization. These activities helped the country with all terms combined averse. Following this, the crafted us streamline our opportunities and in one policy. It will also help risk appetite statement affirmed positive impact, and prioritize our facilitate data analytics that will help that Ayala is risk-averse towards material factors. Our material factors us establish preventive initiatives in risks related to workplace safety and and their positive impact may be the long run. ethical standards and any incident found in our Materiality Section, related to it will not be tolerated. pages 62-69. Negotiations with the insurer for the other insurance lines, such as Risk officers of different business Optimizing the Ayala Group’s property damage and business units then underwent training on the risk transfer strategy interruption, general liability, political same subject to ensure consistency To better understand the group’s violence, and directors and officers in the process of setting risk appetite current risk transfer strategy, the liability, are currently ongoing and within the group. They are expected Ayala group embarked on an placements are expected to be to have their own risk appetite limits insurance optimization study in 2016. completed by the end of April 2018. and statements in 2018, which will The results showed that there is a be consolidated at the group level. decentralized purchasing strategy Establishing Ayala’s risk appetite and mixed purchasing practice across Recognizing that risk appetite is a Increasing Risk Awareness the group, resulting in duplicate and relevant driver for strategic decision- Ayala held its 3rd ERM Summit with varied covers. Significant uncovered making, the Group Risk Management the theme “Building a Stronger Ayala exposures were noted despite high and Sustainability unit organized amidst Emerging Risks”. Regional insurance premium spend. a Risk Appetite Establishment experts and practitioners shared workshop for the company. During their knowledge on the top risks Insurance optimization was the workshop, management in the Asia Pacific region, status of implemented in 2017 to consolidate identified non-negotiable risks and emerging risks such as cyber, talent, and centralize procurement, which is provided their risk appetite limit innovation and technology, and expected to deliver better coverage for each of the business strategies. political and regulatory risks, and and wordings, as well as cost savings. They set the risk limits for each of risk management strategy to protect As of the reporting period, the group the drivers of four impact areas companies from such. The 2017 has placed its first optimized motor (financial, people, compliance, and summit was well-attended by more car insurance program. This program reputational), and used these limits than 160 senior and mid-level officers generates an average premium as the basis for crafting risk appetite across the group, an increase of 25 savings of 20 percent per entity in statements. percent in number of attendees. the conglomerate, and allows for
Ayala’s senior leadership participate in the Risk Appetite Establishment workshop. Ayala Chairman and CEO Jaime Augusto Zobel de Ayala speaks at a panel on the future of risk management in the Philippine landscape. 54 2017 Ayala Corporation Integrated Report Unit heads and senior management are involved in the group’s risk management processes. Ayala President and COO Fernando Zobel de Ayala speaks at the 2017 Ayala ERM Summit. With its commitment to becoming and monitor emerging risks to the As we go through the process, a risk intelligent conglomerate, organization’s business model, long- communication among different Ayala will continue to advocate term viability, and ability to create levels of the organization is and implement a robust risk value. This approach was chosen to encouraged. These interactions can management program, and share emphasize that events currently not form the basis of a continual process its findings and experiences across perceived as risks may pose a threat of alignment that allows people at all the group. Ayala’s goal by 2020 is to to the organization later on. With the levels to understand the risks of any fully maximize the value-creating introduction of this methodology, activity they undertake, and how this proposition of risk management— top management is now starting to might affect the risks being managed one that is able to find opportunities be cognizant of emerging risks and by others. Correspondingly, each in risks to create greater shared value how the fast-moving risk landscape step undergoes monitoring and for Ayala and its diverse stakeholders. can possibly affect their businesses. review for continuous improvement. This is an area that we want to Risk Management Protocol further develop in the years to come. Principal Risks and Uncertainties The Group Risk Management & facing the Group Sustainability Unit continues to Risk Management Process Enabled by a comprehensive be innovative in the tools and Following the provisions of ISO Enterprise Risk Management methodologies it uses. In 2014, 31000, the risk management process program, Ayala continues to refine Ayala used the black swan at Ayala starts with establishing the its appreciation of the complex array approach to identify its value drivers context by identifying external and of risks that affects its businesses. For and risks. In 2015, we deepened internal factors that may impact this year, aside from giving us a better our understanding of risks and value creation and value protection understanding of the various external opportunities using the bow-tie objectives. We conduct research on factors affecting our operations, our methodology and risk interaction current and emerging risk trends, annual risk assessment once again matrix. In 2016, principal risks were engage risk management experts challenged our internal assumptions. mapped against the five vision and collaborate with internal As we pursued scientific approaches pillars. In addition, risk management stakeholders to ensure that the to realize opportunities, we also was incorporated as a key result area right perspective is in place for relied on our management’s foresight in the performance evaluation of the risk assessment – an activity and creativity, as not all risks can employees. where senior officers are gathered be quantified through a model. As to identify and analyze risks, a result of this discussion and in For 2017, the risk sensing evaluate and prioritize risks, allocate collaboration with the ERM Council, methodology was introduced to resources, and plan risk mitigation three risk categories were added in management in identifying and strategy accordingly. The results of the risk register and included in the assessing risks. It employs human this activity are used to update the risk prioritization exercise. insights and advanced analytic risk register. capabilities to identify, analyze,
INTO THE FUTURE 55 AYALA CORPORATION’S 2017 HEATMAP
1 Political and Regulatory
5 2 Information Security and Cyber 3 Brand and Reputation
4 Competition 4 5 Portfolio Management
1 OD 6 Market 4 2 7 Business Resiliency 3 3 8 7 6 5 8 Innovation and Technology 1111 LIKELIHO 14 1010 9 9 Governance and Controls 2 133 121 10 Talent
11 Operational
1 12 Partnerships and Alliances
13 Funding 1 2345 14 Synergy IMPACT
Risk description Potential impact Current key risks, issues or Risk exposure Management and mitigation areas of uncertainty Political and Regulatory • Reduced income and • New national and local Higher by 1 • Strengthen relationships with the government margin government officials point from through Public Policy Unit • Inability to anticipate with different mindsets previous year changes in the political • Greater variability of and priorities • Periodically discuss new regulations that and regulatory returns may affect business operations at the Ayala landscapes • New tax rulings Regulatory Council • Higher cost of compliance • Advocacy groups with • Review regulatory risk framework previously opposing causes developed for Ayala and its investee companies • Delayed projects • New laws and • Difficulty in regulations without management and implementing administration guidelines, which are subject to varying • Weaker brand value interpretations Information Security • Data loss • Rise of social Higher by 5 • Strengthen layers of control on both hardware and Cyber networking, mobile, points from and software assets • Higher cost of cloud, and analytics previous year • Failure to ensure operations and • Perform vulnerability tests prior to first use of strong and adequate compliance • Increasing malware hardware, software, and web hosts information security and viruses controls to safeguard • Eroded brand and • Establish centralized 24/7 security operation confidentiality, reputation • Threat from Bring-your- center integrity, and own-device practice availability of critical • Constantly improve knowledge of cyber attacks information • Increasing cyber attacks • Regular cascade of IT policies and standards across the organization
• Benchmark with international companies on mitigating cyber risks Brand and Reputation • Difficulty managing • Sway of social media Same ranking as • Regularly engage in meaningful discussion with Ayala’s growing last year investors and analysts • Inability to maintain our portfolio • Increase in internet- stature as a company based systems and • Analyze local and global news and trends of choice • Increased cost of capital communications • Regularly refresh Ayala’s branding position • Fewer top candidates • Superior products for vacant positions and services of • Continue to actively identify opportunities for competitions collaboration with partners • Higher employee attrition rate • Good governance issues • Difficulty in maximizing value for stakeholders • Shift in customer behavior
• Campaigns against Ayala and its business units by competitors
56 2017 Ayala Corporation Integrated Report Risk description Potential impact Current key risks, issues or Risk exposure Management and mitigation areas of uncertainty Competition • Eroded market share • Superior products New risk • Cultivate market intelligence (local, regional, and services of category for and global) and compare key metrics with • Inability to meet the • Actual cash losses and competitions 2017 competition using an internal team desired market position volatility in profitability • Shift in customer • Analyze annual innovation trends and new • Difficulty managing behavior sectors Ayala’s growing portfolio • Inability to • Partner with competitors in some industries competitively price • Difficulty in maximizing products and services • Leverage on the brand and reputation of Ayala value for stakeholders • Campaigns against Ayala and business units by competitors Portfolio Management • Inability to create value • Aggressive Lower by 1 • Analyze portfolio twice a year (capital for stakeholders competition point from management, valuation, investment and/or • Inability to align previous year divestment) portfolio management • Eroded brand and • Technological strategy with business reputation disruptions • Cultivate market intelligence (local, regional, objectives and global) and compare key metrics with • Expensive funding • Changes in regulatory competition using an internal team mechanisms policies and frameworks • Conduct deep-dive analysis of portfolio and business unit performance • Market saturation • Analyze annual innovation trends and new • ASEAN integration sectors
• Talent shortage • Strengthen Ayala’s gating process where all possible business ventures are discussed and • Weak partnerships or monitored collaborations • Strengthen relationships and establish networks • Shift in customer with potential business partners and advisers behavior Market • Unstable funding • Capital market dry-up Same ranking as • Operationalize approved FX risk management requirements and last year policy • Inability to manage destabilized liquidity • Political or social adverse impact of position instability • Manage fixed/floating mix in anticipation of market factors such rising interest rates as foreign exchange, • Increased cost of doing • Changes in global interest rates, among business politics • Apply hedging policies as approved by the Board others • Delayed investment • Maintain FX position within approved limits strategy execution • Monitor FX and interest rate risk exposure of • Actual cash losses and publicly-listed business units volatility in profitability • Guide wholly-owned subsidiaries in managing their FX and interest rate risk exposure Business Resiliency • Loss of lives • Climate change (i.e. Lower by 6 • Establish a business continuity management higher temperature, points from system that includes an IT Disaster Recovery Plan, • Inability to restore • Damage to properties rising sea levels, previous year Crisis Management Plan, and Business Continuity normal operations flooding, stronger Plan following natural or • Delayed business typhoons) man-made disasters recovery • Regularly review adequacy of insurance coverage and/or failure of • Vulnerability in the business contingency • Weaker public areas near the fault • Run training programs on crisis communication processes and systems confidence segments, particularly and disaster management, among others in West Valley Fault • Collaborate with subsidiaries and government • Quick spread of agencies towards shared resources and mutual pandemic diseases like assistance SARs, Ebola
• Heightened terrorism activities, whether local, regional, or global Innovation and Technology • Loss of market share • Fast-paced Higher by 1 • Regularly perform disruptive change assessments technological point from for subsidiaries and industries • Failure to remain • Lower margins advancements previous year relevant and cope with • Publish annual trends with sector-specific input rapid changes • Higher cost of • Presence of data from each business unit operations analytics and cloud services • Run group-wide Innovation Summit to increase • Limited business awareness of possible disruptive trends viability • Increasing presence of mobile applications • Eroded brand and and OTT players reputation • Shift in customer • Disrupted business behavior model
INTO THE FUTURE 57 Risk description Potential impact Current key risks, issues or Risk exposure Management and mitigation areas of uncertainty Governance and Controls • Penalties and other • A more complex Lower by 1 • Strengthen implementation of Code of Ethics possible fines operating environment point from and Conduct, Anti-Corruption Policy, Whistle • Ineffective and previous year Blowing Policy, among others inadequate governance • Delayed investment • New regulations and internal controls strategy execution without clear • Regularly review internal controls through the implementing Internal Audit Group • Lower profits guidelines • Ensure that policies and manuals are in place • Weaker brand and reputation • Form Board-level Committees to review critical transactions such as RPTs, mergers, acquisitions, among others Talent • Prolonged investment • New generation of Same ranking as • Approach talent management comprehensively strategy execution incoming employees last year at all stages • Failure to ensure that with differing mindsets we have the right • Waning confidence in and needs • Engage employees in continuing opportunities people at all times brand for development • ASEAN integration • Difficulty in achieving • Perform annual benchmarking of compensation business objectives • Brain drain and benefits phenomenon • Continuously review and update programs for • Competitors offering leadership development based on participant superior compensation feedback, current issues, and future trends and benefits package • Annual discussion of succession planning by • Inadequacy of senior leaders the academe to address the needs of businesses Operational • Delayed or ineffective • Fast-paced New risk • Operational and financial audits conducted execution of business technological category for by Internal Audit Unit and external auditor, • Failure of and/or transactions advancements 2017 respectively inefficient operational processes, people and • Difficulty in achieving • Changes in business systems business objectives and operating models
• Non-compliance to local • Increased dependence laws and international on technology standards
• Mistrust by employees and customers Partnerships and Alliances • Inability to create value • Aggressive New risk • Strengthen relationships with current partners for stakeholders competition category for and establish networks with potential business • Inability to form 2017 partners and advisers and retain external • Eroded brand and • ASEAN integration partnerships and reputation • Due diligence of potential business partners and alliances that help • Weak partnerships or third-party assessment for suppliers and vendors us achieve business • Expensive funding collaborations objectives mechanisms • Engage in regular communication with external • Changes in business partners • Delayed investment models strategy execution
• Difficulty in achieving business objectives Funding • Increased cost of doing • Capital market dry-up Lower by 8 • Align funding strategy with budgeted capital business points from expenditure, operating expenses, and dividend • Insufficient funding • Political instability previous year payout strategy to meet its • Delay in investment obligations strategy execution • Business units’ failure • Control mix of currencies (Peso and USD), interest to deliver dividends or rates (fixed and floating), and types of financing • Weaker brand and income targets (bank loan, capital market) reputation • Possible impact from • Establish contingency funds, both short-term Brexit and Trump and long-term lines presidency • Monitor major changes in funding requirements
• Evaluate funding opportunities as necessary
• Engage in regular banker/lender communication Synergy • Loss of additional • Strong cross-selling of Lower by 3 • Strengthen group focus to identify possible revenue streams services and products points from synergy opportunities • Failure to collaborate in by competitors previous year support of the group’s • Disrupted business • A senior director was assigned to spearhead competitiveness processes • Ayala business units analytics on possible synergy activities partnering with direct • Higher cost of doing competitors of other • Include synergy in the agenda of the Innovation business Ayala business units Council
• Eroded brand and reputation
• Lost opportunities
58 2017 Ayala Corporation Integrated Report STAKEHOLDER ENGAGEMENT
(102-21, 102-40, 102-42, 102-43, 102- 44)
We uphold integrity, transparency, and accountability in all our dealings with our stakeholders. We continue to develop mechanisms for actively engaging and partnering with them as we create shared value across the group. Their feedback on our practices is as valuable as their contributions to our growth. As such, we ensure open communication with them through different engagement channels, as appropriate and applicable.
Our stakeholders Investors and Shareholders Creditors and Suppliers Business Partners and Affiliates How we engage them • Annual stockholders’ meeting • Regular company updates • Dialogues
• Integrated Annual Report • Meetings • Partnerships
• Four analysts’ briefings in 2017 to discuss • Roadshows, particularly for • Due Diligence FY1016, 1Q2017, 1H2017, and 9M2017 results bondholders • Meetings (Board and Executive • 12 institutional investor conferences and non- • Formal correspondence Committee Level) deal roadshows in Asia, Europe, the United States, and the Philippines • Phone and e-mail communication • Business organizations and/or clubs (e.g. World Economic Forum, • 150 one-on-one and group meetings, and • Accreditation Asia Business Council, ASEAN conference calls with institutional investors Business Club) and analysts • Trainings
• Site visits • Focus Group Discussions
• Corporate disclosures
• Website
• Investor relations mobile app What are their concerns • Macroeconomic and socio-political • Timeliness and accuracy of • Management team environment payments • Governance • Business outlook, viability, and growth • Financial performance • Financial performance • Execution of Ayala’s strategy and its business • Compliance to covenants units • Business outlook • Minimum accreditation • Financial management requirements and schedules • Commercial viability
• Project pipelines • Network and relationships
• New procurement policies • Value that Ayala brings to the partnership • Investments in coal/thermal energy (expressed by some banks)
Relevant material factors • Economic performance • Energy as a business • Economic performance
• Foreign and domestic investments • Jobs supported in the supply • Foreign and domestic investments chain • Business resilience to climate change • Business resilience to climate change How we respond • Regular engagement with institutional • Timely and accurate payments • Transparency and timeliness of investors, analysts, corporate regulators, and disclosures and reporting the investing public through various channels • Compliance to covenants • Risk management and other • Risk management, governance, and • Regular engagement with bankers governance processes sustainability processes and suppliers to maintain and nurture relationships • Regular engagement with • Transparency and timeliness of disclosures business partners and affiliates and reporting • Forums for vendors and on safety through various channels
INTO THE FUTURE 59 (102-21, 102-40, 102-42, 102-43, 102- 44)
Our stakeholders Government agencies and regulators Employees Customers How we engage them • Policy dialogues and consultations • Online portals • Customer touch points (branches, personnel, • Learning events • Meetings phone, email, website, social media channels) • Invited lectures • Performance appraisals • Annual and periodic • Annual audits • Engagement surveys satisfaction surveys
• Official correspondence • Summer outings and Christmas party • Regular visits to existing clients including area • Reports (financial statements and • Quarterly activities briefings other disclosure requirements) and publications • Sports activities (JZA Cup, Ayala Olympics)
• Regular briefings and updates • Special wellness events
• Formal proceedings • Planning/training and learning sessions
• Townhall meetings
• Roadshows (rolling out of new policies)
• Email blasts / bulletins / online publications
• Social media
• Focus group discussions
What are their concerns • Compliance with laws and regulations • Strategy and direction • Quality of service
• Completeness and accuracy of data • Employee salaries and benefits • Convenient, affordable, reliable, and efficient delivery • Transparency and accountability • Financial assistance of products and services
• Policy alignment with areas of national • Career development programs / succession plans • Sales process interest (e.g., inclusive growth; healthy competition) • Safe working environment • Billing concerns (where applicable) • Public confidence • Work relationship
• Potential areas for the public and private • Work-life balance sectors to collaborate • Opportunity for external trainings, conventions, seminars, etc.
Relevant material factors • Economic performance • Employee engagement • Customer management
• Foreign and domestic investments • Workplace Conditions
• Training and Development
• Diversity, equal opportunity, and anti-discrimination
How we respond • Regular engagement with government • Innovations in processes and company practices • Timely resolution of customer agencies and regulators through various complaints channels • Structured communication approach such as town hall and roundtable sessions • Timely and regular feedback • Transparency and timeliness of disclosures and reporting • Career development programs • Constant monitoring and upgrade of systems • Employee engagement programs • Personnel capacity building through product briefings, seminars and training
1 2
60 2017 Ayala Corporation Integrated Report (102-21, 102-40, 102-42, 102-43, 102- 44)
Our stakeholders Industry Association/s Other stakeholders1 How we engage them • Membership • Press briefings and conferences
• Conferences, dialogues, forums and industry workshops • Events/ social gatherings and meetings
• Sponsorships of special events • Regular company updates through corporate websites, emails, phone calls, social media, etc. • Industry meetings and working committee meetings
• Industry surveys and studies What are their concerns • Continuing support and long-term membership • New business operations, developments, and strategies • Business developments and strategy • New products and services • Financial performance • Product availability and reliability • Adoption of new rules and regulations • Sustainability practices, including sustainable • Setting of industry standards and market practice development programs
• Building of collaborative networks • Disaster preparedness and response programs
• Economic/ financial performance Relevant material factors • Economic performance • Customer management
• Foreign and domestic investments • Economic performance
• Community relationship How we respond • Sharing information on market trends • Regular engagement through various channels
• Participation in industry surveys and reports • Transparency and timeliness of disclosures and reporting • Participation in meetings, exhibits, conferences, seminars, symposia, and fellowship activities
1Includes media, communities, NGOs and civil society
2 3
1
3 4 5
1 Ayala holds quarterly and annual analysts’ briefings on its financial and operating results. 2 Chairman and CEO Jaime Augusto Zobel de Ayala joins CFOs, senior executives, and Investor Relations teams at an Ayala group investor day in Singapore. 3 President and COO Fernando Zobel de Ayala and Ayala group CEOs share their insights with investors at an Ayala group investors night. 4 Press briefings ensure the media are apprised of developments in the group. 5 An annual summit brings together Investor Relations practitioners to learn from thought leaders, global peers, and other resource speakers.
INTO THE FUTURE 61 MATERIALITY
(102-29)
Ayala has a varied range of material factors for each of its businesses. Guided by the GRI framework on defining material topics and processes, we undertook a collaborative review with the different business units to determine their material factors, taking into consideration the various stakeholders of the group and local and global sustainable development challenges. Further identification of external factors that affect Ayala’s operations allowed us to identify the possible risks and opportunities per material factor.
The following table depicts our materiality process based on the GRI Standards: Core Option.
DEFINING OUR MATERIAL FACTORS AND BOUNDARIES
Steps and Governing Principles Our Process Identification As Ayala supports the country’s growth through its core businesses and Sustainability Context contributes to the progress of emerging industries, we reviewed local and global sustainability topics relevant to the group and in alignment with the UN SDGs.
We worked with each company to align and identify the material factors related to their respective businesses, ensuring that the aspect boundaries are defined.
We used our existing stakeholder engagement channels to understand our Stakeholder Inclusiveness stakeholders’ areas of concern. Prioritization We prioritized key material factors based on the extent that these affect our Materiality and Stakeholder Inclusiveness businesses, stakeholders, and the sustainable development of the country.
Validation We considered stakeholder interests and concerns vis-à-vis our list of material Completeness and Stakeholder Inclusiveness aspects and identified topics. Review We analyzed three-year data to determine our businesses’ performance in Sustainability Context and Stakeholder Inclusiveness identified factors and qualified areas for improvement and the respective management approaches employed.
We also reviewed their relevance to our overall sustainability performance, to help improve our list of material factors for the next reporting cycle.
Materiality roadshows were conducted across business units to help them identify their material factors.
62 2017 Ayala Corporation Integrated Report IDENTIFYING OUR MATERIAL FACTORS Ayala conducts its businesses in an ethical manner and contributes to the SDGs through our shared value creation process. Part of this is the commitment to continue managing our key economic, social and environmental impacts.
We established our materiality matrix in 2013, and since then, periodically review and assess our material factors. In 2017, we took a deeper look at our sustainability indicators. Acknowledging that economic, environmental and social aspects of our businesses have varying metrics and level of impact, we used fundamental questions to further identify our material factors.
Economic We look at our economic performance based on how much value our companies contribute to society. Our direct contributions are material because they come from the economic value we generate and distribute to our stakeholders, as well as the foreign and domestic investments we have enabled. To further understand the breadth and depth of our economic efforts and performance, we also looked into our indirect contributions.
DIRECT CONTRIBUTIONS INDIRECT CONTRIBUTIONS Impact of Use of Products and Services Our products and services help promote the growth of SMEs. Economic Performance Jobs supported in the supply chain We distribute the economic value we generate to our We contribute to the growth of our partners in the supply capital providers, our suppliers, our employees, the chain. government, and communities. ECONOMIC VALUE WE HAVE Impact to the vulnerable sector CONTRIBUTED TO PHILIPPINE In addition, we disclose our economic value retained. We develop quality products and services, including those SOCIETY Foreign and Domestic Investments Enabled accessible to the underserved. We grow our businesses through strategic Business resilience to climate change acquisitions, investing both locally and globally, and We explore opportunities and address risks that will allow deployment of capital expenditures. us and our customers to be more resilient to the effects of climate change.
Environmental Risk that the issue poses / ENERGY Our environmental dependency impacts vary in nature of business WATER and scale across our to the issue HIGH GREENHOUSE GAS CLIMATE ACTION businesses. We clustered EMISSIONS and assessed our material factors based EFFLUENTS RESOURCE EFFICIENCY WASTES on the similarity of MATERIALS companies’ metrics. BIODIVERSITY ECOSYSTEM AND We further developed MEDIUM OTHER AIR EMISSIONS BIODIVERSITY a group-wide matrix WATERSHEDS considering the business risks associated with material topics and the magnitude of their impact to the LOW environment.
LOW MEDIUM HIGH
Impact of the issue to the environment / influence to sustainable development
*Refers to air pollutants
INTO THE FUTURE 63 Social As we develop and promote shared value in our businesses, it is important that we fulfill our responsibilities to our key stakeholders. As such, we examine the fundamental topics and metrics that measure how we positively impact our employees, customers, and the communities that we serve.
Social Aspect Fundamental Question What topics / metrics / practices answer the question? Employee Engagement Assessment We measure our ability to keep our employees sustainably engaged through regular surveys. We provide channels to promote open communication.
Training and Development We allot sufficient training hours for our employees’ professional development.
Hiring and Attrition How do we ensure the well- EMPLOYEE ENGAGEMENT We measure our hiring statistics and understand the drivers of being of our employees? employee turnover.
Occupational Health and Safety We ensure that our health and safety management practices positively affect our employees’ productivity and well-being.
Labor Management Relations We ensure that our employees exercise their right to freedom of association, and take part in important management decisions or organizational changes. We ensure that our workplaces are guided by policies or standards on: Forced / Child Labor How effective are we in upholding human Anti-corruption WORKPLACE CONDITIONS rights principles and Diversity, Equal Opportunity & Anti-Discrimination good governance in our workplace? Supplier Assessment We ensure that our dealings with our suppliers and business partners remain professional and ethical through due diligence and assessment practices. Indigenous Rights We ensure that we consider indigenous rights in our dealings with the communities where we operate. How well have we included Local Community Engagement including COMMUNITY RELATIONSHIPS our communities in our value CSR, Education, Youth, and Culture proposition? We constantly engage with local communities through programs on education, youth leadership and culture. We look at the beneficiaries of our community work and assess our impact on them. Customer Satisfaction We measure how our customers perceive our products and services through customer satisfaction surveys. We also gather feedback and address complaints accordingly.
How well do we take care of Product Quality CUSTOMER MANAGEMENT our customers? We offer quality products and services.
Customer Data Privacy We adhere to the protection of our customer and businesses’ digital records. We track risks related to potential breaches of privacy and implement mitigating measures to address them.
64 2017 Ayala Corporation Integrated Report Material Factors
Positive Impact Negative Impact
(What kind of outcomes (What kind of outcomes Performance Material Factor Link to Principal Risks Management Approach can be expected if the can be expected if the scorecard indicator material factor is well material factor is not well addressed?) addressed?) Economic • Overall positive • Inability to execute • Portfolio • Conduct deep-dive • Economic Value Performance investment climate strategic agenda Management analysis of macro- Generated, that supports the economic and socio- Distributed and group’s health • Business units failing • Capital Market political indicators Retained agenda to deliver dividends or income targets • Funding and business units’ • Sustained domestic performance. consumption • Increased cost of • Partnerships and growth that benefits doing business Alliances • Align funding businesses strategy with • Competition budgeted capital • Positive financial expenditure, trajectory for the • Brand and reputation Ayala group operating expenses, and dividend payout. Foreign and • Strong contribution • Delay in investment • Portfolio • Strengthen • Spending on Domestic to national strategy execution Management relationships with acquisitions of Investments infrastructure current partners and local and foreign spending • Delay in project • Capital Market establish networks companies execution • Job creation • Funding with potential • Increased cost of business partners and • Capital doing business • Partnerships and advisers. expenditures Alliances including • Loss of potential • Diversifying and investments revenues • Competition expanding portfolio for local through strategic infrastructure • Business partners’ failure to synergize acquisitions with group ideals Jobs supported in • Local sourcing as • Increased cost of • Political and • Due diligence of • Indirect hires or the supply chain strategy doing business Regulatory potential partners support staff through internal • Higher cost of • Operational team or third-party • Spending on supplier goods due to local suppliers new tax rulings • Partnerships and assessments Alliances • Implementation of • Operating costs • Brand & Reputation vendor accreditation systems in some companies Impact to the • Creation of targeted • Limited access to the • Portfolio • Investments in • Student vulnerable sectors inclusive business vulnerable Management affordable quality enrollees from models for the education and low-income vulnerable • Limited market • Funding healthcare segment reach for emerging businesses • Innovation and Technology • Delivery of affordable • Number of water to marginalized students covered • Synergy communities by government subsidies • Partnerships and Alliances • Number of transactions • Brand and Reputation of generic medicines sold
• Number of unique patients
• Number of households connected through Tubig Para Sa Barangay Program
INTO THE FUTURE 65 Positive Impact Negative Impact
(What kind of outcomes (What kind of outcomes Performance Material Factor Link to Principal Risks Management Approach can be expected if the can be expected if the scorecard indicator material factor is well material factor is not well addressed?) addressed?) Impact of use • Positive consumer • Negative consumer • Brand and Reputation • Continuous • Number of SMEs of products and outlook outlook innovation to and start-ups • Innovation and services develop relevant financed and • Improved • Decreased customer Technology products and services supported productivity of loyalty • Partnerships and organizations • Volume of bank Alliances involved corporate loans • Operational • Number • Competition of GCash subscribers • Portfolio and monthly management transaction • Synergy amount • Volume of fintech-enabled loans • Customer satisfaction ratings and net promoter scores • Total number of LRT-1 Passengers • Total man-hours and fuel savings due to MCX • Total number of contactless payments via beepTM Business resilience to • More businesses • Physical damage to • Business resiliency • Business continuity • Energy efficiency climate change resilient to climate infrastructure management initiatives • Operational change systems include crisis • Loss of lives management plan, • New business models • Brand and Reputation business continuity and investments • Prolonged plan, and IT disaster that address climate interruption or recovery plan change issues inability to restore operations • Insurance solutions • Increased demand for products and services that address climate change Energy as a business • Robust contribution • Lower revenue due to • Portfolio • Diversify portfolio • Total power of energy business a highly competitive Management of thermal and generated to group equity energy market renewable energy • Funding earnings businesses • Total renewable • Negative energy • Capital Market • Improved efficiency environmental generated of conventional and consequences • Political and renewable plants Regulatory • Innovation and Technology • Partnerships and Alliances • Competition • Brand & Reputatiion • Operational Energy as • Lower energy • Increased group-wide • Operational • Continuous • Energy consumption consumption of energy consumption monitoring of energy consumed • Brand and reputation companies consumption • Energy intensity • Energy efficiency initiatives by some of our companies
66 2017 Ayala Corporation Integrated Report Positive Impact Negative Impact
(What kind of outcomes (What kind of outcomes Performance Material Factor Link to Principal Risks Management Approach can be expected if the can be expected if the scorecard indicator material factor is well material factor is not well addressed?) addressed?) Water as a business • Improved water • Disruptions in water • Portfolio • Expansion in areas • Water abstracted distribution in more supply Management outside of Manila homes, including Concession • Billed volume those in vulnerable • Higher cost of • Funding operations • Used water areas • Capital Market treated • Termination of water concession • Political and • Non-revenue Regulatory water reduction • Innovation and Technology • Partnerships and Alliances • Competition • Operational • Brand and Reputation
Water as • Lower water • Increased group-wide • Operational • Continuous • Water consumed consumption consumption of water consumption monitoring of water • Brand & Reputation companies consumption • Water intensity • Improve water treatment operations in our industrial plants Resource Efficiency • Optimized purchases • Higher cost of • Operational • Integrate resource • Volume of and use of materials compliance to efficiency within the materials used • Brand and Reputation environmental supply chain • Proper control of • Waste generated standards • Business Resiliency waste • Waste management by type • Higher cost of • Political and disposal system, • Percent of waste operations Regulatory i.e. accredited third-party waste diverted from • Partnerships and disposal, storage, and landfill alliances treatment facility Ecosystems & • Potential increase • Continued decline • Operational • Group-wide • Hectares of land Biodiversity in the population of vulnerable fauna reforestation and watersheds • Brand & Reputation of endemic fauna and flora in owned activities through protected and flora present or leased sites, Project Kasibulan in companies’ protected areas, and • Number of trees operational sites and external areas of high • Biodiversity studies planted and watershed adjacent biodiversity biodiversity value • Number of IUCN areas protection programs across operational Red List Species sites of some monitored companies Greenhouse gas • Reduced emissions • Higher greenhouse • Operational • GHG Emission • GHG Emissions emissions according to gas emissions mitigation efforts • Brand and Reputation acceptable global through Project • GHG Intensity • Regulatory fines and standards Kasibulan penalties • Partnerships and Alliances • Energy efficiency • Stakeholder initiatives complaints
Employee • Strong reputation • Inadequate mix of • Talent • Approach talent • Direct employee Engagement and ability to attract skills and expertise management headcount • Political and diverse and qualified for the workforce comprehensively at Regulatory talent all stages • Employee • Higher recruitment engagement • Operational • Strong employee expenses • Conduct of employee score engagement score • Competition engagement surveys • Prevalence of labor • Employee disputes • Brand and Reputation • Annual discussion of turnover succession planning by senior leaders • Regular dialogue and communication with labor groups • Annual benchmarking of compensation and benefits
INTO THE FUTURE 67 Positive Impact Negative Impact
(What kind of outcomes (What kind of outcomes Performance Material Factor Link to Principal Risks Management Approach can be expected if the can be expected if the scorecard indicator material factor is well material factor is not well addressed?) addressed?) Workplace • Improved well-being • Dissatisfied • Operational • Due diligence of • Employee Conditions of employees and employees and potential partners Engagement • Political and partners across the partners across the through internal Score Regulatory supply chain supply chain team or third-party assessments • Enhanced brand and • Regulatory fines and • Brand and Reputation reputation penalties • Talent • Policies related to human rights and • Increased complaints • Governance and child/forced labor • Eroded brand and Control reputation
Diversity, Equal • Engaged workforce • Possibility of • Operational • Group-wide policies • Employee Opportunity, and discrimination in the on equal opportunity headcount by • Enhanced brand and • Political and Anti-Discrimination workplace employment and gender, by age reputation Regulatory diversity group, and by • Eroded brand and rank reputation • Brand and Reputation • Talent • Employee engagement • Governance and score Controls
Community • Continued license to • Adverse impact on • Political and • Development and • Community Relationships operate within the vulnerable groups Regulatory implementation of investments community sustainable programs • Eroded brand and • Funding for youth, culture, • Total number • Well-managed social reputation of Mangyan • Synergy education, and impact weavers, and • Limited license of livelihood sales of Mangyan operations • Partnerships and Alliances products • Operational • Monthly income of farmers in • Brand and Reputation the MDC Greens farms Training & • Highly capable • Lack of future- • Talent • Employee • Total number of Development workforce proofing skills among engagement training hours employees • Political and • Established career Regulatory • Leadership • Average training path for employees development hours per • Operational program employee • Brand and Reputation
Occupational Health • Engaged workforce • Dissatisfied workforce • Talent • Employee health and • Number of and Safety wellness programs health and • Political and wellness Regulatory • Continous programs monitoring of • Operational incidences and • Number and • Brand and Reputation injuries types of injuries • Governance and Controls Customer • Enhanced brand and • Eroded brand and • Operational • Quality management • Customer Management reputation reputation system satisfaction • Competition ratings and net • Increased customer • Customer complaints • Customer satisfaction • Brand and Reputation promoter scores loyalty surveys • Customer • Customer feedback complaints and grievance resolved mechanisms
68 2017 Ayala Corporation Integrated Report Positive Impact Negative Impact
(What kind of outcomes (What kind of outcomes Performance Material Factor Link to Principal Risks Management Approach can be expected if the can be expected if the scorecard indicator material factor is well material factor is not well addressed?) addressed?) Security Practices • Stronger customer • Eroded brand and • Information Security • Policies on data • Security and Privacy confidence in reputation and Cyber privacy and IT practices and products and services security Data Privacy • Regulatory fines and • Innovation and Policy penalties Technology • Centralized 24/7 security operations • Higher cost of • Operational operations • Brand and Reputation • Governance and Controls • Business Resiliency
Investor Relations, Corporate Communications, Sustainability, and other teams from across the Ayala group underwent a workshop on the Integrated Reporting framework in 2017.
INTO THE FUTURE 69 SUSTAINABILITY PHILOSOPHY AND FRAMEWORK
(102-31)
The Ayala Sustainability Philosophy Ayala is committed to contributing to the UN Sustainable Development Goals and we view our businesses as opportunities to create shared value. In 2012, our group management committee approved our sustainability philosophy. In 2013, the Ayala group underwent into a materiality process which resulted in its 360° Sustainability Framework. This was enhanced further through our alignment with the UN SDGs, which was declared in the 2014 Sustainability Report—even before the SDGs were formally launched in 2015. To ensure our framework is in line with the growth of our businesses, we conducted workshops in 2017 to improve and update our 360° Sustainability Framework. This updated model continues to prioritize three focus areas: Economic, Environmental, and Social. As part of our commitment to, and as a founding member of the UN Global Compact Network Philippines, we also incorporated its10 Principles, resulting in a more holistic framework.
Management Approach regulatory compliance, apply best work in the safest and healthiest In line with our commitment, we practices, and adopt global voluntary possible environment. We provide continue to improve the economic standards on environmental and work that encourages professional value we deliver as we responsibly social responsibility. and personal growth, and we ensure manage our impact on the they have avenues to develop environment and society. The inputs Products and Services their interests. We encourage and expectations of our stakeholders Improving quality of life is a main our employees to be proactive in are important to us, and in response, driver in the development of our contributing to sustainable business we practice good governance and products and services. We pursue practices. remain proactive in our engagement excellence to empower more with them. We continue to pursue customers and enhance their Community Involvement opportunities that will help us experience. We keep the needs of We value education, cultural improve and be more effective. marginalized communities in mind, development, gainful and seek innovative ways to reach microenterprise, and health and Business Sustainability them and increase our support for wellness. We ensure that these are Long-term, sustainable growth is a nationbuilding. The design of our cultivated and promoted in the key priority, and we strive to expand products and services also takes into communities with whom we interact. our businesses in both the local consideration our environmental and global arena. Guided by the UN footprint. SDGs, we look at how we can further improve our bottomline while being Supply Chain transformational to society and the We observe sustainability practices environment. We also continue to in dealing with our suppliers, explore possibilities in underserved and prioritize those that adopt sectors. sustainability principles. In line with the principles of good governance, Operations we choose suppliers based on We are committed to the efficient their adherence to human rights. use of our natural capitals, while We welcome community-based ensuring the proper control of our entrepreneurs and cooperatives. waste and greenhouse gas emissions. We integrate environmental Human Resources parameters into business operations We recognize that our employees are and establish green practices in the our first customers. Their well-being workplace. We aim to go beyond is our priority and we ensure they Ernest Cu speaks about Globe’s experience in integrating sustainability in its products and services.
70 2017 Ayala Corporation Integrated Report THE AYALA 360° SUSTAINABILITY FRAMEWORK
This 360° Sustainability Framework is the result of the materiality process across the Ayala group. It gives a comprehensive look at the factors, indicators, and metrics that we focus on. This framework is aligned with the 10 Principles of the UN Global Compact. We contribute to the UN SDGs through our various programs that drive positive economic, social, and environmental outcomes. Due to the nature of our businesses, we have a direct impact on 11 of the SDGs. Consequently, our activities also have an indirect impact on the remaining six SDGs.
INTO THE FUTURE 71 PERFORMANCE HIGHLIGHTS VALUE CREATION
Economic Redistributing Economic Values back to Society Ayala companies 17 percent increase in economic value distributed, from P321 billion to P377 billion by Ayala companies to its key stakeholders
Multiplying Gains by Supporting Other Businesses Globe Supported 35 start-ups in 5 countries in the fields of Enterprise Solutions/Software-as-a-Service (SaaS), Health- Tech, FinTech, Digital Lifestyle, eCommerce & Marketplace, and Edutech
Disbursed P332 million for 66,000 fintech-enabled loans for personal and business uses
BPI Provided P445.5 million of micro-finance loans for self-employed micro-entrepreneurs through BPI Direct BanKo
(indirect contribution) 15.5 percent increase in total banks loans disbursed, from P1 trillion to P1.2 trillion
ALI 22 percent increase in gross leasable area of offices, from 836,000 to 1.02 million sqm with the opening of six buildings 11 percent increase in malls’ gross leasable area, from 1.62 million to 1.8 million sqm with the opening of five malls Reviving the Philippine’s position as a manufacturing hub: AC Industrials IMI Manufactured more than 31 million units of automotive, connectivity and smart energy technology components
Addressing Pain points in Mobility AC Infra 6 percent increase in LRT 1 passengers, from 148 million to 157 million due to improved train punctuality
Improved train quality, from 98.33 to 99.39 percent due to restoration of 9 non-working trains and extension of operating hours 21 percent increase in vehicles accommodated per day, from 24,000 to 29,000 by MCX, with potential savings of P519 million in fuel consumption and man-hours 241 million contactless payment transactions amounting to P4.6 billion for train, bus rides, retail and tollways through beep ™ ALI 8 Ayala malls serve as loading and unloading terminals for 9 Point-to-Point (P2P) bus routes Managing Risks and Opportunities of Climate Change GLOBE 347 percent increase in green solutions, from 750 to 3,350 ranging from fuel cells, lithium ion batteries, FCS, DC-HPU and DC generator sets
BPI 8 percent increase in total amount insured for catastrophies and natural hazards
72 2017 Ayala Corporation Integrated Report Social Ensuring Community Health and Safety AC Health 3.5 percent increase in total sales transaction count, from 40.3 to 41.7 million at Generika drugstores 4.5 percent increase in sales transaction count, from 31.4 to 32.8 million generic medicines Three times more unique patients served, from 14,769 to 65,102 through FamilyDOC clinics Engaged 100 corporate clients covering 60,000 employees for an improved health benefits management system and cheaper medicine through MedGrocer MWC Total of 212,000 connections since the inception of Tubig Para Sa Barangay, affordable water program for the marginalized
IMI Two times more automotive cameras assembled, from 1.96 to 4.3 million to improve road safety
Education and Youth Leadership AC Education 16,219 students enrolled in 23 APEC Schools in Metro Manila and Cavite for SY 2017-2018, 60 percent comes from D and E income segments AFI Total of 1,449 Ayala Young Leaders Congress alumni since the program started in 1999
Fostering Financial Wellness BPI 24 percent increase in Jumpstart accounts to promote saving to the youth
Building Sustainable Livelihood AFI 21 percent increase in average monthly income, from P6,200 to P7,000, of farmers in a livelihood project in Calauan Provided livelihood to 242 Mangyan weavers in Talipanan, Puerto Galera 14.2 percent increase in Mangyan product sales from P5.2 million to P5.94 million (indirect contribution)
Environmental Smarter Energy Measures AC Energy 1,349MW and 268MW attributable capacities for thermal and renewable energy assets, respectively 9 percent increase in power generated, from 5,992.6 to 6,552.1GWh. 1,774GWh of which is attributable to AC Energy 20 percent increase in power generated, from 342.1 to 410.3 GWh from renewable energy sources
This led to a 22 percent increase in greenhouse gas avoidance, from 160,476.0 to196,224.2 tonnes CO2e MWC Generates 1.3kWh of electricity per day from 0.67 cubic meters of septage through its waste-to-energy facility
Advocating Climate Change Action Ayala companies Total of 3,498 seedlings planted in 2.19 hectares of land in Pagudpud, Ilocos Norte for Project Kasibulan ALI Established and protects 450 hectares of carbon forests
BPI 36 percent increase, from P84.7 to P115.1 billion in loans disbursed for energy projects
Water and Sanitation for All MWC 4 percent increase in volume of water supplied, from 550.2 to 570.0 million cubic meters 7 percent increase in water abstracted, from 653.2 to 682.3 million cubic meters
6 percent increase in sewers, from 139,482 to 147,431 that are connected to sewage treatment plants 10 percent increase in volume of used water treated, from 51.5 to 56.4 million cubic meters avoiding 57,248 tonnes of carbon dioxide emissions Our Natural Capital: Ecosystems and Biodiversity ALI Protects 34 IUCN species and 14 threatened species as classified by DENR MWC Planted 15,800 seedlings in La Mesa watershed and 1,700 seedlings in Ipo watershed, covering 79 and 4.3 hectares respectively
INTO THE FUTURE 73 PERFORMANCE HIGHLIGHTS ECONOMIC, ENVIRONMENTAL AND SOCIAL
2017 Percent change Relevant SDGs Performance from 2016 Economic Economic Value Generated (Ayala Corporation) Billion peso 259.66 19% Consolidated Revenues (Group-wide)* Billion peso 463.84 15% Economic Value Distributed to Stakeholders (Group-wide)* Billion peso 377.19 17%
Capital Investments (Group-wide) Billion peso 173.50 5%
Social Direct Jobs Generated Head count 55,264 13% Other Jobs Generated Head count 83,810 11% Group-wide Turnover Percent 7.5% (69%) Male: Female ratio 1:1.33 1:1.37
(indirect contribution)
Employee Engagement Score Percent 88% 0 ** Total Employee Training Hours Million hours 1,288,875 52% Average Employee Training Hours hours per employee 23.3 34%
Environment Total Energy Generated Gigawatt-hours 6,552.1 9% Total Energy Generated from Renewable Sources Gigawatt-hours 410.3 20%
Total Energy Consumed Million gigajoules 27.9 28% Energy Intensity Gigajoules per million peso 54.0 6%
GHG Emissions (Scope 1 and 2) Million tonnes of CO2e 3.0 23% GHG Intensity Tonnes of CO2e per million peso 5.7 1%
Total Water Delivered (m3) Million cubic meters 570.0 4%
Total Water Consumed (m3) Million cubic meters 14.5 28% Water Consumption Intensity Cubic meter per million peso 28.1 (5%)
Hazardous Waste Generated Tonnes 1,788.7 48% Non-hazardous Waste Generated Tonnes 36,167.1 (9%) Construction Waste (Ayala Land) Cubic meters 838,519.6 52% Consumed Cement and Steel (Ayala Land) Tonnes 521,501.0 (5%)
*Excludes Ayala Corporation since portions of the individual companies’ revenue are reflected in the parent company’s economic value generated **The employee engagement survey of the Ayala group is done only every two years
74 2017 Ayala Corporation Integrated Report Economic Section EXTENDING ECONOMIC PROGRESS
Ayala is committed to driving broad-based economic gains for more Filipinos. As one of the oldest and largest conglomerates in the country, we have played a key role, and shall continue to use our leading position, in working for inclusive economic growth.
We expand our business network and pursue strategic acquisitions in a bid to enlarge the value we generate and redistribute back to the economy. We also pursue innovative business strategies to support other businesses and increase the potential gains of entrepreneurship for start-ups and new players.
We develop large-scale infrastructure and growth centers that continue to attract top investors and spur economic growth for more people. We have also started to invest more in industrial manufacturing to revive the country’s position as a manufacturing hub and exporter of quality industrial products.
By using our businesses as platforms for economic sustainability, we are able to generate greater economic values for society, fill gaps in developmental services, and forge wider pathways to inclusive growth across our supply chain.
REDISTRIBUTING group increased by 15 percent from alone, our subsidiaries paid about ECONOMIC VALUES BACK P402.3 billion to P463.8 billion in 51 percent of revenues to suppliers TO SOCIETY 2017. This growth was primarily to cover operating costs, eight Ayala’s businesses are engines for driven by significant revenue percent to government, 13 percent economic growth as we continue increases recorded by Ayala Land, to providers of capital, 10 percent to redistribute significant portions IMI, and Globe. to employees, and invested 0.04 of our profits back to the national Consolidated Economic Value Generated percent into communities. To sustain economy. by Ayala Companies the operations of our respective companies, we retained and Our five-year cumulative group-wide reinvested 19 percent of the total 15% capital expenditures are now at PhP 463.84 economic value we generated. 11% P748.3 billion. This includes our PhP 402.34 investments in shared-value business PhP 362.12 models, such as our new ventures in energy, industrial technologies, infrastructure, healthcare, and education. 19% 0.08% 20% 0.06% 19% 0.04% THE AYALA GROUP SUPPORTS 9% 9% 8% THE NATIONAL ECONOMY (201-1) 14% 14% 13% 10% 10% 10% Our economic impact comes mainly 2015 2016 2017 from our subsidiaries. They directly conduct business with suppliers, Total in billion pesos Percent increase create employment opportunities, generate shareholder returns, pay Breakdown of Consolidated 47% 48% 51% loan providers, remit taxes, and Economic Value Distributed and 2015 2016 2017 enable and empower communities. Retained by Ayala Companies Over the past three years, our Consolidated Economic Value companies have distributed about Generated by Ayala Companies 81 percent of their revenues to Consolidated revenues of the Ayala their key stakeholders. In 2017
INTO THE FUTURE 75 At the Parent Company Level (201-1) and financing charges. About P255 Integrated Micro-electronics, Inc., million went to local community through its subsidiary Integrated Economic Value Generated by investments, through Ayala Micro-electronics UK Limited, Ayala Corporation Foundation and other partners. acquired an 80 percent stake in Our total economic value generated Surface Technology International, a in 2017 increased by 19 percent from private company based in the United P217.6 billion to P259.7 billion. This Kingdom, which provides electronics growth was driven by an increase design and manufacturing solutions 0.31% 2% 0.10% in equity earnings contributions 0.19% for high-reliability industries (i.e. from our companies, led by Ayala 20% 19% medical, automotive, aerospace, 23% 8% 9% Land and AC Energy. We distributed 9% 8% and defense) that have production 8% this economic value generated 10% standards of low to zero defects per to our various stakeholders, million. STI has two factories in Hook supporting the productivity of the and Poynton and a design center country’s economy and extending in London in the UK, as well as, one opportunities to more Filipinos. factory in Cebu, Philippines. 58% 61% 65% (1%) (0.16%) 2015 2016 2017 AC Ventures now owns a stake in Economic Value Generated by Ayala Corporation Fintech Innovations, Inc. (Mynt) in a bid to help drive, and capitalize on the growth of the online financial services market. It also ventured into e-commerce by acquiring 19% 12% PhP 259.66 43.2 percent of BF Jade E-Service PhP 217.61 PhP 193.76 Philippines, the company that owns STRATEGIC ACQUISITIONS FOR and operates Zalora Philippines. CONTINUED GROWTH (102-10) Ayala Land, BPI Capital Corporation, In order to create more shared value and Kickstart Ventures also bought and better support overall economic minority shares in Zalora. 2015 2016 2017 growth, we continue to seize opportunities to scale our operations AC Industrials acquired a controlling and further diversify our income stake in Misslbeck Technologies
Total in billion pesos streams. GmBH, a German-based automotive Percent increase supplier of models, tools and Over the past years, we have plastic parts to automotive original vigorously expanded our portfolio equipment manufacturers and Breakdown of Consolidated by investing in industries that have automobile tier 1 suppliers. Economic Value Distributed and the potential to deliver greater Retained by Ayala Corporation social value and financial returns. AC Health recently invested in In 2017, Ayala Corporation We are also looking into strategies, Wellbridge Health, Inc., which distributed about 100 percent of innovations, and emerging operates MedGrocer, an ePharmacy its generated economic value as business models and sectors that business that provides quality payments to its key stakeholders, a are disrupting the way goods and services at lower costs. 21 percent increase from 2016. services are delivered. Of the total economic value AC Energy took over Bronzeoak generated, 65 percent was paid to Through its Singaporean unit Manila Philippines, Inc. in early 2017, and local and foreign suppliers. About 19 Water South Asia Holdings Pte. rebranded the company to AC percent was paid to the government Ltd, Manila Water now owns 37.99 Energy DevCo, Inc. It acquired 100 in the form of taxes and licenses. percent of the outstanding capital percent ownership of Bronzeoak Eight percent was distributed to stock of Saigon Water Infrastructure Clean Energy and San Carlos Clean employees to cover wages and Corporation in Vietnam and Energy. Additionally, it acquired a benefits, while another eight is expanding its reach across 19.8 percent stake in the Indonesian percent was distributed to capital Southeast Asia. geothermal assets of Chevron. providers as dividends, and interest Moreover, AC Energy through its
76 2017 Ayala Corporation Integrated Report affiliate, AC Energy International MULTIPLYING GAINS BY Holdings Pte Ltd., a Singapore private SUPPORTING OTHER limited company, invested in a 75 BUSINESSES (203-2) MW wind farm project in South Ayala’s innovative spirit, significant Sulawesi, Indonesia. The project market reach, and strong will be developed through PT UPC commitment to overall national Sidrap Bayu Energi, a special purpose development inspire our companies company based in Indonesia. to pursue strategies that enrich and empower other businesses. Through AC Infrastructure Holdings, BPI Card innovative business models, we Finance Corporation, and Globe are able to deliver more products have a total stake of 26 percent in AF and services that help more groups Payments, Inc. which is a consortium to find entrepreneurial solutions with First Pacific group. AFPI provides to economic and developmental contactless payments solutions for challenges. Once completed, the Sidrap project will be the Filipino public. Indonesia’s first utility scale wind farm. PROVIDING TOOLS TO BOOST BUSINESS PRODUCTIVITY: GLOBE Moving beyond calls, text, and
Ayala Company Companies Acquired Current Asset Description data promos, Globe provides an Ownership enabling environment for businesses Manila Water Saigon Water 37.99% Provider of water and wastewater management through digital technologies. Globe Infrastructure services to municipal entities, businesses, and myBusiness provides customizable Corporation manufacturers in Vietnam and affordable business solutions Integrated Micro- Surface Technology 80% Contract electronics manufacturer based in electronics, Inc. International the UK which provides electronics design and to micro, small, and medium manufacturing solutions for high-reliability enterprises. Globe’s goal is to give industries, such as aerospace and defense, that small businesses a competitive has production standards of low to zero defect per million. advantage by improving their AC Ventures Globe Fintech 10% Financial technology unit of Globe providing a efficiency and productivity, and Innovations, Inc. (Mynt) one-stop shop of financial technology services reducing their operating costs. for consumers, merchants, and organizations through GCash, a micropayment service These products and services provider, and Fuse, a technology-based lending include Cloud Solutions, Digital company Payments and Website Development BF Jade E-Services 43.2% Owns and operates Zalora Philippines, an online and Management, Sales Force Philippines fashion retail platform Automation, and Security and Asset AC Industrials Misslbeck Technologies 94.9% German-based automotive supplier of models, Tracking, among others. For 2017, GmBH (MT) tools, and plastic parts to automotive original equipment manufacturers and automobile tier Globe myBusiness engaged MSMEs 1 suppliers in tourism (hotels, restaurants, cafés), AC Health Wellbridge Health Inc. 17% Domestic start-up that operates MedGrocer, retail, manufacturing, financial, and which provides affordable medicines and healthcare management solutions using education sectors. technology AC Energy San Carlos Clean Energy 100% Operates and provides management support On the other hand, Globe (rebranded to AC Energy services to San Carlos Solar Energy Inc. and Business provides end-to-end DevCo, Inc.) Negros Island Solar Energy Inc. with a total capacity of 143 MW mobile and fixed line solutions Bronzeoak Philippines, that serve large enterprises. They Inc. (rebranded to Visayas Renewables Corp.) also provide IT-enabled services through their ICT unit. These Star Energy Geothermal 19.8% Indonesian consortium that owns and operates (Salak-Darajat) B.V. Darajat and Salak geothermal fields in West include Connectivity Solutions, Java, Indonesia, with a combined capacity of Mobility Solutions, Business Voice 637MW of steam and power Solutions, Collaboration Solutions, AC Infrastructure, AF Payments, Inc. 26% Consortium between Ayala group and First BPI Card Finance Pacific group serving as a contactless electronic Machine-to-Machine Solutions, and Corporation, payment system provider, beepTM as the main IT-enabled services. In 2017, Globe Globe product Business engaged several Top 5000 Philippine companies in the financial,
INTO THE FUTURE 77 healthcare, IT-BPO, logistics and adult population — gain access to safe that it provides the right products, transportation, manufacturing, retail, and more convenient payment and whether business or personal and public sectors. lending platforms. Currently, Mynt has loans. Loan sizes range from P300 two innovative products, which help to P300,000. FUSE communicates INSPIRING MORE drive financial inclusion: GCash and updates and approvals to clients ENTREPRENEURS: Fuse. through their mobile phones. KICKSTART VENTURES Disbursements are flexible as they Another Globe subsidiary, venture Globe subscribers enrolled in can be done through GCash, bank capital firm Kickstart Ventures, has GCash can use basic services, such deposit, or check. In 2017, FUSE been supporting startups develop as sending money and paying released a total of 66,000 loans new products and services through bills, using their mobile phones. amounting to P332 million. collaborative digital platforms. GCash users may also shop online To date, Kickstart has invested in worldwide through American ENABLING BUSINESS 35 startups in five countries: the Express Virtual Pay, a virtual card GROWTH: BPI Philippines, Indonesia, Israel, Canada, linked to their GCash accounts. By BPI continues to help more and the US. Kickstart supports start- the end of 2017, a total of 5.1 million entrepreneurs to pursue their ups from the fields of enterprise Globe subscribers already use GCash dreams through its various loan solutions/software-as-a-service, with an average of P6 billion worth of programs. These lending channels healthtech, fintech, digital lifestyle, transactions per month. have benefited not only large ecommerce & marketplace, and companies, but also small and edutech. In 2017, GCash also launched Scan medium enterprises. In 2017, almost to Pay, a new payment option that 81 percent of BPI’s total loan portfolio To address poverty-related issues allows customers to pay for goods was availed by these segments. The in the country through the use and services by simply using their remaining 19 percent composed of of technology, Globe, together smartphones to scan QR codes. retail loans. with Kickstart, Globe Labs, and This innovation also helps business Ashoka Philippines, mounted the owners as they can now charge BPI’s comprehensive range of Globe Telecom Future Makers customers simply through QR code lending products includes short- Program where 135 startups and stickers, diminishing the need term inventory and trade financing, individuals from various parts of to purchase expensive payment term facilities for the financing of the country displayed their unique terminals and systems. capital expenditures or acquisitions, and innovative ideas. Out of the and project financing. These loans five startups who won the GFM Fuse Lending, Inc., meanwhile, is are aimed to drive both urban competition, Globe chose iVolunteer a licensed lending institution that and countryside growth. As a and Virtualahan as Philippine caters to the underserved and financial advisor, BPI ensures that representatives to the “SingTel Group unbanked population of the country. loan packages are flexible to cater Regional Future Makers 2017” in It seeks first to understand the loan to different business needs. The Australia. iVolunteer is a platform needs of its customers to ensure total outstanding loans availed linking individuals to small non- governmental organizations. On the other hand, Virtualahan is another platform for learning and capacity building for people with disabilities and medical conditions.
EXPANDING OPPORTUNITIES FOR THE UNBANKED: MYNT Ayala Corporation and Globe Fintech Innovations, Inc. (Mynt) partnered with the Ant Financial Services Group. This partnership with one of the world’s leading digital financial services provider aims to help more Filipinos — especially the unbanked, Mobile platforms create opportunities to expand products and services. which comprise over 50 percent of the
78 2017 Ayala Corporation Integrated Report by corporate clients grew by 15.5 allowing them to move away from new offices in 2017, namely, Circuit percent from P1 trillion in 2016 to unlicensed money lenders. BPO Tower 1 and 2 in Makati, The P1.2 trillion in 2017. 30th Corporate Center in Pasig, One By the end of 2017, a total of 103 Bonifacio High Street in BGC, Tech In 2017, real estate and Direct BanKo branches and micro- Tower Cebu and Vertis North BPO 2 manufacturing were the top banking offices were opened, from in Quezon City. This expanded the sectors in BPI’s loan portfolio. On a only 10 in 2016. Its micro-finance total gross leasable area of Ayala macroeconomic level, these sectors loan portfolio has reached P445.5 Land’s office leasing portfolio from were also two of the main drivers of million covering 8,291 micro-finance 836,000 square meters in 2016 to GDP growth in 2017. Another sector clients. 1.02 million square meters at the end with a highly significant proportion of 2017. of corporate loans is wholesale and As a vehicle for financial inclusion, retail trade. BanKo disbursed 94 percent of its loans to areas outside Metro Manila. BPI also grants loans to firms For its efforts towards promoting engaged in agriculture and related financial inclusion, BanKo was named industries such as piggeries, poultry, The Microfinance Initiative of the Year livestock, milling, agri-trading by The Asian Banker in its Philippines and food processing. These loans Country Awards 2017 . contribute to the modernization of farming operations, ensuring CREATING CENTERS OF improved quality and continuous ECONOMIC GROWTH: AYALA productivity. As of 2017, the LAND bank disbursed P156 billion in Ayala Land continues to lead the agribusiness loans. way in developing large-scale, mixed-use estates that become leading economic hubs and growth centers across the country. As of 2017, the company has created and is now managing 25 estates in key Vertis North is in a 30-hectare masterplanned estate in cities across all major regions of the Quezon City. Philippines. All these developments continue to attract both global and national locators and investors. REVIVING THE PHILIPPINE’S They also enhance local economies POSITION AS A through the growth of commerce MANUFACTURING HUB (203-2) and trade and the provision of Through AC Industrials, Ayala is infrastructure that inspire new taking advantage of the ongoing entrepreneurial ventures. disruption in the manufacturing space, particularly in the In 2017, the company also turned- automotive sector. By maximizing over 12,673 residential units, and our investments in industrial completed new hotels and resorts technology, we strive to contribute with a total of 556 rooms. Ayala to the renaissance of the Philippine FOSTERING FINANCIAL Land opened five new malls in 2017, manufacturing sector, which we INCLUSION: BPI DIRECT BANKO namely, The 30th in Pasig, Ayala Malls believe can contribute significantly to As part of its thrust to provide Vertis North, Ayala Malls Cloverleaf economic growth and employment financial services to all Filipinos, in Quezon City, Ayala Malls Marikina generation. BPI established Direct BanKo, Inc. and Ayala Malls Feliz, Marikina. This which provides financial solutions to brought the total gross leasable area Our global manufacturing arm, self-employed micro-entrepreneurs. of shopping centers from 1.62 million IMI has expanded its capabilities BanKo allows the unbanked to get square meters in 2016 to 1.80 million to move beyond traditional easier access to loans with simple square meters at the end of 2017. electronics manufacturing services. administrative requirements, The company also completed six The company works with partners
INTO THE FUTURE 79 and customers in co-designing ADDRESSING PAIN POINTS and co-engineering a wide array IN MOBILITY (203-1) of manufacturing solutions. As the economy grows, the need for IMI has increased its markets to efficient mobility rises and transport include aerospace and defense, challenges become more difficult on top of automotive, industrial, to manage. In partnership with the telecommunications, consumer, government and other companies, medical, renewable energy, and Ayala supports major efforts to power semiconductors. achieve sustainable transport solutions and address worsening One of the areas with growing traffic congestion in our cities. potential is the manufacturing Through AC Infrastructure, Ayala and supply of sensing cameras, supports national efforts to expand night vision, and rearview cameras, and strengthen our transport as demand for advanced driver infrastructure. With toll road and rail assistance systems rises. In 2017, projects under the government’s IMI Philippines produced 4.3 million public-private partnership program, LRMC works to ensure that automotive cameras. IMI is also AC Infrastructure aims to improve passengers need not wait in long involved in the development of the transport of people, goods, and queues by optimizing interval time mirror replacement technologies services for more communities. that will enable cameras to replace between running trains. Train interval during peak hours decreased from side mirrors, allowing clearer, more IMPROVING EXISTING five minutes in 2016 to 3.4 minutes in accurate displays for drivers. INFRASTRUCTURE: LRMC 2017. Likewise, train interval during With growing demand for electric In Metro Manila, the train system is off-peak hours declined from six vehicles, there is an equal need for one of the most widely used public minutes in 2016 to 4.3 minutes in accessible charging infrastructure. transport systems. At present, there 2017. Train punctuality also improved One of IMI’s major customers in are three operational lines in the from 98.3 percent in 2016 to 99.39 Chengdu, China, is a top service capital’s railway system, with the LRT percent in 2017. provider of charging solutions for Line 1 as the oldest. AC Infrastructure electric vehicles, capturing about 43 engaged in a joint venture with The time it takes for a train to percent of total market share. IMI’s Metro Pacific Rail Corporation and complete a journey from a terminal involvement in this segment will Philippine Investment Alliance for station and back, also called average pave the way for the company to Infrastructure Fund to form Light cycle time, is at one hour and 42 capture more opportunities in the Rail Manila Corporation which minutes in 2017. This is lower by evolution of cars. now operates LRT-1, which spans seven minutes compared to 2016. Roosevelt in Quezon City to Baclaran These resulted in a 15 percent In 2017, IMI won several power in Pasay City. module projects for high power increase in daily passenger capacity from 560,580 in 2016 to 644,108 applications from a French-Italian No new light rail vehicles were in 2017. The annual number of multinational electronics and purchased since the turnover of passengers increased by six percent semiconductor manufacturer, for LRT-1 operations to LRMC in 2015. from 148 million in 2016 to 157 both industrial and automotive However, the company spent P124.3 million in 2017. On a daily basis, products. The need for more cost- million and P408 million in 2016 and average passengers increased from effective energy management 2017, respectively, for the restoration 409,785 in 2016 to 434,657 in 2017. systems will continue to rise due and rehabilitation of existing LRVs. A to the increasing demand for high significant number of trains were fixed Incidents of total stoppage, late power applications in cars, motor and there are now 109 operating LRVs arrival, and late departure of trains drives, charging and heating systems, from 77 units in 2015. inverters, welding tools, climate substantially declined compared to 2016. This is attributed to various control systems, uninterrupted LRMC also implemented extended management efforts. Instead of power supplies, and other high- operating hours to better serve the relying solely on high-speed line power applications. In all, IMI commuting public: 4:30 AM to 10:15 technicians, train drivers are enabled manufactured 31 million units of PM for southbound trains and 4:30 AM to assess immediate train concerns, various technological components. to 10:00 PM for northbound trains. thus reducing response time.
80 2017 Ayala Corporation Integrated Report Also, LRMC staff strictly adheres AFPI’s current product, beepTM , is and observed properly. Buses are to the Safety Code system, which an electronic wallet which can be equipped with wider seats, WiFi, guides them in implementing used to pay for train and bus rides, CCTV, and Euro 5 gas engines which the appropriate series of actions toll fees, and even retail purchases. reduce emissions. during train delays or stoppages. beepTM cards can be purchased and The company further provides reloaded primarily through ticket As a partner company, Ayala employees with periodic training and vending machines and teller booths Land primarily provides terminal refresher courses, and acquires new at LRT and MRT stations, at select and parking space, and assists in technologies to improve train traffic partner establishments, and through housekeeping, traffic management, management. Coins.ph. AFPI had a loading partner and marketing efforts for the P2P network of approximately 400 at the bus service. By the end of 2017, Train failures caused by faulty end of 2017. Ayala Malls that serve as loading and parts typically require the overseas unloading points include Trinoma, procurement of spare parts, which In 2017, the total number of card Glorietta, Alabang Town Center, is a lengthy process. Through its transactions reached 241 million with Greenbelt, SouthPark, Market! Laboratory Repair Section, LRMC a total value of P4.6 billion. Of this Market!, UP Town Center, and is already capable of repairing amount, 95 percent were for train Solenad, supporting a total of nine defective electronic modules, cards, rides, 4.6 percent for bus, and the rest routes. and control equipment. This allows were from retail and toll fees. LRMC to conduct its maintenance MANAGING THE RISKS and repair activities in a timely SUPPORTING PUBLIC AND OPPORTUNITIES OF manner, resulting in fewer failure TRANSPORTATION: AYALA LAND incidents and considerable financial To reduce congestion in Metro CLIMATE CHANGE (201-2) savings. Manila and encourage car owners At the Ayala group, we are cognizant to shift to public transportation, that our economic advances will DEVELOPING STRATEGIC the Department of Transportation be reversed if we fail to address INFRASTRUCTURE: MCX launched the Premium Point-to-Point climate-related challenges today. In 2015, Ayala Corporation bus service in certain areas. This We support efforts to increase launched the Muntinlupa-Cavite was done in collaboration with local awareness of the dangers of climate Expressway, its first toll road under government units, bus operators, change while developing business the government’s public-private and real estate developers. solutions to mitigate its harmful partnership program. This four- effects. In partnership with various kilometer, four-lane road connects P2P buses offer express services environmental and civil society Daang Hari in Las Piñas to SLEX to and from designated locations, groups, we continue to highlight through Susana Heights, easing with no stops to pick up passengers. the critical role businesses play in traffic and providing an alternative Departure times are scheduled preventing further global warming. route to motorists. Dedicated personnel monitor train operations. Average daily traffic recorded by MCX increased to 29,000 in 2017. This also helped motorists potentially save P165 million in man-hours, and P354 million in fuel consumption otherwise lost to traffic in 2017.
EASING PAYMENTS IN PUBLIC TRANSPORT: AF PAYMENTS To ensure greater convenience in the purchase of bus and train tickets, the Ayala Group has formed a consortium, AF Payments, Inc., with the First Pacific group to develop a more efficient contactless payment system.
INTO THE FUTURE 81 REDUCING CLIMATE CHANGE IMPACT THROUGH INFRASTRUCTURE From 750 in 2016, Globe now has 3,350 green solutions, ranging from fuel cells, lithium ion batteries, FCS, DC-HPU and DC Generator sets. With its fuel cell partner, Serenergy, Globe is undertaking an effort to make all its cell sites in the country greener. Serenergy supplies methanol fuel cell solutions to replace diesel generators and provide green power supply. Globe site operators underwent training to properly operate fuel Zalora has developed an efficient fulfillment solutions system. cell systems as part of its integrated network. Globe suppliers undergo a profile, financial soundness, and comprehensive accreditation process technical capabilities. IMI’s Supplier The DC Genset consumes less fuel which includes the assessment of Quality Engineering group conducts due to its load-following ability their technical and financial capability, qualification assessments based on the compared to an equivalent AC business continuity, safety, health, and company’s Supplier’s Quality manual, genset and has a longer service environmental policies. Apart from the quality management system and interval of approximately 500 screening process, Globe fosters strong other customer-specific requirements. hours. It is also a more cost-efficient business relations with its partners Environmental, Health and Safety solution compared to fuel cells for through its supply chain programs. The Standards, and Code of Conduct are open field sites. The quiet-type DC company opens learning opportunities integral parts of the screening criteria genset produces low noise at 48dBa to vendors through plant visits and of IMI for its suppliers. allowing its use even in residential technology briefings as well as vendor areas during power loss. clinics for selected suppliers to help Manila Water also ensures the improve their performance and compliance of vendors to financial PROTECTING ASSETS FROM RISK competitiveness. and technical requirements by OF DISASTERS implementing robust accreditation With more assets exposed to higher Ayala Land has institutionalized and pre-qualification processes. The climate risk, BPI’s insurance business a Vendors’ Code of Ethics which compliance of these vendors and continues to deliver insurance is anchored on the principles suppliers with environmental laws and solutions to protect its clients. In and standards of Ethical Supply other relevant standards are checked 2017, total amount insured for Management Conduct set by the extensively through these processes catastrophes or natural hazards grew Institute for Supply Management. The and is consistently monitored by eight percent. Total premiums Code is being updated to enhance throughout the period of engagement generated increased by 5.6 percent sustainable development provisions, with the company. from P5.62 billion to P5.94 billion. and to conform to the International Organization for Standardization We are working to further EXTENDING as specified in the guidelines for institutionalize our best practices in supply chain management and SUSTAINABILITY TO OUR Sustainable Procurement 20400:2017. Ayala Land’s suppliers undergo supplier assessment by developing SUPPLY CHAIN (102-9, 204-1) third-party screening to assess and strengthening related policies Our extensive supply chain across environmental performance and especially for our emerging operating companies presents ensure that they do not employ businesses. opportunities to improve the underage workers in their operations. economic resilience of businesses Audits are regularly done in project Ayala companies also engage local and individuals. By managing sites to ensure subcontractors and suppliers as much as possible. Globe, our supply chain through better vendors adhere to the General Manila Water and some AC Energy procurement processes, we improve Labor Standards. Ayala Land also companies spent P35 billion, P16.7 our business continuity while advocates for decent work practices billion, and P6.5 billion for local ensuring that we always do business in its supply chain to safeguard the suppliers, respectively. ethically and fairly. company from risks of forced, bonded, and indentured labor, child labor, Ayala’s major subsidiaries, such as discrimination, and harsh or inhumane Globe, Ayala Land, Manila Water, treatment. and IMI have comprehensive, publicly-disclosed policies on IMI conducts management supplier assessment and vendor assessments on potential suppliers accreditation. based on the suppliers’ company
82 2017 Ayala Corporation Integrated Report Social Section UNITING BUSINESS STRATEGY WITH SOCIAL IMPACT
At Ayala, we believe that serving the common good and working for social development are integral components of a profitable business strategy. We therefore strive to develop business models that unite profit with human development and social impact, creating both social and economic benefits for our communities.
The success of our businesses, moreover, is a direct function of human development and the well-being of our key stakeholder groups—our employees, our customers, and the communities around us. Their overall health and well-being, as well as their active participation in meaningful forms of social engagement, is therefore in our best interest.
In this section, we review our key programs that have directly contributed to improving the welfare of our communities, particularly those related to gainful employment, healthcare, education, and sustainable livelihood.
PROVIDING MEANINGFUL are formed, while sharing resources, In 2017, we continued our AND GAINFUL EMPLOYMENT maximizing opportunities, and partnership with leading professional At the heart of Ayala’s drive for finding pathways to new shared- services firm Willis Towers Watson. inclusive growth is a talented value approaches. We have adopted their framework workforce that executes our on Sustainable Engagement, which strategies and enables us to realize Over the years we continue to grow measures engagement in three our vision. The diverse interests of the and support more employees, as areas – Energy, Enablement, and Ayala group support about 139,000 evidenced by our high employment Engagement. jobs through our companies, directly rate of seven percent, which is higher employing more than 55,000. than the country’s average of We concluded our survey with a 1.1 percent1. 96 percent (30,271) participation We strive to provide meaningful and rate which is significantly higher gainful employment—the kind that Our approach to employee than the 81 percent Global Average also ensures continuing education engagement was affirmed in 2017 as Response Rate and two points and personal development. This Forbes Global 2000— higher compared to our 2015 overall commitment is proven by our high an annual ranking of the top participation rate. engagement scores and low turnover companies in the world by Forbes rate across the group. Magazine—named Ayala 18th This year, our SE score across the in its first-ever list of World’s Best Ayala group is at 88 percent, which is The diverse mix of expertise and Employers. one point above the Philippine norm interests among Ayala employees ENGAGING EMPLOYEES, THE enable us to pursue a wide variety Ayala’s 2017 Sustainable Engagement Index of shared-value business models. AYALA WAY (102-43) We assess our performance as an Our employees excel in their core 97% functions and also serve as our brand employer by our ability to keep our employees sustainably engaged. 87% ambassadors in and outside the 83% conglomerate to promote Ayala’s A deeper understanding of what values and its spirit of innovation keeps our employees motivated and through collaboration. involved allows us to design policies and programs that create a better Every day, our employees ensure that work environment. We measure synergies and creative partnerships this through third-party surveys administered every two years.
1 This indicates that about 70 employees (net of turnover) are added to the company for every 1,000 employed, which is a lot higher compared to the national average of 11 new hires per 1,000 employees during the third quarter of 2017, as indicated by the Philippine Statistics Authority’s report on Labor Turnover.
INTO THE FUTURE 83 and two points above the Global Sustainable Engagement score further. teams more effective and energized. High Performing Norm. The SE score A healthy exchange of ideas is is the simple average of scores across Trust in Leadership crucial for achievement of the the areas of Energy, Enablement, and High levels of confidence in team’s deliverables. Fundamental Engagement. management decisions keep to maintaining good working employees highly engaged. Ayala relations is how each employee feels A key finding indicates that our actively works to reach such levels respected. A good 88 percent of our employees possess a strong affinity of trust, with 83 percent of Ayala employees say they are treated with with our respective company brands employees saying that they consider respect regardless of their role. and goals. management decisions to be consistent with the values of the Balancing Work and Leisure at About 87 percent of our employees organization. Ayala consider themselves energized, Acknowledging the importance meaning they derive a sense of In this respect, the Ayala group scored of work-life balance, the company personal accomplishment in their six percentage points higher than provides opportunities for work and in working with their the Philippine norm due to a number employees to engage in sports peers. As a result, they tend to have of factors. 85 percent are convinced or leisure activities. The company a good individual, interpersonal, and that their management is interested holds an annual foundation day, a emotional outlook at work. in the well-being of the employees. yearly summer outing, and special In addition, our employees have celebrations for holidays such as Enabled employees believe that a high regard for the standards of Halloween and Christmas. There are resources and tools are available for integrity across the organization. 92 quarterly activities ranging from fun them to do their job effectively with percent believe that their respective runs, health and wellness events, and fewer obstacles. Around 82 percent companies operate with integrity in movie nights. Most of these events of our workforce find themselves external dealings with customers and are open to the dependents of our enabled. suppliers, among others. A majority employees. are willing to report instances of Moreover, 96 percent of our dishonest or unethical practices To further promote healthy employees find themselves engaged. to appropriate authorities without living, Ayala supports the gym Engaged employees work beyond fear of reprisal. In fact, 80 percent of memberships of Ayala Corporation what is required to ensure our employees say internal processes are employees and encourages them success. They have a strong belief geared toward providing the best to engage in sports through the in our goals and objectives and possible service to our external clients. JZA Cup, named after our chairman manifest pride in being associated emeritus Jaime Zobel de Ayala. This with Ayala. Employees also appreciate the Cup is a year-long tournament in way we provide feedback and golf, bowling, badminton, volleyball, Key Engagement Drivers recognition. About 79 percent and street dance. Every four years, Across the Ayala group, the following says they get regular feedback the group also holds the Ayala categories are the strongest on their performance from their Olympics where employees from influencers on our Sustainable supervisors and 81 percent says their across the group unite through Engagement score: Empowerment, supervisor gives due recognition for sports tournaments like track-and- Operating Efficiency, and Stress, outstanding work. field, cheerdance, and more. Balance, and Workload. Continued efforts in these areas Healthy Working Relationships ENSURING OUR EMPLOYEES’ will help drive and improve our Good working relationships make HEALTH AND WELL-BEING (403-2) Ayala ensures that our employees Key Drivers Our Definition 2017 2015 and dependents enjoy continuous Empowerment Relates to whether employees believe that 90% 89% medical and dental care and undergo they have sufficient authority and decision making to do their job well and that annual and executive checkups. their work contributes to achievement of Our vaccination program is held company’s business objectives annually to combat flu, hepatitis B, Operating Efficiency Measures our effort to make our operations 87% 85% cervical cancer, and pneumonia. The more streamlined and cost-effective company also maintains an on-site through use of appropriate technology and medical clinic managed by doctors continual process improvement and nurses; it is supervised by one of Stress, Balance, and Provides information on how the employees 70% 64% the top hospitals in the country. First- Workload feel the support provided by the company in terms of sufficient number of employees aid support and over-the-counter handling the workload as well as how their medicines are given in this clinic. schedule allows sufficient flexibility to meet On a group-wide basis, we track our their personal/family needs employee’s health and instances
84 2017 Ayala Corporation Integrated Report of illnesses, and review our records development and lifelong learning. periodically to create safer and MDC TTAC: Developing healthier working environments2. Ayala University: Catalyst for Developing Leaders in Ayala Builders that Build the Nation Embracing wellness, Ayala started Ayala Corporation is on the frontlines the “Ayala Goes Healthy” program, of employee development through Ayala Land, through its which brings together interest clubs its strong support of continued construction arm Makati across the group to collaborate and learning. This is embodied by Ayala Development Corporation, create wellness programs, such as University, which now serves as a established the MDC Technical sports events, blood-donation drives, catalyst for innovative learning and Training Assessment Center, and health-and-safety lectures. development programs for Ayala which provides construction employees. The program forms skills to workers deployed Caring for the health and safety of linkages with Ayala leaders and in MDC’s construction sites. our workforce is key in ensuring centers of excellence across the Ayala Land initially invested that our employees perform at group and develops training sessions P3 milllion for the school’s maximum potential, and that we based on developmental needs of operations. Starting with a fulfill our responsibilities to them. individuals and business units. single training center and five As an example, Ayala Land provides mentors in 2016, the school yearly physical examinations, health In 2018, Ayala University will pilot grew to have eight technical risk assessments, and an extensive test the Alternative Work Spaces centers and 41 active trainers at health insurance coverage for project that aims to promote remote the end of 2017. employees. These privileges extend working platforms. to family members of employees. The skills trainings offered There are also nurses and doctors Globe University: Preparing in TTAC include: Masonry, stationed at Ayala Land’s head Employees for the Digital Age Carpentry, Electrical Installation office. For field personnel, stricter Globe’s flagship employee and Maintenance, Shield health and safety prevention development platform, Globe Metal Arc Welding, Scaffold practices have been set such as University, offers courses based on Erection, Truck-Mounted Crane designating safety and pollution the specific needs of each Globe Operation, and Kitchen Cabinet control officers, enforcing use of employee. Installation. The center also safety equipment, and establishing provides skills assessment emergency response plans. The program has reached 2,900 services and trainings for employees, 40 percent of Globe’s foremanship. Aside from Manila Water commits to ensuring workforce, and offers the following the technical sessions, the safety, preservation of life and health courses: Digital Marketing, Cloud center also aims to develop of its employees and stakeholders Technology, Agile Methodology, soft skills for workers such as: through its Safety, Health and Network Function Virtualization, understanding and adherence Welfare Policy. With an occupational Software Defined Network, to safety and quality programs, health and safety management Business Intelligence and Analytics, values enhancement and system in place, the company Information Security and Data Center application to daily activities continuously assesses its processes Training. of workers (i.e. concern and and improves its operations in order courteousness), among others. to manage its health and safety risks. To support the soft skills needed for holistic development, Globe As of 2017, the project had Likewise, Globe implements an OHS University, under the Leadership graduated 5,267 workers over Policy and adheres to the OHSAS Academy, also provides training 41,974 training hours. There 18001 standards for its occupational on Everyday Leadership, People are 7,927 active trainees, all health and safety management Management, and Fundamentals of of whom are also deployed in system. Leadership. New programs are set MDC projects. to be launched in the first quarter PEOPLE DEVELOPMENT IN AYALA of 2018, including: Leading with This initiative significantly (404-2) Emotional Intelligence, Collaborative improved the quality of The sustainability of Ayala’s Leadership, and Leading in the workmanship among MDC business is directly related to Digital Age. workers. Notably, their sense the knowledge and skills of our of self-worth also increased, employees. We therefore provide A Digital Learning Team also designs while the trainers are better ample opportunities for professional and creates digital learning tools. able to grasp their purpose in enriching the skills of their peers. 2The list of occupational health and safety incidents across the group can be found on page 187
INTO THE FUTURE 85 Some of the tools that the team developed include the e-learning Average Training Hours Per Rank development system, e-books library, and GU Online Learning Digest.
IMI ETEEAP: Providing
Opportunities for Higher 14.09 Education IMI-Philippines partnered with the University of Batangas for the Expanded Tertiary Education Equivalency and Accreditation Program. Through this scheme, IMI employees who are still undergraduates and have been employed for at least five years, can obtain an academic degree or Average training hours per Employment Figures (102-7, 102-8) complete their tertiary education, employee stands at 23.33 man- In 2017, around 10 percent of the based on their knowledge, skills, hours, a 34 percent increase from economic value generated by Ayala and prior learning achieved through 2016, reflecting Ayala’s commitment was distributed to its employees. Our actual working experience. In 2017, to people development. employee headcount increased by there were 18 graduates, two of 13 percent from 48,753 in 2016 to which were promoted to the next NEW HIRES AND TURNOVER 55,264 in 2017, as the group ramped employment rank after graduation. (401-1) up its operations. Ayala hired 7,991 new employees in Employee Training Hours (404-1) 2017, a hiring rate of 14.5 percent. In 2017, the Ayala group provided This is higher than the Philippine more than 1.2 million training hours average of 8.91 percent. Employee for employees. turnover this year totaled 4,148 which represents a reduction in labor turnover rate from 24.5 Group-wide Total Training Hours percent in 2016 to only 7.5 percent in 2017. This is lower than the 1,288,875 Philippine average of 7.81 in 20173.
809,614 849,929 CELEBRATING DIVERSITY AMONG THE WORKFORCE (405-1) The Ayala group provides equal employment opportunities regardless of gender, race, ethnicity, color, religion, marital status, 2015 2016 2017 disability, economic status, and
Ayala Corp IMI AC Energy political affiliation. Ayala Land AC Auto AC Infra BPI Live It AC Education Globe AC Healthcare Manila Water HCX AFI Total Generika conducts medical missions and other community Group-wide Average Training Hours activities.
23.33
16.47 17.43
2015 2016 2017 3Based on Philippine Statistics Authority survey in 2017
86 2017 Ayala Corporation Integrated Report Total Headcount of Direct Employees
55,264 49,155 48,753
BPI has dedicated teams and units to provide the best possible financial advice to its clients.
2015 2016 2017
Ayala Corp IMI AC Energy Total Ayala Land AC Auto AC Infra BPI Live It AC Education Globe AC Healthcare Manila Water HCX AFI IMI’s expanded manufacturing operations led to an 18 percent increase in employees. The Direct Employees by Gender expansion of our land development and water services projects increased 30,672 28,630 28,297 Ayala Land’s and Manila Water’s
23,116 headcount by 15 and 14 percent, 20,525 20,456 respectively. BPI’s operations rose to 942 branches and micro-financing offices this year, with a 12 percent increase in employee count, as the company continued to reach out to the unbanked. Female Female Female Group-wide demographics remain 2015 2016 2017 dynamic with approximately 43 Ayala Corp IMI AC Energy Total percent below 30 years of age and 51 Ayala Land AC Auto AC Infra BPI Live It AC Education percent within 31 to 50 years of age. Globe AC Healthcare Seven percent of our employees are Manila Water HCX AFI over 50 years old.
Male-to-female ratio in 2017 was Direct Employees by Age Group 1:1.33. 27,234 25,701 25,720 22,957 19,931 19,650 In 2017, around 66 percent of direct employees were rank and file, 31 percent were middle managers, and 3,523 3,383 3,597 three percent represented senior management.
er 50 years old er 50 years old er 50 years old w 30, years old w 30, years old w 30, years old 30-50 years old 30-50 years old 30-50 years old Ov Ov Ov Belo Belo Belo 2015 2016 2017
Ayala Corp IMI AC Energy Total Ayala Land AC Auto AC Infra BPI Live It AC Education Globe AC Healthcare Manila Water HCX AFI
INTO THE FUTURE 87 Extending Employment to Support Staff Direct Employees by Rank 35,058 The group’s operations also provide 31,114 32,646 meaningful employment to indirect
hires. These employees may not 16,251 perform core business functions, but 13,769 13,615 they nonetheless serve vital tasks that are crucial to the smooth flow of 1,481 1,397 1,477 daily operations. In 2017, the group nt nt
supported almost 84,000 indirect nt nt nt nt ile ile ile employees4.
COLLECTIVE BARGAINING Rank and F Rank and F Rank and F AGREEMENTS (102-41) Senior Manageme Senior Manageme Senior Manageme We uphold our employees’ right Middle Manageme Middle Manageme Middle Manageme to exercise freedom of association. 2015 2016 2017 Across the group, collective bargaining agreements provide Ayala Corp IMI AC Energy Total venues for employee groups to Ayala Land AC Auto AC Infra negotiate and settle labor disputes BPI Live It AC Education and voice out concerns regarding Globe AC Healthcare Manila Water HCX AFI employee development and remuneration5.
ENSURING COMMUNITY HEALTH AND SAFETY FamilyDOC provides quality primary care services to high-density communities in Mega Manila. Beyond ensuring the personal development and well-being of our employees and workers, we also take concrete steps to extend the social value we create to our communities at large. In order to create wider impact and better address development issues, we pursue innovative social enterprise models in key industries that can deliver social solutions at scale, such as healthcare and education.
BUILDING AN INCLUSIVE HEALTHCARE ECOSYSTEM: AC HEALTH Improving Philippine health outcomes is the core business strategy of AC Health. The company Providing Affordable Quality Generika started an electronic aims to build an inclusive healthcare Medicine through Generika gift certificate program called ecosystem with synergies across its All Generika drugstores are MedPadala. This allows Filipinos multiple assets. It seeks to improve compliant with the standards of the working abroad to ensure that a access to affordable healthcare Food and Drug Administration and specific portion of their remittances services for underserved Filipinos, ensure optimum levels of inventory can go towards meeting their family’s particularly the growing middle class. for stable availability of supplies. In medicine needs. Local residents can It currently has three subsidiaries: 2017, the company recorded a total also send medicine gift checks to Generika, FamilyDoc, and MedGrocer. of 41.7 million sales transactions, their loved ones living far from them. a 3.5 percent increase from 2016. This year, 3,110 transactions were Of these, 32.8 million are sales recorded for MedPadala. transactions for generic medicines.
4 The group-wide headcount for support staff can be found on page 187 5 The percentage of employees covered by collective bargaining agreements can be found on page 185
88 2017 Ayala Corporation Integrated Report Aside from providing affordable Clinics use customized electronic MedGrocer’s digital platform enables quality medicine, Generika also medical records system, developed better service levels at reduced offers PLUS services which includes by AC Health, to keep patient data costs. The company had a total of medicine guide, free consultations secured and centralized, accessible 593 unique customers and 1,221 and mobile laboratory services. only to authorized physicians across individual customer transactions all FamilyDOC branches. An average in 2017. MedGrocer also engaged Customers may request a medicine in-patient visit is around 43 minutes, 100 corporate clients for its services guide from Generika pharmacists including waiting time. In 2017, covering about 60,000 employees. when purchasing medicine to ensure FamilyDOC served an additional compliance with proper intake and 50,333 unique patients, pushing the DELIVERING AFFORDABLE WATER dosages. cumulative customer base to 65,102. Manila Water works to provide universal access to safe and potable They also offer free medical To further improve the skills of its water. consultations to customers. Mobile healthcare professionals, AC Health Laboratory services which includes now offers Family and Community The company fully complies with the Fasting Blood Sugar, Uric Acid, Serum Medicine, as an alternative residency Philippine National Standards for Glutamic Pyruvic Transaminase, program, for its licensed medical Drinking Water by safely managing Complete Blood Count, Cholesterol, doctors under FamilyDOC. The its water systems and ensuring that Blood Urea Nitrogen, Urinalysis, and program is accredited by the the water it provides meets the Electrocardiogram tests are offered Philippine Academy of Family health-based targets established at affordable prices. Schedules of free Physicians. Its curriculum and by the Department of Health. consultations and mobile laboratory training activities revolve around Manila Water observes operational are in the Generika website. the foundation courses prescribed excellence to be able to deliver by the PAFP which includes clinical clean, potable water to its customers, These programs and improvements and non-clinical courses. At the including underserved and unserved in customer service led to an 89.9 end of training, graduates will have communities. percent customer satisfaction rating, achieved terminal competencies up by 3.8 percent from 2016. congruent to the PAFP’s mandate Reaching Marginalized to provide patient-centered, family- Communities Providing Affordable Quality focused, and community-oriented Manila Water’s Tubig Para sa Primary Healthcare through care. Unique to the program is Barangay or Water for the FamilyDOC the inclusion of technology and Community Program continues FamilyDOC is a chain of community- exposure to specialized areas. to bring quality water services to based primary care clinics, offering low-income communities. TPSB the combined services of a clinic, a Deploying Technology for Better addresses pilferage and water loss by diagnostic facility, and a pharmacy. Access to Healthcare Products: providing water service connections By end of 2017, FamilyDOC had a MedGrocer to marginalized households at a total of 21 clinics: 15 branches in To increase accessibility and subsidized rate. From the Manila Metro Manila and six in Cavite. To affordability of healthcare services, Concession, TPSB has been replicated serve more people, FamilyDOC is Ayala invested in MedGrocer, a local in Boracay Water and Laguna Water. now open from 7:00 AM to 9:00 PM, start-up online pharmacy. Monday to Saturday. Since its inception in 1998, about MedGrocer offers an integrated 212,000 households have been FamilyDOC offers affordable doctor ePharmacy and health benefits connected to Manila Water’s services. consultations with a free follow-up management services for individual In 2017 alone, 355 households were within seven days after consultation. consumers and companies. It allows reached by the Manila Concession It provides ultrasound, x-ray services, customers to purchase medicines and Laguna Water. annual physical examination, and medical supplies online and have executive check-up, pre-natal care, these delivered to their homes. chronic disease maintenance, wound For corporate clients, MedGrocer care, minor surgery, and laboratory offers a health benefits management tests. It offers various medical system that administers, augments, packages to cater to different needs and analyzes in-patient and of its customers. outpatient health benefits to improve employee wellbeing and reduce costs.
INTO THE FUTURE 89 Providing High Quality Drinking Water Manila Water ensures that the water it delivers is safe and potable. However, there are people that are still wary of the residual levels of chlorine in tap water. There are UNC has a track record of excellence in board examination performance. also communities and households with rusty or old pipes that might contaminate their tap water supply. education or pursue employment after graduation. In response to this, Manila Water developed the Healthy Family brand APEC schools is aligned with of high-quality drinking water global best practices and uses a that can be directly delivered to unique curriculum that is designed customers. Healthy Family eliminates to enhance the employability of human intervention in the process students. In addition to core subjects, through full automation of “closed- the APEC curriculum has a strong loop” production systems. In 2017, service reminders to about 58,000 focus on English competency, self- they sold 5.5 million five-gallon customers, a 49 percent increase confidence building, and values bottles and 945,000 mini bottles from 2016. The percentage formation. The school also follows through 344 distributor partners of customers pursuing actual a student-centered collaborative across the nation. maintenance checks as a result of learning track, with non-traditional these reminders have also been learning facilitators and an immersive FOSTERING ROAD SAFETY increasing from 59 percent in 2015 learning environment. IMI has been developing innovative to 66 percent in 2016 and 68 percent after-market solutions to develop in 2017. Junior High School tuition fees for advanced driver assistance the whole year can go as low as systems, of which cameras are key EDUCATION AND P20,000 per year. And Senior High components to ensure road safety. YOUTH LEADERSHIP School is offered free at voucher IMI manufactures automotive Ayala supports national educational value for students from public school cameras in its Philippine sites. These while those from private school pay outcomes through AC Education 6 devices prevent road accidents and various educational initiatives of as low as P15,000 for the year . by assisting drivers through lane Ayala Foundation. departure warnings, road signage For school year 2017-2018, APEC’s recognition, and collision avoidance. AC EDUCATION total enrollment count is 16,219 In 2017, IMI’s output increased by 119 AC Education is committed to among 23 schools in Metro Manila percent, from 1.96 million units in improving the quality of education and Cavite. The first set of graduates 2016 to 4.3 million units in 2017 due in the country and ensuring that of the K-12 Basic Education Program to higher order volume. students are equipped with the will come from this batch. About 60 knowledge and skills needed to percent of students come from D and AC Automotive also advocates road secure gainful employment. E income segments. safety. The company’s customer- care programs on defensive driving, Affordable Quality Secondary APEC Schools are highly accessible to traffic rules and regulations, basic Education the communities they strive to reach. car care, troubleshooting and fuel APEC schools is a pioneering chain Almost 57 percent of APEC students efficiency seek to prevent accidents of stand-alone private high schools are within close proximity (around and promote courtesy and discipline in the Greater Metro Manila area. three kilometers), and 34 percent live on the road. within a kilometer radius, from the APEC Schools provide students 7 access to world-class education school . AC Automotive dealership at an affordable price, with the companies Volkswagen and goal of ensuring that students are APEC Schools use technology Honda sent periodic maintenance empowered to continue on to higher devices during class discussion and
6Based on SY 2017-2018 tuition fee for Grade 7 in Lipa and Grade 11 in NCR 7Geomapping was used to analyze 7,700 student addresses from the 16,274 enrollment count
90 2017 Ayala Corporation Integrated Report activities, to boost students’ comfort Collaboration Projects in using technology. Classrooms are UNC also accommodated students with Academe equipped with wireless networks with government vouchers. For SY that allow Senior High School 2017-2018, 1,439 students in junior IMI regards the academe as students to use chromebooks high school and 1,478 students in a key partner in developing and tablets depending on subject senior high school are covered by technological innovations. Last requirements. By having two shifts government subsidies totaling P34.7 May 2017, IMI took part in the and using block class scheduling, million. Academic Grants for Industry- the schools were able to maintain Led Applications program of a tablet to student ratio of 1:1 and Learning with Industry the United States Agency for chromebook student ratio of 1:4 for Collaboration International Development’s each section. LINC is the senior high school Science, Technology, academic program at the University Research and Innovation for Some subjects in Junior High School of Nueva Caceres to prepare students Development program. also use chromebooks at a ratio of for professional employment. The one chromebook per four students. LINC programs are K-12 compliant Under a program duration APEC Schools plan to further increase and have a strong focus on English of one year, IMI is co-funding the number of chromebooks in the mastery and technology-powered two projects with De La coming school years. learning. This program is available to Salle University. First is the three academic strands of the senior development of an electronic APEC continues to accommodate high school curriculum: ABM, STEM, gas-sensing device that can students receiving assistance from and GAS. quickly detect lung diseases the government for their education. without the use of expensive In SY 2017-2018, a total government LINC also works closely with its medical tests and equipment subsidy of P118 million is expected employer partners for curriculum and second is the development to cover the tuition and fees of 5,700 development, work immersion of an electronic resonance senior high school students, 35 programs, and linkage of students device that can be used as non- percent of total current enrollment. to potential employment with invasive therapy for muscular companies within and outside of the problems. University of Nueva Caceres Ayala group. The University of Nueva Caceres in Naga City, Camarines Sur, is the Professional Employment Program Meanwhile, PEP graduates from UNC oldest and one of the most reputable In collaboration with companies received salaries that are 140 percent learning institutions in Southern such as Globe, Accenture and higher than Bicol minimum wage. Luzon. It implements the K-12 Convergys, AC Education designed curriculum and offers programs a platform called PEP to increase the from kindergarten to graduate potential of its graduating students studies. It has a strong academic for immediate employment. This standing in the fields of Business program aims to develop strong and Accountancy, Engineering and English skills, enhance critical Architecture, and Education. thinking, and improve technological application skills of college students. UNC consistently surpassed the In 2017, PEP was offered at UNC, in national overall board passing rates, Naga City and Jose Rizal University in on average, four percent higher Mandaluyong City . than the national average, with two national board placers in 20178. For school year 2016-2017, about 90 percent of PEP graduates were hired The school maintains a manageable within 90 days from graduation. This class size to effectively engage is notably higher compared to the students. The average number of average 53 percent hiring rate for students per class is 40, 46, 45, and 30 regular graduates9. PEP graduates for grade school, junior high school, from JRU received salaries that senior high school and college, are 66.7 percent higher than NCR respectively. minimum wage.
8UNC considered passing rates of first time takers only 9This is the hiring rate of JRU and UNC graduates for SY2012-2013 before PEP was introduced
INTO THE FUTURE 91 GOING BEYOND INVESTMENTS IN education to elementary schools in meet UNESCO standards. These EDUCATION El Nido, Palawan and Puerto Galera, include sustainable ICT-proficiency Ayala Foundation is committed to Oriental Mindoro. In 2017, ProFuturo training for teachers, an ICT-equipped contribute in improving the quality of reached a total of 31 schools and school environment, and committed education in the country, particularly started a training program for 195 education stakeholders. In 2017, two among our public schools. At present, teachers. laboratories were set up, 69 teachers programs focus on primary education were trained on ICT integration in the to enhance learning at the early A collaboration by Ayala Foundation classroom, and 1,394 students gained stages. In 2017, Ayala Foundation and Globe, the Global Filipino access and improved skills in using supported 123 financially-challenged Schools program empowers schools ICT in learning. Since 2015, a total of students through scholarships. to become 21st-century-ready 10,896 students benefitted from the It also collaborated with various educational institutions by providing program. communities and sectors to develop them with support systems that complementary modes of learning.
Center of Excellence in Public Appreciating Culture and Arts Elementary Education The Center of Excellence in Public Inspiring pride in being Elementary Education provides Filipino and fostering a greater holistic, quality education for appreciation of our history, bright children from economically arts, and culture have long disadvantaged families. This pilot been among Ayala’s advocacies laboratory school hones the and legacies. As such, Ayala confidence and competencies of Foundation aims to make its students, not just inside the Philippine history, culture and classroom but also through after- art accessible and inspirational hours learning sessions in the through various means. performing arts and other skill- building activities. CENTEX schools Ayala Museum Contrapuntos, which featured improved and sustained their Ayala Museum houses artwork, paintings embodying a synthesis performance in national learning archaeological artifacts, antiques, and harmony of Asian and Western indicators by achieving 98 percent and traditional crafts. It also installs painting techniques was also cohort survival and 100 percent exhibitions and conducts cultural showcased at the 55th Venice promotion to next grade level. For programs using both traditional Biennale. SY 2017-2018, CENTEX has 1,050 and non-traditional platforms. In enrollees. 2017, the museum mounted 15 Filipinas Heritage Library unique exhibitions featuring local Established in 1996, Filipinas CENTEX Training Institute and international artists. These Heritage Library is the other half of Ayala Foundation also established a attracted more than 163,000 Ayala Foundation’s Arts and Culture training institute on critical thinking viewers for the year. Division. As a one-stop digital research and methodologies in teaching for Through travelling exhibitions center on Philippine Studies, its public school teachers. A total of 362 across the Philippines, Ayala mission is to spark and stoke interest teachers from 16 schools enhanced Museum is able to expand its in the visual, aural, and printed story their teaching proficiency through reach to increase awareness of the Filipino. sustained coaching and mentoring. and appreciation of our history, These teachers in turn had an impact culture and art. In 2017, the The library collaborates with on the educational outcomes of Botong Francisco: A Nation individuals and institutions in 12,678 students in public schools. Imagined Travelling Exhibition, preserving documentary heritage which gathered large-scale with a focus on the formative period Digital Education: paintings by the renowned artist, of Philippine nationhood (1930s – ProFuturo and GFS was showcased at the Lyceum 1950s). Its Filipiniana collections are Ayala Foundation partnered with of the Philippines University in shared with the public onsite (on ProFuturo, a program which aims Cavite. Meanwhile, the Pioneers the sixth floor of the Ayala Museum to bridge the education gap for of Philippine Art exhibit, featuring complex), virtually (through its online young children in vulnerable areas the paintings of Juan Luna, public access catalogue), and through through innovative digital platforms. Fernando Amorsolo, and Fernando public programs (exhibitions, lectures, The partnership brought digital Zobel, was shown at Lyceum of the and educational activities). Philippines University in Manila.
92 2017 Ayala Corporation Integrated Report Youth Leadership: AYLC, options, to build a new generation of CARING FOR OUR LeadCom and FLYPro financially literate clients. CUSTOMERS Ayala Foundation continues to run The health and safety of our major youth programs to develop Jumpstart is a deposit account customers is a top priority across value-oriented servant leaders who specifically for customers aged 10 to all Ayala companies. As we deploy are empowered to effect positive 17. It aims to instill the discipline of our various products and services at change for the country. saving at an early age, and protects a scale to more markets, we recognize portion of the funds from unplanned the extent to which our market The Ayala Young Leaders Congress withdrawals. Total number of presence can impact the well-being is an intensive camp for top college accounts increased by 24 percent of a larger number of people. For this and university student leaders in 2017, while total savings volume reason, we ensure that our products across the Philippines. AYLC aims grew by 11 percent. and services do not pose threats to to build a network of value-based human health or undermine the well- and principled leaders, encouraging ENCOURAGING FINANCIAL being and safety of our communities. stewardship of their communities FREEDOM: UNIT INVESTMENT and the country’s future. As of 2017, TRUST FUNDS VALUING CUSTOMER there were already 1,449 Ayala BPI also has products to meet the HEALTH AND SAFETY Young Leaders from 19 batches. varying investment objectives At Ayala Land, safety is a paramount of customers through its Asset consideration of project developers On the other hand, the Leadership Management and Trust Corporation. in every step of the process from site Communities program taps AMTC provides Unit Investment assessment to delivery. Once the young community leaders from Trust Funds which spread across two project is set to operate, the project ARMM, Lanao del Norte, and Iloilo. brands, BPI Investment Funds and lead goes through a sustainability The young leaders develop and Odyssey Funds. checklist that includes design implement targeted projects. In specifications and operational 2017, a total of 265 youth leaders The BPI Investment Funds seek to procedures. from 53 youth groups were trained. offer attractive risk-adjusted returns with focus on undervalued and lower In 2017, Globe conducted Radio AYLC and LeadCom alumni have beta names, shorter durations, and Frequency Radiation Measurement established projects that address diversification principles consistent at eight cell sites. All sites passed their communities’ needs through with capital preservation. These the required standard set by the outreach and livelihood programs. are best suited to investors who Department of Health and have are generally conservative, looking been issued radiation-safety Ayala Foundation is also a founding for stability, minimal volatility, and certificates. This attests that radio partner of FYLPRO, a program for certainty of income. frequency signals coming from such outstanding young professionals in facilities do not pose any adverse Filipino communities in the United Odyssey Funds are actively-managed health impact. The radiation-safety States. This immersion program funds that represent BPI AMTC’s certificates issued by DOH are aims to cultivate and promote the specialist or opportunistic strategies based on guidelines issued by the best in Filipino culture among the that express the fund manager’s International Commission on Non- participants. best ideas to derive higher total Ionizing Radiation Protection and the returns consistent with clients’ more Institute of Electrical and Electronics FOSTERING FINANCIAL aggressive risk profiles. These are Engineers on maximum human WELLNESS best suited for the more aggressive exposures to radio frequency fields. Income inequity and the exclusion investors, who prefer specific sectors, of some communities from the and want to expand their asset bases. AC Health extends its advocacy of formal economy diminish business good health even to groups outside prospects. To address these, BPI also BPI AMTC continuously updates its its drugstores and clinics. The pursues innovations to empower products and services to remain company frequently holds events the young and to cater to investors relevant in a changing environment, that raise the general public’s health with varying investment targets and providing its clients domestic and awareness. For 2017, FamilyDOC and risk appetites. international investment alternatives. Generika held a total of 58 health Its innovative investment products awareness missions. Furthermore, ENABLING THE YOUTH: have attracted younger investors. FamilyDoc convened 18 initiatives JUMPSTART DEPOSITS In 2017, 42 percent of its customers focusing on disease spread control. BPI has new platforms, ranging from were in their 30’s or younger. savings and credit, to investment
INTO THE FUTURE 93 DELIVERING QUALITY PRODUCTS IMI, meanwhile, values the needs SECURITY PRACTICES RESPONSIBLY (102-43) and requirements of its customers. AND DATA PRIVACY In AC Automotive, commercial The company has developed a success goes hand-in-hand with comprehensive procedure on Safeguarding Our People and customer satisfaction. Its dealership customer satisfaction. A database Operations sites ensure that all customer queries is created to capture all customer Ayala maintains a high level of safety are addressed within five days ratings from different IMI sites. in our operations by engaging through systematized complaint A scoring guideline, covering security agencies and employing management systems. specific customer requirements, appropriate security practices. such as quality, cost, delivery Its Honda brand received more and responsiveness, is defined Ayala Land’s property management than 2,600 complaints in 2017, all and agreed with customers. An team ensures that security personnel of which were resolved in a timely escalation process is applied if are properly briefed in human rights manner. The company assigns an defined improvement plans are not and the rule of law. Additional audit team to review its customer implemented and standardized. training is conducted to orient processes, overall look, and image Regular review of results is personnel on the company’s values of branches to further enhance the conducted during quarterly business and way of doing things. impression of clients and promote review meetings. excellent customer care. Meanwhile, Given the sensitivity of the its Volkswagen brand received 61 Across the group, we measure our information it handles, BPI complaints for the year and achieved customers’ satisfaction with our makes significant investments in a resolution rate of 94 percent. products and services and track them improving its branches’ security. Remaining concerns were due to yearly. In 2017, it allotted P350 million for delays in vehicle parts arrival and the enhancement of the bank’s prolonged client feedback. To better threat identification and response manage these concerns, Volkswagen mechanism. Furthermore, BPI’s strengthened its complaint handling security guards are well-trained process and created a customer on various programs such as Gun satisfaction committee that shall Safety and Proficiency Firing, Bomb address similar concerns. Identification and Detection, and Robbery or Hold-up Procedures, to name a few.
AYALA COMPANIES’ CUSTOMER SATISFACTION PERFORMANCE Company Metric Description 2017 2016 2015 Ayala Land CSAT (APMC) Percent of tenants satisfied with APMC’s property management 92.0% 93.0% 92.7% services Globe Net Promoter Score A measure of how likely customers recommend its services to 27.0% 22.0% 17.0% others (-100% means everybody are detractors while +100% means everybody are promoters) Manila Water C1 (service-related 96.0% 98.0% 99.1% complaints) Percent of service-related complaints resolved C2 (billing related 95.0% 96.0% 98.4% complaints) Percent of billing-related complaints resolved IMI (Philippines) CSAT Scoring guideline that covers specific customer’s CTQ require- 4.66 4.61 4.36 ments such as Quality, Cost, Delivery and Responsiveness that are defined and agreed with customers AC Automotive CSAT (sales) Percent of customers who are satisfied with new vehicles sales 92.0% 94.0% 94.1% CSAT (services) Percent of customers who are satisfied with vehicle service 85.0% 93.0% 93.9% provided HCX CSAT Percent of customers who are satisfied with services provided 59% NA N/A Generika CSAT (internal) 62.5% 55.0% N/A Percent of customers who are satisfied with sales/services CSAT (external) provided 90.4% 89.3% N/A Med Grocer CSAT 89.9% 86.1% N/A FamilyDoc Net Promoter Score A measure of how likely customers recommend its services to 80.0% NA N/A others (-100% means everybody are detractors while +100% means everybody are promoters)
94 2017 Ayala Corporation Integrated Report Makati Development Corporation and Ayala Foundation’s partnership through the MDC Ornamental Greens Farm provides livelihood opportunities to 30 farmers.
MCX’s security practices go beyond safeguarding its tollway operations. The company engages local communities in the vicinity of the expressway to augment security and act as Barangay Patrol Volunteers. They aid in guarding against acts that endanger lives, such as stone- BUILDING SUSTAINABLE income reached P2.9 million. This expansion increased the number of throwing at passing vehicles and LIVELIHOODS: AYALA loitering along the expressway. farmers to 30. Average monthly income FOUNDATION (413-1) per farmer also increased by 21 percent Protecting Digital Information and While we continue to develop from P6,200 in 2016 to P7,500 in 2017. business models that directly address Intellectual Property (418-1) Our companies comply with the societal challenges, we realize that Project Lio 2.0 is a program with Data Privacy Act. We ensure that our there are obstacles that will require women weavers of barangay Sibaltan, 10 businesses’ intellectual property and a non-profit approach to solve. For El Nido, Palawan to produce buri bags our customer’s personal information these circumstances, we allocate a and other buri products. The goal is are held within lawful bounds of portion of our revenue for projects to improve and increase production confidentiality. that directly help build the capability and connect the weavers to various of communities to create value for markets. Globe implements a Corporate themselves. Information Security Policy and Moreover, in 2017, market research Privacy Policy. The company also Our social development arm, Ayala identified four activities with high upholds the provisions of fair use of its Foundation, is one of the local economic potential—vegetable products and services through its Fair pioneers in this developmental area, production, laundry service, on-call Use Policy for Mobile and Broadband as it has designed and implemented manpower service, and choco- Service Data Privacy Policy. sustainable livelihood programs from cashew production. The project a non-profit lens since the 1970s. also revived the Pasadeña Farmers BPI has designed and deployed a Today, the foundation aims to Association, Lamoro-Pasadeña People’s data privacy program that covers provide households with access to Organization (fisherfolk) and Pasadeña its entire operations. At the core of skills training programs, employment Women’s Association to engage in this program is a robust awareness opportunities, financial services, long-term initiatives. Groundwork for campaign that includes nationwide and connections to markets, so choco-cashew livelihood project was roadshows and the launch of online they may have gainful employment implemented. This involved training courses on data privacy. Completion or diversified income sources. The 12 workers, procuring materials and of these courses by all personnel group currently works through three equipment for the project, and testing that handle personal information is project sites: Caluan, El Nido, and production. mandatory. Talipanan. The last project site in Talipanan, Puerto Ayala Foundation, meanwhile, The project site in Calauan, Laguna is Galera, is a development program has established a Data Privacy located at Southville 7, a 107-hectare for the Iraya-Mangyans, which aims Management Group, and created relocation site for families displaced to revive the indigenous group’s a Data Privacy Manual covering by Typhoon Ondoy (Ketsana) in tradition of weaving particularly in the policies on data processing, security 2011, and those relocated under the creation of beautiful and functional 11 measures and guidelines, website Pasig River rehabilitation program. nito products. With the help of privacy policy, and conduct of The foundation partnered with local Ayala donors and partners, Ayala privacy impact assessment. A data government units and other groups Foundation also provides training in breach management procedure to implement livelihood projects, dressmaking, electrical skills, masonry, was also established to ensure that mainly the MDC Greens farm. From and agriculture, among others. The cases of data leakage will be properly 2016 to 2017, the farm doubled its project now involves 242 Mangyan handled. size to two hectares due to increased weavers and one store established in demand for its ornamental plants. 2017. Product sales increased by 14.2 Purchase orders increased by 81.8 percent from P5.2 million in 2016 to percent, while the farm’s total annual P5.94 million the following year.
10Hand-woven products made from leaves of the Buri palm tree 11Hand-woven products made from the stems of the Nito plant, as type of climbing fern
INTO THE FUTURE 95 Environment Section ALIGNING BUSINESS GROWTH WITH ENVIRONMENTAL PROTECTION
Environmental stewardship has always been and will always be a cornerstone of Ayala’s growth strategy.
From establishing one of the world’s most successful private-public partnerships in water services, to funding new business concepts that directly address climate change, Ayala is always on the lookout for innovative business solutions that benefit the planet.
In this section, we detail our most successful environmental programs in 2017. These programs brought in significant business values through scalable green initiatives that reach underserved communities.
SMARTER ENERGY Net % Attributable Operational Operational Capacity in Ownership Capacity in Status Control MEASURES MW MW Ayala’s commitment to promoting Conventional affordable and clean energy is GMCP 632 20% 126.4 Operational No embodied by AC Energy, a core business line that now holds an SLTEC 244 35% 85.4 Operational No attributable capacity of 1,349MW GNPK 552 85% 469.2 Under Yes and 86MW in thermal and renewable construction energy assets, respectively, in the GNPD 1,336 50% 668 Under Joint Control construction Philippines. It has an approximate attributable capacity of 1,617.3MW, Total Thermal 1,349 inclusive of its regional power Renewable generating assets. NLR 81 36% 29.2 Operational Joint Control NorthWind 52 68% 35.4 Operational Yes The company explores opportunities Montesol 18 100% 18 Operational Yes to expand its thermal and renewable Islasol 80 2% 1.6 Operational No portfolio through the acquisition of brownfield projects and development Sacasol 45 4% 1.8 Operational No of greenfield energy projects. Total Domestic Renewable 85.9 Foreign Investments Apart from its wind and geothermal Salak-Darajat 637 19.8% 126.1 Operational No projects in Indonesia, AC Energy also Sidrap 75 75% 56.3 Under Joint Control took over Bronzeoak Philippines, construction Inc. in early 2017, and rebranded Total Foreign Renewable 182.4 the company to AC Energy DevCo, Inc. The acquisition provides AC Energy with a renewable energy San Carlos Solar Energy Inc., Negros unit of its 1,336MW super-critical development, management and Island Solar Energy Inc., Monte Solar coal fired power plant, in Dinginin, operations platform that has a Energy, Inc., San Carlos BioPower Bataan. track record of successful project Inc., South Negros BioPower Inc., and development. The platform North Negros BioPower Inc. The GNPD Project will support the currently provides operations and increasing electricity demand of management support services to GNPower Dinginin Ltd. Co. also Luzon and Visayas. Construction of a number of renewable energy achieved financial close for the the first unit is well underway, and is generation companies that include project financing of the second
96 2017 Ayala Corporation Integrated Report technology significantly reduces expected to produce more electricity Total Power Generation sulfur dioxide emissions. than the plant requires and (in million kWh) potentially translates to P17 million GN Power Mariveles Coal Plant, annual savings per year. meanwhile, reported a total power 6,552.1 5,992.6 generation of 4,287.5 million kWh Manila Water also plans to go full in 2017, a five percent increase scale on waste-to-energy with three 4,357.6 compared to 2016. AC Energy, more projects lined up for 2018. however, has no operational control These renewable energy initiatives over, and a limited stake in GMCP. will aid the company in reducing dependency to grid power. Overall, the power generated by AC Energy through its operational ENERGY EFFICIENCY ACROSS THE plants increased by nine percent AYALA GROUP (302-4, 305-5) 2015 2016 2017 from 5,992.6 million kWh in 2016 to Ayala promotes various energy 6,552.1 million kWh in 2017. efficiency programs within its group. GMCP (Thermal) Northwind (Wind) SLTEC (Thermal) Montesol (Solar) NLR (Wind) Total RENEWABLE ENERGY INITIATIVES Ayala Land utilizes energy ACROSS THE GROUP (302-4, 305-5) conservation equipment such as targeted for commercial operations Outside of AC Energy, we enable motion sensors and LED lights in by 2019, with the second unit our companies to mitigate their common areas of new buildings. scheduled for completion by 2020. climate change impact by reducing Other practices include the use their dependence on fossil fuels and of control pumps and motors With these achievements, AC adopting clean energy sources in to monitor efficiency level per Energy moves towards its goal of their operations. appliance, and the inclusion of an additional 1,000MW renewable energy consumption metrics to capacity and a 2,000MW combined Ayala Land pledges to reduce its evaluate property managers. thermal and renewable portfolio by carbon footprint down to three 2020. percent by 2020. The company Through its two energy-related had started to purchase power subsidiaries (DirectPower and Altogether, AC Energy’s renewable from renewable sources, such as PhilEnergy), Ayala Land also delves energy imprint in 2017 reached geothermal energy, through retail into the provision of electricity 410 million kWh, 20 percent higher electricity supply contracts, for supply and services related to than 2016. This increase was driven several of its properties. This led to cooling systems. These subsidiaries by higher wind generation from a reduction of 641.2 million kWh further look for ways to come up Northwind and NLR. Both wind farms of electricity consumption from with energy savings methods that capitalized on a better wind regime conventional sources in 2017. This serve not only Ayala Land and its and boosted plant availability. is equivalent to a GHG reduction of properties, but other entities as well. 24,101 tonnes CO2e. The company’s thermal plants BPI also strives to use energy- also remain active in meeting the Manila Water started operating efficient equipment in its facilities. country’s energy demand. Both its first waste-to-energy facility, In 2017, the company converted the units of the South Luzon Thermal aptly named Operations Zero lighting system of 263 branches into Energy Corporation’s circulating Project, which generates biogas LED lights. LED lamps provides the fluidized bed boiler system ran in from septage coming from the same amount of light as fluorescent full operation in 2017 and generated households served by its South lamps but at lower electricity 1,854.4 million kWh of electricity. Septage Treatment Plant in Taguig consumption. Additionally, 380 BPI This led to an 18 percent increase City. Collected biogas is converted to branches installed inverter type air in generation compared to 2016. electricity that is then used to power conditioners that consume about The CFB technology also allows the facility. The pilot plant is capable 30 percent less electricity than for higher efficiency in electricity of generating 1.3 kWh of electricity non-inverter types. These efforts generation. Hence, less fuel is out of 0.67 cubic meter of household allow BPI to limit its environmental needed to generate power. This new wastewater daily. Operations Zero is impact, while providing a
INTO THE FUTURE 97 comfortable and convenient percent from 51.1 to 54 GJ / million to limiting our consumption. For banking experience for its clients. pesos revenue, indicating that more 2017, electricity intensity increased fuel was consumed per revenue by nine percent from 0.0023 GWh Similarly, MCX supports and earned by the group. per million pesos revenue in 2016 incorporates energy conservation to 0.0025 GWh per million pesos in its tollway operations. It installed Our total electricity consumption revenue in 2017. This indicates that energy-efficient street lighting increased by 30 percent considering the electricity we consumed per and air-conditioning units that are our active spending on infrastructure million peso of revenue is higher as optimally set to operate during and widening our businesses’ reach a result of a more robust monitoring specific hours. in 2017. This change mainly came and reporting scheme. from the expanded operations of APEC Schools also practices energy Ayala Land, additional reporting from efficiency through the 398 split- IMI’s Philippine and global sites1, type air conditioning units installed and improved train operations of in 2017. This enables the schools LRMC. Nonetheless, energy efficiency to provide cooling to offices and efforts across the group contributed classrooms with lower electricity consumption compared to window-type units. The schools has also replaced 818 fluorescent lights Direct Energy Consumption (in million GJ) since 2016.
IMI optimizes the operating hours of various energy intensive equipment, such as exhaust blowers and dry-air equipment. The company has also reduced the operating hours of its cooling tower, through regular cleaning and removal of scales from its filter. In addition, IMI installed ducting links on air-conditioning units and further rolled out the use of its energy-efficient lighting system.
ENERGY CONSUMPTION Group-wide Electricity Consumption (in million kWh) (302-1, 302-3) Our climate change impact is primarily a function of the way we source and consume energy. We track and optimize our consumption.
Given the continued growth of our business, our energy consumption will also inevitably increase. Remaining cognizant of this, we will strive to remain responsible in effectively and efficiently consuming energy.
Our group-wide energy consumption increased by 28 percent in 2017. Sub-bituminous coal accounts for the largest chunk among our energy sources amounting to 80 percent by heat. This increase is attributed to stronger operations of SLTEC. Energy intensity also increased by about five 1This is the first year of reporting for IMI global sites.
98 2017 Ayala Corporation Integrated Report Direct (Scope 1) Energy Emissions (in ‘000 tonnes CO2e) ADVOCATING CLIMATE CHANGE ACTION Our energy efficiency initiatives are all geared toward minimizing greenhouse gas emissions in our businesses’ operations.
DIRECT (SCOPE 1) EMISSIONS (305-1, 305-4) Direct greenhouse gas emissions come from the combustion of fuel, whether from a stationary power Total generation unit or vehicle. In 2017, our Scope 1 emissions increased by Indirect Energy (Scope 2) Emissions 26 percent as SLTEC fully utilized (in tonnes C02e) 753,660.1 767,551.5 both of its power generation units. 675,593.3 With this, AC Energy comprises about 1.98 97 percent of the group’s Scope 1 1.60 emissions. Likewise, Scope 1 intensity 1.49 increased from 4.05 to 4.28 tonnes CO2e per million pesos revenue. Nonetheless, the output of our renewable energy generation plants helped avoid 196,224 tonnes CO2e potential GHG emissions.
INDIRECT ENERGY (SCOPE 2) EMISSIONS (305-2, 305-4) Indirect energy emissions come mainly from the consumption of Total electricity that is purchased from the national grid. In 2017, our Scope 2 Indirect Energy (Scope 3) Emissions emissions increased by 14 percent, (in tonnes C02e) 258,273.3 274,674.2 indicating that more greenhouse gases are released from increased usage of electricity among our operating companies.
Nonetheless, our Scope 2 intensity improved from 1.60 in 2016 to 1.49 14,384.8 tonnes CO2e per million pesos revenue in 2017, indicating that we 2015 2016 2017 emitted less carbon per revenue BPI (armored cars) generated by the group. AC Energy Ayala Land (from LPG use by tenants in malls) IMI Ayala Land (from sold residential properties) Manila Water In 2016, Ayala Land segregated Total emission data from common areas in its malls and offices which comprised outsourced vehicles, including jet majority of its Scope 2 emissions. Leased fuel estimates from employees’ areas are now classified under Scope 3. business flights. Our properties’ tenants also contributed to Scope 3 OTHER INDIRECT (SCOPE 3) with their cooking fuel and electricity EMISSIONS (305-3) consumption. In 2017, our Scope 3 emissions increased by six percent. These originated from fuel used by
INTO THE FUTURE 99 FARTHER AS ONE: HELPING comprised of 140 volunteers have The complexity of Ayala Land’s SAVE THE PHILIPPINE FOREST planted 3,498 seedlings, covering businesses and the influence it has THROUGH PROJECT KASIBULAN 2.19 hectares of land. on the many areas where it is present A key touchstone of Ayala’s overall drive the company to continuously work toward sustainability is its Ayala aims to widen the scale of look for ways to maximize the reforestation and forest protection Project Kasibulan in the coming intersections between its business, program called Project Kasibulan. years. As it expands, the protection of the community, and the surrounding The program was launched in 2016 in critically endangered species are also environment. NLR to help mitigate Ayala’s carbon being considered, like the Tamaraw, footprint, and serve as a testament also known as the Mindoro Dwarf Notably, LRMC also contributes by of the group’s commitment to Buffalo (IUCN, 2016), and a highly planting 2000 propagules to help nurturing the environment. The distinctive Philippine bird, called the rebuild the mangroves in Lobo, program also aims to inspire the Luzon Bleeding Heart (IUCN, 2016), Batangas. This is a vital activity employees to have a change in both located in Mindoro. because fish and other marine life mindset towards sustainable living take shelter and reproduce in such and provides opportunities for NEW WAYS OF CREATING VALUE habitats. Any loss in mangroves volunteerism. To contribute to the reduction of the directly translates to a decrease in Philippines’ overall greenhouse gas fish supply. Ayala employee volunteers were emissions, Ayala Land announced given the opportunity to fully its plans to embark on a progressive BPI: GREENING THE BUSINESS appreciate the importance of forests program to become carbon neutral LANDSCAPE and how they can yield various by 2022. Its three strategies are: (1) BPI leads the banking industry creative concepts for sustainable the shift to renewable energy, (2) in promoting green projects and livelihood. They were then trained the integration of passive-cooling ensuring that these have been on the proper and complete cycle of design in its developments, and (3) screened for technical feasibility and planting seedlings, giving emphasis the establishment and protection of financial viability. on the importance of planting carbon forests. endemic species. The volunteers also The Structured Financing Division interacted with partner communities Ayala Land goes beyond the of BPI provides competitive long- to better appreciate the shared value traditional means of creating value term local currency financing created by the program. for land by protecting and enhancing support to large-scale renewable 450 hectares of land as carbon energy generation projects, such as More importantly, the partner forest sites for at least 25 years. large hydros, run-of-river projects, communities were given the chance While remaining aware of financial geothermal, and wind projects. to appreciate both the economic and business considerations, the value and the importance of taking company believes that there is great On the other hand, BPI’s Sustainable care of the environment. value in dedicating these parcels of Energy Financing offers CAPEX land as carbon forests, which results financing for green building or plant Since the beginning of Project in benefits for the environment, the construction; modernization of Kasibulan, a total of five batches community, and other stakeholders. lighting, ventilation and production facilities; working capital for raw Project Kasibulan brings Ayala employees together under the group’s drive to protect the environment. material or equipment inventory; as well as leasing of more efficient machineries. Under this program, SMEs and mid-size companies are assisted in increasing operational efficiencies and reducing electricity consumption; producing clean and inexpensive energy; and decreasing vulnerability to climate risks.
In 2017, total combined SFD and SEF disbursed loans amounted to P30.5 billion, of which, SFD accounted for P25.3 billion loans to support renewable energy projects with aggregate capacity of about 900 MW. On the other hand, BPI disbursed SEF loans to SMEs and mid-sized companies amounting to P5.1 billion, covering energy
efficiency, renewable energy, and
100 2017 Ayala Corporation Integrated Report climate resilience projects. As a result, the accumulated sustainable loans disbursed through SFD and SEF from inception have reached P115.1 billion.
Increase of combined SFD and SEF loans from 2015 to 2017
+13
+54 +35 43.1B
+251
28.1B 13.3B 72.1B
As of % increase % increase As of Ayala Land’s mixed-use estates are notable for their abundance of green space. 2015 in 2016 in 2017 2017
SEF Water Distribution 2015 2016 2017 SFD Pipes (in km) WATER AND SANITATION Manila Concession 5,049 5,094 5,111.9 FOR ALL Clark Water 12.90 58.11 61.8 Through Manila Water, Ayala Laguna Water 666 932 999.9 continues to promote clean Boracay Water 5.50 30.66 46.8 water and sanitation as a key developmental goal and as a viable Estate Water 85.41 145 and profitable business strategy. Total 5,733.40 6,114.77 6,220.4
Since the establishment of Manila Water 2015 2016 2017 Water in 1997, it has brought clean Connections2 potable water to over 10 million Manila Concession 976,321 1,008,918 961,663 Filipinos, many of whom previously Clark Water 1,978 1,994 2,050 had to make do with inadequate supply and inefficient services. Laguna Water 107,263 128,734 99,081 Boracay Water 6,379 6,501 6,267 Manila Water continuously invests in Estate Water 10,153 water and wastewater infrastructure Total 1,091,941 1,146,147 1,079,214 both as a strategy for expansion and a way to address pressing environmental needs. Billed Volume (In million cubic meters)
570.0 In 2017, Manila Water laid a total of 550.2 105.6 kilometers of pipes across the 522.8 Manila (East Zone), Clark, Laguna and Boracay concessions. Additionally, the Estate Water division also laid 59.6 kilometers of pipes in the estates that the company serve. Manila Water also taps its vertical expansion arm, Manila Water Total Solutions, 2015 2016 2017 to install water supply pipes in its
service areas. MWTS had laid 50.6 Manila Concession Boracay Water kilometers of new pipes. (East Zone) Laguna Water Clark Water Estate Water Cebu Water Total (Philippine As a result of these advances, the Operations) company increased its billed volume by four percent in 2017 as compared to 2016.
2 2015 and 2016 numbers are based on Water Service Connections. Starting 2017, MWC is monitoring billed connections based on the number of connections that generate actual revenues and is net of permanent disconnections.
INTO THE FUTURE 101 Manila Water protects its watersheds to ensure the sustainability of water supply.
Percentage Non-Revenue Water Used Water Treated MINIMIZING WATER LOSS (in million cubic meters) The reduction of non-revenue 47.0% water remains a critical aspect of 56.4 Manila Water’s work amid a growing 51.5
population with limited fresh water 34.0% 42.4 resources. Minimizing wasted water 22.5% due to faulty infrastructure or illegal 21.5% connections also benefits both 12.6% 18.2% 11.5% consumers and the water utility. 11.6% 11.2% 10.8% 4.5% 3.9% 4.6% Clark Water, reduced its NRW from 4.6 percent in 2016 to 3.9 percent in 2017. Similarly, the Estate Water 2015 2016 2017 2015 2016 2017 division improved its NRW from 47 percent in 2016 to 34 percent in Manila Concession Clark Water Manila Concession Boracay Water (East Zone) Laguna Water (East Zone) Laguna Water 2017. Estate Water targets to reduce Boracay Water Estate Water Clark Water Total it NRW to 14 percent by 2020. These Estate Water (Philippine Operations) improvements may be attributed to pipe and meter replacement, water threaten life under water. facilities rehabilitation, and proactive
leakage management. Laguna In 2017, Manila Water increased Tonnes Organic Pollutants Removed Water’s NRW also improved from 19.9 its number of sewers connected percent in 2016 to 18.2 percent in to sewage treatment plants from 2017, as a result of continuous efforts 139,482 in 2016 to 147,431 in 2017. 9,003 9,087 of active leak detection, pressure The Used Water Services division also 8,329 management, and pipe refurbishing. desludged 104,170 and 3,824 septic tanks in the East Zone and Boracay Meanwhile, Boracay Water and the concessions, respectively. Manila Concession increased their NRW percentages to 22.5 percent These efforts translate to 56.42 and 11.6 percent, respectively, in million cubic meters of used water 2017. Both concessions are set to treated in 2017, which is 10 percent intensify their NRW programs. higher than in 2016. The company 2015 2016 2017 also prevented a total of 9,087 USED WATER SERVICES (306-1) tonnes of organic pollutants from Manila Concession Boracay Water Used water treatment helps in the entering waterways, a one percent (East Zone) Laguna Water Clark Water Total preservation and rehabilitation of increase from 2016. Additionally, the Estate Water (PhilippineOperations) waterways by treating used water removal of this amount of pollutants prior to its discharge to receiving reduced the unwanted methane bodies. If left untreated, wastewater formed from septage, thus avoiding will contaminate bodies of water carbon dioxide emissions by 57,248 with organic pollutants that could tonnes.
102 2017 Ayala Corporation Integrated Report NEW WATER BUSINESS MODELS Group-wide Water Consumption for wastewater discharges and In response to a niche demand for (in ‘000 cubic meters) identified water sources onsite. It used water management services, pays all discharge dues and conducts Manila Water’s Integrated Used Water 36.60 regular water quality testing to Solutions has started catering to 29.58 14,526 ensure compliance with prescribed commercial and industrial clients 12,554 28.12 standards. Through these programs, looking for the latest used water 11,359 Globe has consistently lowered treatment technologies to comply to its water consumption over the regulatory standards. IUS developed last three years. In 2017, Globe’s seven used water treatment plants as water consumption amounted to of 2016 and continued to construct 104,130 cubic meters, which is lower new facilities and improve its existing compared to 125,341 cubic meters processes in 2017. 2015 2016 2017 in 2016.
AC Energy (SLTEC) IMI (Philippines) Meanwhile, Manila Water’s Estate Globe Ayala Land These efforts allowed us to reduce BPI AC Health Water division has been providing Water Intensity AC Automotive our water usage intensity from 29.6 water and used water solutions to (cubic meters/ AC Education to 28.12 cubic meters per millon million pesos Total aid Ayala Land in the development revenue) pesos revenue in 2016 and 2017, of sustainable spaces. In 2017, Estate respectively. This indicates that IMI balances its water usage streams Water added 358 residential and we consumed less water for every by optimizing the operation of 47 commercial and industrial water million pesos of revenue the group its deionized water system and service connections. made, as compared with previous by improving its maintenance year. processes. These efforts resulted in All these enabled Manila Water to higher quality water and reduced increase its estate billed volume to water losses. The company reuses 4.6 million cubic meters. treated and excess water, and harvests rainwater to be used for WATER MANAGEMENT WITHIN domestic applications. THE AYALA GROUP (303-1, 303-2, 306-1) The total water use of the SLTEC draws its water from Balayan conglomerate increased by 28 Bay for use as cooling and process percent in 2017. This is largely due to water. 100 percent of cooling water is a marked increase in properties and returned to the bay, along with water estates developed by Ayala Land. left over from the demineralization About 89 percent of the group-wide process. Water that is used for the water consumption comes from process itself undergoes a closed- Ayala Land’s construction activities. loop cycle of evaporation and We also started reporting on AC condensation, with minimal losses Education, AC Automotive and AC due to evaporation. Health’s water consumption. Less than one percent of SLTEC’s In order to achieve water efficiency, water consumption is from Ayala Land’s property managers groundwater, supplied by the monitor water consumption per Manila Water provides crucial water and used water industrial park. This is used for property as part of their operations. services to communities. domestic purposes, with an For areas without water coverage, estimated 60 percent of the domestic Ayala Land partners with qualified water going to the wastewater suppliers to limit the use of deep treatment facility to be treated and wells and groundwater primarily for reused. The remaining 40 percent is health and sanitary purposes. The used for watering plants and similar company also designs and operates uses. onsite water and wastewater treatment plants. Our telecom business, Globe, meanwhile, uses on-site treatment Other Ayala businesses also technologies and has a drainage continued to explore best practices system in place. The company in water management. regularly files all necessary permits
INTO THE FUTURE 103 Balay Kogon: Sowing the Seeds of Sustainability OUR NATURAL CAPITAL: ECOSYSTEMS AND As Ayala Land commits to of species – native, endemic, and BIODIVERSITY achieving its carbon neutrality invasive, (2) Propagation of native Whenever needed or feasible, Ayala target, the company constantly and endemic species, (3) Nursery subsidiaries integrate ecosystems finds ways to make its estates creation and maintenance, (4) and biodiversity protection programs and nearby communities more Proper handling in balling out into their operations. sustainable. of trees, and (5) Assisted Natural Regeneration. Manila Water, for instance, has an One good example of how extensive watershed management the company is able to link At the end of the training, program. Other companies, such biodiversity protection with participants are then employed as Ayala Land and AC Energy, have livelihood provision is in Balay to propagate 13,000 saplings of ongoing biodiversity studies and Kogon, an Ayala Land boutique various native species of trees, monitoring programs that are bed and breakfast situated in shrubs, palms, and mangroves. intrinsically linked to their operations the rich forest island of Sicogon, They are also expected to and brand propositions. Iloilo. strengthen the island’s resiliency against natural disasters, while WATERSHED MANAGEMENT To preserve Sicogon’s also protecting Ayala Land’s (303-1, 303-2, 304-3) natural beauty and wealth investments and business goals in Manila Water needs sustainable of biodiversity, Ayala Land the island. sources of good quality raw water to allocated P2 million to develop serve its customers. and implement a training Since the start of the program, curriculum for members of 19 trainees have already The company abstracted 87.12 the island’s local community. been employed by a partner percent of its raw water from surface Participants were trained on manpower agency for the project. water sources, mainly from the the following: (1) Identification La Mesa and Ipo watersheds. The remaining 12.88 percent came from groundwater and river infiltration. The company withdrew 683 million cubic meters in 2017, a seven percent increase compared to its total abstraction in 2016.
Increasing demand for water denotes higher utilization of watersheds. Hence, Manila Water is dedicated to managing its catchment areas through forest protection and rehabilitation efforts. The company works closely with government and civic organizations in implementing forest and wetland restoration activities at the La Mesa and Ipo watersheds.
Like the rest of Ayala Land’s developments, Balay Kogon strives to protect the integrity of its natural environment. For 2017, Manila Water planted 15,800 seedlings in 79 hectares of La Mesa and 1,700 seedlings in 4.3 hectares of the Ipo Watershed.
Boracay Water has also initiated its watershed management plan. It targets to plant 10,000 trees in 20 hectares of the Nabaoy Watershed in Aklan in 2018.
Aside from planting saplings, the company ensures that previously planted seedlings are regularly maintained and that the area is cleared of illegal human activities. An The La Mesa Dam supplies the majority of Metro Manila’s water supply.
104 2017 Ayala Corporation Integrated Report oversight committee monitors and Natural factors and human activity plans. Ayala Land identifies endemic evaluates the outputs of the program influence species distribution species of flora and fauna in its in accordance with the targets set in and diversity, including climate, estates and integrates all findings the approved Integrated Watershed geographic ranges and vegetation in design and development. The Management Plan of Manila Water, types. Data collected from field company’s latest biodiversity as well as the corresponding annual surveys also showed that species study focused on the 34 identified work plans for each watershed area. could tolerate some degree of sightings of species under the disturbance provided that vegetation IUCN’s Red List of Threatened BIODIVERSITY STUDIES is protected and left out to re- Species in its estate in Palawan. The (304-1, 304-4) generate, or enhanced through latest study also acknowledged Some of our operational sites reforestation. 14 additional flora on the list of are situated near areas rich in threatened species under the biodiversity. It is therefore important With these data onboard, NLR Department of Environment and for us to characterize and quantify commits to further improve Natural Resources’ radar. the species inhabiting these areas, their forest rehabilitation and so we may better understand and management initiatives, and to Among these species are the mitigate our operations’ impact on establish a biodiversity monitoring critically endangered Starburst these rich natural sites. system that shall measure their (Clerodendrum quadriloculare) reforestation outcomes. and five other endangered species Our AC Energy affiliate, North namely the Palawan Schefflera Luzon Renewables operates Ayala Land and its business units, (Schefflera palawanensis), the Pitcher its windfarm adjacent to a vast meanwhile, recognize that its Plant (Nepenthes philippinensis), forestland within the Ilocos region. development and construction Manila Palm (Adonidia merrillii), In 2017, the company performed a activities leave significant impact and the Philippine Mussaenda comprehensive biodiversity study on the environment. For this (Mussaenda philippinensis). Ayala within the area. reason, the company undertakes Land preserves and protects these biodiversity assessments and other species by ensuring that no major environmental studies before disturbances occur within their BIRD SPECIES crafting its design and execution respective habitats. Wet season: 29 BIRD SPECIES NLR employees help maintain and nurture the environment through tree-planting and other activities. 14 ENDEMIC Dry season: 60 BIRD SPECIES 21 ENDEMIC 02 VULNERABLE • Philippine Duck (Anas luzonica) • Philippine Dwarf Kingfisher (Ceyx melanurus)
MAMMAL SPECIES 05 VOLANT (flying and gliding) 03 NON-VOLANT (land-based, non-flying) • Philippine Long-tailed Macaque (Macaca fascicularis ssp. philippensis) *near threatened according to IUCN Red List
REPTILE SPECIES 03 SPECIES OF SNAKE • 1 vine snake • 2 rat snake
INTO THE FUTURE 105 RESOURCE MANAGEMENT is recyclable, while 23 percent is As the combustion of coal yields a As we seek to innovate and residual. Outside MDC, Ayala Land’s sizeable amount of fly ash as by- develop new products and other business units collectively product, AC Energy’s affiliate SLTEC services that present solutions generated 4,899.2 metric tons of seeks ways to better manage its to environmental challenges, we recyclable waste and 16,867 metric disposal. In 2017, SLTEC generated must also advocate sustainable tons of residual waste in 2017. On 74,763.2 tonnes of fly ash. About production and consumption within the other hand, compostable and 59 percent was sold to cement our conglomerate and respective food waste from Ayala Land’s estates manufacturing companies for co- supply chains. Over the past years, and residential and commercial processing into cement clinker. The we have laid down the groundwork properties decreased by 13 percent remaining 41 percent was disposed for monitoring and improving our in 2017, as only 14,229.6 metric in the company’s ash management efficiencies in the use of key natural tons were generated compared to facility, where the ash is dumped into resources, waste management, and 16,354 in 2016. To further minimize a DENR-approved pit with a synthetic green supply chain management. the generation of waste, Ayala Land lining. Once full, the pit is then implemented a ban on plastic use in covered by soil. ECO-RESOURCE EFFICIENCY IN their Palawan resorts beginning in CONSTRUCTION (301-1) 2017. Recycling and Landfill Diversion Ayala Land is committed to the (306-2) prudent use of resources, especially Globe’s intensive campaign to IMI strictly implements segregation during the construction of its estates. reduce the use of paper led to of waste at the source and the This is evident in the systems and a higher subscription rate to its reclaiming of other reusable materials practices of Makati Development paperless billing program. As of through its 3R (Reduce, Reuse, Corporation. 2017, around 95 percent of Globe Recycle) program. The company also postpaid subscribers or 3.3 million requires its haulers to provide material In 2017, Ayala Land used 35 percent users had shifted to electronic billing. recovery facilities and to segregate less reinforced steel than in 2016 This marks a 26 percent increase the recoverable materials, thereby despite having more projects under compared to 2016 and led to savings avoiding the dumping of residual development. Cement consumption of 286,294 reams of paper in 2017, or waste to municipal landfills. In 2017, was 20 percent higher as Ayala about 13,742 trees saved per ton of IMI diverted 98 percent of its waste Land completed 174 projects in paper recycled. from landfill. 2017 compared to 130 in 2016. The company, however, minimizes use AC Education had also started to Globe also takes significant steps of virgin materials as it requires its monitor its paper consumption while to reduce waste produced from cement providers to adhere to a 10 inculcating in its students a stronger products and operations to further to 15 percent fly-ash substitution in awareness of waste management. lower its impact on the environment. cement, while maintaining concrete APEC Schools consumed only 2,224 Waste management efforts remain strength at above industry standards. reams of paper across their branches in full implementation on all Globe Additionally, MDC’s concrete batching in 2017. Meanwhile, the University sites. The solid waste, e-waste, and plants and pre-fabrication sites allow of Nueva Caceres had implemented a hazardous waste the company Ayala Land to minimize material paperless office transaction program generates are tracked throughout delivery time, fuel consumption, and which resulted in a 56 percent the year. In 2017, Globe had diverted greenhouse gas emissions. reduction of paper consumption for nine percent of its waste from SY 2016-2017. landfills through waste segregation MANAGING NON-HAZARDOUS and recycling. WASTE (306-2) Ayala’s efforts to reduce wastage Its flagship recycling program, is evident in its 2017 group-wide Project 1 Phone, is a mobile recycling performance. The amount of non- program focused on recovering hazardous waste generated by and recycling electronic waste, Ayala companies decreased by nine specifically mobile phones and percent this year, as our businesses portable devices such as tablets. actively monitored waste generation E-waste typically contains hazardous and implemented mitigation elements such as lead, cadmium, approaches. and arsenic. If disposed in landfills, these chemicals could potentially Similarly, the group monitors its contaminate the soil and water table. waste generation and explores Additionally, high value metals such ways to minimize its environmental as gold, palladium and platinum can impact vis-à-vis its increasing project still be recovered from discarded portfolio. In 2017, about 77 percent phones and reused commercially. of Ayala Land’s construction waste In 2017, Globe through Project 1
106 2017 Ayala Corporation Integrated Report Group-wide Hazardous Waste Phone had collected 216,816 kg of by Company (in tonnes) e-waste. All devices and accessories that Globe gathered were turned- 1,788.7 over to an electronics waste recycler. 1,207.8 The proceeds of which helped build classrooms in schools in Aklan that were damaged by Typhoon Haiyan 572.1 in 2013.
MANAGING HAZARDOUS WASTE (306-2, 306-4) Hazardous waste comes in different 2015 2016 2017 forms and usually includes organic solvent, e-waste, lead-acid batteries, Manila Water Ayala Auto Globe Ayala Land IMI (Global Sites) Total and used oil. Each pose their own AC Infra (LRMC) IMI (Philippines) peril to human health and local economies if handled poorly. Our companies that produce hazardous waste follow all pertinent laws and regulations related to their storage, transport, and treatment. 1,788.7 1,207.8 Monitoring per type of waste has become more accurate as the group 572.1 enhances its waste management efforts. Total hazardous waste reported increased by 48 percent in 2015 2016 2017 2017 with additional reporting from Ayala Land, Manila Water, and IMI’s Batteries E-waste Organic Solvent 3 Used Oil Grease-waste Total Philippines and global sites. Other Hazardous Asbestos-containing Wastes products Used oil from vehicles and industrial equipment also increased as AC Automotive had serviced more Used Oil by Company clients requesting vehicle demos and (in liters)
had outsourced more fleet trucks for 594,704.8 delivery of vehicles sold.
394,000.4 Our companies undertake further efforts to minimize the impact of the 235,544.5 hazardous by-products we generate.
Some of our companies partner with non-profit groups for recycling, treatment, and disposal of used oil 2015 2016 2017 and batteries. IMI, for example, turns
over its hazardous waste to ABS- Manila Water AC Infra (LRMC) IMI (Philippines) CBN Foundation’s Bantay Kalikasan, Ayala Auto Globe Total Ayala Land which in turn surrenders the waste to their partner recycling agents. The monetary value of these waste is used to support communities and treatment and recycling. Other company also implements a waste livelihood projects. hazardous waste are transported and turn-over system for hazardous treated by DENR-accredited service waste for easier tracking. A third Manila Water, meanwhile, donates providers. party, DENR accredited treatment, used lead-acid batteries and used storage and disposal facility is oil to ABS-CBN Foundation’s Bantay LRMC follows waste segregation at engaged to ensure proper waste Baterya and Bantay Langis for both its depot and train stations. The disposal and treatment of hazardous
3Additional reporting from IMI Philippines for Cavite and PSI sites.
INTO THE FUTURE 107 waste. A hazardous waste storage facility is also designated within the depot to serve as temporary storage of the generated hazardous waste. Used oil and used lead batteries are also being donated to ABS-CBN Foundation.
Aside from following all government regulations, NLR has established secondary containment/bunds to prevent or reduce the potential impact of hazardous waste on the soil and groundwater. The company is now assessing all its waste streams to determine other potential hazardous waste that require proper handling and management.
In the case of NorthWind, aside from generating electricity from renewable sources, some of the plant’s inputs, such as oil are recycled Apart from providing clean and potable water, Manila Water also provides sewage and to minimize waste. The company has sanitation services. also invested in a recycling facility for oil used in the gearbox, generators, and other moving turbine parts. Restriction of Hazardous Substances GREENING THE SUPPLY CHAIN in Electrical and Electronic (308-2) Products; Registration, Evaluation, IMI is monitoring its compliance Authorization, and Restriction of with Conflict Mineral Reporting. Chemicals; Automotive industries’ The company supports responsible compliance requirement on sourcing of minerals to ensure that International Material Data System; tantalum, tin, tungsten and gold and Chinese Automotive Material in the products it manufactures do Data System. not directly or indirectly finance or benefit armed groups that At Ayala Land, suppliers undergo perpetrate human rights abuses. third-party screening, which requires IMI exercises due diligence in the vendors to fill up “Green Metrics” source, and chain of custody of these in addition to legal and financial minerals and makes information compliance documents. The available to customers upon request. company launched its Sustainable Procurement Roadmap in 2017 to IMI has also developed a influence its top material suppliers comprehensive policy on green to comply with OHSAS, ISO, or EMS manufacturing and procurement. It certifications, as well as to engage has adopted a system on Hazardous them in appropriate sustainability Substances Process Management. programs by 2022. The policy is designed to manage hazardous substances and adhere At Manila Water, compliance to all applicable laws, regulations, of vendors and suppliers with and other customer-specific environmental laws and other requirements on the prohibition or relevant standards is checked restriction of specific substances extensively and is consistently in products and in manufacturing. monitored throughout their period These include compliance with the of engagement with the company.
108 2017 Ayala Corporation Integrated Report 1 2
3 6
4 5 7
1 Ayala employees volunteer to clean and repaint public schools during Brigada Eskwela. 2 Generika holds Gabay Kalusugan events in various communities to highlight the importance of taking care of one’s health. 3 Ayala group sustainability practitioners gather with colleagues and friends from the private sector at the Sustainability Summit. 4 IMI employees participate in blood donation drives. 5 AC Health conducts a medical mission to benefit underserved communities. 6 LRMC employee volunteers clean rivers. 7 Students visit MCX on a field trip.
INTO THE FUTURE 109 Vehicle traffic along MCX has grown steadily since it began operations.
110 2017 Ayala Corporation Integrated Report BUSINESS REVIEW
INTO THE FUTURE 111 AYALA LAND
“Making a positive impact on communities and the environment provides greater meaning to our success. We implement sustainability practices, focused on site resilience, pedestrian and transit connectivity, local employment, and eco-efficiency.” - Bernard Vincent O. Dy, President and CEO, Ayala Land
Who we are Focused on its vision of “enhancing and the revitalization of its existing Ayala Land is the largest property land and enriching lives for more estates. developer in the Philippines with people,” it empowers its employees to a solid track record in developing deliver quality products and services In November 2017, Ayala Land large-scale, integrated, mixed-use, and build long-term value for our launched Seagrove in Mactan, sustainable estates that are now shareholders. Cebu in partnership with Cebu thriving economic centers in their Holdings and Taft Property Venture respective regions. Outlook Development Corporation. The Ayala Land continues to make estate is designed as an “eco-fun” Following the success of the Makati progress on its 2020-40 plan, lifted by destination. Central Business District (Makati a positive macroeconomic outlook CBD), Ayala Alabang, Cebu Park that will benefit the whole property NET INCOME District, Bonifacio Global City (BGC), development sector. It believes that (IN BILLION PESOS) and Nuvali, it continues to increase the stable contributions of the BPO 25.3 its footprint by building estates that sector, overseas Filipino remittances, reach and benefit more people. a growing tourism sector, and strong 20.9 household consumption will spur the 17.6 With 10,285 hectares in its landbank, continued growth of the property 14.8 24 estates, and a presence in 55 sector. 11.7 growth centers across the country, Ayala Land offers a balanced and Looking ahead to 2018, the company complementary mix of residential will continue to execute its strategies. developments, shopping centers, It will endeavor to reach a wider offices, hotels and resorts, and market and provide growth not only other businesses. Construction and for its shareholders but also for the 2013 2014 2015 2016 2017 property management services communities it serves. are led by subsidiaries, Makati Development Corporation and Ayala Business Review RETURN ON EQUITY Property Management Corporation, Ayala Land made headway in 2017, (%) 16.2 respectively. halfway into its 2020-40 plan, with net 14.9 14.4 14.7 income reaching P25.3 billion, up 21 13 It pioneers standards and practices percent backed by the strong topline that reflect the value the company delivered by its property development places on sustainability in all its and commercial leasing businesses. developments. As a responsible corporate citizen, Ayala Land acts with Estate Development integrity, foresight and prudence. The company expanded its reach with the introduction of three new estates 2013 2014 2015 2016 2017
112 2017 Ayala Corporation Integrated Report Ayala Land plans its estates to allow sufficient green space for recreation and leisure.
Property Development Lifted by increased bookings and project completions, its property development segment delivered robust results, with revenues growing 24 percent to P96.4 billion. The development business grew with reservation sales increasing 13 percent from its year-ago level to P122 billion.
Commercial Leasing Ayala Land’s commercial leasing business delivered P30.9 billion in revenues, 10 percent higher from the previous year, as the company rolled out a record number of malls, offices, and hotels and resorts.
Revenues from malls grew 10 percent to P17.7 billion in 2017 on the back of steady contributions of existing shopping malls and the improved performance of newly-established malls. Average occupancy rate Shoppers fill Ayala Land’s Glorietta malls. remained healthy for all malls at 92 percent, while stable malls recorded a In August 2017, the company Cavite. Located just five kilometers 97 percent average occupancy rate. launched Azuela Cove, a 25-hectare away from CAVITEX, the estate will estate in Lanang, Davao City, which feature 19 hectares of sprawling parks Revenues from Ayala Land Offices features verdant open spaces and and open spaces. reached P6.7 billion, 12 percent spectacular views of the Davao higher than the P5.9 billion recorded gulf. The project is developed in To further promote walking and in the previous year. Stable offices partnership with the Alcantara Group healthy lifestyles in its estates, Ayala maintained an occupancy rate of 97 of Companies. Land reserves certain roads for percent, while average occupancy, pedestrians and joggers in the Makati including new buildings that opened In early 2017, Ayala Land launched CBD and BGC at specific times and in the last quarter of 2017, registered Evo City, a 236-hectare estate in Kawit, days of the week.
INTO THE FUTURE 113 an 86 percent occupancy rate. Six new offices were opened in the year, adding 185,000 sqm of gross leasable space. This brought the total office portfolio to 1.02 million sqm.
Hotels and resorts recorded P6.6 billion in revenues, 10 percent higher than the previous year. In 2017, six new hotels and resorts were opened, with a total number of 556 rooms. This increased the company’s portfolio to 2,583 rooms at year-end.
In 2017, the company introduced The Flats, a dormitory product to support the housing needs of the growing population of young professionals and those working in the BPO sector. It also launched Clock In, a co-working space, that aims to capture start-up ventures and SMEs that need flexible office space. Clock In targets to reach over 1,450 seats in 2018.
Services Pedestrian connectivity is a key feature of the company’s developments. Total revenues from construction and property management amounted to P71.8 billion, five percent higher than the P68.5 billion posted in the Strategy previous year. Strategy Description Performance in Priorities in 2018 2017 Its construction arm, Makati Increase Target to triple the Recurring income Deliver on target Development Corporation, contribution of GLA of shopping businesses pipeline by maintained steady growth with commercial leasing centers, offices, and contributed 35 completing GLA revenues of P68 billion, four percent assets to achieve hotel and resort percent of net under construction: higher than 2016 due to an increased a more balanced rooms from their income: order book and the higher completion portfolio 2013 operating levels Malls: 823k sqm of projects. Meanwhile, Ayala • Malls: opened five new malls and Offices: 499k sqm Property Management Corporation added 189k sqm of registered revenues of P1.8 billion, GLA for a total of Hotels and resorts: an eight percent growth from the 1.80 million sqm 3,522 rooms previous year. As part of improving service quality, APMC introduced new • Offices: opened six technologies and best practices to new offices and increase operational efficiencies and added 185k sqm of reduce costs. GLA for a total of 1.02 million sqm As part of its strategy to diversify • Hotels and resorts: revenue streams, Ayala Land increased opened six new its ownership in Malaysian real estate facilities adding developer, MCT Berhad. In January 556 rooms totaling 2018, the company announced it 2,583 rooms was acquiring an additional 17.24 percent stake in MCT, which increased Balance residential Improve the mix Launched 28 Launch products Ayala Land’s total ownership to 50.19 product launches between horizontal residential and office attuned to market percent. This was further increased to between horizontal and vertical projects for sale projects in demand, and 72.31 percent in February, as a result of and vertical projects to maximize margin 2017 of which, 10 aspire to achieve a mandatory take-over offer made by gains were horizontal a healthy mix the company, in connection with the while 18 were between horizontal prior transaction in January. vertical and vertical developments
114 2017 Ayala Corporation Integrated Report OUR HOW WE THE VALUE CAPITALS CREATE WE VALUE CREATE
Natural Estate Development Environment • 10,285 hectares landbank Its landbank is strategically Ayala Land develops estates Ayala Land upholds • 450 hectares carbon forests located in key growth centers that host its property Philippine biodiversity and • 34 IUCN species protected for immediate and long-term development and commercial ecosystems within and development. leasing products. adjacent to our landbank.
Intellectual Property Development Communities • 132.4 hectares of permeable Ayala Land’s unique master It offers and builds residential, It provides spaces that are site green space planning process integrates office for sale, and commercial -resilient, pedestrian-friendly, • Three estates added in 2017 product lines to create products that address various public transport-connected, • 25 total estates sustainable and vibrant market segments represented and eco-efficient, uplifting • Nine P2P transport routes in communities and foster urban through five brands: Ayala living standards for Filipinos. Ayala developments development. Land Premier, Alveo, Avida, Amaia, and BellaVita. Property Buyers, Residents, • 12,763 completed and Manufactured Shoppers, Mall Locators, turned-over residential units It has a wide range of products Commercial Leasing Office Tenants, Tourists, • Five malls opened in 2017, that caters to all markets and It develops and operates General Public adding 180,000 sqm GLA segments of the property malls, offices, and hotels and It provides homes and venues • Six offices opened, adding sector. resorts across the Philippines for business and leisure that 185,000 sqm GLA represented by Ayala Malls, support the community and • 556 hotels and resorts keys Social Ayala Land Offices, branded spur economic growth. added It ensures the quality of its hotel formats, SEDA hotels, products and services and and El Nido, Lio, and Sicogon General Public, Media, • Recognized by upholds strict sustainability Resorts. Property Buyers, Academe, RobecoSAM as one of and corporate governance Government, NGOs the most sustainable practices for its customers and Construction and Property With sustainable practices companies stakeholders. Management and strict corporate • Property Company of the Ayala Land develops its governance standards, Ayala Year by Frost and Sullivan Human projects through its own Land protects the interest of Asia Corporate Excellence A decentralized structure construction company, all stakeholders and ensures and Sustainability Awards empowers its people, and Makati Development Corp., the value of their investment. • Best Corporate Brand provides the flexibility to and manages completed in the Philippines by execute its strategy in a fast and properties through its own Workers, Suppliers Asiamoney efficient manner. property management and Service Providers, • Don Emilio Abello DOE company, Ayala Property Consultants awards Financial Management Corp., to ensure The company contributes • 4th Best Managed Ayala Land has a strong quality throughout the entire to local employment, skills Public Company in the balance sheet to support project life. development and career Philippines - FinanceAsia growth plans and a prudent growth. fiscal policy to maintain Other Busineses • 90% OCS Score in 2017 the strength of its financial It holds investments in • 5,040 total workforce position. selected companies that • 7,603 total support staff complements core businesses • 132,337.3 total training like Cebu Holdings, Ortigas hours and Company, Prime Orion Investors, Analysts, Philippines, MCT Bhd, and Creditors • 21% net income growth other ventures in healthcare It provides consistent growth • 16% ROE and retail. in shareholder returns, • 0.77 net D/E ratio ensures long-term value for • 4.6% average cost of debt investors, and fulfills credit obligations.
OUR CONTRIBUTIONS TO THE SDGs
INTO THE FUTURE 115 BANK OF THE PHILIPPINE ISLANDS
“We have come out of 2017 stronger than ever. While the bank has grown significantly in the past several years, we will continue to invest in people, technology, and branches to support and benefit from a surging Philippine economy. Inclusive, profitable growth will be our focus.” - Cezar P. Consing, President and CEO, Bank of the Philippine Islands
Who we are www.bpiexpressonline.com, crucial for this key segment of society The Bank of the Philippine Islands its online and mobile banking as they look to partake in the robust is one of the top banks in the facilities for retail customers, growth of the Philippines. Rising Philippines, providing a wide range and ELink/BizLink, its electronic income levels are seen to increase of financial products and services cash management platform for the demand for credit as individuals, to meet the diverse needs of its 8.5 businesses. BPI has banking locations entrepreneurs, and corporates all million customers. and representative offices in Hong look to prepare the groundwork Kong and London, and maintains for sustained growth in the near to BPI nurtures the trust it has gained over 140 remittance tie-ups and medium-term. Additional liquidity from its customers through products correspondent banking relationships brought about by the Bangko Sentral and services tailored to the needs of with over 50 partner banks and ng Pilipinas’ reserve ratio requirement a broad base of retail and corporate financial institutions globally. cut is expected to meet this demand. clients, including self-employed microentrepreneurs, overseas Market outlook Mirrored in the growth of capital Filipinos and their beneficiaries, Philippine economic growth is goods importation since 2015, small and medium enterprises, expected to remain resilient with investments have begun to pick domestic conglomerates, and household consumption seen up, with the promise of the current multinational corporations. The to be the main driver of growth, administration’s Build, Build, Build bank serves its clients through one further boosted by the recently- infrastructure program. Foreign direct of the most extensive physical and implemented personal income tax investments in 2017 were the largest digital distribution network in the cuts on select individuals. Overseas in Philippine history thus far. It should industry with 945 branches, and 3,105 remittances will continue to support be noted that higher government ATMs and Cash Accept Machines consumer spending as recipients debt due to its infrastructure program nationwide. Its physical distribution enjoy more income due to the may provide upward pressure on local network is complemented by digital manageable depreciation of the interest rates. Moreover, inflation may platforms, namely peso. Access to credit will remain touch the upper limit of the BSP’s target range in 2018 due to higher oil prices. However, the central bank expects inflation to return to its target in 2019 given the transitory effects of the tax adjustments.
The BSP’s recent change in leadership has led to a new focus on market- driven bias and financial technology liberalization. Its flagship project, the National Retail Payment System, intends to create a safe, efficient, and
BEA allows the fast-tracking of transactions by allowing clients to reserve timeslots at BPI branches. reliable electronic retail payment
116 2017 Ayala Corporation Integrated Report In 2017, BPI launched a new look for its branches. system that is interconnected and expansion in the bank’s core NET INCOME interoperable. The NRPS is viewed to intermediation business. (IN BILLION PESOS) create opportunities for increased commerce, as the BSP looks to balance Net interest income increased by access with security. 13.4 percent to P48 billion, the result 22.1 22.4 of an 11.3 percent expansion in the 18.8 Business Review bank’s average asset base and a slight 18 18.2 In 2017, the Bank of the Philippine improvement in net interest margin. Islands realized net profits of P22.4 billion, 1.7 percent higher than the In the absence of one-off trading previous year. This increase was gains recorded in 2016, non-interest achieved through a P4.5 billion increase income decreased 4.9 percent to in total revenues, partly offset by higher end at P23 billion. The 15.6 percent operating expenses and provision for increase in fee-based income offset income taxes which grew P3.6 billion the decline in trading gains, primarily and P1.4 billion, respectively. Total driven by higher credit card fees, comprehensive income ended at the trust and investment management 2013 2014 2015 2016 2017 same level as net income at P22.4 billion, fees, insurance fees, commission and an increase of 3.1 percent over 2016. service charge. RETURN ON EQUITY The bank continues to deliver Given moderate loan growth relative (%) consistent value to its investors, to 2016, provision for loan losses taken posting a return on equity of 12.8 in 2017 amounted to P3.8 billion. percent and return on assets of 1.3 percent, though these were lower Total operating expenses ended at 18.1 than the previous year’s 13.8 percent P38.5 billion, 10.3 percent higher as and 1.4 percent, respectively. Cost-to- spending on technology, operations, 13.8 13.8 income ratio stood at 54.3 percent, and marketing increased to sustain 12.3 12.8 slightly higher than the previous year’s growth initiatives, and as asset growth 52.5 percent, and continues to be was accompanied by an increase in one of the lowest in the industry. The regulatory costs. Other operating bank paid regular cash dividends of expenses likewise increased 17.4 P1.80 per share. As of the end of 2017, percent on higher product-related book value per share was P45.87, and insurance premiums, third-party fees earnings per share was P5.69. and commissions, litigation expenses and other transaction-related 2013 2014 2015 2016 2017 Total revenues for the year were at expenses. P71 billion, a 6.7 percent increase, primarily brought about by continued With its pre-eminent brand, BPI has
INTO THE FUTURE 117 BPI BanKo meets the needs of SEMEs.
continued to grow its broad base platform. Recognizing the need of retail and corporate clients to 8.5 to provide credit facilities to an million, thereby expanding its asset underserved market, self-employed base by 10.3 percent to P1.9 trillion. microentrepreneurs, the bank through its microfinance arm BPI Direct BanKo Loans, net of allowance for loan losses, expanded its network from nine pilot amounted to P1.2 trillion, 15.5 percent branches in 2016 to 103 branches and higher than last year’s P1 trillion microbanking offices in 2017. as the bank continued to finance corporate clients’ requirements In February 2017, the BPI Asset for project financing, acquisition Management and Trust Corporation financing, and capital expenditure commenced operations as a stand- loans. With its disciplined approach alone trust entity. to risk management, the bank’s asset quality continues to improve with In November 2017, the bank raised a gross 90-day non-performing loans record P12.2 billion offering of Long ratio declining from end-2016 level of Term Negotiable Certificate of Time 1.5 percent to 1.3 percent and reserve Deposits, the largest issuance by far in cover ratio increasing year-on-year the industry. from 118.7 percent to 129.2 percent. Deposits increased by P130.9 billion Strategy or 9.1 percent, ending at P1.6 trillion Strategy Description Performance in Priorities in 2018 in 2017, with the current and savings 2017 account ratio at 71.2 percent. Loans to Achieve asset Focus on SME, Retail growth rate SME deposit ratio stood at 77 percent. growth in high- retail (specifically • Housing: 4% growth, high-margin housing, auto, and • Auto: 2% Retail BPI’s investment securities were stable businesses credit cards), and • Credit cards: 19% • Housing at P306.12 billion, over 90 percent microfinance • Auto of which were in held-to-maturity Microfinance: 2.6x • Credit cards Create business assets, and as such are less exposed to bank segment *SME business bank Microfinance interest rate risk. focused on SMEs organization was completed in 2017 BPI’s capital funds increased by Grow current and Grow deposits and • Deposit growth • Deposit growth 9.4 percent to P180.7 billion. The savings accounts improve CASA ratio rate: 9% rate: 12% improvement in capital came from higher profits from operations, net • CASA ratio: 71.2% • CASA ratio: 72% of dividends paid in 2017. At year- end, the bank’s capital adequacy Moderate branch Strategically expand • New bank • Continue to ratio and common equity tier 1 expansion branch network branches: 18 expand branch ratio ended at 12.7 percent and 11.8 footprint across BPI, percent, respectively, both well above • New BanKo BPI Family Bank, and branches: 93 BanKo regulatory minimum. BPI’s market capitalization remained one of the largest in the industry at P425.9 Increase digital Increase users of • Online banking: • 15% increase in billion. As of December 31, 2017, the platform users online banking 1.456 million users clients who access bank’s share price closed at P108.10, platforms for retail the bank’s digital representing a multiple of 2.4x book and business • Mobile banking: platforms value. customers 1.450 million users
The bank continues to enhance • Online platform for its extensive physical and digital business: distribution network. It opened 18 24,400 users BPI and BPI Family Bank branches and relaunched ELink/BizLink, its electronic cash management
118 2017 Ayala Corporation Integrated Report OUR HOW WE THE VALUE CAPITALS CREATE WE VALUE CREATE
Financial Capital Raising, Advisory, Employees The bank maintains a strong and Financing BPI invests in its employees, • P13.7 billion in total balance sheet, and continues BPI addresses capital provides a workplace that fosters payments to employees to grow and optimize its needs across all client learning and development, deposit franchise and loan segments by providing career advancement, and book. various forms of financing, sustainable engagement. from working capital loans, Engaged employees give clients Manufactured and capital expenditure loan, better service. Intellectual acquisition financing, BPI has a reliable, secure, supply chain and trade Clients and Communities and expanding network of financing, project finance, Financial inclusion delivery infrastructure in small business loans, and wellness • 2,985 trainings on both traditional and digital and microfinance. It also BPI reached underserved financial management platforms. provides financial advisory segments and helped them and helps clients raise grow and protect their Human debt and equity from the assets. • 8.5 million total clients BPI is driven by energized, capital market. from corporate and retail enabled, and engaged Enterprise growth segments employees with diverse Growing Assets The bank helped enterprises talents. The bank grows its assets raise capital through loans • 64,370 total customer through its treasury syndication, and debt and availments of life insurance Social and Relationship portfolio management equity issuances. BPI is a beacon of stability and and participation in credibility upon which trust Philippine trading Implemented Sustainable • P201.8 billion in total is built and sustained among markets. It also grows its Development Projects funding for projects its clients and global banking clients’ assets through It also financed investments identified to directly partners. deposit and investment that directly contribute to contribute to SDGs in fixed income securities, sustainable development Natural capital equity securities, unit • P13.6 billion in payments BPI’s environmental investment trust fund, and Government and Regulators to government management systems ensure mutual funds. BPI contributed to government in that it uses resources capital raising through securities efficiently and minimizes its Insuring Life and Assets distribution, in facilitating impact to the environment. The bank helps protect the inflow of overseas remittances, value of its client’s assets and ensuring compliance with through its life and non- regulations, transparency, and life insurance products. prudent risk management.
Other Financial Services Investors and Shareholders • 6.7% revenue growth BPI provides its clients With engaged employees, efficient means to make satisfied clients, and good financial transactions government relations, the • P22.2 billion payments to through card payments, bank optimizes its financial providers of capital remittance services, performance and value creation, and cash management ensuring delivery of superior facilities. shareholder returns in a manner that is transparent and equitable.
OUR CONTRIBUTIONS TO THE SDGs
INTO THE FUTURE 119 GLOBE TELECOM
“Commodo“We continue nulla to create facilisi wonderful nullam experiencesvehicula ipsum through a arcu connectivity, cursus. content, and service, and by providing opportunities for Filipinos to be part of the digital economy and community. This is how Globe Ligulacan truly ullamcorper say it is leading malesuada a purpose-led proin transformation.” libero nunc consequat interdum varius sit. Aliquam faucibus purus in massa.” - Ernest L. Cu, President and CEO, Globe Telecom
Who we are a nation that is admired all over the NET INCOME Globe Telecom is the number one world. (IN BILLION PESOS) mobile company in the Philippines. It provides cellular, broadband and The company’s principal mobile data services, and has forged shareholders are Ayala Corporation partnerships with leading content and Singtel, both industry leaders 16.4 15.8 creators to enhance its products. in their respective countries and in 15.1 This is in recognition of the growing the region. It is a member of Bridge 13.3 preference of customers for content- Alliance, a strong alliance of premier rich offerings and multimedia mobile operators serving over 800 applications that enrich the Filipino million customers from 34 countries digital lifestyle. in Asia Pacific, Middle East, and Africa 5 along with strategic partners in Supported by over 7,200 employees, Europe and the Americas. Globe has and over 1.1 million retailers, 756 roaming partners in 236 calling distributors, suppliers and business destinations worldwide. 2013 2014 2015 2016 2017 partners nationwide, Globe serves more than 63.4 million individual Market Outlook customers, small and medium-sized The Philippines has always rated high businesses, as well as corporate and in adoption of mobile and digital enterprise clients. It operates one technologies. Mobile penetration RETURN ON EQUITY of the largest, most technologically stands at 120 percent, and internet (%) advanced and robust mobile, fixed penetration is growing. With the line, and broadband networks. prevalence of affordable prepaid Through first-world internet and postpaid data plans, demand for 28.9 27.8 connectivity, Globe can help create data continues to increase, driving 25.9 23.2
11.4
2013 2014 2015 2016 2017
Globe continues to improve its customer service through different channels.
120 2017 Ayala Corporation Integrated Report The ICONIC store allows customers to experience Globe’s products and services in an interactive and dynamic format.
heavy use among Filipinos. Moreover, revenue, and safeguard vital business continued mobile data revenue with digital devices becoming more information. growth. Globe Prepaid and TM, the affordable, everyday experiences company’s mass-market brand, posted are increasingly enriched by digital On the regulatory front, the annual revenue growths of 11 percent interactions. As a result, today’s government is focused on bringing and eight percent, respectively, while customer can also be creators - able a third player into the telecom sector Globe Postpaid also recorded a one to create and curate content that can with the view that this will improve percent increase. Globe’s mobile easily be shared with others. telecommunications services for subscriber base reached 60.7 million all Filipinos. This is an initiative as of end-December 2017, down three Beyond social networking, video and incumbent players support. Related percent from 62.8 million subscribers music streaming, and gaming, more to this, Globe has announced it in 2016. The decline in the cumulative Filipinos are using the internet to avail is in preliminary discussions with mobile subscriber base was due to of transport network vehicle services, third parties for the creation of the change in reporting of prepaid order food, or use navigation apps an independent tower company. subscribers beginning in 2017. using their smartphones. At home, However, regulatory headwinds still smart televisions are enabling the remain as the government continues From a product perspective, mobile consumption of bandwidth-intensive to review existing laws and policies data is the biggest contributor to multimedia content such as network and align these to international norms. total mobile revenues, increasing to gaming. More customers are now 44 percent against 38 percent a year taking advantage of free content and Business Review ago, with revenues of P43.1 billion paid streaming services which are Globe Telecom recorded strong in 2017, 23 percent higher than the encroaching on cable TV service. consolidated service revenues for previous year. Mobile SMS revenues 2017, ending the year with P127.9 were flat while mobile voice declined The prevalence of mobile use has billion, six percent higher than 2016. by five percent year-on-year. However, created an opportunity for alternative This also represents the company’s on a normalized basis, mobile data service providers. Since a majority of highest full-year revenues. The revenues would have grown by 30 Filipinos remain unbanked, fintech sustained revenue momentum was percent, while mobile SMS and voice companies are looking to disrupt driven by the solid growth in data- would have declined by seven percent mainstream financial services via related products brought about by the and four percent respectively, as both mobile technology services to serve increasing popularity of streaming and products continue to be challenged millions of financially unserved and on demand video content. This was due to the shift to internet-based underserved Filipinos. likewise enabled by the promotion applications, consistent with global of the digital lifestyle and content trends. Beyond connectivity, corporate partnerships, underpinned by a robust and enterprise clients are looking 3G and 4G network. Globe’s home broadband business to service providers, including telco likewise sustained its growth partners, to provide solutions to help Mobile revenues grew seven percent momentum at P15.6 billion in 2017, businesses grow, generate more to P98.5 billion in 2017, driven by increasing revenues by seven percent
INTO THE FUTURE 121 year-on-year, with total subscriber Globe ended the year with gross debt base now reaching 1.3 million or 15 to equity ratio on a consolidated percent growth from a year ago. Solid basis at 1.98:1 from 1.67:1 in 2016, growth in revenues was driven by while net debt to equity ratio was at the continued subscriber expansion 1.81:1 as of end December 2017 from in fixed wireless solutions, given 1.53:1 in 2016. favorable customer response to the latest Globe home broadband plans. Total cash capital expenditures stood at about P42.5 billion (approximately Globe’s corporate data business also $844 million), 16 percent higher than grew four percent year-on-year at last year’s level of P36.7 billion. P10.3 billion in 2017 from P9.9 billion in 2016, due to the strong demand for Globe paid out P12 billion in data-driven solutions by corporates. common cash dividends in 2017, These resulted in more customers, representing 75 percent of 2016 circuit count, and usage. Traditional core net income. This was in line fixed line voice revenues on the other with Globe’s dividend policy of hand, declined by eight percent to distributing 75 percent to 90 percent end at P3.5 billion from a year ago. of the prior year’s core net income.
Globe posted consolidated EBITDA of P53.3 billion, up seven percent from In 2017, Globe and 9Works Theatrical staged the first local 2016. Total operating expenses and production of Disney’s Newsies. subsidy grew in step with revenues, Strategy increasing by six percent year-on-year to P74.6 billion, as Globe reinvested Strategy Description Performance in Priorities in 2018 gains to support its growing 2017 subscriber base and the aggressive Build the network of Provide mobile 37,517 base stations Fulfill NTC expansion of its data network. EBITDA choice coverage to about 95 with 24,700 for 4G commitment to margin was at 42 percent, higher than percent of cities and provide mobile last year’s 41 percent. municipalities in the coverage to 95% Philippines within of cities and Despite the increase in EBITDA, the three years, thus municipalities in increased investments in its data ensuring first world the Philippines by connectivity end-2018 network resulted in higher non- operating expenses and depreciation charges, leading to a five percent Empower Filipino Be the purveyor of Introduced Continue to forge consumers the digital lifestyle GoWATCH, its partnerships and decline in net income, which stood at by providing promos for mobile create innovative, P15.1 billion in 2017. The two percent affordable world- video streaming, content-driven increase in non-operating expenses class entertainment to address rising experiences for was largely due to the higher available to all demand for data consumers interest expenses and spectrum Focus on the Create the best 85 million foot traffic Continue to enhance amortization related to the SMC telco customer experiences for in 240 Globe stores the customer asset acquisition. This however, was every digital nationwide experience through partly offset by the one-time gain in Filipino through a traditional and new September from the increase in fair technology-driven channels value of the retained equity interest in and customer- Mynt following the investment of Ant centric approach Financial and Ayala. Bring wonderful Improve Connected 1.3 Provide ultra-fast experiences to connectivity at million homes by internet in two Globe’s core net income, which homes home by connecting end of 2017 million households excludes the impact of non-recurring two million homes in 20,000 barangays in 20,000 barangays by 2020 charges, and foreign exchange and by 2020 through mark-to-market charges, likewise high-speed internet declined 15 percent to stand at P13.5 billion, with the full year impact of the Put people f-irst Create a high- 7,206 regular Continue to performing employees (54% foster a culture of SMC transaction. organization male and 46% nurturing employee through a purpose- female) well-being and Globe’s balance sheet and cash flows driven workforce growth to deliver remain strong with ample liquidity with a culture of wonderful customer and gearing below bank covenants. empowerment, experiences collaboration and innovation
122 2017 Ayala Corporation Integrated Report OUR HOW WE THE VALUE CAPITALS CREATE WE VALUE CREATE
Financial Build The Network Of Choice Shareholders Driven by continued mobile To be an admired nation by providing Globe continues to ensure a data revenue growth and strong mobile services to about 95 percent of sustainable, consistent, and consolidated service revenues; cities and municipalities in the Philippines competitive dividends distribution. continued investment in network by end of 2018. expansion to monetize rising data traffic Employees Empower Consumers Its employees are empowered to Manufactured To be the purveyor of the digital lifestyle champion the company’s purpose to Fast-tracking telco infrastructure build by providing affordable world-class create a Globe of Good. and diversifying the customers’ multiple entertainment available to all touchpoints Customers Focus On The Customer Customers are enabled with the power Intellectual To create the best experiences for every of choice as they embrace a digital Best-in class content is continually digital Filipino through a technology- lifestyle. Globe also enables micro, enriched through local and global driven and customer-centric approach small, medium and large enterprises partners. on customer service, education, with relevant business solutions. engagement, and rewards Human Business Partners and Suppliers Developing a people-centered Bring Wonderful Experiences To Homes It provides opportunities to suppliers organization To connect two million homes in 20,000 and business partners within its supply barangays by the end of 2020 with chain. Social And Relationship leading-edge network technology Putting customer-centricity and nation- building at the core of partnerships in Put People First the supply chain. To create a high-performing organization through a purpose-driven workforce with a culture of empowerment, collaboration, and innovation
OUR CONTRIBUTIONS TO THE SDGs
Globe partners with different products, service, and content providers that cater to Filipino’s digital and lifestyle needs.
INTO THE FUTURE 123 MANILA WATER
“Manila Water continued to deliver solid results on sound fundamentals, and generate a robust pipeline of prospects “Commodoin the Philippines nulla and facilisi in the nullamASEAN region. vehicula Our aspiration ipsum a to arcu double cursus. our net income by 2020 continues to drive Ligulaour strategy ullamcorper to build a strongmalesuada portfolio proin of businesses, libero nuncand sustain consequat our position as a partner of choice of the many stakeholders we serve.” interdum varius sit. Aliquam faucibus purus -Ferdinand in massa.” M. dela Cruz, President and CEO, Manila Water
Who we are in Vietnam and a mandate to seek NET INCOME Manila Water is a portfolio of water new acquisitions and partnerships (IN BILLION PESOS) infrastructure businesses and assets in ASEAN; and Manila Water Total across the Philippines and Southeast Solutions, its platform for vertical Asia. By delivering water, used water, expansion through innovative and environmental services, it aims products and services. 6.1 6.2 to empower people, protect the 5.8 5.8 6.0 environment, and drive sustainable With over 20 years of solid development. Manila Water strives experience in the water and to ensure consistent, reliable access sanitation space, Manila Water’s to affordable water and sanitation competitive advantage lies in its services to all its customers. access to human and financial capital and strong spirit of innovation to Manila Water’s portfolio includes: support expansion. As a multi- the Manila Concession, the exclusive service, multi-national, and multi- provider of water and used water cultural enterprise, the company’s services to approximately 6.8 million policies and procedures ensure its 2013 2014 2015 2016 2017 people in the eastern part of Metro brand of service remains best-in- Manila; Manila Water Philippine class. Manila Water will continue to Ventures, its vehicle for expansion expand its portfolio to achieve its in the country while leveraging growth aspirations, which remain RETURN ON EQUITY the track record of its businesses in aligned with regional development (%) Clark, Laguna, Cebu, and Boracay; and sustainability goals. Manila Water Asia Pacific, its holding company for international Market Outlook investments with a leading presence Since the adoption of the United 20.2 17.9 16.2 14.4 13
2013 2014 2015 2016 2017
Employees undergo an average of 30 training hours each.
124 2017 Ayala Corporation Integrated Report Available in two sizes, Healthy Family Drinking Water meets the drinking water preferences of Filipinos.
Nations Sustainable Development participate in untapped sectors and Manila Concession carried out five Goals in 2015, the importance of underserved markets. An example is major projects which strengthened its providing safe and equitable access to its diversification into industrial water mission of providing water and used water and sanitation services to more through Estate Water, which provides water services, including the Rizal communities has steadily increased. water system solutions for mixed-use Province Water Supply Improvement SDG targets include access to drinking real estate developments. Management, which will abstract water, sanitation services, and overall and treat water from Laguna de Bay reduction of pollution to water bodies, Southeast Asia represents significant to benefit 400,000 homes. Its used all of which should be achieved by opportunities for international water facilities, the Pasig North and 2030. These imperatives can best be expansion, with the region South Sewage System, Marikina North achieved through the collaboration characterized by a growing consumer Sewage System, and Taguig North of all concerned stakeholders, both class and rapid urbanization. A Sewage System, have a combined public and private. company like Manila Water, which has treatment capacity of 275 million liters developed best-in-class operational per day, serving about 690,000 homes. In the Philippines, access to safe capabilities in water and used drinking water and sanitation services water services, can maximize this Manila Water Philippine Ventures still needs significant improvement. potential, and meet the needs of other In 2017, the company marked several At the national level, only 43.5 percent populations. wins through new partnerships across of the population has access to piped the country. Consolidated core income water. For sanitation, an alarmingly Business Review reached P640 million, a 13 percent low 2.4 percent has access to piped Manila Water’s net income grew one increase from the previous year. sewer service. The majority is served percent to P6.2 billion in 2017. Revenues This was largely due to a 14 percent by way of septic tanks, while the increased five percent to P18.5 billion, growth in billed volume across all remainder is still without coverage. on the back of Laguna Water’s and domestic subsidiaries, coupled with a To address this gap, both the Boracay Water’s contributions, as well as 31 percent increase in the supervision government and the private sector higher supervision fees recognized by fees of estate water. must provide infrastructure to fast- Estate Water. track coverage expansion and improve Boracay Water’s billed volume grew service delivery. Manila Concession 13 percent to 5.5 mcm driven by The Manila Concession’s net income growth in tourist arrivals and the Manila Water aims to augment this grew six percent to P5.9 billion. Billed sale of bulk water to the Malay Water massive gap in water and used volume grew two percent to 488.4 District beginning in the second water services by expanding its mcm on the back of a three percent quarter of 2017. Meanwhile, Laguna presence nationwide. In addition, increase in billed connections from Water achieved a 12 percent increase evolving industry dynamics and the expansion areas of Marikina, driven by an around 1,500 increase consumer preferences have pushed Pasig, Rizal, and Taguig. It recorded its in billed connections. Laguna Water’s Manila Water to develop innovative highest capital expenditures in two concession was likewise expanded products and services and create new decades at P10.6 billion, a 64 percent to cover all cities and municipalities business models that allowed it to jump from the previous year. The in the province, including the
INTO THE FUTURE 125 provision of used water services and Manila Water Total Solutions management services primarily to the establishment of an integrated Manila Water Total Solutions is the land developers, commercial and sewage and septage system. Cebu company’s vehicle for vertical growth. industrial customers, and utilities. Water’s and Clark Water’s billed In 2017, strong bottle sales of Healthy volume also grew during the year. Family, its bottled water offering, were In April 2017, MWTS launched Healthy offset by a slowdown in construction Family Mini, a 500-ml bottle that retails Estate Water posted a billed volume of contracts of its Corporate Accounts in packs or cases of 24 bottles. As of 4.5 mcm, a 117 percent increase from Management division, which lays end-2017, Healthy Family has five the previous year. This was attributed pipes in horizontal development and plants with a total production capacity to a 50 percent growth in billed townships, and provides used water of 71,400 containers per day. connections, which reached 10,153 from the 63 brownfield Ayala Land Strategy developments it has taken over since Strategy Description Performance in Priorities in 2018 last year. 2017 Improve water Ensure the Construction of Operationalize In 2017, Manila Water also signed a services in the completion of the the 100 mld water Rizal Province 25-year concession agreement with Province of Rizal Rizal Province Water supply facility is in Water Supply the Obando Water District in Bulacan, Supply Improvement its final stages. The Improvement which includes the construction, Project facility is designed Project to serve operations, and maintenance of water to utilize filtration Taytay, Angono, and reverse osmosis, and Binangonan and sanitation services. It also signed a cost-efficient municipalities in the a 25-year concession agreement to technology, in Province of Rizal develop the water supply system abstracting water in Calasiao, Pangasinan. In the first from Laguna Lake. quarter of 2018, it received notices of Increase used water Offer used water Clark Water ensured Offer used water award from the City of Ilagan Water services in Clark services to key real compliance with key services to all real District, and the Leyte Metropolitan Water estate and industrial regulators estate and industrial Water District, to establish joint locators locators in the Clark ventures for a bulk water supply and Special Economic septage management company, and a Zone concession company, respectively. Expand water Increase water Laguna Water is Serve the entire service connections service coverage serving a population three million Manila Water Asia Pacific in the province of and include the 19 of one million across population of Manila Water remains the largest Laguna municipalities other the municipalities Province of Laguna foreign investor in Vietnam’s water than the five being of Biñan, Sta. Rosa, sector. Thu Duc Water, Kenh Dong served Cabuyao, Victoria, and Calauan Water, and Saigon Water, contributed P457 million in net income, a 24 Engage local Provide Established Close deals and percent increase from the previous government units environmental footholds in concessions and businesses in and sustainable targeted LGUs and with LGUs and year. Capacity in Ho Chi Minh City now providing waste to solutions in solid businesses businesses as a stands at 820 mld, equivalent to 50 energy services waste management waste-to-energy percent of the city’s demand. technology and operations provider Manila Water extended its geographic Expansion of Enable new business Saigon Water’s Acquisition of reach, penetrating new markets in engagement in development to acquisition of a key projects Southeast Asia. In the first quarter ASEAN focus on expanding 43% stake in Tan and exploration of 2018, the company acquired an its portfolio of Hiep Water that will of greenfield 18.72 percent stake in Thailand’s businesses supply water in Hoc opportunities in Eastern Water Resources Development Mon, Ho Chi Minh strategic locations and Management Public Company city; and a 51% stake Limited, a publicly-listed water supply in Gia Lai Water servicing the central and distribution company. Expansion highlands of Gia Lai continued with the acquisition of a 20 Province percent stake in Indonesian bulk water supplier PT Sarana Tirta Ungaran. STU serves PDAM Kabupaten Semarang, a regency in Central Java, and industrial customers in its Bawen District which includes PT APAC Inti Corpora, a 100-hectare textile and garment manufacturing company.
126 2017 Ayala Corporation Integrated Report OUR HOW WE THE VALUE CAPITALS CREATE WE VALUE CREATE
Financial Water Utility Operation Investors and Shareholders • Total revenue of P18.5 billion Manila Water has a strong Through PPPs, joint venture Profitability and growth • Net income of P6.2 billion financial position and has projects with water districts through water and • P13 billion in capital the ability to mobilize capital and agreements with estate environmental investments expenditures disbursed through financing to support and property developers, its expanding business. it provides water and used Customers, Communities, • 738.7 million cubic meters of water services to more and Businesses water supplied to customers Manufactured than 17.3 million customers Access to clean and affordable • 5.5 million five-gallon It has well-maintained dams, in the Philippines and water and sanitation services bottles of purified water sold impounding reservoirs, Vietnam, and continues • About one million 500-ml deepwells, water treatment to explore opportunities Safeguarding community bottles of purified water sold facilities, pumping stations in ASEAN. It ensures health, and enabling • 56.42 million cubic meters of and reservoirs, water and potable water is delivered productivity and growth for used water treated sewer distribution networks, 24/7 and used water and individuals and enterprises and used water treatment septage are treated to meet facilities. effluent standards before discharging back to water Human bodies. The company delivers its Employees • Above average engaged products and services through Total Solutions Opportunities for career growth employees (compared to its 2,022 competent, skilled, It develops innovative and development Philippine norm) and passionate employees. products and services • Average of 30 training hours It also partnered with to address the needs of per employee 232 material suppliers, 70 customers. These include contractors, 17 consulting pipelaying, Integrated Environment • Protection of 9,300 hectares firms, and 88 service Used Water Solutions, and Protection of watersheds and of watersheds providers. Healthy Family Purified water sources • 79 hectares enrichment Water. planting in La Mesa Natural Restoration of quality of water Watershed; tree nurturing in Manila Water responsibly NRW Reduction bodies 4.3 hectares in Ipo Watershed abstracts raw water from It improves water • Diverted 9,087 tons of BOD rivers, dams, and aquifers. It distribution efficiency organic pollution load from efficiently uses fuel, electricity, through a non-revenue water bodies and chemicals to optimize the water reduction program. • 57,249 tons of carbon use of these resources. It also partners with water dioxide avoided due to used service providers in the water treatment Social and relationship Philippines and abroad It nurtures good relationships to reduce NRW through while creating shared value leak repair, and pipes and for stakeholders. meter replacement.
Bulk Water Supply Manila Water provides bulk water to Metropolitan Cebu Water District in the Philippines and Saigon Water in Vietnam. It has an on-going bulk water project in Tagum City, Philippines.
OUR CONTRIBUTIONS TO THE SDGs
INTO THE FUTURE 127 AC ENERGY
“Commodo“AC Energy is nullaat a critical facilisi period nullam of transformation—from vehicula ipsum a aPhilippine-focused arcu cursus. energy investment holding company, it is transitioning into a regional player with investment, development, and operation capabilities.” Ligula ullamcorper malesuada proin libero nunc consequat - John Eric T. Francia, President and CEO, AC Energy interdum varius sit. Aliquam faucibus purus in massa.”
Who we are Market Outlook AC Energy was established in 2011 The Philippine power demand- as Ayala’s platform to participate in supply situation is stable at present, the energy sector and contribute with a healthy reserve margin across 20X to addressing the country’s need Luzon, Visayas, and Mindanao. This for reliable and affordable energy has led to decreases in energy prices, sources. Since then, the company which can be observed in the retail has assembled a robust portfolio of competition market, thus benefiting GROWTH FROM 2011-2017 power generation assets in thermal consumers. However, some and renewable technologies. uncertainty remains on the demand- supply situation in the medium AC Energy has achieved significant term, given the expected decline of growth over the past six years: from Malampaya, the Philippines’ largest 1,300 only 80 megawatts of attributable source of natural gas, as well as capacity in 2011 to over 1,600 in pending regulatory approvals for MW 2017. It was named by London-based power projects. International Finance Magazine as the “fastest growing energy platform” The Philippine government ATTRIBUTABLE THERMAL CAPACITY in 2017. continues to push for increasing renewables’ share in the energy mix. With its strong growth and the In December 2017, the Department capabilities it has built over time, AC of Energy’s Renewable Portfolio Energy is gearing up to be a regional Standards On-Grid Rules took 300 player and has successfully entered effect. This requires distribution the Indonesia and Vietnam markets. utilities, electricity suppliers, and MW
ATTRIBUTABLE RENEWABLE CAPACITY
AC Energy and the BIM group broke P3.5B ground on their 300MW solar project in Ninh Thuan Province, Vietnam. NET INCOME
128 2017 Ayala Corporation Integrated Report The Salak and Darajat geothermal plants in Indonesia contributed to AC Energy’s equity earnings beginning in April 2017. other mandated energy participants improvement in energy produced critical thermal power plant achieved to source or produce a share of from NorthWind and North Luzon financial close in December 2017. their energy mix from renewable Renewables. Availability of Montesol, a Construction has started, with Unit 2 sources. We view this as a positive solar asset, also improved. expected to come online in 2020, a development, as it will pave the way year after Unit 1 begins operations. for more renewable investments. Effective in April, the operations GNPower Dinginin will support the of Salak and Darajat Geothermal electricity demand of Luzon and The prices and efficiencies of in Indonesia gave a significant Visayas. renewable technology continue to boost to equity earnings in 2017. improve, including solar and wind. SD Geothermal was part of the AC Energy also scaled up its retail The next crucial development lies acquisition of Chevron’s Indonesia electricity supply operations, with in the affordability and efficiency of assets, with total capacity at 637MW approximately 100MW of customer storage, which will enable the scale-up and attributable capacity at 126MW. contracts signed. and reliability of renewable energy Following the Chevron acquisition, sources. AC Energy is building a portfolio of Transformation renewable energy assets in Indonesia. In 2017, AC Energy started its AC Energy believes that there remains Undertaken in partnership with UPC transformation into a full-fledged potential to invest in the Philippine Renewables, the 75MW Sidrap wind energy company, with development, energy sector, especially with the farm project is expected to come operation, and retail capabilities. It medium-term supply uncertainties online in early 2018. A 30-year power acquired the development platform facing the sector. Meanwhile, ASEAN purchase agreement has been signed previously owned by Bronzeoak holds potential for renewable energy with Indonesian state electricity Philippines, which has a strong developers, with countries like company PLN. track record in renewables, having Vietnam having favorable policies developed over 250MW of solar and supporting renewables. The availabilities of AC Energy’s biomass projects. The development thermal power plants improved platform is being integrated into the Business Review across the board, for a total weighted company, which will allow it to scale In 2017, AC Energy made substantial average capacity of approximately 83 up its renewable energy investments. progress in attaining its 2020 goal percent. of reaching 2,000MW of attributable AC Energy is exploring opportunities capacity. The company’s attributable Construction of GNPower Kauswagan in the region. In 2017, it successfully capacity grew to approximately is nearing completion, with entered Indonesia with investments 1,600MW after securing financing for commercial operations expected in in geothermal and wind assets. the second unit of GNPower Dinginin 2018. Over 450MW of contracts have Subsequently, in the first quarter of in Bataan. Net income was P3.5 billion, been signed for this facility, which 2018, it forged a partnership with up 31 percent from 2016. is one of the lowest cost producers Vietnam’s BIM group to develop over and the most competitively priced 300MW of solar projects in the Ninh Renewable and Thermal Assets in Mindanao. Meanwhile, Unit 2 of Thuan province. The first 30MW is A strong wind regime drove an GNPower Dinginin’s 2 x 668MW super- expected to come online in 2018.
INTO THE FUTURE 129 Sustainability In September, AC Energy’s affiliate North Luzon Renewables completed its reforestation project. NLR planted 209,874 seedlings within the vicinity of its 81MW wind farm in Pagudpud, Ilocos Norte. The reforestation program has a survival rate of 94 percent, and exceeds the required 205,000 goal set by the Department of Environment and Natural Resources. The company develops and protects the 625-hectare forest area covered by its wind farm, under the Forest Land Use Agreement with DENR. It plans to continue this environmental effort and livelihood program which benefits surrounding communities.
In November, AC Energy and Kennedy Renewable energized the Mindanao State University in Tawi- Tawi through the use of solar panels. AC Energy provided technical and financial support, while Kennedy Renewable acted as the main developer and engineering, procurement, and construction contractor for the project.
The Sidrap 75MW wind farm is expected to begin operations in 2018. Strategy Strategy Description Performance in Priorities in 2018 2017 International Invest in overseas Successfully entered Solidify footprint expansion markets with Indonesia, and in Vietnam by favorable investment deployed $200 participating in solar opportunities and million of equity and wind projects policy support in geothermal and wind Ramp-up Leverage capabilities Acquired Bronzeoak • Establish a pipeline development in development of development of greenfield capabilities and power plants platform projects in the roll out greenfield medium to long- projects term
• Achieve financial close for 1-2 projects in the Philippines
The San Carlos Solar farm is one of AC Energy’s three solar farms in the Visayas.
130 2017 Ayala Corporation Integrated Report OUR HOW WE THE VALUE CAPITALS CREATE WE VALUE CREATE
Financial Participation in the greenfield Investors and Shareholders AC Energy has a strong balance sheet, development of power plants The company secures capital efficiency backed by significant capital allocation For greenfield development, the with 12% return on equity. from its parent company, Ayala, to company ensures due diligence, support its fast-paced growth and permitting, supplier agreements and Customers regional expansion. The company also on-time construction. The company It contributes to the country’s energy capitalizes on project financing by determines viable energy mix and also requirements through affordable lenders and banks. explores expansion of renewable energy electricity affordable electricity. In platforms. 2017, AC Energy generated a total net Manufactured of 6,552.1 GWh, higher by 6% from the AC Energy uses wind turbines, solar Mergers and Acquisitions previous year. panels, and boilers which are regularly AC Energy continues to explore maintained for efficient operations. The possibilities for brownfield growth by The Environment company also engages Engineering, either acquiring plants with expansion It has also increased renewable energy Procurement, and Construction potential, and are either operational or plant output. In 2017, it produced 410 contractors for the construction of its under construction. GWh, a 20% increase from 2016. power plants. Commercial generation Employees Natural AC Energy generates power and transmits AC Energy gives meaningful jobs to Its business, which utilizes wind, solar to the National Grid Corporation of its employees, contributing to their and thermal energy sources, operates the Philippines for distribution. It also professional development and career in a responsible manner to minimize its transmits to distribution utilities, Retail growth. Through its employees’ impact to the environment. Electricity Suppliers, the spot market, and favorable ratings, the company Feed-in-Tariff. achieved an employee engagement Human score of 96% in the recently conducted The company’s operations are driven Retail Electricity Employee Engagement Survey of the by competent employees equipped The company also sells directly to end Ayala group. Its results are higher than with diversified skills that it continually customers from its own plants or other the Philippine national norm. supports for their professional power plants. development and for them to cope with Communities the fast-evolving business environment. The company considers the communities in which it operates as Social and relationship partners in its growth and engages New linkages with different local and with them through various activities regional stakeholders allow AC Energy to and CSR efforts in support of their expand its operations in the Southeast livelihood, and to further educate them Asian region, while it continues to in responsible energy generation. maintain good relationships with the communities where it operates.
OUR CONTRIBUTIONS TO THE SDGs
AC Energy’s thermal assets contribute to the Philippines’ need for reliable baseload capacity.
INTO THE FUTURE 131 AC INDUSTRIALS
“In AC Industrials’ first full year of operations, we strengthened and reinvented existing businesses while planting the “Commodoseeds for future nulla growth facilisi with nullamkey acquisitions vehicula and ipsuminitiatives. a arcuThe coming cursus. years will be exciting ones, as we deploy the Liguladisruptive ullamcorper technologies malesuada of the future intoproin leading libero products nunc consequatand services that benefit the markets and customers we serve.” interdum varius sit. Aliquam faucibus purus in massa.” - Arthur R. Tan, President and CEO, AC Industrials
Who we are to tap markets in North America, Established in 2016, AC Industrial Europe, and Asia. Technology Holdings is the Ayala group’s emerging industrial It is Ayala’s platform to boost its technology arm. AC Industrials is presence in the global and domestic 12 currently building an integrated and industrial technologies spaces by synergistic portfolio of operating capitalizing on opportunities brought units composed of platforms in global about by disruptive technological COUNTRIES manufacturing solutions, emerging shifts, changing industry landscapes, WHERE IT technologies, and vehicle assembly, and increasing demand from end- OPERATES distribution, and retail. users.
The company is founded on the Market Outlook strengths of Integrated Micro- The global pace of innovation has ~$1.1 B Electronics Inc., which traces its been accelerating over the past two roots as one of the Philippines’ decades, allowing the emergence of electronics manufacturing services new business models, disruption of pioneers and is now a globally incumbent companies, and creation leading manufacturing and of opportunities for new entrants REVENUE CONTRIBUTION technology solutions partner, and to capture value in previously FROM IMI AC Automotive, the country’s largest inaccessible areas. The diverse multi-brand dealership group. AC industrials space has seen especially Industrials operates in nine countries disruptive change. around the world, with the capacity 28,701
VEHICLE UNITS SOLD
1,800
IMI has operations and the capacity to tap markets around the world. KTM MOTORCYCLE UNITS PRODUCED
132 2017 Ayala Corporation Integrated Report KTM motorcycles are assembled in IMI’s facility in Laguna for the domestic market, and eventually, for export. For example, AC Industrials’ key space, automotive industry associations in revenue in its first seven months automotive, is undergoing transitions project flat sales in the year ahead, in the group. The entry into these two such as the moves from fossil fuels while retaining optimism for the new spaces underscores the continuing to cleaner power, and from a focus medium and long-term as the impact diversification of IMI’s revenue base. on the driver to one of autonomous, of tax reform stabilizes. Contribution of the automotive shared mobility. These have resulted segment – still the largest and most in changes to the vehicle itself. For Business Review important – closed at 41 percent, while example, the electronic component of In its first full year, AC Industrials the other priority segment, industrial, cars has been steadily increasing over focused on its twin priorities of grew 21 percent. the years. From only 10 percent of the delivering solid operational results total cost of a vehicle a decade ago, while continuing to assemble a The global manufacturing group it now stands at 40 percent. This ratio synergistic portfolio of businesses and continues to capture emerging is expected to reach 50 percent by investments. Net income grew four opportunities in the automotive 2025. Moreover, the number of electric percent year over year to P1.2 billion, and industrial sectors. IMI’s factory vehicles in use is expected to grow driven primarily by robust results from in Chengdu, China now provides from two million units in 2016 to over both IMI and AC Automotive. charging solutions to support the 20 million units by 2020. Advanced ongoing transition to electric vehicles. driver assistance systems are expected Driving Operational Growth from to evolve into a critical component of Major Businesses As industry demand and regulations every vehicle, creating opportunities IMI reached a milestone in 2017 as it that require advanced driver to deepen participation at both ends crossed $1 billion in revenues for the assistance systems have intensified, of the industry’s value chain. first time. Topline grew to $1.1 billion, a IMI has partnered with Tier 1 29 percent increase over the previous automotive suppliers to co-design Regulatory forces have also helped year, boosted by recent acquisitions and engineer several related push automotive disruption forward. and continuing advancement into applications such as sensors and China, the world’s largest electric the globally competitive automotive sensing camera systems, with VIA vehicles market, has enacted policy and industrial markets. Net income, doing the same for display solutions. expected to accelerate domestic meanwhile, reached $34 million, up STI, meanwhile, is well-positioned production and consumption of 21 percent over 2016. to serve the advancement of next- electric vehicles. The UK and France generation satellite communication also announced that sales of gasoline Operations in Europe and Mexico led systems, which enable asset-light and diesel cars will end by 2040. the way with revenues growing 14 telecommunications access into far- and 29 percent respectively. Germany- flung locations, and unlock benefits The demand side will also see based VIA Optronics, acquired in 2016, for the connected automotive, disruption. Tax reform enacted by the posted $148.4 million in revenues, aerospace, and logistics sectors. Philippines in 2017 is poised to change the highest in its history. Meanwhile, IMI is also ramping up its capabilities buying behavior and preferences, since its addition in May 2017 to to be a major player in power as higher take-home pay is offset boost IMI’s exposure to the aerospace modules, a key component in by raised excise taxes for certain and defense markets, UK-based STI electric vehicles and other industrial automotive price brackets. As a result, Enterprises contributed $45.5 million applications. Electric and hybrid
INTO THE FUTURE 133 vehicles, which both face rising needs in IMI’s Laguna campus, which began for automotive original equipment for higher power requirements, are production of the all-new 390 Duke. manufacturers. This new platform expected to represent about 40 will advance AC Industrials’ abilities percent of the overall power module AC Automotive continues to progress in the segment and is expected to market by 2022. toward its goal of becoming the eventually complement both IMI and Philippines’s largest automotive group AC Automotive. IMI spent $65.3 million in capital – by aiming for a leading presence expenditures, primarily to advance in terms of industry market share MT, along with other additions in the group’s strategic position as an and building an emerging domestic recent years – Volkswagen, KTM, Via, enabler of disruptive technology for assembly base in concert with sister and STI – forms part of Ayala and AC both its customers and its parent business unit IMI. Industrials’ strategy of assembling company. Investments into future an industrial portfolio that owns, growth platforms, automation, and Building, Managing, and Consolidating develops, and commercializes high capacity equipment will position Ayala’s Industrial Arm disruptive technologies in rapidly the business unit to serve emerging At the holding company level, AC transforming sectors. By consolidating technologies key to AC Industrials’ Industrials continued to operationalize operations and unlocking synergies strategy, and will advance productivity itself and make key acquisitions. This among existing and new businesses, and enable sustained market share was highlighted by the acquisition of a AC Industrials will be in position growth as a leading manufacturing 94.9 percent stake in MT Technologies to capitalize on opportunities in solutions providers. GmbH, a Tier 1 supplier and designer the globally competitive industrial of models, tools, and plastic parts technology space. On the domestic front, the Philippine automotive market continued its Strategy strong year-on-year growth with industry sales increasing 18 percent to Strategy Description Performance in Priorities in 2018 473,000 units. Motorization remained 2017 in full swing as models preferred Maintain industry Strengthen and • IMI grew revenues • Assist organic by Filipino buyers – midsize SUVs, leadership of support growth of to over $1B for the expansion of IMI compact multipurpose vehicles, established IMI, and Honda and first time via stock rights subcompact sedans, and subcompact businesses Isuzu businesses • Honda and Isuzu offering and other SUVs – continued to experience rising increased network initiatives share • Support Honda and demand. The aforementioned passage Isuzu expansion of new excise taxes, which took effect both operationally in January 2018, also propelled a and financially significant volume surge in the last Build on capabilities Scale existing • Deployed P2 billion • Scale up and quarter of 2017. of emerging businesses acquired in capital to acquire strengthen MT, STI, businesses in recent years; MT Technologies and Via These industry tailwinds helped AC add key pieces that and launch entry • Operationalize Automotive attain P671M in net pioneer or deepen into solar solar business income in 2017, a 36 percent increase AC Industrials’ • Launched • Activate new over the previous year and with presence in priority key models in model sourcing for all brands in the portfolio posting sectors Volkswagen and Volkswagen significant growth. Honda Cars Makati activated KTM • Ramp up exports gained four percentage points in factory in IMI for KTM • Continue network share to 43.5 percent on the integrating STI and back of improved unit sales, while Via Optronics Isuzu Automotive Dealership added one percentage point in network Holding company Operationalize AC • Activated AC • Nurture synergies Industrials as a Industrials and and joint areas share to 39.2 percent, supported holding company, of cooperation by strong fleet sales. Volkswagen began strategic adding value to its and financial across IMI, AC Auto, Philippines distributed 29 percent subsidiaries and integration of new and other new, more vehicles as new models – the driving synergies/ and existing units emerging pieces Golf GTS and new Jetta lines – helped integration among • Launched ongoing • Progress on data the German marque maintain businesses overhaul and and digitization its market growth. Finally, KTM transformation efforts Philippines closed its first full year of of automotive • Continue operations with a threefold escalation distribution strengthening holding company in sales to 1,725 motorcycles, marked business as well by the opening of its factory
134 2017 Ayala Corporation Integrated Report OUR HOW WE THE VALUE CAPITALS CREATE WE CREATE VALUE
Financial Portfolio Management Investors and Shareholders A healthy balance sheet with a capital It actively grows its portfolio, and It provides growing shareholder returns base that can be readily deployed to constantly searches for synergy that are diversified by the sectoral and address growth opportunities and opportunities among the group. From geographic scope of its portfolio. respond to customer needs a management perspective, it provides • 2017 group net income of P1.2 billion a broad range of corporate functions • 2017 IMI revenues of $1.1 billion, net Manufactured such as strategic planning, governance, income of $34 million Facilities located around the world allow resource allocation, and financial • 2017 AC Auto revenues of P31.2B, net AC Industrials to create and distribute management. income of P671 million products, services, and solutions to its customers. IMI has 19 plants around Global Manufacturing Services Employees the world with 132 surface-mount It delivers full manufacturing solutions for Its employees are able to build technology production lines and its customers and partners, and across its meaningful, long-term careers that 287,000 sqm of manufacturing space. own portfolio of companies. develop their skills and allow them to AC Industrials directly holds a majority support their families. stake in the KTM motorcycle production Emerging Technologies Development plant in Laguna, Philippines, as well as a It constantly seeks out, acquires, and Partners nationwide network of 24 automotive commercializes key technologies that Its long-term strategic partners are dealerships covering four vehicle brands. enhance and protect its competitive treated fairly, and these ventures position. generate growing, consistent returns Intellectual that equitably accrue to all sides. It deploys an emerging suite of Vehicle Sourcing proprietary technologies and intellectual It partners with multiple OEM brands Customers property for the benefit of customers to competitively source a broad, It offers products, services, solutions, and partners. complementary, and integrated selection and ownership experiences that exceed of vehicles for its customers. customer requirements and global Human quality standards. It has a strong base of over 18,500 Vehicle Retail employees and executives that deliver It offers a wide array of vehicles from • 4,338,107 units of automotive operational excellence, customer leading brands. cameras satisfaction, and value-adding technical • 7,049,203 units for smart energy expertise. applications • 20,027,803 units for connectivity Social and Relationship applications It treats partners and customers • 28,348 vehicles sold, with majority fairly, and view them as long-term share within the automotive brands it relationships that stand the test of distributes time. Its operations adhere to Ayala’s standards of sustainability and good Government and policymakers governance. It champions the development of quality manufacturing in the Philippines in support of the government’s thrust to promote and revive the sector as a pillar of national development. It lives this out by investing and locating in its home country, utilizing key frameworks and programs like the Motor Vehicle Development Program, the Investment Priorities Plan, and the Philippine Economic Zone Authority.
OUR CONTRIBUTIONS TO THE SDGs
INTO THE FUTURE 135 AC INFRASTRUCTURE
“AC Infra continues to develop public-private partnership projects to address urgent transportation infrastructure “Commodoneeds, while ournulla operating facilisi companies nullam vehicula improve on ipsum their efficiencies. a arcu cursus. Outside PPPs, we are investing in innovative Ligulainfrastructure ullamcorper platforms malesuada to support new proin and liberodisruptive nunc business consequat models.” interdum varius sit. Aliquam faucibus - Jose purus Rene in Gregory massa.” D. Almendras, President and CEO, AC Infrastructure
Who we are Its current projects, all of which AC Infrastructure invests in operate under a concession infrastructure needed for the agreement with the government, P11.7 B Philippines’ sustained and inclusive serve the commuting and motoring development. AC Infra intends public who live and work in Metro to meet the country’s urgent Manila and nearby provinces. need for efficient, reliable, safe, IN TRANSACTION VALUE and sustainable modes of mass The company’s ability to steward and FOR BEEP™ SINCE transportation and transport services lead projects from its development, ROLLOUT to move people, goods, and services implementation, operations and by investing in strategic solutions maintenance is its key advantage. using new or existing technologies AC Infra builds on Ayala’s reputation and platforms. It develops businesses and track record of excellence and infrastructure projects to in developing and sustainably 430 M support the growing needs of managing large scale projects. the public and private sectors in the areas of mass transportation, Market Outlook mobility, and fulfilment solutions In the Transport Infrastructure BEEP™ TRANSACTIONS services. Roadmap Study for Mega Manila SINCE ROLLOUT
29,000
MCX AVERAGE DAILY TRAFFIC
435,000
LRT-1 AVERAGE DAILY RIDERSHIP LRMC continues to upgrade stations along the LRT-1 to provide a better commuting experience to Filipinos.
136 2017 Ayala Corporation Integrated Report MCX helps alleviate traffic congestion along Daang Hari, Cavite, and Commerce Avenue, Muntinlupa. released by the Japan International Apart from hard infrastructure, 2017. Apart from its recent partnership Cooperation Agency, it is estimated opportunities also exist in adjacent with coins.ph to enable loading of that the Philippines now loses some and related sectors. For example, beep™ cards through smartphones, P3.5 billion daily due to the traffic with the increasing adoption of there are now more than 400 top- situation in Metro Manila. JICA e-commerce, there is growing demand up stations in strategic locations to also predicts that Mega Manila will for efficient logistics and fulfilment ensure convenience for cardholders. become one of the largest megacities solutions services. Increasing digital in the world by 2035, but will also be and mobile penetration, as well as the For the Muntinlupa-Cavite Expressway, among the most congested. The loss public’s growing familiarity with new average annual daily traffic stood at of efficiency and potential due to poor platforms to purchase products and 29,000 vehicles in 2017, a 19.5 percent infrastructure underscores the need services, also creates opportunities— increase from 2016. This is in line to invest in solutions to improve mass for example, the payments platform with projected growth in vehicular transportation. Inclusive infrastructure that AC Infrastructure is operating can traffic and is expected grow steadily is key in enabling the Philippines to be leveraged for a wider variety of in the coming years. As a result, total build on its economic gains and to applications across different platforms. revenues from MCX, including non-toll improve its competitiveness globally revenues, in 2017 hit P205 million, and in Southeast Asia. Business Review while EBITDA reached P96 million, a 92 In 2017, AC Infrastructure continued to percent increase from 2016. The Philippine government is currently build on the efficiencies and gains of implementing its Build, Build, Build its existing projects. Since taking over operations and initiative—an ambitious plan to maintenance in September 2015, construct over 70 priority infrastructure Its payment platform, AF Payments, Light Rail Manila Corporation has projects worth P8 trillion over the or the beep™ card, grew, with over invested over P2 billion to upgrade next five years, with several projects four million in circulation at the end the system and ensure a more aimed at improving mobility and mass of the year, from 2.8 million in the comfortable riding experience. transportation across the country. The previous year. Annual transaction Functioning light rail vehicles have government intends to do this through count increased six percent to 430 increased to 109, resulting in shorter different means, including budgeted million in 2017, with total value of headways averaging 3.35 minutes in infrastructure allocations, official transactions processed during the December 2017 as compared to 3.61 development assistance, government- year at P11.7 billion, an increase of 7 minutes for the same period in 2016. to-government agreements, and percent from 2016. Initially developed This has improved the commute of both solicited and unsolicited public- for all three Metro Manila rail lines, the 435,000 passengers who use the private partnership projects. Different beep™ is steadily expanding as a LRT-1 daily. Philippine companies have formed payment mode in city and point- consortiums among themselves, as well to-point buses, toll roads, and retail Various technical improvements as with foreign partners, to participate chains. beep™ entered the quick serve have reduced the occurrence of in the infrastructure buildout. restaurant segment with a partnership air-conditioning faults by 92 percent, with Wendy’s that started last October brake faults by 67 percent, and
INTO THE FUTURE 137 signaling faults by 81 percent leading support facilities to meet the current to improved train reliability, fewer and projected passenger traffic. The trip cancellations, and significantly company also committed P1.1 billion improved passenger comfort. for its new venture in the fulfillment Replacement of the 32-year old solutions industry. rails of the LRT-1 was completed in September 2017. With the new rails, trains can increase speed from 40kph to 60kph, further reducing passenger Strategy waiting time. Strategy Description Performance in Priorities in 2018 2017 Customer satisfaction is up by 200 Ensure high levels Deliver consistent • MCX average • Increase annual percent as commuters have taken of efficiency level of service and annual daily traffic average daily traffic notice of the improved state and for operating continue to exceed increased 19% from to 32,000 cleanliness of the stations, a project companies key performance 2016 also undertaken by LRMC. Since indicators for • Further reduce inaugurating the newly-renovated operating toll, • Increase number headway and Doroteo Jose station last February rail, and payment of light rail vehicles cycle time, and 2017, refurbishment has been companies to 109, resulting in complete station shorter headways improvements completed in six stations, while the rest are in various stages of • Over four million • Begin completion. Station improvements beep™ cards in preconstruction shall be completed in 2019. circulation; non-rail work on Cavite network expanded extension In May 2017, LRMC broke ground to 281 bus units and for the LRT-1 Extension project that 493 retail partners • Expand beep™’s will extend the line by 11.5km from non-rail network Baclaran to Cavite. LRMC has secured to 420 Buses and 1,800 retail outlets, the financing and the engineering, and roll-out to 200 procurement, and construction jeepney/PUV units contract for the extension and expects to begin preconstruction works in Propose new Propose projects With partners, Secure Original 2018. Construction shall commence projects for PPP to address the submitted Proponent status soon after the right of way is delivered. country’s urgent unsolicited and requisite transportation proposals for the C3 approvals from A ground-breaking ceremony infrastructure needs Expressway and the government. for the common station project NAIA rehabilitation was held in September 2017, and upgrade following agreements among various stakeholders involved in the Develop non- Outside Signed investment Set-up organization development of the project, which will regulated PPPs, identify agreement with and commence serve as a transfer point for passengers infrastructure opportunities and ZALORA affiliate to commercial using LRT 1, MRT 3, and MRT 7. business propose innovative jointly invest in a operations infrastructure fulfilment solutions solutions to support company AC Infrastructure has continued to new and disruptive seek opportunities to expand its business models portfolio of projects in the public and private sectors. In the first quarter of 2017, AC Infrastructure and SM Investments Corporation submitted an unsolicited proposal to the Department of Public Works and Highways to design, build, operate, and maintain the C3 Expressway. In February 2018, as part of a consortium, it submitted a proposal to the Department of Transportation to transform the Ninoy Aquino International Airport into a regional airport hub, and upgrade its airside, landside, and air navigation beepTM is increasingly growing its non-rail partner network to benefit more customers.
138 2017 Ayala Corporation Integrated Report OUR HOW WE THE VALUE CAPITALS CREATE WE VALUE CREATE
Financial Project Develepment Customers A strong balance sheet and strategic AC Infra pursues investment Travel time is reduced for motorists and capex investments funded by Ayala opportunities that address infrastructure train passengers. needs of the public and private sectors. Manufactured Together with highly competent partners, In 2017, MCX served 29,000 motorists Continued improvement in the it stewards the project development daily, saving 8-10 minutes of their operating efficiencies of LRT-1, MCX, and process to develop innovative and travel time. LRT 1 accommodated beepTM sustainable infrastructure solutions. over nine million more passengers, due to extended operating hours Intellectual Implementation and Start-up and improved headways. Cashless Experience and track record in putting It has assembled a competent team and faster transactions are promoted together PPP project proposals for toll that will steward the implementation of through beepTM card. road, rail, and airport infrastructure. projects and execute plans in a timely, cost-efficient, and socially sustainable Grantors and Government Human manner. The company employs best Infrastructure targets and needs of A team with a diverse and practices to meet industry standards and the country are supported through complementary set of skills that can ensures compliance with all regulatory the projects developed. Continued steward projects from inception to processes. improvements in operations and development to operations. maintenance are translated into Business Operations benefits in the form of better public Social and Relationship It consistently meets the Key Performance image and service to citizens. Wide spectrum of local and foreign Indicators in its concession agreements project partners with complementary through teams that deliver smooth Employees knowledge and expertise. Supportive and efficient operations. Staff have Employees under the previous partnerships with public sector improved capabilities to ensure proper administration were transitioned from stakeholders maintenance to minimize disruptions, contractual to regular employees, while management continually seeks giving them job security. The improvement across all operations. employees, under various programs, continue to increase their capabilities and improve their skills.
OUR CONTRIBUTIONS TO THE SDGs
MCX enables motorists to save time and cut down on the cost of gas.
INTO THE FUTURE 139 AC HEALTH
“AC Health’s focus has always been to improve healthcare for Filipinos. In 2017, we increased our retail health footprint “Commodothrough our nullaGenerika facilisi pharmacies, nullam and vehicula FamilyDOC ipsum primary a arcu care clinics.cursus. In 2018, we hope to expand our portfolio further through strategic partnerships in hospitals, specialty care, and health technology. Most importantly, we keep Ligulaour patients ullamcorper at the heart malesuada of everything proin that welibero do.” nunc consequat interdum varius sit. Aliquam faucibus purus in massa.” - Paolo Maximo F. Borromeo, President and CEO, AC Health
Who we are AC Health has a growing retail AC Health is the portfolio company footprint, which enables it to provide for Ayala’s healthcare businesses. AC last-mile access to consumers. It Health aims to address the need for utilizes innovative products, services, 100 accessible, affordable, and quality and business models, including healthcare by building an integrated health technology solutions, to healthcare ecosystem, providing address the needs of its patients and TARGET products and services across the customers. FAMILYDOC continuum of care. CLINICS BY 2020 As a portfolio company, it aims to At present, its portfolio includes build strong business partnerships, Generika Drugstore, the pioneer and to work in collaboration with in generic retail pharmacies, different sectors of the healthcare FamilyDOC, a chain of primary industry, including the private sector, 1,000 care clinics, and various health the public sector, and the academe. technology solutions, such as These will allow the company to MedGrocer, an FDA-licensed improve its healthcare products and e-Pharmacy. Generika Drugstores services for patients and customers. TARGET GENERIKA STORES BY has over 750 branches nationwide, 2020 while FamilyDOC has 28 clinics in the Greater Metro Manila area as of March 2018. Extended opening hours allow FamilyDOC to serve more patients. 65,000
UNIQUE PATIENTS SERVED BY FAMILYDOC
~60,000
PATIENTS SERVED BY MEDGROCER
140 2017 Ayala Corporation Integrated Report FamilyDOC’s Family Medicine Training Program is the largest in the Philippines.
MedGrocer enables the convenient purchase of medicine. Market Outlook Emerging consumer trends point to The healthcare industry continues to a greater desire for patient centered- show high single-digit growth, with care, and an openness to new increasing demand of healthcare technology in health. Globally and products and services driven by the in the region, healthcare technology growth of the middle-class. In the face is a burgeoning field, although it of growing demand, there continues is still in its very early stages in the to be an unmet need for accessible Philippines. Additional regulatory and affordable quality products frameworks are needed to encourage and services, including affordable health technology solutions such as medicines, primary care, hospitals, and electronic medical records, Telehealth, specialty care. and e-Prescriptions.
There are several challenges in AC Business Review Health’s expansion of services. First, AC Health continues its rapid the supply of medical professionals expansion in the healthcare space, will continue to be a limiting factor in pursuit of its vision to build an to scale – recruitment and retention integrated healthcare ecosystem that of quality medical professionals will provides patients with a seamless be critical to meet expansion targets. healthcare experience. Second, there is a need to balance regulatory compliance with speed in In the pharmacy space, Generika expansion. Drugstore grew its network to 750 stores nationwide, after opening 100 new stores in 2017. Revenues for the year were P3.3 billion, up 15 percent from the previous year. This also outpaced industry growth of 8.4 percent. Generika also grew its Actimed Housebrand line to a total of 112 products, including 36 new products in the past year. In 2017, Generika became the first recipient of the ASEAN Inclusive Business Award in recognition of its business model, which pioneered the retail of quality generic medicines in the country. In primary care, FamilyDOC opened 15 Both Generika and FamilyDOC conduct community engagement activities.
INTO THE FUTURE 141 new branches in 2017, reaching a total existing operations, targeting to end In parallel, it continues to pursue of 21 clinics at the end of the year. the year with a total of 850 Generika expansion into hospitals, and specialty It has expanded into new locations stores nationwide, and over 50 care, in line with its vision of offering in the Metro to include clinics in FamilyDOC clinics in the Greater Metro services across the continuum of Parañaque, Taguig, Pateros, and Pasig Manila Area. It also plans to introduce care. With its solid footprint in retail in addition to Cavite and Las Pinas. new health technology solutions, health, it is well-positioned to serve Since its establishment in December such as its electronic medical records more Filipinos, and to offer innovative 2015, FamilyDOC has served over system, to more healthcare providers. products and services towards 65,000 unique patients as of end-2017. improving healthcare for all. It now employs 79 doctors, under its duly-accredited Family Medicine Strategy training program, the largest in the Strategy Description Performance in Priorities in 2018 country, and over 120 allied health 2017 professionals. Expand footprint of Expand Generika 100 new stores, for a Total of 850 stores Generika stores footprint to 1,000 total of 750 stores AC Health added health technology pharmacies to its portfolio in 2017 by investing nationwide by 2020 in MedGrocer. Medgrocer is an FDA-licensed ePharmacy, serving Build FamilyDOC Build the largest Total of 21 clinics Over 50 clinics over 60,000 customers across 100 clinic network network of primary corporate clinics. care clinics
The company also launched Vigos Invest in health Invest in healthcare • Invested in Expand portfolio of EMR, an electronic medical records technology technology MedGrocer, health technology and clinic information system utilized solutions solutions to • Launched Vigos solutions in all FamilyDOC clinics. The system improve efficiency, EMR improves efficiency and enables integration, and integration across the clinic network, reach in addition to performing extensive Portfolio-building Build a healthcare Established retail Complement retail data analytics for population health. ecosystem across health footprint health with hospitals AC Health will focus on ramping up the continuum of and specialty care care
Generika offers additional services, such as a medicine guide and scheduled free consultations.
142 2017 Ayala Corporation Integrated Report OUR HOW WE THE VALUE CAPITALS CREATE WE VALUE CREATE
Financial Asset Performance Business Partners Strategic capital allocation from the AC Health aims to expand its network Through AC Health’s integrated and parent company, Ayala, to support its of Generika drugstores, and FamilyDOC innovative network, partners can leverage expansion plan and 2020 vision. clinics. It is also developing its own shared resources and collectively make health technology solutions, such as an quality healthcare more accessible to Manufactured electronic medical records and clinic more patients. Partners benefit from an Continued expansion of its network of information system exchange of knowledge, people, and technology across the ecosystem. Generika pharmacies, with 750 branches nationwide, and growth of FamilyDOC Portfolio Building and Business Healthcare Industry to 21 clinics, by end of 2017. Development AC Health promotes a multi-sectoral and AC Health’s goal is to build an integrated collaborative approach to addressing Intellectual healthcare ecosystem across the healthcare challenges so that the Various intellectual capitals grouped in continuum of care shared vision of improving everyone’s three categories: health will be more attainable. Through 1. Products and services: Certificates Synergies its subsidiaries, AC Health provides of Product Registration for medicines, AC Health drives synergies within its opportunities for healthcare professionals. and medical service and training healthcare businesses, and across the protocol Ayala group to improve efficiency, and Customers and Patients 2. Brands: AC Health, FamilyDOC, and ensure integration Generika Drugstore has been providing Generika B greater access to affordable, quality 3. Technology and analytics: Priorities: Invest and Integrate Key Pillars generic medicines to more Filipinos. MedGrocer, in-house electronic 1. Pharmacies and pharmaceuticals Aside from providing affordable, quality medical record and clinic information 2 Clinics generic medicines, which delivers up to system (Vigos EMR) 3. Hospitals and specialty clinics 85% savings as compared to branded counterparts, Generika is also active in 4. Healthcare financing promoting health and wellness at the Human 5. HealthTech community level and offers additional Pool of medical, non-medical, and services like free blood pressure check, health IT professionals, which includes Build a strong retail health component a medicine guide, and scheduled free 13 employees from AC Health, 825 (Generika and FamilyDOC) consultations. employees from Generika, 194 employees from FamilyDOC, and 23 FamilyDOC has served a cumulative total employees from MedGrocer of 65,102 unique patients as of end-2017. It is also active in promoting preventive Social and Relationship health and wellness through its community Affiliation with Ayala brand, franchisees, events, such as the Kalusugan Caravan business partners, and external partners, and the Ministry of Moms. FamilyDOC also which include the government and offers packages and promotions targeted regulatory agencies (i.e. the Department to the profile of its patients, including a of Health and the Food and Drugs diabetes and hypertension club, and a Administration), and healthcare kiddie club. professionals MedGrocer continues to provide convenience through its medicine delivery platform. Patients can now order their medicines online and have them delivered within the day through MedGrocer. The website has an easy upload feature for medications that require doctor’s prescription. As of 2017, MedGrocer has served 1,221 clients via medicine delivery. On the other hand, MedGrocer is also serving corporate clients through clinic management. To date, it has already served 60,000 people through its network of 100 corporate clinics.
OUR CONTRIBUTIONS TO THE SDGs
INTO THE FUTURE 143 AC EDUCATION
“AC Education continues to deliver quality, affordable education that leverages an industry-based, experiential, and technology-enabled approach to significantly improve the employability of our high school and college graduates. We aim to transform more lives by expanding our platform through both mergers and acquisitions and organic growth.” - Alfredo I. Ayala, President and CEO, AC Education
Who we are Batangas, and approximately 16,000 AC Education is the holding students. APEC offers junior high company for Ayala’s investments in school and senior high school with an education. Its vision is to empower innovative and progressive approach ~16,000 Filipino parents and their children to both learning and employability, in by delivering affordable, quality a fully airconditioned environment, at education that enables significantly an affordable price point. improved employability for its high STUDENT POPULATION IN APEC SCHOOLS school and college graduates. The AC Education also has a majority stake company achieves this through in the University of Nueva Caceres, the proprietary student value-add oldest university in the Bicol region, programs, systematic teacher training, offering basic, high school, and higher professional management operations, education with approximately 8,000 and a strong industry network. students in its campus in Naga City, ~8,000 Camarines Sur. The Affordable Private Education Center Schools began in 2013 with Market Outlook one school site and 130 students. The Philippine education industry is STUDENT POPULATION IN UNC Since then, it has scaled up to become highly regulated and fragmented. In the largest chain of affordable, private school year 2016-2017, there were high schools with 23 branches across 2,396 higher education institutions in Metro Manila, Cavite, Rizal, and operation. 89%
EMPLOYMENT WITHIN THREE MONTHS POST GRADUATION (UNC PEP COHORT)
54%
AVERAGE SALARY PREMIUM OF UNC PEP COHORT The University of Nueva Caceres is one of the most respected universities in the Bicol region.
144 2017 Ayala Corporation Integrated Report APEC encourages a collaborative learning environment.
In recent years, the government has chain of low-cost, private high Engineering and Architecture, Graduate made significant progress in passing schools with branches across Metro Studies, Law, and Nursing. Last school critical legislature. This includes the K-12 Manila, Cavite, Rizal, and Lipa in year, UNC introduced Industrial Law, which aligns the country’s basic Batangas, and a student population of Management Engineering to further education system with the rest of the approximately 16,000 from Grades 7 to enhance the programs being offered by world by introducing Grades 11 and 12 in school year 2017-2018. Through the College of Engineering and fortify 12 as well as the Universal Access to the government’s senior high school UNC’s position in the region as a leader Quality Tertiary Education Act of 2017, vouchers, APEC provided access to its in engineering. UNC also established a which provides equal opportunity to innovative and progressive learning partnership with San Beda University to quality tertiary education in both public curriculum to low-income learners. offer a Masters of Law program, making and private educational institutions, Students who graduated from public UNC the only university in the Bicol and gives priority to the poor, as well junior high schools can attend APEC’s region that offers the LLM program. as academically able and motivated senior high school without paying students. additional tuition on top of the UNC also expanded its student government voucher. value added programs, by delivering School year 2018-2019 is a critical compelling results through its year for the education industry as it APEC expects to graduate its first cohort Professional Employment Program, marks the return of college freshmen of approximately 2,000 students in June which is designed to place graduating following the full implementation of 2018. After only two years in APEC, students in a working professional K-12 in 2016. The previous two years out of 700 students who took college environment to enhance their potential saw a drought for all universities, due entrance exams in selective schools, for immediate employment. In school to the additional two years of senior 41 percent passed the exams with a 29 year 2017-2018, UNC’s PEP cohort high school required of all students, percent passing rate in the Ateneo de achieved 89 percent employment effectively reducing college enrollment Manila university, 60 percent in De La within 90 days post-graduation, with of many higher education institutions Salle University Manila, and 53 percent average salaries 54 percent higher than by half. in the University of Santo Tomas. the control group. PEP graduates went on to work in BPI, Sutherland Global Competition is expected to In higher education, despite the lack Services, Ford Philippines, iBEX manila, intensify because of the first year of of college freshmen and sophomore Telus Manila, among others. implementation for the Universal cohorts due to K-12, the University Access to Quality Tertiary Education Act, of Nueva Caceres, one of the largest Also in school year 2017-18, UNC which offers completely free education private schools in the Bicol region, also piloted the Culminating “x” in state-run universities and colleges increased its student population to Project for seniors in Business, HRM, and publicly-run technical-vocational approximately 8,000 in school year Accountancy, Computer Studies and institutions. 2017-2018. Arts and Sciences. CxP is similar to PEP in that it provides a simulation of the Business Review UNC offers degrees in Arts and Sciences, real-world employment environment In basic education, APEC Schools Business and Accountancy, Computer and boosts employability. UNC also secured its position as the largest Studies, Criminology, Education, started doing the groundwork for
INTO THE FUTURE 145 the full implementation of its English UNC students enjoy a variety of extracurricular programs. Immersion Environment.
UNC has sustained its excellence in board examination performance, consistently surpassing the national board passing norms, both in overall and first timer passing rates. In school year 2017-2018, UNC had two top ten placers from its College of Education and College of Engineering. Its students also received distinctions in other national and local awards, including the Ten Outstanding Students of the Philippines, Top 10 Jose Rizal Model Strategy Students of the Philippines, Ten Strategy Description Performance in Priorities in 2018 Outstanding Students of Bicol, and 2017 Naga City Mayoral Awards. Enrollment Increase student • APEC: 16,232 Continue student population through students (55% population growth As a testament to the quality of strong academic growth) in both APEC and its academic programs, UNC was and employment UNC, as well as recognized by the Philippine outcomes, and • UNC: 8,053 through mergers and Association of Colleges and Universities mergers and students (5% acquisitions Commission On Accreditation with acquisitions growth) Level III Reaccreditation Status for two of its graduate programs – Master of Employability Improve • APEC Sustained Arts in Education and Master in Business employability of *First cohort will improvement of Administration – the first among higher graduates through graduate in 2018 speed of hiring and education institutions in the entire Bicol student value add salary premiums programs and • UNC: 89% of PEP region. This adds up to a total of three employer partner graduates were Level III programs, with Bachelor of network employed within Science in Business Administration as 90 days post- the first program in UNC to be granted graduation, with Level III status in 2016. an average salary premium of 54% AC Education has made significant over control group progress in expanding its educational platform through mergers and Academic efficacy Improve learning • APEC: Significant • APEC: Improve acquisitions. In December 2017, it outcomes as improvements in average scores signed a non-binding term sheet for a measured by English and Math for for English, Math, performance in current Grade 7 and and Science for potential merger with iPeople, the listed standard diagnostic, Grade 11 students, junior high school holding company for the education entrance, and and in English as a and senior high sector of House of Investments. The licensure exams Second Language school pre/post potential merger would include iPeople from August 2016 diagnostics, and and its significant subsidiary, Malayan to April 2017; 41% ensure takers pass Education System, or Mapua University, college entrance selective college/ a leading private engineering and passing rate in program entrance technical university in the country, selective schools exams and its subsidiaries, Malayan Colleges • UNC: Consistently • UNC: Continue Laguna and Malayan Colleges surpassed the its track record of Mindanao. Moreover, in January national overall surpassing national 2018, AC Education signed a share board passing rates. overall board purchase agreement to acquire the UNC’s passing rate passing rates National Teachers College, which has was 9% higher an established track record in teacher than the national education, and close to 10,000 students norm for overall in its University Belt campus in Manila. performance, and 4% higher than the national form for first-timer performance
146 2017 Ayala Corporation Integrated Report OUR HOW WE THE VALUE CAPITALS CREATE WE VALUE CREATE
Financial Marketing, sales and expansion Students and Parents Capital infusions from Ayala and from its Increase student population by: Students from low to middle income partners to support increase in capacity, • Leveraging strong brand in Mega segments are given the opportunity transform facilities, integrate technology, Manila and Bicol to access quality private education and strengthen human capital. • Delivering quality outcomes: board and with good linkages to potential college entrance examination scores, employment, through affordable Manufactured graduate speed of hire and starting pricing and open admission. In 2017, Facilities, technology and classrooms salaries, compelling careers, academic APEC had 16,232 high school students that are aligned with the vision of and leadership awards, efficacy in of which 60% came from the D and providing quality, affordable education. English and Math, industry-aligned E income segments, while UNC had skills and values 8,053 students from basic to higher APEC: 23 sites across Mega Manila • Improving student retention through education. In school year 2017-2018, UNC: Five-hectare campus in Naga City, remediation program, student financial UNC had 857 graduates, a record Camarines Sur aid, catch basin programs, and number. Meanwhile, APEC will have its engagement first ever cohort of senior high school Intellectual • Partnering with like-minded, graduates, numbering over 2,200 • Curriculum (for K-6, JHS & SHS, established institutions students. college, graduate studies) that is progressive, constructivist, learner- Content and Curriculum Development Teachers and Employees centered, collaborative, outcomes- • Brand promise: aligned curriculum Continuous learning and development based, integrated with technology, that is progressive, learner-centered, are fundamental programs given to with strong elements of English outcomes-based, integrated with teachers and employees through and employability, and aligned with technology and aligned with both coaching, mentoring, and technical regulatory requirements regulatory and industry requirements training including continuing • In-house developed student value- • Integrates Experiential Education for professional development, as well add programs: LINC Senior High Employment (E3) Model as opportunities to pursue graduate School, CRED or College Readiness, studies. ACE or Accelerated Career Experience, Career Placement Services PEP or Professional Employment • Forging meaningful employer Companies Program, CxP or Culminating “x” partnerships, i.e. scholarships or Enables various organizations to tap Project, and EIE or English Immersion internships with a path to employability a rich pool of human capital talent Environment • Intensive engagement: career who are skilled, trained, and with education through career portal & job-ready habits and values. About Human social media, job fairs, career talks and 90% of AC Education’s PEP graduates Faculty and staff who are competent, job immersion, coaching on interview were employed within 90-days after nurturing, forward-thinking, constantly and college application, employment graduation with starting salaries at a learning, engaged, and motivated. monitoring significant premium over the general labor market. Number of employees and average Talent Development training hours: • Faculty retooling aligned with new APEC: 738 employees; 42 hours each curriculum UNC: 529 employees; 24 hours each • Continuing Leadership Development AEI: 30 employees; 8 hours each Program as well as differentiated, needs- based employee training, extensive Social and Relationship pre-service training, coaching and Strengthened relationships and mentoring reputation with partner schools, • Leveraging Ayala group learning employees, NGOs, private school and development: innovation, risk associations, public schools, management, sustainability, disaster risk communities around AC Education management schools, and other stakeholders • Partnering with San Beda College for Master of Laws (LLM) program
OUR CONTRIBUTIONS TO THE SDGs
INTO THE FUTURE 147 AC VENTURES
“Fintech and payments, e-commerce with brick and mortar, data flow processors for artificial intelligence, and “Commodoinnovative real nullaestate facilisiredevelopments nullam are vehicula some of ipsumthe themes a arcu AC Ventures cursus. focused on in 2017. Our mission is to Ligulamake more ullamcorper of these types malesuada of investments proin that libero complement nunc consequatour existing businesses.” interdum varius sit. Aliquam faucibus purus- Jose in massa.” Teodoro K. Limcaoco, President and CEO, AC Ventures
Who we are Mynt, a fintech venture, with Globe growth. It is expected to grow further AC Ventures was formed in 2017 to and Ant Financial. following the implementation of the house Ayala’s strategic investments. It first package of the government’s tax aims to fulfill two roles as an enabler Market Outlook reform program, which has lowered by investing in adjacent businesses The world is experiencing tremendous personal income taxes for the majority complementary to Ayala’s existing digital transformation, with emerging of the population. This, together with business units; and as a pathfinder by business models creating new ways to high adoption rates across mobile and investing in new sectors, emerging make better, differentiated products digital platforms, has helped spur the trends, and innovative businesses. and services more accessible to a rise of e-commerce. The Philippine AC Ventures hopes to provide a broader consumer market. Big data, e-commerce market is expected to window into new technologies artificial intelligence, edge computing, grow exponentially, from 0.5 percent and business models and invest in and the internet of things are some of of the total retail market to 4.7 percent disruptive platforms in sectors that the trends already disrupting existing by 2025–equivalent to a market size of are relevant to Ayala. Among the industries. Some of these disruptions $9.7 billion. Related to this, the fashion disruptive sectors that AC Ventures has are in industries where Ayala is a major and lifestyle retail market—which entered are e-commerce and financial player in the Philippines. counts among the most popular technology. e-commerce categories—is seen to Strong domestic consumption reach $21 billion by 2019 accounting In addition, AC Ventures makes has consistently contributed to for approximately a quarter of the offshore investments through AG the Philippines’ robust economic overall Philippine retail market Holdings. Over the past years, AG Holdings has served as Ayala’s Globe’s and Ayala’s partnership with Ant Financial, a leading digital financial services provider, can drive fintech development in the Philippines. platform for its investments in real estate in the US and Asia. Following the establishment of AC Ventures, AG Holdings’ mandate has evolved into being the vehicle for the former’s international investments.
AC Ventures also makes direct strategic investments in local opportunities. In 2017, AC Ventures acquired a 43.3 percent stake in Zalora Philippines, the Philippines’ largest fashion and lifestyle e-commerce platform, and a 10 percent stake in
148 2017 Ayala Corporation Integrated Report AG Holdings has investments in international real estate including in the US, Macau, Thailand and Singapore.
On the fintech front, huge In 2015, AINA, AG Holdings’ North market opportunities persist with American subsidiary, committed to approximately 120 percent mobile invest $20 million in a multifamily penetration, more than 87 million value-add fund sponsored by the Filipinos owning a digital device, Sares Regis Group, a real estate and 41 million being active mobile management company with 18,750 ~100M social users. In contrast, only 21 apartment units under management percent of Filipinos have access to across the US west coast. The the services offered by banks and multifamily fund’s main strategy is insurance companies, while only 10 to acquire and renovate residential VISITS TO ZALORA WEBSITE percent have credit scores. Apart developments in high-growth, supply- IN 2017 from the geographic makeup of the constrained markets in the US. As of country, this reflects the potentially end-December 2017, the multifamily strong demand for fintech-enabled fund has acquired 12 assets. In June innovations in the Philippines. 2017, AINA co-invested $5 million with the multifamily fund for the Business Review acquisition of AMLI Victoria Arbours, AG Holdings a 319-unit apartment community in $50M In Asia, AG Holdings continues to Rancho Cucamonga, California. maintain its investments in ARCH Funds. In 2017, AG Holdings’ In line with its new mandate, AG investment in ARCH realized valuation Holdings also invested in varied funds IN CAPITAL COMMITMENT TO ARCH gains of $7.5 million. It has committed that serve as windows into disruptive FUND III $50 million of capital into ARCH Fund technologies, evolving trends, and III, which shall deploy its capital to new markets. In 2017, AG Holdings residential and commercial projects invested in Arbor II, a fintech fund in China, Hong Kong, the Philippines, focused on opportunities in Asia; Taiwan and Thailand. Maloekoe Ventures, an Indonesian- based venture capital fund focused AG Holdings’ direct residential on new technologies; and the New 1.6X investment in Macau, where it co- Retail Strategic Opportunities Fund invested with ARCH Fund I, continues managed by Alibaba focused on to generate profits on the back of investing in retail brick-and-mortar strong economic growth and unit businesses in China. GROWTH IN MYNT’S sales. In 2017, distributions to AG CUSTOMER BASE Holdings from the Macau investment Moreover, in keeping with AG amounted to $1.96 million. Holdings’ new thrust, AINA, through
INTO THE FUTURE 149 services. To further scale its active users, in the third quarter of the year, GCash ramped up its merchant acquiring business with the launch of QR payments, a new and convenient way for traditional retailers to accept payments using e-money. By forging key partnerships with the likes of Ayala Malls, SM Supermalls, SSI Group, Max’s Group, and Suyen Corporation, the service is now widely offered in several locations nationwide.
Filipinos can access loans using only their cellphones through Fuse’s services.
Strategy PFIL North America, invested in Wave Computing, a Silicon Valley startup Strategy Description Performance in 2017 Priorities for 2018 that develops innovative computing Enable new Invest in adjacent Acquired stakes in Look out for systems that accelerate machine opportunities for the businesses Zalora and Mynt disruptive trends learning, co-founded by Filipino Ayala group complementary to as well as explore entrepreneur Dado Banatao. the Ayala group new business opportunities and Zalora relationships Zalora is riding the wave of the Strengthen AG Manage offshore Existing investments Strengthen existing e-commerce boom as the leading Holdings’ offshore investments to generated value and relationships online fashion platform in the investments maximize gains for returns, while the with partners and Ayala company made new continue looking Philippines with close to 100 million investments in funds for pockets of visits in 2017. Zalora is engaging the and companies with opportunities within young and tech-savvy market by disruptive strategies the real estate sector providing them access to over 1,000 local and international brands and reaching them through omni-channel initiatives. Zalora is also expanding its reach, serving areas beyond the greater Metro Manila area, to include far flung areas in the Philippines. As a result of these efforts, net merchandise value transacted through Zalora grew at a healthy rate of 29 percent in 2017.
Mynt In 2017, Mynt grew its customer base by 1.6x, while doubling monthly active users through its operating subsidiaries, GCash and Fuse Lending. GCash, Mynt’s mobile wallet platform, allows users to buy load, send money, pay bills, and purchase items, among other conveniences. Fuse, which serves as Mynt’s lending and Zalora is one of the fastest growing online shopping platforms in the country. microfinancing arm, complements GCash’s suite of mobile money
150 2017 Ayala Corporation Integrated Report OUR HOW WE THE VALUE CAPITALS CREATE WE VALUE CREATE
Financial Pathfinder Ayala group It infuses capital as needed to support It explores new trends, businesses, and • Explore innovative trends and its various ventures, and when strategic relationships and invests in businesses business models that could transform opportunities arise. that provide innovative and disruptive the Ayala group’s various businesses solutions in evolving markets outside its Manufactured cornerstones. Through the financial and • Invest in new ventures and business Its e-commerce business uses intellectual capital it provides, it aims to partnerships that can complement fulfillment infrastructure (i.e. scale up the impact of these businesses. existing businesses warehousing facilities) in its operations. Meanwhile, its fintech business uses Enabler payment infrastructure. With its investments, it synchronizes Customers innovative technologies and practices • Provide convenient access to In Asia and the US, it has direct into the value chains of companies products and services through the investments in real estate projects. across the Ayala group. The disruptive use of technology (Zalora and Mynt) business models of companies it invests Intellectual in can provide alternative solutions Strong retail brands, e.g., GCash and to Ayala’s traditional brick and mortar Zalora, and proprietary software operations. systems enhance its position in business.
An innovative mindset allows it to spot disruptive opportunities, and its knowledge of the market allows management of investments.
Human It has a diverse pool of talents who seek out innovative ways of building businesses Zalora: ~300 employees Mynt: ~400 employees
Social and Relationship Strong partnerships with global and local companies, including retailers and suppliers, investors, and other professional networks also serve as vehicles for growth.
Its affiliation with the Ayala brand bolsters its credibility.
OUR CONTRIBUTIONS TO THE SDGs
INTO THE FUTURE 151 AYALA FOUNDATION
“Commodo“Ayala Foundation nulla facilisiremains nullam true to its vehicula “AFI–3Cs—2Ps” ipsum strategy—alignment,a arcu cursus. focus, and impact, for the benefit of our conglomerate, communities, and country, supported by competent people and processes. We Ligulacontinue ullamcorper to make significant malesuada headway proin in liberoimproving nunc more consequat lives through our programs.” interdum varius sit. Aliquam faucibus purus in massa.” - Ruel T. Maranan, President, Ayala Foundation
Who we are community aspirations. By serving Ayala Foundation is the social as an advocate for community development arm of the Ayala group. development, it helps improve It develops, implements, and sustains lives by creating and providing programs in education, youth opportunities for growth and P30M leadership, sustainable livelihood, progress. and arts and culture, and periodically manages special projects, including It adheres to the highest standards initiatives in disaster recovery and of transparency and accountability. IN INVESTMENTS FOR MARAWI AND SIYAPEN INITIATIVES rehabilitation, and other projects for It is certified by the Philippine community development. Council for NGO Certification, a self-regulating body which Its headquarters are located in Makati certifies nonprofit organizations City, with regional offices in Cebu City that meet established minimum and Cagayan de Oro City. In 2017, its criteria for financial management 12,678 programs are directly implemented and accountability in service to in 26 provinces and Metro Manila, but underprivileged Filipinos. Ayala its program beneficiaries are present Foundation is an active member of in other parts of the country and the civil society organizations such as the STUDENTS WHO BENEFITTED FROM world. Association of Foundations and the THE CENTEX TRAINING INSTITUTE League of Corporate Foundations. Founded in 1961, Ayala Foundation The foundation has a mechanism acts as a catalyst for inclusion that measures the impact and tracks in bridging business needs and the outcomes of its initiatives. 175
FILIPINO YOUTH TRAINED BY THE BANGSAMORO YOUNG LEADERS PROGRAM
10,896
Handcrafted products by the Iraya-Mangyan community in Puerto Galera are available for purchase in select STUDENTS REACHED BY GLOBAL Ayala Malls. FILIPINO SCHOOLS
152 2017 Ayala Corporation Integrated Report 30 farmers are given sustainable livelihoods through MDC Farms in Calauan, Laguna.
Market Outlook Business Review The first run of GNPower Kauswagan- As the Filipinas Foundation when As it continues its journey to become LeadCom in Lanao del Norte trained 40 it was founded in 1961, the Ayala a bastion of community development, young leaders from eight youth groups Foundation was the first corporate Ayala Foundation contributes to society and implemented eight youth-led foundation in the country. Today, through its programs in education, community projects. corporate foundations are numerous, youth leadership, sustainable and work hand-in-hand with livelihood, and arts and culture. The Ayala Young Leaders Congress held businesses to undertake community its 19th congress with 80 participating outreach and other corporate social Ayala Foundation undertook a number youth leaders and continues to responsibility activities. of initiatives in education for 2017. It be a venue for the Ayala group to piloted ProFuturo, which uses digital strategically invest in the leadership The civil society sector in the technology to provide access to skills of the youth. Philippines has frequently been cited quality education, in Southeast Asia. as one of the most well-developed Ayala Foundation, Spain’s ProFuturo The Community Engagement Plan and institutionalized in the world. Foundation, and the Department of developed for Ayala Land’s Project CSOs are cited for their role in Education signed an agreement to Lio identified enterprises with the championing improvements in the bring the program to 31 schools in highest economic potential for Lio’s delivery of social services, as well Palawan and Oriental Mindoro. surrounding communities. The market as advocating greater social and study identified vegetable production, economic participation among the The CENTEX Training Institute trained laundry service, on-call manpower poor and underserved. 190 teachers in 17 sites, benefitting service, and choco-cashew production. 12,678 students. The two CENTEX Based on recent estimates, there schools, meanwhile, registered a 98 The four-hectare ornamental farm are about 60,000 registered percent cohort survival rate, 100 percent established in the Ayala property in nongovernmental organizations in the promotion rate, and zero drop-outs. Calauan, Laguna, in partnership with 175 country today. However, only between the Makati Development Corporation, 200 and 300 of these organizations Global Filipino Schools was turned continued to provide sustainable have passed the certification process over to Globe after reaching 11 income for 30 farmers. of the PCNC. schools, 297 teachers, and 10,896 students. The Iraya Mangyan Development The Pork Barrel Scam of 2013 and the Program served 280 families from an NGOs that were used as channels to In youth leadership, the Bangsamoro indigenous community in Puerto Galera. steal government funds negatively Young Leaders Program–Leadership affected the civil society sector and put Communities provided training for Under its arts and culture initiatives, it under great scrutiny. CSOs responded 175 young leaders from 35 youth Ayala Foundation partnered with to the scandal by emphasizing greater groups in ARMM. Twenty-seven the Bank of the Philippine Islands transparency and accountability, youth-led community projects were to manage the BPI Art Collection. particularly in matters of corporate implemented by participants, despite This partnership will oversee the governance and financial disclosure. the Marawi situation. cataloguing and assessment of almost
INTO THE FUTURE 153 400 significant artworks.
Through the Mañara art installation, which was first opened at the Ayala Museum Plaza in May, the works of artists Toym Imao and Liliana Manahan celebrated the richness, and sought to foster a greater understanding of Moro culture. Mañara was later exhibited in Abreeza Davao, Ayala Center Cebu, and Cotabato City.
The museum introduced its first fully immersive Virtual Reality Experience of Philippine History, bringing to life the Students are empowered through digital education, with AFI’s partnership with ProFuturo. execution of National Hero Jose Rizal Strategy for museumgoers to experience. Strategy Description Performance in 2017 Priorities in 2018 Align with the Strengthening Worked with Ayala Further enhance Ayala Foundation also made a splash in conglomerate’s relationships with the group companies collaboration, synergy, the international art scene, as the Ayala sustainability Ayala group through for community and partnership with Museum became the first Philippine framework program partnerships engagement programs, Ayala group including the pilot museum to stage a collateral event at implementation of the Venice Biennale. Highlighting the four new community works of artist Fernando Zóbel, Zóbel enterprises for Contrapuntos focused on the artist’s communities surrounding Lio, a Saetas and Serie Negra. partnership to assess over 400 pieces from Working with the city government BPI’s art collection, of Marawi and Autonomous and an FHL-Manila Water partnership Region of Muslim Mindanao, the for document Ayala Foundation completed the management construction of the Siyapen Center, a Focus on community Implementing Sustained gains of Build on 2017 gains facility envisioned to provide holistic programs development existing programs: for flagship programs inpatient and outpatient care for programs relevant in education, youth drug dependents. Following the to the needs of • CENTEX Training leadership, sustainable communities Institute trained 190 livelihood, and arts and Marawi siege, Siyapen also became a teachers culture hub of economic activity for Marawi • LeadCom trained residents, especially those in need of 215 young leaders, short-term employment. The Ayala who implemented 35 community projects group has invested as much as P30 million in Marawi- and Siyapen– Have an impact on the Implementing • First Philippine Scale up programs to related initiatives. country’s development programs and special museum to stage a reach a national scale, goals and the projects that are collateral event at the and further promote Ayala Foundation connected Ayala promotion of national aligned with the Venice Biennale Filipino pride both here companies to the Department of pride nation’s development • Worked closely with and abroad goals, as well as government partners Agriculture’s Corporate Rice Farming promote Filipino like the Department Program, which links large institutional culture and identity of Agriculture and buyers directly to rice farmers. This the Marawi City was supported by the Ayala Multi- governnment • Piloted the ProFuturo Purpose Cooperative and Ayala Land, education project in and was launched in Iloilo (with Seda) Southeast Asia and El Nido (with Ten Knots). Strengthen people and Investing in the • Rolled out a training Strengthen Ayala internal processes training and and development Foundation citizens development of Ayala program under as advocates Foundation talents, a community of community supported by stronger development development, in and more efficient framework support of expanded internal processes • Instituted reforms programs and controls in the second year of a three- year enterprise risk management roadmap
154 2017 Ayala Corporation Integrated Report OUR HOW WE THE VALUE CAPITALS CREATE WE VALUE CREATE
Financial Education Programs Teachers and Students Ayala Foundation has an adequate Providing access to high quality education Ayala Foundation increases the endowment fund, building on strong for the poor through teacher training in proficiency of our teachers through partnerships with private and public ICT; classroom management and critical coaching and mentoring, benefitting donors to sustain flagship projects and thinking; scholarships; and center-based 12,678 students in 17 public schools. new programs and initiatives. modelling of strategies. The foundation equipped schools with ICT facilities to improve learning of Manufactured Sustainable Livelihood 1,394 students from 33 public schools. Ayala Museum offers a variety of art Providing access to capacity, capital, It also supported 123 scholars. and library collections, permanent and technology and market link to low travelling exhibitions on the rich history income families. Balanced early childhood care and and artistic heritage of the nation, values formation supported the cultivating pride in being Filipino. Youth Leadership early childhood formation of 80 Investing in potential leaders of the economically disadvantaged children. Intellectual country and communities through youth The foundation possesses expertise in leadership training. Communities community development, program Livelihood projects implemented management, education, research and Arts and Culture across the country helped the publication, art curation, and impact Making Philippine history, culture, and communities improve economic assessment using social return on art accessible and inspirational through productivity and cultural preservation. investment as a framework. art exhibitions, and increasing brand and advocacy awareness and reach through Through Ayala Museum, the Human traveling exhibitions. foundation also helped widen Its pool of committed talents has the cultural appreciation, both locally and capacity to link the shared value created Employee Engagement internationally. by Ayala business units to the needs of Providing opportunities for the Ayala people with less capacity and access to group to exercise corporate citizenship Young Leaders resources. and help the foundation’s partner schools It supported the development of through Brigadang Ayala. young leaders and contributed to Social and Relationship: their capacity building. These young Good relationships and linkages leaders were able to ideate and with local government units, local implement community-based projects government agencies, non-government that improve livelihood and support organizations, and community groups community development
Natural Employees The Calauan property is utilized by Employees from across the Ayala farmers to produce ornamental plants group are given opportunities for for the requirements of MDC Greens volunteerism in communities that it serves
OUR CONTRIBUTIONS TO THE SDGs
INTO THE FUTURE 155 The Bonifacio Global City is an excellent example of Ayala Land’s skill in developing mixed-use estates.
156 2017 Ayala Corporation Integrated Report OUR GOVERNANCE
INTO THE FUTURE 157 GOVERNANCE: THE BUSINESS OF BUSINESS
“We realized very early on that we needed to have a sharp focus on quantitative results and metrics for the business to succeed. The business could not be compromised by unreasonable family needs or interests. It had to be run in a highly professional manner with clear business objectives that were defined by the industry environment.” - Jaime Augusto Zobel de Ayala at the SharePhil Summit 2017
Governance has always been a of good governance; sought to include a combination of internal hallmark of Ayala. Since becoming elevate the level of transparency; and and external mechanisms such as the a publicly-listed company in 1976, ensured that integrity, accountability, structure, role, and responsibilities Ayala has never wavered in its and fairness are hallmarks of of the board of directors, its belief that good governance plays its dealings with shareholders, committees, and management; and a paramount role in the success of customers, investors, and other sound policies and controls. its businesses. Then or today, Ayala stakeholders. The basic elements of has always adhered to the principles Ayala’s corporate governance system
KEY COMPONENTS OF AYALA’S GOVERNANCE SYSTEM (102-18)
BOARD OF DIRECTORS Corporate Secretary
CEO
President and COO BOARD COMMITTEES Risk Corporate Management Personnel Inspectors of Proxies Executive Finance Governance Audit and Related and MANAGEMENT and Party and COMMITTEES Compensation Nomination Transactions Ballots • Ayala Group • Investment • Ayala Corporation
SUPPORT FUNCTIONS MANAGEMENT TEAMS Human Compliance • Corporate Strategy and Finance Resources Internal Risk Management Human Development Audit and Sustainability Resources Internal Strategic Planning Office of • Finance Audit • Corporate Resources the Data Protection • Public Affairs Officer • Corporate Governance Office of the Corporate Secretary and Office of the Chief Legal Officer
158 2017 Ayala Corporation Integrated Report Our governance framework is high standards allows us to retain the The Board also reviews and affirms constantly evolving in line with the trust and confidence of our partners the true and fair representation of expectations of regulators, investors, and stakeholders. We raise the bar the annual financial statements, as and other stakeholders, which higher for ourselves by inculcating a it did for the financial statements for have shifted over the years towards strong sense of commitment across fiscal year 2017. greater board involvement and all levels of our organization and more active oversight by the board upholding a corporate tradition BOARD COMPOSITION and its committees. By continuously deeply rooted in integrity and trust, The structure, size, and composition evaluating and improving our as well as an organizational culture of the Board are regularly reviewed governance structures, systems, and that reinforces a well-rounded ethic and monitored by the Corporate procedures, we are able to create in all that we do. Governance and Nomination a balance between performance Committee. and conformance, as well as remain BOARD STRUCTURE AND relevant to the changing needs of PROCESS There is sufficient diversity in society and the communities we thinking across our board of serve. Having adequate controls KEY ROLES AND RESPONSIBILITIES directors, characterized by a while complying with regulatory Leading Ayala’s governance combination of knowledge, requirements and international system is its Board of Directors, experience, and expertise to guide standards allows us to create a who provides active management management as it addresses issues sustainable enterprise for the long- oversight; encourages a culture of facing the company, new challenges term. Ayala is in full compliance with trust, openness, and constructive and market opportunities. There the Code of Corporate Governance dissent; and ensures individual is also an appropriate mix of non- for Publicly-Listed Companies set accountability. As mandated by its executive and executive directors. forth by the Securities and Exchange Charter, its roles and responsibilities Commission, supported by an include establishing the vision, as • Ayala’s Board of Directors is attestation from the company’s CEO, well as the strategies, key company composed of seven directors from Compliance Officer, and Chief Audit policies, and mechanisms to monitor, a wide variety of backgrounds, Executive for 2017. evaluate and improve management’s all of whom possess expertise in performance. In exercising its powers a range of disciplines, including Ayala’s corporate governance and duties, the Board considers the economics, finance, accounting, practices have been consistently best interest of the company, its business, and contract, recognized in various awards, polls, shareholders, and other stakeholders. commercial, and international law. and publications in the Philippines • Each director is elected by the and in the region. In 2017, for The Board oversees the business affairs shareholders annually and serve the fourth consecutive year in of the company. It meets regularly and for a term of one year FinanceAsia’s annual poll, Ayala allots time to discuss strategic issues • 71 percent of the Board is Corporation was ranked second with the Ayala Group Management composed of non-executive and in the “Best Managed Companies Committee to gain insights into independent directors in the Philippines” category. Ayala each specific business area. It leads • None of the independent directors was also recognized in the same the review of the company’s vision own more than two percent of the poll as the “Most Committed to and mission every year, revisits and outstanding capital stock Corporate Governance,” “Best at approves the group’s corporate • The profile of each director can Corporate Social Responsibility,” and strategy and performance objectives, be found in the Board of Directors ranked fifth for “Investor Relations.” and monitors its implementation. section of this report on page 33. Its Chairman and Chief Executive In 2017, the Board reviewed and Officer, Jaime Augusto Zobel de affirmed the appropriateness of We ensure an independent minority Ayala, was ranked third for “Best the Ayala Corporation’s vision and representation in the Board and the CEO.” Ayala also ranked 18th in the mission statement. The Board reviews exercise by minority shareholders list of Forbes Magazine’s “Global and ensures the adequacy of the of their rights, including the right to 2000: World’s Best Employers,” the only company’s internal control mechanisms cumulative voting in the election of Philippine company in the top 20. and risk management process for directors and appraisal right. good governance, and the proper Good governance is an important implementation of the Code of Conduct INDEPENDENT DIRECTORS pillar of our operations. Adhering to and Ethics. The Board is currently composed
INTO THE FUTURE 159 of seven members, including three CHAIRMAN AND VICE CHAIRMAN meeting, enabling them to make independent directors who make (102-23) informed decisions. In addition to the up more than 40 percent of the The Chairman of the Board is company’s and group’s performance, Board’s membership: Xavier P. Loinaz, Jaime Augusto Zobel de Ayala, the Board agenda includes reports Antonio Jose U. Periquet, and Ramon who assumed the position in 2006. on emerging risks; updates on R. Del Rosario, Jr. Fernando Zobel de Ayala has held sustainability, business, and the the position of Co-Vice Chairman regulatory environment; and reports Aside from their fees and since 1994, and has been the sole of the different Board Committees. shareholdings, independent directors Vice Chairman since 2006. This provides the Board with critical have no interest or relationship with information on key issues; current the company that may hinder their The positions of Chairman of the trends, challenges and opportunities independence from the company Board and CEO are held by the same in the industries in which the Ayala or management, or that could person. The company’s corporate group is present; and developments reasonably be perceived to interfere governance principles, which include that may have a significant impact on with their exercise of independent clear and well-understood roles and the group. judgment in carrying out their responsibilities, as well as a culture of responsibilities as directors. open communication with the CEO Discussions during Board meetings and senior management, enables are open, with independent Ayala has set a term limit of nine the Board to maintain independent views given due consideration. In years for its independent directors reviews and quality discussions at accordance with company policy, in accordance with the rules set meetings. Board members are required by the SEC. As of 2017, none of to abstain from participating in the independent directors have LEAD INDEPENDENT DIRECTOR discussions on an agenda item in served the company for more than Xavier P. Loinaz was appointed Lead which they may have a conflict of nine years, reckoning from 2012, in Independent Director by the Board interest. compliance with SEC Memorandum at its organizational meeting held on Circular No. 9, series of 2011. April 21, 2017. His role includes, among Each fiscal year, the Board meets at others, acting as an intermediate least six times, with the schedule of Moreover, none of the directors or between the Chairman of the Board Board meetings determined before senior management have worked and the other Directors, if and when the start of each financial year. for Ayala’s external auditing firm needed; convening and chairing All the directors recorded perfect within the three years immediately the periodic meetings of the non- attendance for all Board meetings in preceding the date of their election executive directors with the external 2017. Refer to page 198 for specific or appointment. auditor and heads of internal audit, details on attendance. compliance and risk management, The non-executive and independent as needed; and contributing to In line with the guidelines directors met on April 21, 2017 the performance evaluation of the in conducting performance without the presence of Chairman of the Board. assessments, each year, the Board the executive directors and conducts a review to evaluate management. The meeting was BOARD PERFORMANCE (102-28) the performance of the Board, its chaired by the Lead Independent The Board is committed to fulfilling Committees, and its individual Director, Xavier P. Loinaz. Discussions its duties and responsibilities and members; to measure the during the meeting revolved dedicates ample time for their effectiveness of the company’s around cascading the role of the meetings. The presence of at governance practices and identify non-executive directors under the least two-thirds of the number of areas for improvement; and Code of Corporate Governance directors, as fixed in the Articles of to adopt new methodologies for Publicly-Listed Companies. The Incorporation, constitutes a quorum towards further strengthening the directors also exchanged ideas for the transaction of business. company’s corporate governance on management succession and standards. Each of the directors retirement issues, the identification The annual calendar of activities was requested to complete a self- of potential female nominees to the for the Board and Committees are assessment form which includes Board, technology and/or cyber risk established and approved at the start criteria such as: (1) structure of the security issues, the performance of the year. To effectively perform Board, (2) shareholder benefits, of the company’s share price, their roles and responsibilities, the (3) fulfillment of the Board’s key and the quality of the company’s Board is supported by the Corporate responsibilities, (4) oversight partnerships. The Corporate Secretary who monitors the calendar function, (5) effectiveness of the Secretary also informed the directors for the Board and Committees Board’s processes and meetings, (6) that, at the time, Ayala Corporation and ensures that the materials are quality of the Board-management was preparing to comply with the made available at least five working relationship, (7) corporate ethics, and requirements of the Data Privacy Act. days in advance of the scheduled (8) performance evaluation.
160 2017 Ayala Corporation Integrated Report The results of the self-assessment All directors and senior management data and information, and apprise survey were compiled by the met the SEC requirement to undergo participants of the movement Compliance Officer and were corporate governance training towards greater transparency in both reported and discussed during annually, through their attendance in government and the private sector. the June 22, 2017 Board meeting training administered by either the immediately following the Institute of Corporate Directors, or Ayala has also sponsored the ICD’s completion of the survey. SGV & Co., both accredited training Distinguished Corporate Governance providers of the SEC. Speaker Series for the past four years, CORPORATE SECRETARY in support of the ICD’s advocacy to As the Corporate Secretary, Atty. As a group-wide initiative, a promote professional directorship in Solomon M. Hermosura plays Corporate Governance and Risk line with global principles. The series an important role in supporting Management Summit has been held brings together the world’s foremost the Board in the fulfillment of annually since 2014. The summit thinkers and corporate governance its responsibilities. Among his serves as a venue for collaboration, practitioners in a forum to help responsibilities are: assisting the promotes the importance of Philippine corporate directors add Chairman in preparing the Board strengthening our corporate value to their boards. meeting agenda, maintaining Board governance structures, and acts as minutes and records, facilitating the a continuing education program DIRECTOR COMPENSATION training of directors, and providing for the Board, CEOs, and senior The Personnel and Compensation directors with updates on relevant management. In August 2017, the Committee has the responsibility statutory and regulatory changes. group held its summit with the to recommend to the Board He is knowledgeable on legal and theme of “Right to Privacy and remuneration packages for directors, regulatory requirements and has Obligation to Transparency.” Its goal ensuring that compensation is kept well-informed on relevant was to provide an overview of the consistent with the company’s developments by taking on a part- changes in the Philippine regulatory culture, strategy, and control time role in teaching graduating law landscape, particularly surrounding environment, and aligned with students; appearing as a speaker in various public fora; and taking executive development programs such as the Comparative Tax Policy and Administration Program from the Harvard Kennedy School in 2016. Atty. Hermosura was also recognized as “Company Secretary of the Year,” “among Asia’s best,” by Corporate Governance Asia in November 2014.
TRAINING OF DIRECTORS (102-27) Ayala ensures that it provides its directors with updates on current trends and relevant training. The company allocates National Privacy Commissioner Raymund Liboro confers with Chairman and CEO Jaime Augusto Zobel de Ayala an annual training budget for its at the 2017 Ayala CGRM Summit. directors and encourages them to attend continuing professional development programs and other applicable courses, conferences, and seminars. All new directors must undergo an orientation program on the company’s business and structure, vision and mission, business strategy, Governance Codes and Policies, Articles, By-Laws, Corporate Governance Manual, Board and Committee Charters, SEC-mandated topics on governance matters and other subjects essential for the effective performance of their duties and responsibilities. The CGRM Summit is a platform through which the group’s Board of Directors and executives can keep abreast of trends and best practices in governance.
INTO THE FUTURE 161 the long-term interests of the company and its stakeholders. Total remuneration or changes thereto are approved by the stockholders during the annual stockholders’ meeting.
On April 21, 2017, upon the recommendation of the Committee, the Board approved a resolution fixing the current remuneration of non-executive directors. The power of fixing the fees was delegated by the stockholders to the Board during the annual stockholders’ meeting in 2011 and is as provided for in the amended by-laws.
Non-executive and independent directors are Board members who are not officers of the company. They receive remuneration consisting of: 1) an annual retainer fee of P3,000,000; 2) a per diem of P200,000 for each Board meeting attended; and 3) a per diem of P100,000 per The Distinguished Corporate Governance Speaker Series allows global practitioners and thought leaders to share Committee meeting attended. their insights and experiences with Philippine corporate directors.
None of the non-executive and independent directors have been In 2017, the following directors received gross remuneration as follows: compensated by Ayala for services Director Gross Remuneration other than those provided as a director. They are not entitled to Yoshio Amano 900,000.00 stock options and performance Delfin L. Lazaro 5,600,000.00 bonuses from the company. Xavier P. Loinaz 4,950,000.00 Keiichi Matsunaga* 4,700,000.00 As executive directors, Jaime Augusto Zobel de Ayala and Antonio Jose U. Periquet 5,850,000.00 Fernando Zobel de Ayala do not Ramon R. Del Rosario, Jr. 5,450,000.00 receive remuneration for attending TOTAL 27,450,000.00 Board meetings. *Mr. Keiichi Matsunaga was elected to be a member of the Board, replacing Mr. Yoshio Amano, on April 21, 2017
An economic briefing is held every year to apprise employees and executives of the domestic, regional, and global economic outlook.
162 2017 Ayala Corporation Integrated Report BOARD COMMITTEES (102-22) The Board has created the following committees to assist in exercising its authority and responsibilities, and to aid in good governance:
Executive Finance Corporate Audit Risk Personnel and Committee of Committee Committee Governance Committee Management Compensation Inspectors of and and Related Committee Proxies and Nomination Party Ballots*** Committee Transactions Committee
Jaime Augusto Zobel de Ayala C M Fernando Zobel de Ayala M M Keiichi Matsunaga* M M M M Ramon R. Del Rosario, Jr.** C M M C Delfin L. Lazaro* C M Xavier P. Loinaz** M C Antonio Jose U. Periquet** M M C Solomon M. Hermosura C Catherine H. Ang M Josephine G. De Asis M C - Chairman *Non-executive Director M - Member **Independent Director ***May not be members of the Board of Directors
The Nomination Committee was Corporation and Manila Water reviews, and evaluates the financial renamed “Corporate Governance Company, Inc. affairs of the company. and Nomination Committee” in • Additional Capital Infusion into AC The Committee approved various May 2017 to expand its role and Infrastructure Holdings Corp. and transactions in 2017: assist the Board in the performance Disbursement of Funds for MCX’s • Additional Equity Infusions and of its corporate governance Capital Expenditures, as well as Advances to Wholly-owned responsibilities. AC Ventures Holding Corp. and its Subsidiaries of the Company Initial Investments • Allocation and Use of the P2 Board Committees are established • Partial In-Kind Redemption of Billion General Investment Fund to provide focus on specific Board Arran Investments Pte. Ltd.’s • Issuance of Fixed-For-Life Bond of functions and assist the Board in Redeemable Preferred Shares in up to US$400 Million the optimal performance of its roles Liontide Holdings, Inc. • Sale of Shares Held as Available- and responsibilities. The rights and • Actions Relating to the Code of For-Sale responsibilities of each Committee Corporate Governance for Publicly • Availment of Credit Facilities and delegated by the Board are defined Listed Companies Authorized Counterparties for in the specific Committee Charters • Reduction of Investment in Bestfull Peso Yield Enhancer/Investment duly approved by the Board, all of Holdings Ltd. Products which are available on the company’s • Issuance of Up to US$400 Million • Exercise of Right of First Refusal website. Guaranteed Undated Notes by AYC over Renewable Energy Test Center Finance Limited Shares Executive Committee • Sale of Shares Held as Available- • Capital Allocation for Ayala The Executive Committee has the For-Sale Education, Inc., AC Education, Inc., authority to exercise the powers • Execution of Amended and AC Industrial Technology Holdings, and perform the duties of the Board Restated Equity Support Inc., and AC Energy Holdings, Inc. within the powers granted to them. Documents for AC Energy’s GNPD • P30 Billion Shelf Registration It acts by majority vote of all its Expansion • Availment of a Revolving USD members during the intervening • Obtention of Confidential Credit Credit Facility from Bank of China period between scheduled Board Rating from S&P Global Ratings • Bilateral Fixed Term Loan Facility meetings. • Engagement of SWIFT’s Services from UnionBank of the Philippines • Additional Capital Allocation for AC • Peso Yield Enhancers or The Committee reviewed and Education, Inc.’s Project Gamma Investment Products approved the following transactions • Investment in AC Infra for Logistics in 2017: Business The Finance Committee had 10 • Renewal and Amendment of meetings in 2017. Refer to page 198 Administrative Support and Finance Committee for details on attendance. Services Agreement between the The Finance Committee oversees,
INTO THE FUTURE 163 Corporate Governance and Corporate Governance and for the oversight of the company’s Nomination Committee (102-24) Nomination Committee enterprise risk management system. The Corporate Governance and The Committee ensures that Nomination Committee is appointed The Corporate Governance and management maintains a sound by the Board. This Committee is Nomination Committee is composed risk management framework and tasked with ensuring that good of three members, all of whom are internal control system to mitigate corporate governance principles independent directors, including the material risk exposures identified and practices are complied with chairman. The Committee had three by the company. The Board also and observed by the company. This meetings in 2017, during which the assigned the Committee to review includes the adoption of an effective Chairman and members were all all material RPTs for endorsement to Board process in the nomination, present. Refer to page 198 for details the Board to ensure that these are at election, or replacement of Board on attendance. arm’s length, the terms are fair, and members and the review of the they will inure to the best interest of succession plans for members of the Audit Committee the company and its subsidiaries or Board and senior executives. The To assist the Board in fulfilling its affiliates and their shareholders. Committee strives to ensure that responsibilities, the Audit Committee the Board composition allows it to oversees matters relating to the During the financial year, the exercise effective decision-making financial statements and financial Committee reviewed and confirmed powers by maintaining a suitable reporting process, external auditors, that the company’s risk management number of independent directors. internal auditors, internal control, processes are effective. The and compliance with applicable legal Committee also reviewed various Annually and as necessary (i.e. and regulatory requirements. material RPTs and ensured that all upon vacancy of position or when the transactions are at arm’s length additional directors are required), As part of its function, the Audit prior to endorsement to the Board the Committee recommends to Committee conducts a review on for approval. The Committee also the Board qualified individuals the work performed and reports reports annually to the Board with for nomination and election as provided by both internal and descriptions on how it carried out directors based on the established external auditors. Based on the its responsibilities. Refer to the Risk criteria to ensure sufficient diversity assurance gathered from the Management and RPT Committee in the Board and aligned with the auditors as a result of their 2017 report on page 201 for the highlights company’s vision, mission, strategic reviews, the Committee assessed of its 2017 activities. directions, its By-Laws, Revised the company’s systems of internal Manual of Corporate Governance, controls, risk management, and The Risk Management and RPT and the rules of the SEC. For this governance processes to be Committee is composed of three purpose, the Committee may make adequate. The Committee also members, the majority of whom are use of professional search firms or reports annually to the Board, independent directors, including the other external sources of candidates describing how their responsibilities chairman. The Committee had three to search for qualified candidates to were discharged, as well as any other meetings in 2017, during which the the Board. information required by law. Refer to Chairman and members were all the Audit Committee report on page present. Refer to page 199 for details The Committee’s accomplishments in 200 for the highlights of its 2017 on attendance. 2017 were: activities. • The review of the qualifications of Personnel and Compensation all persons nominated to positions The Audit Committee is composed Committee requiring appointment by the of three members, the majority of The Personnel and Compensation Board whom are independent directors, Committee is responsible for • The approval of the final list of including the chairman. At least establishing a formal and transparent nominees for directors for election one of the members possesses procedure for the development of at the 2017 annual stockholders’ a background and expertise in a policy on executive remuneration meeting after ensuring that all accounting. The Committee had four and for fixing the remuneration nominees to the Board have met meetings in 2017. Refer to page 199 packages of corporate officers all the qualifications and none of for details on attendance. and directors, ensuring that the disqualifications as set forth compensation is consistent with in the corporation’s By-Laws and Risk Management and Related the company’s culture, strategy, and Revised Manual of Corporate Party Transactions Committee control environment; and is aligned Governance, as well as the rules of To assist the Board on risk with the long-term interests of the the SEC governance processes, a board- company and its stakeholders, while • The approval of the revision of level Risk Management and Related remaining competitive against the Committee Charter and additional Party Transactions Committee was market. The Committee is guided functions as the reconstituted organized, which is responsible by the objective of ensuring that
164 2017 Ayala Corporation Integrated Report the level of compensation should fairly • Provide updates to the Board corporate goals, annual targets, pay directors for the work required, on the implementation of the and long-term strategic plans. It considering the company’s size and scope. company’s strategy also adopts a performance-based variable compensation scheme using The Committee’s accomplishments in The respective roles of the Chairman the KRA scorecard accomplishments 2017 were: and CEO and the President and COO as metrics. In addition, Ayala provides • The approval of the performance are complementary and ensure a a long-term incentive program for bonus and merit increases of the strategic distribution of leadership senior executives and key talents. company’s employees functions with clearly defined From the three percent of the • The approval of the 2017 Employee accountabilities: company’s authorized capital stock Stock Ownership Plan allocated by the stockholders, the • The CEO takes the lead on Board approved the grant under the The Personnel and Compensation company strategy, visioning, and stock ownership program to eligible Committee is composed of three developing business partnerships. executives in April 2017. The basis members, chaired by an independent • The President and COO is for grants is a consistent outstanding director. The Committee had one responsible for daily operations, performance record over a period of meeting in 2017. Refer to page 199 for new business initiatives, corporate three years. The grant price is based details on attendance. policies, and resource allocation. on the PSE volume weighted average price over 30-day trading days Committee of Inspectors of Proxies In all functions and critical issues, ending April 17, 2017. and Ballots both coordinate closely with each The Committee of Inspectors of Proxies other. The Chairman and CEO and MANAGEMENT COMMITTEES and Ballots has the responsibility of the President and COO are supported Management has created ensuring that the validating process of by management committees committees to ensure that decision- the proxies and ballots is transparent, composed of key executives who making is always made in the fair, and in accordance with applicable meet regularly to discuss business best interest of the organization. laws, regulations, and company performance and issues critical to Initiatives which are reviewed and policies. the growth of the company, and to endorsed by management-level facilitate the flow of strategic and committees are discussed at length The Committee’s accomplishments in operational information among the with the appropriate Board-level 2017 were: company’s decision-makers. Committees for approval and • The validation and tabulation of the consequently, for endorsement to proxy votes received for the 2017 The Board, CEO, and senior the full Board for ratification. Annual Stockholders’ Meeting leadership team are also supported • The tabulation of the stockholders’ by the Chief Legal Officer. Through Ayala Group Management votes for items taken up during the his deep knowledge of the law and Committee (102-20) 2017 Annual Stockholders’ Meeting regulations, he acts as an advisor The Ayala Group Management on a range of issues and strategies Committee is composed of the The Committee met twice during the to minimize legal risks, and on legal Chairman and CEO, the President year where the Chairman and the matters and protocols that relate and COO, the five Ayala Corporation members were all present. Refer to to their roles and the company’s Group Heads, and the CEOs of page199 for details on attendance. operations. the Ayala group companies. The Committee oversees the group MANAGEMENT A culture of good governance strategic plan and ensures the is fostered throughout the alignment of individual business ROLES AND RESPONSIBILITIES organization, with the management unit priorities to the group-wide Management is accountable to the and the Board equally responsible direction. It meets regularly to review Board of Directors for the operations for ensuring that the mechanisms business performance, discuss of the company and its performance. and structures for good governance group-wide issues and events, and Furthermore, they: are securely in place. The Chairman identify areas of possible synergy • Define the company’s business and CEO, the President and COO, and collaboration. The full profiles objectives and goals in concrete and and members of the management of the Ayala Group Management specific terms committees attend the annual Committee members can be found • Execute the Board-approved stockholders’ meetings. on pages 204-206. strategies for achieving these targets SENIOR EXECUTIVE Investment Committee • Inform the Board in a regular and COMPENSATION The Investment Committee is timely manner about any issues Ayala provides market-competitive composed of the Chairman and concerning the company’s strategy, executive compensation and CEO, the President and COO, and risk management, and compliance benefits, which are aligned to key members of the company’s
INTO THE FUTURE 165 senior management. The IC the appointment and removal of There were no disagreements with reviews, provides direction, and the external auditor. The Audit the company’s external auditor on gives preliminary approval for Committee also oversees the work any matter of accounting principles initiatives that may originate from of the external auditors and ensures or practices, financial statement the company or its subsidiaries that they have unrestricted access to disclosures, or auditing scope or specifically requiring funding from records, properties, and personnel procedures. the company. Once a project clears to enable the performance of the the IC, it is endorsed for approval to required audit. The Audit Committee Internal Auditors the appropriate Board Committee had an executive session with Internal Audit supports the and to the full Board. the external auditor in November Audit Committee in the effective 2017 without the presence of discharge of its oversight role and Ayala Corporation management. responsibility. The Chief Audit Management Committee Executive, Catherine H. Ang, reports The Ayala Corporation Management All audit, audit-related, and permitted functionally to the Audit Committee Committee includes the Chairman non-audit services rendered by the of the Board of Directors, and and CEO, the President and COO, and external auditor must be approved administratively to the President the five Group Heads. The Committee by the Audit Committee to ensure and Chief Operating Officer or his approves corporate, administrative, that the external auditor maintains designate. and organizational matters that the highest level of independence pertain exclusively to the company, from the company, both in fact and Internal Audit adopts a risk-based as well as group-wide affairs when appearance. Non-audit services audit approach in developing relevant. expressly prohibited by regulations its annual work plan, which is of the SEC are awarded to other audit reassessed quarterly to consider INTERNAL GOVERNANCE firms to ensure that the company’s emerging risks. The Audit MECHANISMS external auditor carries out its work in Committee reviews and approves an objective manner. the annual work plan and all STRATEGY FORMULATION AND deviations therefrom, and ensures EXECUTION Total fees billed by SGV and Co. that internal audit examinations Ayala utilizes an inclusive and for the years ended December cover the evaluation of adequacy iterative approach in crafting and 31, 2017 and 2016 amounted to and effectiveness of controls executing a long-term strategic plan P11.09 million and P17.04 million, encompassing the company’s for the entire Ayala Group. respectively, inclusive of VAT. governance, operations, and As these plans are finalized, we The Audit Committee reviewed information systems, reliability and also ensure that risk is managed the nature of non-audit services integrity of financial and operational appropriately using a robust risk rendered by SGV & Co. and the information, safeguarding of assets, management process. Refer to pages corresponding fees and concluded and compliance with laws, rules, 52-55 for a discussion on Ayala’s that these are not in conflict with and regulations. The Committee risk management mechanisms, and their function as the company’s also ensures that audit resources are pages 56-58 for a discussion on the external auditor. The breakdown of adequate and reasonably allocated company’s principal risks. the fees for 2017 and 2016 are shown to the areas of highest risk. below: ACCOUNTABILITY AND AUDIT As of 2017, the audit team has External Auditors (Amount in millions of pesos) an average of 12.4 years audit experience and an average of SGV & Co. is the external auditor of External 2017 2016 the company for the year 2017, with Auditor Fees 7.5 years tenure in the company. Lucy L. Chan as the lead engagement Audit and Audit- P10.97 P15.85 The audit team has the following partner. During the Annual Related Fees certifications and professional Stockholders’ Meeting last April 21, Non-Audit Fees 0.12 1.19 affiliations: certified public accountants, certified internal 2017, the shareholders re-appointed Grand Total P11.09 P17.04 SGV & Co. as the company’s external auditors, a certified risk management assurance practitioner, a certified auditor. The external auditor’s Audit and Audit-Related Fees include the audit of responsibility is to assess and provide Ayala Corporation’s annual financial statements foreign exchange professional, IT an opinion on the conformity of and the mid-year review of financial statements auditors, a crisis communication in connection with the statutory and regulatory the audited financial statements planner; certified in ISO 9001, ISO filings or engagements for the years ended 2017 22301, ISO 27001, IT Infrastructure with Philippine Financial Reporting and 2016. This also includes assurance services Standards and the overall quality of that are reasonably related to the performance of Library, COBIT 5 (F), and Global the financial reporting process. the audit or review of Ayala’s financial statements Innovation Management pursuant to the regulatory requirements. Institute Level 1; and a member of the Financial Executives of the The Audit Committee has the Non-Audit Fees include one-time, non-recurring primary responsibility to recommend special projects, consulting services and seminars. Philippines, and a fellow of the
166 2017 Ayala Corporation Integrated Report Institute of Corporate Directors. disciplinary action There were no cross or pyramid All the internal audtiors are also • Ensures the integrity and accuracy shareholdings. members of the Institute of Internal of all documentary submissions to Auditors-Philippines and adopt the regulators Accurate and Timely Disclosures International Professional Practices • Identifies and manages Ayala is committed to providing Framework promulgated by The compliance risks quality, accurate, and timely disclosures Institute of Internal Auditors, Inc. • Ensures that the company adheres to regulators and the investing to sound corporate governance public, including information on the Ayala’s Internal Audit adopted and best practices results of its operations and financial portfolio-based subsidiary oversight • Issues an annual Integrated Annual performance. There are procedures for to standardize the implementation Corporate Governance Report that internal reporting and ensuring that of good practices and ensure that is duly signed under oath by the disclosures are promptly provided critical issues are monitored and Chairman, Chief Executive Officer, to the investing public on significant addressed across the Ayala group. or President, all independent and market sensitive information Synergy is also strengthened within directors, the Compliance Officer, that may affect their decisions. Ayala the internal audit functions of the and the Corporate Secretary conducts investors’ meetings and group, including its subsidiaries • Facilitates a yearly performance quarterly analysts’ briefings, as well and affiliates, by sharing resources, assessment of the Board, Board as press briefings, where the senior knowledge, tools, and best practices Committees, and individual management discusses the results through the Ayala Group Internal members of the Board using a of the company’s operations with Auditors’ Network Council, four formal self-rating system investment and financial analysts. Refer AGIAN Circles, and AGIAN quarterly • Performs other such duties and to pages 172-175 for more details. technical sessions. In November responsibilities as may be provided 2017, AGIAN also held its 2nd Chief for by the SEC All relevant disclosures are filed Audit Executive Forum and 19th in a timely manner with the SEC, Annual Conference with the theme On April 27, 2017, Atty. Hermosura Philippine Stock Exchange, and “The Future is Now. Internal Audit participated as a panelist on Philippine Dealing and Exchange and the New Reality” to further Unity in Diversity: The Changing Corporation. Policies and procedures strengthen collaboration among Role of the In-House Counsel and are in place to make sure that Ayala internal auditors and increase their Legal Profession within an ASEAN consistently complies with disclosure awareness on digital disruption and Integration at the Asian Legal requirements under the listing rules business model transformation. Business Philippine In-house Legal of the SEC, PSE, and PDEx. Summit. To equip the internal auditors with the required auditing skills during DISCLOSURE AND TRANSPARENCY the conduct of their reviews, the Ownership Structure (102-5) company provides continuing As of December 31, 2017, Ayala’s outstanding common shares were held as follows: training and development programs, from specific job skills to long-term Outstanding % Ownership Common Shares professional development. Mermac, Inc. 296.3 million 47.68 CHIEF COMPLIANCE OFFICER PCD Nominee Corporation (Non-Filipino)* 168.2 million 27.07 As Ayala’s Compliance Officer, Atty. PCD Nominee Corporation (Filipino)* 71.3 million 11.48 Solomon M. Hermosura: Mitsubishi Corporation 63.1 million 10.15 • Ensures the proper onboarding of Others 22.5 million 3.62 new directors and the attendance of Board members and key officers Total 621.4 million 100 to relevant trainings *Out of the 239.5 million common shares registered under the name of PCD Nominee Corporation, 67.1 • Monitors, reviews, evaluates, million or 10.81% are for the account of Deutsche Bank Manila while 60.96 million or 9.81% are for the account of Hongkong Shanghai Banking Corporation. and ensures compliance by the company, its officers and directors Outstanding Shares % Foreign Owned with relevant laws, the Code of Common Shares 621.3 million Corporate Governance for Publicly Listed Companies, and relevant Voting Preferred Shares 200.0 million rules and regulations, as well Total Voting Shares 821.3 million 32.58 as all governance issuances of Preferred B Series 1 Shares 20.0 million regulatory agencies Preferred B Series 2 Shares 27.0 million • Reports to the Board if violations Total Outstanding Shares 868.3 million 30.83 are found and recommends the imposition of appropriate
INTO THE FUTURE 167 As a result of Ayala’s continued overall value creation. Refer to disseminated to the public and efforts to provide timely and relevant pages 40-43 and 72-74 of this report three full trading days had lapsed information: for the financial and non-financial from the disclosure thereof. • On April 11, 2017, the Annual performance indicators, respectively. Report (SEC Form 17-A) together Reporting of Transactions with the consolidated audited Ayala has an existing policy on Guidelines for all directors, officers, financial statements for 2016 were Related Party Transactions. These are employees and consultants on when submitted to the SEC, within 120 transactions between the company to declare trades have been clearly days after year-end or any of its subsidiaries or affiliates established and implemented. • On February 06, 2017, the Notice of and a related party which shall be the Annual Stockholders’ Meeting subject to review and approval to All directors and officers from with a detailed explanation of the ensure that they are at arm’s length, Managing Directors and above, Agenda items was released to the fair, and will inure to the best interest and the Comptroller, Chief Audit SEC and PSE, 74 days ahead of the of the company and its subsidiaries Executive, Chief Risk Officer, scheduled annual meeting on April or affiliates and the shareholders. Treasurer, Corporate Secretary, and 21, 2017 These transactions may include Assistant Corporate Secretary must • On March 22 and 26, 2017, the sales and purchases of goods and report all acquisitions or disposals, or audited financial statements services to and from related parties any changes in their shareholdings as contained in the Definitive that are concluded at normal in the company within three trading Information Statement were commercial terms consistent with days from the transaction date, submitted to the SEC and PSE, the principles of transparency two days earlier than the five-day respectively, 26 days before the and fairness. As per policy, the disclosure requirement of the PSE. All annual stockholders’ meeting company or a related party or any other officers and employees must • Interim or quarterly financial of its subsidiaries or affiliates, as the submit a quarterly report on their statements and results of case may be, shall disclose material trades of company securities to the operations were submitted to the RPTs to the Risk Management and Compliance Officer. regulators within 45 days from the RPT Committee for review and end of the financial period. approval prior to entering into the Refer to page 203 for the directors’ transaction, unless it is considered and officers’ reported trades in Ayala This information, past annual reports, as a pre-approved RPT. Material Securities in 2017. and this Integrated Report and RPTs are transactions that meet the the consolidated audited financial threshold values – P50 million or Trading Blackouts statements are readily available five percent of the total assets of The Policy on Insider Trading provides through the company’s website. either party, whichever is lower. that all directors, officers, consultants, and employees of the company who Refer to page 202 for the There were no RPTs classified as may have knowledge of material company’s filings in 2017, including financial assistance to entities other facts or changes in the affairs of Ayala unstructured disclosures and than wholly-owned subsidiaries. that have not been disclosed to the clarifications of news reports. There were also no cases of non- public, and members of covered compliance with the laws, rules, persons’ immediate families are Financial and and regulations pertaining to prohibited from trading in Ayala’s Non-Financial Reports significant or material RPTs in the shares during the trading blackout Through the Audit Committee, the past three years. RPTs are discussed period commencing 10 trading days Board has a responsibility to the and quantified in the Notes to the before and three trading days after shareholders to ensure the integrity Consolidated Financial Statements, the disclosure of quarterly and annual of the company’s consolidated which are made available on the financial results. In addition, they are financial statements and any company’s website. also required to submit annually a financial information disclosed in the certification of compliance with the company’s Integrated Report. These POLICY ON INSIDER TRADING prohibition against trading during the financial statements comply with Ayala adheres to zero tolerance for all blackout periods. the Philippine Financial Reporting unethical practices and is committed Standards. to complying with all relevant laws In 2017, notices of trading blackouts and standards. were disseminated and issued to Both financial and non-financial all covered personnel via e-mail. performance indicators are To protect shareholders, the Compliance was strictly enforced disclosed and thoroughly discussed company defined a policy against during these trading blackout periods in the Integrated Report to help insider trading of company securities and there have been no violations shareholders appreciate the and non-disclosure of material of the company’s policy on insider company’s various businesses and non-public information to any trading in the past three years. their impact on the company’s person until the information is
168 2017 Ayala Corporation Integrated Report STAKEHOLDER RELATIONS Please refer to pages 59-61 for responsibilities. The Code is Ayala aims to adhere to the highest further discussion on Ayala’s anchored on the company’s four possible level of moral benchmarks relationships with its stakeholders. core values: integrity, long-term and fairness in dealing with vision, empowering leadership, shareholders, customers, employees, KEY PARTNERSHIPS and commitment to national and business partners to constantly Ayala is among the oldest, largest, development. strengthen its foundation for long- and leading conglomerates in the term beneficial relationships. Philippines. The company has been All the company’s directors, officers building businesses that transform and employees are expected to avoid Shareholder Meeting industries, challenging the status situations of conflicts of interest and Voting Procedures quo, and introducing innovations or impropriety. The Code provides Stockholders are informed at least that contribute to the nation’s social for the definition, guidelines, and 28 days before the scheduled date and economic agenda. procedures, including the reporting of meeting. The notice of regular or of any such circumstances involving special meetings contains the agenda Ayala combines its over 180-years conflict of interest. and sets the date, time, and place for of experience in doing business validating proxies, which must be in the country with its partners’ On an annual basis, all directors, done at least five business days prior expertise and strengths to grow officers, and employees are required to the annual stockholders’ meeting. its businesses. The company has to report and disclose any business interests in real estate, financial and family-related transactions to Each outstanding common and voting services, telecommunications, water, ensure that all potential conflicts of preferred shares of stock entitles the power, industrial technologies, interest are reported and brought registered holder to one vote. infrastructure, e-commerce, to the attention of management, healthcare and education. The whether actual or apparent. Since 2014, Ayala has provided an company has also entered disruptive electronic voting platform to enable sectors through investments in Management is responsible stockholders in absentia to execute e-commerce and fintech. for enforcing and monitoring their voting rights during the annual compliance with the Code and stockholders meeting. The company Ayala continues to explore dynamic imposing sanctions for violations also provides non-controlling or and innovative business models, thereof. As the overall governing minority shareholders the right to and introduce pioneering products body, the Board ensures that all nominate candidates for board of and services across its businesses. directors, officers, and employees of directors. The company strives to maintain the company adhere to the Code. mutually-beneficial relationships Shareholder and with its partners to generate value WHISTLEBLOWER POLICY Investor Relations for its stakeholders. Empowered by a legacy built It is the policy of the company to on integrity, Ayala established encourage active participation and CODE OF CONDUCT AND ETHICS the Whistleblower Policy to regular dialogues with institutional (102-16) encourage directors, officers, and and retail investors. Through The Board established a Code of employees and all suppliers, business Investor Relations, a unit under Conduct and Ethics to guide all partners, contractors and sub- Finance, information requirements directors, officers, and employees contractors, and other third parties to of the investing public and minority in executing their roles and report any perceived wrongdoing or shareholders are fully disclosed to securities regulators on time.
Ayala continues to strengthen its investor relations framework. In 2017, the Investor Relations Unit organized the third Ayala Group Investor Relations Forum to keep management abreast of the best practices, global trends, and external perspectives on the evolving role of investor relations. It also engaged an external party to conduct an Investor Perceptions Audit to understand its strengths in investor communications and identify areas The Annual Stockholders’ Meeting is a venue for shareholders to learn about the company’s achievements and for improvement. strategic direction from its leadership.
INTO THE FUTURE 169 malpractice involving the company their immediate family, with a view or its personnel. to get favors or to influence business recommendations are immediately The policy is meant to encourage the reported to the appropriate reporting of such matters in good reporting level. Directors, officers, faith, with utmost confidence that and employees, are likewise the whistleblower will be treated instructed not to accept gifts or fairly and protected from reprisal, invitations of any form, except harassment, disciplinary action, or when it meets the criteria set by the victimization for whistleblowing. company. The company likewise strictly adheres to the provisions of The whistleblower may submit a the Anti-Money Laundering Law. written report directly to the Office of the Chief Compliance Officer, or DATA PRIVACY POLICY by e-mail to whistleblower@ayala. Ayala appointed its Data Protection com.ph, or through a face-to-face Officer, Atty. Solomon M. Hermosura, meeting with any member of the and designated Compliance Officers Disclosure Committee composed for Privacy, Atty. Charlene Mae C. of one representative each from Tapic-Castro and Chris Angelica L. the Office of the Chief Legal Officer, Bustonera, to support the company’s Strategic Human Resources, Internal commitment to protect and respect Audit, and Group Risk Management individual personal information in and Sustainability. accordance with the Data Privacy Act of 2012. There is an established Disclosure Committee and investigation process The company implements for reported violations of company reasonable and appropriate physical, policies, rules and regulations. All technical, and organizational security reports are treated in confidence and measures to maintain the integrity discussed with the Audit Committee, and confidentiality of personal which monitors the resolution and data, and protect these against closure of all reports. natural and human dangers, such as accidental loss or destruction, In 2017, there were no incidents unauthorized access, fraudulent reported through the whistleblowing misuse, and unlawful alteration. reporting channels. Inquiries or concerns regarding data privacy or data subjects’ rights may ANTI-CORRUPTION POLICY be communicated to the Office of Ayala is committed to the highest the Data Protection Officer through standards of ethical conduct and channels provided on the website. has adopted a zero tolerance policy towards corruption and bribery in WEBSITE any form. The Anti-Corruption Policy Information on the company’s embodied in the Code provides corporate governance initiatives, guidance to all directors, officers, this Integrated Report, and all other and employees on how to conduct relevant information is available on business in a fair, ethical, and legal the company’s website at www.ayala. manner. Seeking undue financial com.ph. As part of our stakeholder and material advantage from any engagement, Ayala also maintains transactions is strictly prohibited. social media accounts at Facebook. The company has also set guidelines com/AyalaCorporation and Twitter for dealing with gifts and gratuities @Ayala_1834. The Ayala Investor to protect the integrity of its Relations mobile application also employees and its business interests. offer the investment community Any offer or gift of value given to with a wealth of investor-related directors, officers, and employees, or information on Ayala.
170 2017 Ayala Corporation Integrated Report ANNEXES
INTO THE FUTURE 171 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION (102-45)
Ayala Corporation recorded a net reservation sales bounced back to Water income of P30.3 billion in 2017, double-digit levels during the year at Manila Water posted a muted net climbing 16 percent from the previous 13 percent, reaching P122 billion. income growth of one percent to P6.2 year on the back of robust double-digit billion as higher operating expenses and growth of its real estate and power Commercial leasing revenues, business development costs tempered businesses. meanwhile, grew 10 percent to P31 topline growth during the year. billion driven by new mall openings, Consolidated Sales of Goods stabilized occupancy of office spaces, Revenues rose five percent to P18.5 and Services and the improved performance of its billion, bolstered by strong revenue Sales of goods and services climbed hotels and resorts portfolio. contributions from Laguna Water 22 percent to P242.2 billion, on the and Boracay Water, as well as higher back of higher sales in all housing, Ayala Land’s strategy to rebalance supervision fees recognized by Estate residential, and condominium units of its net income mix is increasingly Water balancing out flat revenue Ayala Land; strong vehicle sales across taking shape. In terms of location, growth in the Manila Concession. AC Industrials‘ automotive brands; and established estates (Makati, Nuvali, the improved output of Integrated Bonifacio Global City, Alabang and Operating expenses expanded 19 Micro-Electronics‘ automotive Cebu) accounted for 54 percent, while percent to P7.4 billion on higher electronics and industrial segments, new estates and growth centers made overhead costs owing to Estate Water’s as well as the consolidation of its new up for 46 percent of Ayala Land’s net expansion, business development subsidiary. In addition, higher service earnings in 2017. In terms of business costs, and a one-time write-off of revenues from AC Energy, primarily line, Ayala Land’s recurring income uncollectible accounts in Laguna Water. from the consolidation of its new (mall and office leasing, hotels and subsidiary and Retail Electricity Supply resorts, and property management Manila Water posted higher billed (RES) unit, as well as from IMI and segments) accounted for 35 percent, volume across all its business lines, Manila Water, contributed to this. The while development income (property with the non-Manila Concession account stands at 91 percent of Ayala’s sales and construction) contributed posting strong double-digit billed total revenues for 2017. 65 percent of Ayala Land’s net income volume growth. This brought total during the year. billed volume to 738.7 million cubic Real Estate meters, three percent higher year-on- The resurgence of property sales Ayala Land spent P91.4 billion in year. In the Manila Concession, the combined with a solid leasing capital expenditure during the year. two percent-increase in billed volume business drove Ayala Land’s net It launched 28 residential projects helped offset the impact of tariff earnings during the year, jumping 21 amounting to P88.8 billion. In leasing, reduction. percent to P25.3 billion. it opened five new malls with 189,000 in gross leasable area, and six new Manila Water continues to intensify Revenues from property development, offices with 185,000 in gross leasable its infrastructure build-up with a which includes residential and office- area. In addition, it opened six new 48 percent expansion in capital for-sale developments, as well as hotel and resort facilities, adding 556 expenditures. Last year, the Manila commercial lot sales, rose 24 percent rooms to its portfolio in 2017. Concession completed the Marikina to P96.4 billion on new bookings North Sewerage Treatment Plant, and project completion. Growth in while the Pasig North and South
172 2017 Ayala Corporation Integrated Report (102-45)
System Project is scheduled for Last February, IMI successfully and infrastructure. Headquartered in completion in November 2019. Both completed its P4.998 billion San Jose, California, Merlin currently projects have a capacity of 100 million rights offer with the issue of 350 has additional manufacturing facilities liters per day. million common shares to existing in Thailand. shareholders. AC Industrials, which Further, Manila Water received a notice previously held 50.6 percent of IMI’s Power Generation of award from the City of Ilagan Water outstanding shares, subscribed to AC Energy’s net earnings jumped District to establish a joint venture its proportionate share, as well as 31 percent to P3.5 billion in 2017, for a bulk water supply and septage any unsubscribed rights shares. This primarily driven by fresh equity management company. Manila Water raised its stake in IMI to 52 percent. earnings contribution from its also received a notice of award from Proceeds of the rights offer will be geothermal platform, and boosted the Leyte Metropolitan Water District used to fund IMI’s capital expenditure by solid contributions from its wind to establish a joint venture for a program and for debt refinancing. energy assets. concession company. As part of its ongoing expansion in Southeast Asia, Meanwhile, revenues from AC A strong wind regime bolstered the Manila Water is establishing a footprint Automotive expanded 37 percent to better performance of NorthWind and in Thailand with the signing of a share P31.2 billion, boosted by strong sales North Luzon Renewables during the purchase agreement in February to across all brands—Honda, Isuzu, year. Services income derived from the acquire an 18.72 percent stake in Volkswagen, and KTM. financial close of a new power plant Eastern Water Resources Development likewise contributed to AC Energy’s and Management Public Company AC Industrials continues to ramp net earnings. Limited, a publicly-listed water supply up its portfolio in global and and distribution company in Thailand. domestic industrial technologies AC Energy continues to execute on by capitalizing on opportunities its diversification strategy. Following Industrial Technologies arising from disruptive technological the acquisition of Salak and Darajat AC Industrials registered a net income shifts, changing industry landscapes, Geothermal in Indonesia in early 2017, of P1.2 billion, up four percent from and increasing demand from end- AC Energy is assembling a portfolio of its year-ago level, on the better users. Last month, AC Industrials renewable energy assets in Southeast performance of both its electronics acquired a controlling stake in Merlin Asia. It is developing a 75 megawatt manufacturing and vehicle retail units. Solar Technologies Inc., with an wind project in Sidrap, Indonesia, ownership interest of 78.2 percent which is expected to come online in IMI’s net earnings expanded 21 after the close of the transaction and the first quarter of 2018. percent to US$34 million on the completion of other related activities. back of solid revenue growth, which Merlin is an emerging company Last January, AC Energy, in partnership exceeded the US$1 billion mark that is developing differentiated with BIM Group of Vietnam, agreed to during the year. This topline growth solar solutions resulting in products jointly develop over 300 megawatts was driven by contribution from with high durability, flexibility, of solar power projects in Ninh Thuan recent acquisitions and sustained and increased solar power output, province, Vietnam. The initial 30 growth in the automotive and allowing for potentially innovative megawatts of the solar project broke industrial markets. applications in areas with demanding ground, with investment for this phase environments, such as transportation expected to reach 800 billion VND
INTO THE FUTURE 173 (102-45)
and to be completed within the year. gains registered in 2016. This was dropped five percent to P15.1 billion The solar project is envisioned to partially offset by the bank’s higher in 2017 due to higher operating be expanded by an additional 300 fee-based income, which grew 16 expenses and depreciation charges megawatts. percent to P19.9 billion, lifted by as a result of increased investments higher credit card fees, trust and in its data network. Similarly, AC Energy is boosting its investment management fees, conventional energy portfolio. Last insurance fees, bank commissions, Topline growth, however, remains December, the project financing and service charges. strong, with service revenues for the second unit of its 2 x 668 reaching P127.9 billion during MW super-critical coal fired power BPI continues to be a leader in the year, up six percent year-on- plant in Bataan, GNPower Dinginin, profitability metrics, with cost-to- year. This was fueled by sustained achieved financial close. AC Energy income ratio at 54.3 percent, slightly demand for data-related products. has approximately 50 percent higher from the 52.5 percent posted Mobile revenues grew seven percent economic stake in the project, which a year ago, mainly driven by its to P98.5 billion. Globe’s mobile has an estimated cost of US$1.7 digitalization initiatives. subscriber base reached 60.7 billion. The project will support the million at the end of 2017, three increasing electricity demand of Total loans jumped 16 percent to percent lower from a year ago. The Luzon and Visayas. Construction of P1.2 trillion, boosted by corporate decline in the cumulative mobile the first unit is well underway, and is loans. Asset quality improved with subscriber base was a result of the targeted for commercial operations the gross 90-day non-performing change in reporting Globe’s prepaid by 2019, with the second unit loans ratio declining from 1.46 subscribers in 2017, which excluded scheduled for completion by 2020. percent to 1.29 percent and reserve prepaid subscribers who do not cover ratio increasing from 119 reload within 90 days of the second Share of Profit of Associates and percent to 129 percent. expiry period. Mobile data continues Joint Ventures to drive Globe’s total mobile Share of profits of associates and Last year, BPI announced the creation revenues, accounting for 44 percent joint ventures reached P18.5 billion, of a business banking segment, a from 38 percent a year ago. up two percent, primarily on the new client group focused on the steady increase of equity earnings banking needs of the country’s small Globe’s home broadband segment from investees of Ayala Land and AC and medium scale enterprises. It also posted a seven percent increase in Energy, and the better performance raised a record P12.2 billion from revenues to P15.6 billion in 2017. of BPI. This was partially offset by a its offering of long-term negotiable Total home broadband subscribers slight decline in share in earnings certificates of time deposit, the climbed 15 percent to 1.3 million from Globe. largest issuance by far in the industry. year-on-year, putting Globe on track with its target to provide internet Banking Last January, the bank announced service to two million homes by Bank of the Philippine Islands a stock rights offering of up 2020. Corporate data business recorded a net income of P22.4 to P50 billion to support its increased four percent from a year billion, up 1.7 percent from its year- strategic initiatives, including the ago to P10.3 billion owing to strong ago level, as the absence of one-off strengthening of its market-leading demand for data-driven solutions by gains tempered strong growth in its businesses and core franchises corporates. core banking business during the through the expansion of lending year. Excluding one-off gains from activities across consumer, SME, and Globe’s consolidated EBITDA the sale of securities in 2016, net microfinance segments to capture improved seven percent to P53.3 income grew 31 percent in 2017. positive momentum in the domestic billion, while EBITDA margin stood economy. In addition, the stock at 42 percent from 41 percent in the Total revenues rose seven percent rights offer will strengthen BPI’s previous year. to P71 billion as net interest income capital base as it pursues its growth expanded 13 percent to P48 strategy in the medium term. Ayala Globe spent around P42.5 billion billion driven by asset growth and has signified its participation in the in capital expenditure in 2017 to improvement in net interest margin. rights offering. support its continuous network Non-interest income, meanwhile, infrastructure enhancement. It dropped five percent to P22.9 billion Telecom launched new products to enable on the absence of significant trading Globe Telecom’s net earnings the Filipino digital lifestyle,
174 2017 Ayala Corporation Integrated Report (102-45) including Mynt’s rollout of the Balance Sheet Highlights loan-to-value ratio, or the ratio of GCash scan-to-pay system in malls, Ayala’s balance sheet remains at a the parent net debt to the total fast food chains, major retailers, and healthy level, allowing it to continue value of its investments, was 6.4 convenience stores. supporting its investments and meet percent as of end-December 2017. its debt and dividend obligations. Other Income (Charges) Outlook for 2018 Other income surged 66 percent to Investments in associates and joint 2017 marked a year of stronger- P20.9 billion in 2017, as compared ventures rose to P202.6 billion, as than-expected, broad-based to P12.6 billion in the previous a result of new investments made economic growth for the world, year. This was largely attributed to by AC Energy, AC Ventures, and with a recovery in global trade, income from higher rehabilitation Ayala Land. The parent’s share in net investment, and manufacturing. works of Manila Water; the reversal earnings from BPI and Globe, as well This is expected to continue in the of impairment provision for a as existing investees of Ayala Land, short-term, though medium-term real estate property and higher Manila Water, AC Energy, and AC prospects are somewhat more management and marketing fees Infrastructure, also contributed to muted. Asia continues to remain a of Ayala Land; commission fees of growth, tempered in part by Bestfull’s bright spot in the global economy. AC Energy; and gains on disposal of disposal of certain investments. certain investments of AG Holdings. The Philippines continues to Other charges which pertain to Investments in property jumped 24 grow at a healthy pace. Already- rehabilitation works consequently percent to P137.7 billion through the robust domestic consumption increased in 2017. real estate unit’s expansion projects is expected to increase further, in malls, office properties, and select supported by the passage of the Costs and Expenses land development. Meanwhile, first package of the government’s Consolidated cost of sales for the investments in property and tax reform program. Some pockets year stood at P175.7 billion, a 24 equipment recorded a 33 percent of uncertainty remain, particularly percent increase, brought about increase to P85.4 billion. This was in external and internal policy that by higher sales from the real estate lifted by AC Energy’s construction of may affect trade, and the local segment, particularly in lots and power plants for GNP Kauswagan, business and investment climate. residential units, AC Industrials‘ Ayala Land’s capex for hotels and As such, the group will continue electronic manufacturing and resorts, IMI’s new capital spending to monitor relevant global automotive retail businesses, and for its Europe and Mexico sites, and and domestic macroeconomic stronger service revenues of the Manila Water’s expansion projects. indicators that may have an effect energy group. The impact from the consolidation on its businesses. of AC Energy’s and IMI’s new Consolidated general and subsidiaries also factored in this Ayala remains overall positive administrative expenses rose 20 account’s growth. about the macroeconomic percent to P25.2 billion. This was a environment and its prospects for result of combined increments in At the end of 2017, total debt at the growth as it continues to execute the groups expenses, particularly consolidated level stood at P350.6 on its five-year growth strategy from Ayala Land’s contracted billion, a 19 percent increase from through 2020. services, professional fees, taxes, the December 2016 level of P295.9 retirement, and trainings; the billion. This was due to capital-raising Ayala maintains a healthy parent’s, AC Energy’s, and Manila exercises by the parent, AYC, and balance sheet with access to Water’s manpower, insurance costs, Ayala Land, as well as borrowings for various funding options to depreciation expenses, as well as expansion projects of the real estate, meet requirements. A robust Manila Water’s AR provisions; AC energy, and water segments. Total risk management system allows Industrials‘ automotive business‘ assets crossed the P1 trillion mark in the company to maximize marketing and promotional 2017. opportunities for reinvention, and expenses, and IMI’s manpower costs navigate the challenges faced by and professional and management Cash at the parent level reached its business units. fees. This also includes the impact of P18.6 billion, while net debt stood at consolidation of IMI and AC Energy’s P64.7 billion. Net debt-to-equity ratio new subsidiaries. was 0.68 at the consolidated level, and 0.59 at the parent level. Ayala’s
INTO THE FUTURE 175 MATERIALITY (102-46, 102-47, 102-49)
MATERIAL FACTORS RELATED GRI SPECIFIC TOPICS REPORTING COMPANIES WHY IT IS MATERIAL GRI TOPICS DISCLOSURES ECONOMIC Economic Performance 201:Economic Economic value generated, All companies This is our direct contribution to 201-1 Performance distributed and retained Philippine economy and to our stakeholders. Business Resilience to Climate 201:Economic Climate proofing of Globe Resilience of our infrastructure is 201-2 Change Performance infrastructure important for business continuity. Impact of use of products or 203: Indirect Increase in income Globe, BPI, IMI, Ayala Land, AC As an indirect contribution to the 203-1, 203-2 services Economic Impact or productivity of Infra Philippine economy, our products communities, enterprises and services help promote the and companies served growth of other businesses. Jobs supported in the supply 204: Procurement Indirect hires All companies except AC Managing our supply chain is 102-8 chain Practices Ventures integral to business continuity. Spending on local suppliers Globe, Globe, Manila Water, AC 204-1 Energy (NLR, Montesol, SLTEC, North Wind) Supplier assessment and Globe, Ayala Land, IMI, Manila 308-2, 414-2 accreditation Water Foreign and Indirect 203: Indirect Acquisitions Manila Water, IMI, AC Ventures, Expansion of our portfolio allows 203-2 Investments Economic Impact AC Industrials, AC Health, AC us to diversify, enter new markets Health, AC Energy, AC Infra, BPI, and industries, and increase our Globe sources of revenue. CAPEX All companies Impact to the vulnerable 203: Indirect Affordable education and AC Education, AC Health We innovate on products and 203-2 sector Economic Impact healthcare services to make them more available especially for the low- income segments. ENVIRONMENTAL Energy as Business 302: Energy Power generation from AC Energy Through our energy business, N/A thermal and renewable we invest in power generation sources to cater to the region’s energy demand. Energy as Consumption 302: Energy Electricity consumption All companies except AC Energy, in the form of electricity 302-1 within the organization Ventures and fuel, is used to run our operations. Electricity consumption Ayala Land 302-2 outside the organization Fuel consumption within Ayala Land, BPI, Globe, Manila 302-1 the organization Water, IMI (Philippines only), AC Infra, AC Energy, AC Automotive Fuel consumption outside BPI, AC Automotive, AC Energy 302-2 the organization (SLTEC) Energy intensity All companies except AC 302-3 Ventures Reduction of energy Ayala Land, BPI, AC Infra (MCX), 302-4 consumption AC Education (APEC), IMI Greenhouse gases 305: Emissions Scope 1 Ayala Land, BPI, Globe, Manila This is a by-product of our 305-1 Water, IMI, AC Infra, AC Energy, business operations. Managing Scope 1 Intensity 305-4 AC Automotive and reducing GHG emissions helps us move towards a low- Scope 2 All companies except AC 305-2 carbon economy. Ventures Scope 2 Intensity 305-4 Scope 3 AC Automotive, Ayala Land, BPI, 305-3 Globe, Manila Water, IMI, AC Energy
176 2017 Ayala Corporation Integrated Report (102-46, 102-47, 102-49)
MATERIAL FACTORS RELATED GRI SPECIFIC TOPICS REPORTING COMPANIES WHY IT IS MATERIAL GRI TOPICS DISCLOSURES ENVIRONMENTAL Water as Business 303: Water Water distribution Manila Water As a business activity, water is abstracted N/A from nature, and is treated and Used water treatment Manila Water 306-1 distributed to our customers. Water abstraction Manila Water 303-1 Water as Consumption 303: Water Water consumption Ayala Land, IMI (Philippines Water is used in our business operations 303-1 only), BPI, Globe, AC as natural capital for industrial and office Water intensity N/A Energy (SLTEC), AC consumption. Education, AC Automotive, AC Health Water recylced and reused AC Energy (SLTEC) 303-3 Ecosystems and 304: Biodiversity Biodiversity AC Energy (NLR), Ayala Some of our operations are located near 304-1, 304-4 Biodiversity Land areas rich in biodiversity. Protecting flora and fauna is a form of environmental Watershed management Manila Water 304-1, 304-3 stewardship, and their presence Tree planting All companies in our sites is an indicator of good 304-3 environmental management. Resource Efficiency 301: Materials Construction materials Ayala Land The materials we use in developing 301-1 306: Effluents and communities and the wastes we generate Hazardous wastes Manila Water, Ayala Land, 306-2, 306-4 Waste in our operations pose significant AC Infra (LRMC), AC 308: Supplier environmental impacts. We create efforts Automotive, IMI, Globe Environmental to manage them efficiently. Assessment Non-hazardous wastes Ayala Land, Globe, IMI 306-2 (Philippines only), AC Education, AC Energy (SLTEC) Recycling and landfill IMI, Globe 306-2 diversion Effluents AC Energy (SLTEC), AC 306-1, 306-5 Automotive Supplier environmental IMI, Ayala Land, Manila 308-1 assessment Water SOCIAL Employee Engagement 401: Employment Total employee headcount All companies except AC Our businesses create meaningful and 102-8 Ventures gainful jobs. New hires and turnover All companies except AC 401-1 Ventures Parental leave All companies except AC 401-3 Ventures Indirect hires All companies except AC 102-8 Ventures Employee engagement All companies 102-43 Collective bargaining Ayala Land, Manila Water, 102-41, 407-1 agreements BPI, Globe Occupational Health and 403: Occupational Types of injuries All companies except Ayala A healthy workforce and a safe working 403-2 Safety Health and Safety Corporation, BPI, AC Infra environment are integral in the daily and AC Ventures operation of our businesses. Training and Development 404: Training and Training hours and training All companies except AC The sustainability of our businesses are 404-1, 404-2 Education programs Ventures directly related to the knowledge and skills of our employees. Diversity, Equal Opportuni- 405: Diversity and Breakdown of employees All companies except AC A highly engaged, diverse, and talented 405-1 ty & Anti-Discrimination Equal Opportunity by age, gender and rank Ventures workforce enables us to continue and 406: Non- expand our operations. Non-discrimination All companies 406-1 discrimination Workplace Conditions 408: Child Labor Child labor All companies Our businesses comply with labor 408-1, 414-2 409: Forced or standards. Forced or compulsory All companies 409-1, 414-2 Compulsory Labor labor 414: Supplier Social Assessment Customer Management 102: General Customer satifaction Ayala Land, Globe, Manila Customer satisfaction indicates quality 102-43 Disclosure performance Water, IMI (Philippines of our products and services, and drives only), AC Automotive, HCX, customer loyalty and revenue growth. AC Health Security Practices and 410: Security Security practices Ayala Land, BPI, AC Infra We aim to ensure the safety of individuals 410-1 Privacy Practices (MCX) within our business scope against 418: Customer external dangers. We also comply to the Data privacy policies Globe, BPI, Ayala 418-1 Privacy Data Privacy Act. Foundation Community Relationship 413: Local Sustainable livelihood Ayala Foundation We strongly believe in the need to play an 413-1 Communities programs active part in national development.
INTO THE FUTURE 177 TABLE OF RESTATEMENTS (102-48, 102-49)
GRI Disclosure Item Year Figure in 2016
201-1 Economic Value Generated 2015 378,908.65 362,123.09 Million peso 75, 187 Updated figures from IMI and BPI, exclusion of LiveIT, and inclusion of HCX and AffinityX
201-1 Economic Value Generated 2016 421,406.15 402,338.02 Million peso 76, 187 Updated figures from IMI , AC Health, BPI, exclusion of LiveIT, and inclusion of HCX and AffinityX
201-1 Economic Value Distributed (Operating Cost) 2015 172,499.62 171,274.96 Million peso 187 Updated figures from BPI, exclusion of LiveIT, and inclusion of HCX and AffinityX
201-1 Economic Value Distributed (Operating Cost) 2016 190,795.76 191,682.98 Million peso 187 Updated figures from AC Health, BPI, exclusion of LiveIT, and inclusion of HCX and AffinityX
201-1 Economic Value Distributed (Payment to the Employees) 2015 37,871.02 37,738.00 Million peso 188 Exclusion of LiveIT and inclusion of HCX and AffinityX
201-1 Economic Value Distributed (Payment to Employees) 2016 39,806.80 39,870.51 Million peso 188 Exclusion of LiveIT and inclusion of HCX and AffinityX
201-1 Economic Value Distributed (Payment to Providers of Capital) 2015 49,318.13 49,695.86 Million peso 188 Exclusion of LiveIT and inclusion of AffinityX
201-1 Economic Value Distributed (Payment to Providers of Capital) 2016 54,671.22 55,138.44 Million peso 188 Exclusion of LiveIT and inclusion of AffinityX
201-1 Economic Value Distributed (Payment to Government) 2015 33,863.74 33,881.21 Million peso 188 Exclusion of LiveIT and inclusion of HCX and AffinityX
201-1 Economic Value Distributed (Payment to Government) 2016 34,279.30 34,302.27 Million peso 188 Exclusion of LiveIT and inclusion of HCX and AffinityX
201-1 Economic Value Distributed (Payment to Communities) 2015 287.46 287.86 Million peso 188 Exclusion of LiveIT and inclusion of AffinityX
201-1 Economic Value Distributed (Payment to Communities) 2016 221.22 221.46 Million peso 188 Inclusion of HCX and AffinityX
302-1 Diesel 2015 20,175,881.84 20,066,478.56 Liters 182 Updated figures from AC Automotive
302-1 Diesel 2016 19,275,044.83 19,321,868.45 Liters 182 Updated figures from AC Infra and AC Automotive
302-1 Gasoline 2015 3,112,322.56 3,234,395.22 Liters 182 Updated figures from AC Automotive and inclusion of Ayala Land unleaded gasoline
302-1 Gasoline 2016 3,971,726.70 4,218,825.01 Liters 182 Updated figures from AC Automotive and AC Infra and inclusion of Ayala Land unleaded gasoline
302-1 Electricity Consumption 2015 1,274,759,927.62 1,306,681,320.67 Kilowatt-hours 98, 182 Updated figures from Ayala Land
302-1 Electricity Consumption 2016 1,081,476,389.87 985,605,142.47 Kilowatt-hours 98, 182 Updated figures from Ayala Land, Manila Water, and Globe
303-1 Water Consumption 2015 10,679,071.77 12,553,618.62 Cubic meters 103, 181 Inclusion of water treated from Balayan Bay for process use of AC Energy (SLTEC) and updated figures from Ayala Land
303-1 Water Consumption 2016 12,279,403.33 11,358,780.21 Cubic meters 103, 181 Inclusion of water treated from Balayan Bay for process use of AC Energy (SLTEC) and updated figures from Ayala Land and Globe
305-1 GHG Emission Scope 1 2015 720,731.97 715,410.97 Tonnes of CO2e 99, 183 Updated figures from AC Energy (SLTEC )
305-1 GHG Emission Scope 1 2016 1,730,435.75 1,728,161.47 Tonnes of CO2e 99, 183 Updated figures from AC Energy (SLTEC )
305-2 GHG Emission Scope 2 2015 753,948.95 753,660.05 Tonnes of CO2e 99, 183 Updated figures from Ayala Land
305-2 GHG Emission Scope 2 2016 647,498.25 675,593.28 Tonnes of CO2e 99, 183 Updated figures from AC Infra and AC Health and inclusion of HCX and AffiinityX
305-3 GHG Emission Scope 3 2015 14,745.82 14,384.82 Tonnes of CO2e 183 Updated figures from Manila Water
306-2 Hazardous Waste (Batteries) 2015 62,318.00 62,508.00 Kilograms 180 Updated figures from AC Automotive
306-2 Hazardous Waste (Batteries) 2016 246,717.00 184,176.0 Kilograms 180 Updated figures from AC Automotive and Globe and inclusion of Manila Water
306-2 Hazardous Waste (E-waste) 2015 148,192.63 49,880.7 Kilograms 180 Updated figures from Globe and inclusion of Manila Water and AC Infra
306-2 Hazardous Waste (Total) 2015 230,550.34 1,207,789.62 Kilograms 107, 180 Updated figures from AC Automotive, Globe and inclusion of Manila Water and AC Infra
306-2 Hazardous Waste (Total) 2016 413,665.38 1,624,907.3 Kilograms 107, 180 Updated figures from AC Automotive and Globe, inclusion of Manila Water and AC Infra, and addition of grease waste, asbestos-containing prod- ucts, and other hazardous wastes
401-1 New Hires 2015 12,226.00 12,307.00 Head count 185 Inclusion of HCX
401-1 New Hires 2016 15,235.00 15,271.00 Head count 185 Inclusion of HCX
401-1 Turnover 2015 11,497.00 11,550.00 Head count 185 Inclusion of HCX
401-1 Turnover 2016 11,939.00 11,980.00 Head count 185 Inclusion of HCX
102-7 Total number of employees 2016 48,996.00 48,753.00 Head count 87, 184 Updated figures from AC Energy
102-8 Total number of employees - male 2016 20,695.00 20,456.00 Head count 87, 184 Updated figures from AC Energy
102-8 Total number of employees - female 2016 28,301.00 28,297.00 Head count 87, 184 Updated figures from AC Energy
102-8 Total number of employees - below 30 years old 2016 19,698.00 19,650.00 Head count 87, 184 Updated figures from AC Energy
102-8 Total number of employees -30 to 50 years old 2016 25,902.00 25,720.00 Head count 87, 184 Updated figures from AC Energy
102-8 Total number of employees - over 50 years old 2016 3,396.00 3,383.00 Head count 87, 184 Updated figures from AC Energy
102-8 Total number of employees - rank and file 2016 32,815.00 32,646.00 Head count 88, 185 Updated figures from AC Energy
102-8 Total number of employees - middle management 2016 13,676.00 13,615.00 Head count 88, 185 Updated figures from AC Energy
102-8 Total number of employees - senior management 2016 1,410.00 1,397.00 Head count 88, 185 Updated figures from AC Energy
404-1 Average training hours 2016 18.22 17.43 Hours 86, 187 Updated figures from AC Energy
404-1 Average training hours - rank and file 2016 14.97 14.73 Hours 86, 186 Updated figures from AC Energy
404-1 Average training hours - middle management 2016 25.81 25.62 Hours 86, 186 Updated figures from AC Energy
404-1 Average training hours - senior management 2016 15.83 14.43 Hours 86, 186 Updated figures from AC Energy
404-1 Average training hours 2015 16.61 16.47 Hours 86, 187 Restatement due to changes in total training hours
404-1 Average training hours - rank and file 2015 14.31 14.09 Hours 86, 186 Restatement due to changes in total training hours
404-1 Average training hours - middle management 2015 25.97 25.72 Hours 86, 186 Restatement due to changes in total training hours
404-1 Average training hours - senior management 2015 13.02 11.60 Hours 86, 186 Restatement due to changes in total training hours
Billed Volume 2016 553.42 550.23 Million cubic meter 101, 181 Updated figures from Manila Water (Laguna Water)
Net Electricity Generated 2016 6,179,604,813.00 5,992,622,789.00 Kilowatt-hours 97, 183 Updated figures from AC Energy (GMCP and SLTEC)
CO2e Avoided 2015 125,670.14 126,025.28 Tonnes of CO2e 183 Updated figures from AC Energy (Northwind)
CO2e Avoided 2016 164,067.62 160,475.99 Tonnes of CO2e 183 Updated figures from AC Energy (Northwind and Montesol)
178 2017 Ayala Corporation Integrated Report (102-48, 102-49)
GRI Disclosure Item Year Figure in 2016
201-1 Economic Value Generated 2015 378,908.65 362,123.09 Million peso 75, 187 Updated figures from IMI and BPI, exclusion of LiveIT, and inclusion of HCX and AffinityX
201-1 Economic Value Generated 2016 421,406.15 402,338.02 Million peso 76, 187 Updated figures from IMI , AC Health, BPI, exclusion of LiveIT, and inclusion of HCX and AffinityX
201-1 Economic Value Distributed (Operating Cost) 2015 172,499.62 171,274.96 Million peso 187 Updated figures from BPI, exclusion of LiveIT, and inclusion of HCX and AffinityX
201-1 Economic Value Distributed (Operating Cost) 2016 190,795.76 191,682.98 Million peso 187 Updated figures from AC Health, BPI, exclusion of LiveIT, and inclusion of HCX and AffinityX
201-1 Economic Value Distributed (Payment to the Employees) 2015 37,871.02 37,738.00 Million peso 188 Exclusion of LiveIT and inclusion of HCX and AffinityX
201-1 Economic Value Distributed (Payment to Employees) 2016 39,806.80 39,870.51 Million peso 188 Exclusion of LiveIT and inclusion of HCX and AffinityX
201-1 Economic Value Distributed (Payment to Providers of Capital) 2015 49,318.13 49,695.86 Million peso 188 Exclusion of LiveIT and inclusion of AffinityX
201-1 Economic Value Distributed (Payment to Providers of Capital) 2016 54,671.22 55,138.44 Million peso 188 Exclusion of LiveIT and inclusion of AffinityX
201-1 Economic Value Distributed (Payment to Government) 2015 33,863.74 33,881.21 Million peso 188 Exclusion of LiveIT and inclusion of HCX and AffinityX
201-1 Economic Value Distributed (Payment to Government) 2016 34,279.30 34,302.27 Million peso 188 Exclusion of LiveIT and inclusion of HCX and AffinityX
201-1 Economic Value Distributed (Payment to Communities) 2015 287.46 287.86 Million peso 188 Exclusion of LiveIT and inclusion of AffinityX
201-1 Economic Value Distributed (Payment to Communities) 2016 221.22 221.46 Million peso 188 Inclusion of HCX and AffinityX
302-1 Diesel 2015 20,175,881.84 20,066,478.56 Liters 182 Updated figures from AC Automotive
302-1 Diesel 2016 19,275,044.83 19,321,868.45 Liters 182 Updated figures from AC Infra and AC Automotive
302-1 Gasoline 2015 3,112,322.56 3,234,395.22 Liters 182 Updated figures from AC Automotive and inclusion of Ayala Land unleaded gasoline
302-1 Gasoline 2016 3,971,726.70 4,218,825.01 Liters 182 Updated figures from AC Automotive and AC Infra and inclusion of Ayala Land unleaded gasoline
302-1 Electricity Consumption 2015 1,274,759,927.62 1,306,681,320.67 Kilowatt-hours 98, 182 Updated figures from Ayala Land
302-1 Electricity Consumption 2016 1,081,476,389.87 985,605,142.47 Kilowatt-hours 98, 182 Updated figures from Ayala Land, Manila Water, and Globe
303-1 Water Consumption 2015 10,679,071.77 12,553,618.62 Cubic meters 103, 181 Inclusion of water treated from Balayan Bay for process use of AC Energy (SLTEC) and updated figures from Ayala Land
303-1 Water Consumption 2016 12,279,403.33 11,358,780.21 Cubic meters 103, 181 Inclusion of water treated from Balayan Bay for process use of AC Energy (SLTEC) and updated figures from Ayala Land and Globe
305-1 GHG Emission Scope 1 2015 720,731.97 715,410.97 Tonnes of CO2e 99, 183 Updated figures from AC Energy (SLTEC )
305-1 GHG Emission Scope 1 2016 1,730,435.75 1,728,161.47 Tonnes of CO2e 99, 183 Updated figures from AC Energy (SLTEC )
305-2 GHG Emission Scope 2 2015 753,948.95 753,660.05 Tonnes of CO2e 99, 183 Updated figures from Ayala Land
305-2 GHG Emission Scope 2 2016 647,498.25 675,593.28 Tonnes of CO2e 99, 183 Updated figures from AC Infra and AC Health and inclusion of HCX and AffiinityX
305-3 GHG Emission Scope 3 2015 14,745.82 14,384.82 Tonnes of CO2e 183 Updated figures from Manila Water
306-2 Hazardous Waste (Batteries) 2015 62,318.00 62,508.00 Kilograms 180 Updated figures from AC Automotive
306-2 Hazardous Waste (Batteries) 2016 246,717.00 184,176.0 Kilograms 180 Updated figures from AC Automotive and Globe and inclusion of Manila Water
306-2 Hazardous Waste (E-waste) 2015 148,192.63 49,880.7 Kilograms 180 Updated figures from Globe and inclusion of Manila Water and AC Infra
306-2 Hazardous Waste (Total) 2015 230,550.34 1,207,789.62 Kilograms 107, 180 Updated figures from AC Automotive, Globe and inclusion of Manila Water and AC Infra
306-2 Hazardous Waste (Total) 2016 413,665.38 1,624,907.3 Kilograms 107, 180 Updated figures from AC Automotive and Globe, inclusion of Manila Water and AC Infra, and addition of grease waste, asbestos-containing prod- ucts, and other hazardous wastes
401-1 New Hires 2015 12,226.00 12,307.00 Head count 185 Inclusion of HCX
401-1 New Hires 2016 15,235.00 15,271.00 Head count 185 Inclusion of HCX
401-1 Turnover 2015 11,497.00 11,550.00 Head count 185 Inclusion of HCX
401-1 Turnover 2016 11,939.00 11,980.00 Head count 185 Inclusion of HCX
102-7 Total number of employees 2016 48,996.00 48,753.00 Head count 87, 184 Updated figures from AC Energy
102-8 Total number of employees - male 2016 20,695.00 20,456.00 Head count 87, 184 Updated figures from AC Energy
102-8 Total number of employees - female 2016 28,301.00 28,297.00 Head count 87, 184 Updated figures from AC Energy
102-8 Total number of employees - below 30 years old 2016 19,698.00 19,650.00 Head count 87, 184 Updated figures from AC Energy
102-8 Total number of employees -30 to 50 years old 2016 25,902.00 25,720.00 Head count 87, 184 Updated figures from AC Energy
102-8 Total number of employees - over 50 years old 2016 3,396.00 3,383.00 Head count 87, 184 Updated figures from AC Energy
102-8 Total number of employees - rank and file 2016 32,815.00 32,646.00 Head count 88, 185 Updated figures from AC Energy
102-8 Total number of employees - middle management 2016 13,676.00 13,615.00 Head count 88, 185 Updated figures from AC Energy
102-8 Total number of employees - senior management 2016 1,410.00 1,397.00 Head count 88, 185 Updated figures from AC Energy
404-1 Average training hours 2016 18.22 17.43 Hours 86, 187 Updated figures from AC Energy
404-1 Average training hours - rank and file 2016 14.97 14.73 Hours 86, 186 Updated figures from AC Energy
404-1 Average training hours - middle management 2016 25.81 25.62 Hours 86, 186 Updated figures from AC Energy
404-1 Average training hours - senior management 2016 15.83 14.43 Hours 86, 186 Updated figures from AC Energy
404-1 Average training hours 2015 16.61 16.47 Hours 86, 187 Restatement due to changes in total training hours
404-1 Average training hours - rank and file 2015 14.31 14.09 Hours 86, 186 Restatement due to changes in total training hours
404-1 Average training hours - middle management 2015 25.97 25.72 Hours 86, 186 Restatement due to changes in total training hours
404-1 Average training hours - senior management 2015 13.02 11.60 Hours 86, 186 Restatement due to changes in total training hours
Billed Volume 2016 553.42 550.23 Million cubic meter 101, 181 Updated figures from Manila Water (Laguna Water)
Net Electricity Generated 2016 6,179,604,813.00 5,992,622,789.00 Kilowatt-hours 97, 183 Updated figures from AC Energy (GMCP and SLTEC)
CO2e Avoided 2015 125,670.14 126,025.28 Tonnes of CO2e 183 Updated figures from AC Energy (Northwind)
CO2e Avoided 2016 164,067.62 160,475.99 Tonnes of CO2e 183 Updated figures from AC Energy (Northwind and Montesol)
INTO THE FUTURE 179 PERFORMANCE INDICES
MATERIALS AND WASTE
MATERIALS USED AND WEIGHT HAZARDOUS WASTE GENERATED BY BY TYPE IN TONNES (301-1) 2015 2016 2017 TYPE IN KG (306-4) 2015 2016 2017 Rebar/steel 188,160.0 253,928.0 165,625.0 Batteries 62,508.0 184,176.0 160,400.6 Consumed cement 230,262.0 295,710.0 355,876.0 E-waste 139,684.4 49,880.7 246,454.3 Intensity Rebars (Tonnes per 0.91 2.04 1.16 Organic solvent 28,548.0 18,755.8 19,178.0 million pesos revenue) Used oil 206,337.0 345,144.4 520,961.4 Intensity Consumed cement 2.15 2.37 2.50 Grease-waste 8,848.5 5,115.0 12,263.0 (Tonnes per million pesos revenue) Asbestos-containing products - - 21,800.0 Other hazardous wastes 126,197.8 604,717.8 807,613.2 NON-HAZARDOUS WASTE Total 572,123.6 1,207,789.6 1,788,670.5 GENERATED IN TONNES (306-2) 2015 2016 2017 Recyclables 2,428.5 6,638.6 4,915.0 HAZARDOUS WASTE GENERATED BY Residual 10,361.9 16,560.7 17,022.5 COMPANY IN KG (306-4) 2015 2016 2017 Compostable and Food Waste 2,604.9 16,353.5 14,229.6 Globe 193,086.0 198,786.6 361,313.9 Total 15,395.3 39,552.8 36,167.1 IMI (Philippines) 171,831.3 207,267.4 588,628.1 IMI (Global Sites) - - 144,920.0 RECYCLABLES IN TONNES 2015 2016 2017 AC Automotive 207,206.3 319,610.6 430,153.0 Ayala Land 1,463.7 5,542.3 4,899.2 AC Infra (LRMC) - 4,285.0 1,379.9 Globe 24.2 24.4 15.8 Ayala Land - - 97,448.1 IMI (Philippines) 940.6 1,071.9 - Manila Water - 477,840.0 164,827.5 Total 2,428.5 6,638.6 4,915.0 Total 572,123.6 1,207,789.6 1,778,670.5 Recyclable construction waste 3,439.6 165.9 644.3 from Ayala Land in ‘000 cubic meters BATTERIES IN KG 2015 2016 2017 Globe 58,926.0 167,360.0 116,298.0
RESIDUALS IN TONNES 2015 2016 2017 IMI (Philippines) 994.0 858.0 1,720.0 Ayala Land 10,167.2 16,359.9 16,867.0 AC Automotive 2,588.0 12,778.0 14,922.0 Globe 172.0 178.9 155.5 Ayala Land - - 19,927.1 IMI (Philippines) 22.7 21.9 - Manila Water - 3,180.0 7,533.5 Total 10,361.9 16,560.7 17,022.5 Total 62,508.0 184,176.0 160,400.6 Residual construction waste from 9,248.1 384.4 194.2 Ayala Land in ‘000 cubic meters ELECTRONIC WASTE IN KG 2015 2016 2017 Globe 124,572.2 22,812.9 224,290.7 COMPOSTABLE AND FOOD IN IMI (Philippines) 15,112.2 4,731.8 16,470.3 TONNES 2015 2016 2017 AC Infra (LRMC) - 746.0 153.5 Ayala Land 2,604.9 16,353.5 14,229.6 Ayala Land - - 4,399.8 Manila Water - 21,590.0 1,140.0 Total 139,684.4 49,880.7 246,454.3
180 2017 Ayala Corporation Integrated Report WATER
USED OIL IN KG 2015 2016 2017 WATER CONSUMPTION FROM WATER UTILITIES IN CUBIC 2015 2016 2017 Globe 739.3 3,498.7 8,462.2 METERS (303-1) IMI (Philippines) 979.4 5,234.0 11,417.0 Ayala Land 11,089,483.4 9,834,866.1 12,868,284.2 Ayala Auto 204,618.3 306,832.6 415,231.0 IMI (Philippines) 711,495.8 823,334.1 900,845.0 AC Infra (LRMC) - 3,539.0 1,226.4 BPI 423,013.1 414,902.2 387,087.1 Ayala Land - - 20,494.8 Globe 216,309.4 125,340.8 104,129.9 Manila Water - 26,040.0 64,130.0 AC Energy (SLTEC) 113,317.0 160,337.0 161,499.0 Total 206,337.0 345,144.4 520,961.4 AC Education - - 43,933.0 AC Automotive - - 38,818.0 USED OIL IN LITERS 2015 2016 2017 AC Health - - 21,179.1 Globe 844.0 3,994.0 9,660.0 Total 12,553,618.6 11,358,780.2 14,525,775.4 IMI (Philippines) 1,118.0 5,974.9 13,033.1 Water Intensity (cubic meters/ 36.60 29.58 28.12 Ayala Auto 233,582.5 350,265.5 474,008.0 million pesos revenue) AC Infra (LRMC) - 4,040.0 1,400.0 Water Productivity (million pesos 0.03 0.03 0.04 revenue/cubic meters) Ayala Land - - 23,395.9 Manila Water - 29,726.0 73,207.8 WATER ABSTRACTION IN MILLION Total 235,544.5 394,000.4 594,704.8 CUBIC METERS (303-1) 2015 2016 2017 Manila Water - from ground water 48.0 76.5 87.0 ORGANIC SOLVENT / SPENT 2015 2016 2017 Manila Water - from surface water 536.2 576.7 595.2 CHEMICALS IN KG Total 584.2 653.2 682.3 IMI (Philippines) 28,548.0 18,755.8 19,018.0 AC Energy (SLTEC) - Drawn from 144,717.0 235,656.0 203,501.0 Manila Water - - 160.0 Balayan Bay and treated to be Total 28,548.0 18,755.8 19,178.0 converted to Demineralized Water for process use in cubic meters
GREASE WASTE IN KG 2015 2016 2017 WATER SUPPLIED (BILLED Globe 8,848.5 5,115.0 12,263.0 VOLUME) IN MILLION CUBIC 2015 2016 2017 METERS Manila Concession (East Zone) 461.4 478.9 488.4 BUSTED FLUORESCENT LAMPS IN KG 2015 2016 2017 Boracay Water 4.3 4.9 5.5 Ayala Land - - 52,626.5 Clark Water 12.8 13.4 14.5 IMI - - 300.0 Laguna Water 36.2 39.4 44.1 Manila Water - 2,670.0 16,564.0 Cebu Water 8.1 11.6 13.0 Total - 2,670.0 69,490.4 Estate Water - 2.1 4.5 Total (Philippine Operations) 522.8 550.2 570.0 ASBESTOS-CONTAINING PRODUCTS 2015 2016 2017 Manila Water - - 21,800.0 USED WATER TREATED IN MILLION CUBIC METERS (306-1) 2015 2016 2017 OTHER WASTES 2015 2016 2017 Manila Concession (East Zone) 32.2 37.2 40.7 Manila Water - 424,360.0 53,500.0 Boracay Water 2.1 2.1 2.5 IMI (Philippines) 126,197.8 177,687.8 539,702.8 Clark Water 6.2 6.3 6.9 IMI (Global) - - 144,920.0 Laguna Water 1.9 1.7 1.5 Total 126,197.8 602,047.8 738,122.8 Estate Water - 4.3 4.8 Total (Philippine Operations) 42.4 51.5 56.4
WASTEWATER TREATED IN CUBIC METERS (306-1) 2015 2016 2017 AC Energy (SLTEC) - Waste Water 33,258.0 39,645.0 48,059.0 Treated for re-use as service water (303-3) AC Automotive - through central- - - 38,818.0 ized water treatment in estates where offices are located AC Energy (SLTEC) - Percent water 23.0% 16.8% 23.6% recycled of total withdrawal (303-3)
INTO THE FUTURE 181 ENERGY
ENERGY CONSUMED ENERGY CONSUMPTION WITHIN THE FROM GASOLINE IN GIGA- ORGANIZATION IN JOULES 2015 2016 2017 GIGAJOULES (302-1, 302-3) 2015 2016 2017 Ayala Land 4,681.3 6,479.5 7,396.0 Diesel 768,415.8 739,902.1 678,493.5 Globe 98,168.2 125,338.0 126,747.6 Gasoline 112,101.5 146,221.0 147,840.3 Manila Water 2,585.7 6,612.8 4,526.9 Sub-bituminous coal 6,774,994.0 17,339,968.0 22,437,639.0 IMI (Philippines) 493.3 591.0 375.8 Purchased electricity 4,704,052.8 3,548,178.5 4,623,469.7 AC Infra 6.1 80.1 101.7 Total direct energy 12,359,564.1 21,774,269.6 27,887,442.4 AC Energy 68.3 89.4 300.1 consumption AC Automotive 6,098.5 7,030.2 8,392.1 Total Energy Intensity (GJ/ 32.60 51.13 53.98 million pesos revenue) Total 112,101.5 146,221.0 147,840.3 Total Energy Productivity 0.03 0.02 0.02 (million pesos revenue/GJ) ELECTRICITY/INDIRECT 2015 2016 2017 ENERGY IN KILOWATT-HOURS DIESEL CONSUMPTION IN Ayala Land (Inside) - 339,881,038.6 374,007,590.6 LITERS 2015 2016 2017 Ayala Land (Inside + Outside) 663,218,940.7 - - Ayala Land 6,072,601.5 6,076,208.3 5,733,883.4 BPI 52,873,390.8 52,566,069.4 48,832,505.6 BPI 52,268.2 44,289.9 - Globe 384,584,462.6 332,980,770.6 482,360,321.0 Globe 10,020,194.1 10,185,751.8 9,922,205.6 Manila Water 135,331,000.0 156,800,000.0 173,500,000.0 Manila Water 1,075,248.0 1,181,615.0 1,246,410.0 IMI (Philippines) 50,398,915.0 50,355,209.3 73,141,952.0 IMI (Philippines) 841,676.5 686,977.5 81,923.0 IMI (Global sites) - - 71,207,957.0 AC Infra 10,091.0 70,989.9 74,891.7 AC Health 610,400.0 1,193,468.9 1,364,502.4 AC Energy 1,983,850.1 1,047,996.1 596,865.0 AC Automotive 6,573,212.6 7,062,238.9 7,418,881.0 AC Automotive AC Automotive 10,549.2 28,040.0 62,059.9 AC Infra 10,208,182.0 42,660,890.0 49,460,939.0 Total 20,066,478.6 19,321,868.5 17,718,238.6 AC Education 1,959,750.9 1,464,463.7 2,725,524.0 HCX - - 103,000.0 ENERGY CONSUMPTION FROM DIESEL IN GIGA- AffinityX - - 173,968.0 JOULES 2015 2016 2017 LiveIT 923,066.1 640,993.0 - Ayala Land 232,541.2 232,679.3 219,570.5 Total electricity / indirect 1,306,681,320.7 985,605,142.5 1,284,297,140.7 BPI 2,001.5 1,696.0 - energy consumption Globe 383,708.4 390,048.2 379,956.0 Indirect Energy Intensity in 0.0034 0.0023 0.0025 GWh per million peso revenue Manila Water 41,175.0 45,248.2 47,729.4 IMI (Philippines) 32,230.7 26,306.8 3,137.1 ELECTRICITY/INDIRECT AC Infra 386.4 2,718.5 2,867.9 ENERGY IN GIGAJOULES 2015 2016 2017 AC Energy 75,968.6 40,131.4 22,856.1 Ayala Land (Inside) - 1,223,571.7 1,346,427.3 AC Automotive 404.0 1,073.7 2,376.5 Ayala Land (Inside + Outside) 2,387,588.2 - - Total 768,415.8 739,902.1 678,493.5 BPI 190,344.2 189,237.8 175,797.0 Globe 1,384,504.1 1,198,730.8 1,736,497.2 GASOLINE CONSUMPTION Manila Water 487,191.6 564,480.0 624,600.0 IN LITERS 2015 2016 2017 IMI (Philippines) 181,436.1 181,278.8 263,311.0 Ayala Land 135,068.0 186,948.0 213,392.9 IMI (Global sites) - - 256,348.6 Globe 2,832,388.3 3,616,301.0 3,656,970.6 AC Health 2,197.4 4,296.5 4,912.2 Manila Water 74,603.0 190,795.7 130,613.0 AC Automotive 23,663.6 25,424.1 26,708.0 IMI (Philippines) 14,232.8 17,050.9 10,842.0 AC Infra 36,749.5 153,579.2 178,059.4 AC Infra 175.5 2,310.9 2,933.2 AC Education 7,055.1 5,272.1 9,811.9 AC Energy 1,970.0 2,579.6 8,660.0 HCX - - 370.8 AC Automotive 175,957.7 202,838.9 242,132.6 AffinityX - - 626.3 Total 3,234,395.2 4,218,825.0 4,265,544.3 LiveIT 3,323.0 2,307.6 - Total electricity / indirect 4,704,052.8 3,548,178.5 4,623,469.7 energy consumption in gigajoules
182 2017 Ayala Corporation Integrated Report EMISSIONS
ELECTRICITY CONSUMED GHG EMISSIONS IN TONNES OUTSIDE THE ORGANIZA- CO2E SCOPE 1 DIRECT TION IN KILOWATT-HOURS 2015 2016 2017 ENERGY EMISSIONS (305-1) 2015 2016 2017 (302-2) Ayala Land 33,574.0 43,360.1 16,796.4 Ayala Land 8,918,624.6 388,869,075.2 410,507,701.4 BPI 138.5 117.4 - Globe 36,779.9 39,081.2 38,531.8 ENERGY GENERATED FROM Manila Water 3,056.0 3,952.1 3,768.9 THERMAL SOURCES IN GIGAWATT-HOURS (302-1) IMI (Philippines) 154.5 256.2 246.9 2015 2016 2017 AC Infrastructure 27.5 48.1 147.0 GMCP 3,391.1 4,081.3 4,287.5 AC Automotive 763.6 980.5 1,131.3 SLTEC 689.5 1,569.2 1,854.4 AC Energy 640,917.0 1,640,366.0 2,122,608.0 Total 4,080.6 5,650.5 6,141.9 AC Energy (renewables) (126,025.3) (160,476.0) (196,224.2) Total 715,411.0 1,728,161.5 2,183,230.2 ENERGY GENERATED FROM RENEWABLE SOURCES IN Scope 1 Intensity (305-4) 1.89 4.05 4.28 GIGAWATT-HOURS (302-1) 2015 2016 2017
NLR (Wind) 181.2 212.9 259.4 GHG EMISSIONS IN TONNES Northwind (Wind) 95.7 107.6 126.6 CO2E SCOPE 2 INDIRECT EN- ERGY EMISSIONS (305-2) 2015 2016 2017 Montesol (Solar) - 21.6 24.3 Ayala Land (Inside) - 197,214.3 210,931.0 Total 276.9 342.1 410.3 Ayala Land (Inside + Outside) 357,885.0 - - BPI 36,459.0 36,247.1 28,700.6 CO2 AVOIDED IN TONNES CO2E 2015 2016 2017 Globe 216,345.9 251,047.8 271,458.8 NLR (Wind) 100,315.1 117,853.1 143,554.0 Manila Water 100,633.0 112,851.0 112,423.8 Northwind (Wind) 25,710.2 30,669.1 37,990.4 IMI (Philippines) 30,400.6 30,374.3 44,119.2 Montesol (Solar) - 11,953.8 14,679.7 IMI (Global sites) - - 63,454.2 Total 126,025.3 160,476.0 196,224.2 AC Health 387.5 719.9 823.1 AC Automotive 3,644.1 3,886.5 4,444.5 AC Infrastructure 6,157.6 42,016.8 29,385.1 ENERGY CONSUMED OUT- SIDE THE ORGANIZATION IN 2015 2016 2017 AC Education 1,182.1 883.4 1,644.0 GIGAJOULES (302-2) HCX 65.0 109.4 62.1 Ayala Land 32,107.0 1,399,928.7 1,477,827.7 AffinityX 172.3 118.9 104.9 BPI 32,150.0 29,476.1 27,676.7 LiveIT 565.2 352.3 - AC Automotive 3,775.7 5,334.3 5,188.4 Total 753,660.1 675,593.3 767,551.5 AC Energy (SLTEC) 922.1 3,457.8 5,590.9 Scope 2 Intensity (305-4) 1.98 1.60 1.49 Total 68,954.8 1,438,197.0 1,516,283.7 GHG EMISSIONS IN TONNES CO2E SCOPE 3 OTHER DIESEL CONSUMED OUTSIDE INDIRECT EMISSIONS (305-3) 2015 2016 2017 THE ORGANIZATION IN LITERS 2015 2016 2017 Ayala Land (From sold 5,379.7 248,406.5 266,780.1 residential properties and AC Automotive 98,598.7 139,301.0 135,489.8 common areas in malls AC Energy (SLTEC) 24,079.0 90,298.5 146,000.0 and offices) BPI 839,566.9 769,741.9 722,752.0 BPI 2,250.2 2,063.1 1,958.7 Total 962,244.6 999,341.4 1,004,241.7 Globe 2,247.4 1,893.7 1,610.4 Manila Water 1,126.0 1,765.0 1,652.8 IMI (Philippines) 2,188.4 2,097.3 - AC Energy 1,193.1 2,047.8 2,672.2 AC Automotive 267.2 377.5 367.2 Total 14,652.0 258,650.8 275,041.4
INTO THE FUTURE 183 HR PERFORMANCE
TOTAL WORKFORCE GENDER DISTRIBUTION (102-8 405-1) BREAKDOWN OF 2015 2016 2017 PERMANENT AND FULL-TIME EMPLOYEES MALE FEMALE MALE FEMALE MALE FEMALE (102-7,102-8) 2015 2016 2017 Ayala Corp 67 66 70 78 70 79 Ayala Corp 133 148 149 Ayala Land 2,155 2,065 2,128 2,241 2,461 2,579 Ayala Land 4,220 4,369 5,040 BPI 4,392 10,255 4,514 10,687 5,214 11,822 BPI 14,647 15,201 17,036 Globe 3,620 3,244 3,806 3,374 3,860 3,346 Globe 6,864 7,180 7,206 Manila Water 1,013 542 1,120 633 1,250 772 Manila Water 1,555 1,753 2,022 IMI 5,320 9,008 5,581 8,565 6,261 9,011 IMI 14,328 14,146 16,748 AC Automotive 743 810 1,035 715 1,042 717 AC Automotive 1,553 1,750 1,759 Live It 1,689 1,442 292 282 - - Live It 3,131 574 - AffinityX - - - - 292 272 AffinityX - - 564 HCX - - 49 65 50 63 HCX - 114 113 AC Energy 128 67 128 79 438 168 AC Energy 195 207 606 AC Infra 889 392 1,001 491 1,064 489 AC Infra 1,281 1,492 1,553 AC Education 292 458 432 663 481 816 AC Education 750 1,095 1,297 AC Healthcare 186 223 270 367 606 487 AC Healthcare 409 637 1,093 AFI 31 58 30 57 27 51 AFI 89 87 78 Group-wide Headcount by 20,525 28,630 20,456 28,297 23,116 30,672 Group-wide Headcount 49,155 48,753 55,264 Gender
AGE DISTRIBUTION (405-1) 2015 2016 2017 BELOW 30 30-50 YEARS OVER 50 BELOW 30 30-50 OVER 50 BELOW 30 30-50 YEARS OVER 50 YEARS OLD OLD YEARS OLD YEARS OLD YEARS OLD YEARS OLD YEARS OLD OLD YEARS OLD Ayala Corp 13 62 58 19 70 59 16 76 57 Ayala Land 1,634 2,245 341 1,765 2,297 307 2,144 2,552 344 BPI 7,005 6,477 1,165 7,270 6,892 1,039 8,484 7,494 1,058 Globe 1,543 5,116 205 1,641 5,291 248 1,609 5,304 293 Manila Water 399 619 537 491 711 551 600 907 515 IMI 6,085 7,591 652 5,871 7,575 700 6,871 7,594 807 AC Automotive 681 807 65 842 828 80 863 800 96 Live It 1,789 1,218 124 379 191 4 - - - AffinityX ------379 181 4 HCX - - - 62 50 2 52 59 2 AC Energy 93 88 14 91 107 9 197 359 50 AC Infra 192 878 211 288 981 223 383 959 211 AC Education 242 369 139 517 437 141 700 465 132 AC Healthcare 226 177 6 385 242 10 636 441 16 AFI 29 54 6 29 48 10 23 43 12 Group-wide Headcount by 19,931 25,701 3,523 19,650 25,720 3,383 22,957 27,234 3,597 Age Group
184 2017 Ayala Corporation Integrated Report DISTRIBUTION BY POSITION (405-1) 2015 2016 2017 RANK MIDDLE SENIOR RANK MIDDLE SENIOR RANK MIDDLE SENIOR AND FILE MANAGEMENT MANAGEMENT AND FILE MANAGEMENT MANAGEMENT AND FILE MANAGEMENT MANAGEMENT Ayala Corp 51 57 25 56 66 26 54 71 24 Ayala Land 2,858 1,185 177 3,167 1,138 64 3,700 1,276 64 BPI 8,903 5,555 189 10,095 4,913 193 10,427 6,411 198 Globe 2,572 3,828 464 2,617 4,086 477 2,527 4,203 476 Manila Water 252 1,202 101 255 1,375 123 444 1,444 134 IMI 12,476 1,447 405 12,171 1,577 398 13,137 1,747 388 AC Automotive 1,418 96 39 1,591 112 47 1,588 128 43 Live It 922 151 17 506 62 6 - - - AffinityX ------491 67 6 HCX - - - 70 42 2 69 42 2 AC Energy 65 107 23 143 52 12 278 278 50 AC Infra 1,200 51 30 1,384 71 37 1,091 397 65 AC Education ------1,127 149 21 AC Healthcare 344 58 7 543 85 9 70 18 3 AFI 53 32 4 48 36 3 55 20 3 Group-wide 31,114 13,769 1,481 32,646 13,615 1,397 35,058 16,251 1,477 Headcount by Position
TOTAL NEW EMPLOYEE HIRES (401-1) 2015 2016 2017 TOTAL EMPLOYEE TURNOVER (401-1) 2015 2016 2017 Ayala Corp 16 28 10 Ayala Corp 12 13 8 Ayala Land 902 848 1,199 Ayala Land 553 566 611
BPI 1,751 3,630 3,652 BPI 1,646 2,064 1,943 Globe 1,286 1,009 753 Globe 599 666 155 Manila Water 178 133 414 Manila Water 75 123 186 IMI 6,177 7,512 849 IMI 7,526 7,355 535 AC Automotive 423 547 450 AC Automotive 443 397 309 Live It 431 228 - Live It 304 200 - AffinityX - - 35 AffinityX - - 35 HCX 81 36 28 HCX 53 41 31 AC Energy 61 103 146 AC Energy 46 112 58 AC Infra 511 213 188 AC Infra 16 101 69 AC Education 274 697 228 AC Education 83 156 160 AC Healthcare 197 271 23 AC Healthcare 166 173 35 AFI 19 16 16 AFI 28 13 13 Group-wide Total New Hires 12,307 15,271 7,991 Group-wide Total Turnover 11,550 11,980 4,148
PERCENTAGE OF EMPLOYEES COVERED BY COLLECTIVE BARGAINING AGREEMENTS (102-41) 2015 2016 2017 BPI 95% 84% 86% Manila Water - 10% 9% Globe 3% 3% 4% Ayala Land 5% 4% -
INTO THE FUTURE 185 TOTAL TRAINING HOURS (404-1) 2015 2016 2017 RANK MIDDLE SENIOR RANK MIDDLE SENIOR RANK MIDDLE SENIOR AND FILE MANAGEMENT MANAGEMENT AND FILE MANAGEMENT MANAGEMENT AND FILE MANAGEMENT MANAGEMENT Ayala Corp 738 912 408 1,084 884 2 1,985 2,217 96 Ayala Land 70,394 29,254 2,856 67,981 35,599 1,311 89,275 39,725 3,337 BPI 246,744 150,304 1,464 286,533 129,680 1,800 250,360 90,848 1,136 Globe 46,468 96,324 5,564 45,156 121,772 9,656 30,884 91,953 1,765 Manila Water 1,564 39,531 3,365 2,350 31,311 2,350 2,351 38,735 2,768 IMI 6,438 8,902 2,666 11,141 18,901 3,260 413,766 92,487 18,980 AC Automotive 32,152 899 394 38,898 1,573 1,152 27,664 1,271 314 Live It 33,000 1,580 240 25,055 1,647 28 - - - AffinityX ------23,039 1,177 300 HCX - - - 28 48 - 156 521 24 AC Energy 768 26,358 227 2,084 6,884 532 1,569 5,638 240 AC Infra 72 29 - 406 236 20 2,127 7,730 862 AC Education ------32,187 4,065 1,354 AC Healthcare ------2,844 1,416 72 AFI - - - 309 215 48 1,027 554 57 Group-wide Total 438,338 354,092 17,184 481,023 348,748 20,157 879,234 378,337 31,304
AVERAGE TRAINING HOURS BY RANK (404-1) 2015 2016 2017 RANK MIDDLE SENIOR RANK MIDDLE SENIOR RANK MIDDLE SENIOR AND FILE MANAGEMENT MANAGEMENT AND FILE MANAGEMENT MANAGEMENT AND FILE MANAGEMENT MANAGEMENT Ayala Corp 14.5 16.0 16.3 19.4 13.4 0.1 36.8 31.2 4.0 Ayala Land 24.6 24.7 16.1 21.5 31.3 20.5 24.1 31.1 52.1 BPI 27.7 27.1 7.7 28.4 26.4 9.3 24.0 14.2 5.7 Globe 18.1 25.2 12.0 17.3 29.8 20.2 12.2 21.9 3.7 Manila Water 6.2 32.9 33.3 9.2 22.8 19.1 5.3 26.8 20.7 IMI 0.5 6.2 6.6 0.9 12.0 8.2 31.5 52.9 48.9 AC Automotive 22.7 9.4 10.1 24.4 14.0 24.5 17.4 9.9 7.3 Live It 35.8 10.5 14.1 49.5 26.6 4.7 - - - AffinityX ------46.9 17.6 49.9 HCX - - - 0.4 1.1 - 2.3 12.4 12.0 AC Energy 11.8 246.3 9.9 14.6 132.4 44.3 5.6 20.3 4.8 AC Infra 0.1 0.6 - 0.3 3.3 0.5 1.9 19.5 13.3 AC Education ------28.6 27.3 64.5 AC Healthcare ------40.6 78.7 24.0 AFI - - - 6.4 6.0 15.8 18.7 27.7 19.0 Group-wide Average 14.1 25.7 11.6 14.7 25.6 14.4 25.1 23.3 21.2 Training Hours by Rank
186 2017 Ayala Corporation Integrated Report AVERAGE TRAINING HOURS (404-1) 2015 2016 2017 HEADCOUNT OF SUPPORT STAFF 2016 2017 Ayala Corp 15.5 13.3 28.8 Ayala Corp - 53 Ayala Land 24.3 24.0 26.3 Ayala Land 54,241 53,774 BPI 27.2 27.5 20.1 BPI 2,634 2,415 Globe 21.6 24.6 17.3 Globe 17,090 24,623 Manila Water 28.6 20.5 21.7 Manila Water 647 405 IMI 1.3 2.4 31.4 IMI 413 567 AC Automotive 21.5 23.8 16.6 AC Automotive - 698 Live It 11.1 46.6 - AffinityX 14 19 AffinityX - - 43.5 HCX 11 11 HCX - 0.7 6.2 AC Energy 308 820 AC Energy 140.3 45.9 12.3 AC Infra 91 162 AC Infra 0.1 0.4 6.9 AC Education 104 105 AC Education - - 29.0 AC Healthcare - 90 AC Healthcare - - 4.0 Ayala Foundation 64 68 Ayala Foundation - 6.6 21.0 Total 75,617 83,810 Group-wide Average Training Hours 16.5 17.4 23.3
PARENTAL LEAVE (401-3) 2017 ECONOMIC PERFORMANCE Employees entitled to maternal leave 4,350 ECONOMIC VALUE GENERATED AND DISTRIBUTED (201-1) Employees entitled to paternal leave 4,241 ECONOMIC VALUE GENERATED Employees entitled to solo parent leave 30 - REVENUE IN MILLION PESOS 2015 2016 2017 Employees that availed maternal leave 176 ALI 107,182.94 124,628.80 142,297.00 Employees that availed paternal leave 132 BPI 59,359.00 66,551.00 71,020.00 Employees that availed solo parent leave 40 Globe 120,545.37 126,436.00 137,550.40 Employees that returned to work after maternal leave 158 MWC 17,277.78 17,971.21 20,019.73 Employees that returned to work after paternal leave 131 IMI 36,963.97 39,993.39 55,028.26 Employees that returned to work after solo parent leave 40 AC Infra 2.26 0.74 6.83 Employees that returned to work after maternal leave and still 105 AC Energy 38.50 960.92 2,215.64 employed after 12 months AC Automotive 18,644.03 23,805.05 33,698.38 Employees that returned to work after paternal leave and still 84 AC Healthcare 1.27 40.36 16.30 employed after 12 months HCX 626.55 335.06 208.69 Employees that returned to work after solo parent leave and 28 still employed after 12 months AffinityX 1,472.29 1,594.53 1,746.67 Return to work rate after maternal leave 90% AC Education 9.13 20.97 34.96 Return to work rate after paternal leave 99% AC Ventures - - - Return to work rate after solo parent leave 100% Total 362,123.09 402,338.02 463,842.87 Retention rate after maternal leave 60%
Retention rate after paternal leave 64% PAYMENTS TO SUPPLIERS - Retention rate after solo parent leave 70% OPERATING COSTS IN MILLION PESOS 2015 2016 2017 ALI 58,105.46 68,157.06 81,552.24
OCCUPATIONAL HEALTH AND SAFETY ILLNESSES (403-2) 2017 BPI 10,248.98 11,229.20 13,380.13 Headaches 654 Globe 54,081.45 55,729.80 60,458.40 First Aid Injury / Illness (FAI) inc. Minor Wounds 254 MWC 3,470.00 4,052.35 4,565.76 Musculoskeletal Strain 160 IMI 27,197.48 29,628.75 41,979.81 Hypertension, incl. Hyperlipidemia 110 AC Infra 30.84 35.98 79.62 Acute Upper Respiratory Infection 94 AC Energy 60.48 255.69 1,134.34 Medical Treatment Injury / Illness (MTI) 79 AC Automotive 17,651.33 21,985.31 31,148.60 Colds / Sorethroat 46 AC Healthcare 9.60 89.00 82.45 Urinary Tract Infection 46 HCX 3.86 3.28 6.93 Diabetes Mellitus 42 AffinityX 409.46 484.55 562.21 Physical Injuries 38 AC Education 6.00 32.00 82.60 Lost Time Injury / Illness (LTI) 17 AC Ventures - - 4.60 Fatality 2 Total 171,274.96 191,682.98 235,037.69 Other Illnesses 132
INTO THE FUTURE 187 PAYMENTS TO EMPLOYEES - WAGES PAYMENTS TO COMMUNITIES IN AND BENEFITS IN MILLION PESOS 2015 2016 2017 MILLION PESOS 2015 2016 2017 ALI 4,943.55 5,458.79 4,969.21 ALI 126.02 84.83 42.67 BPI 12,295.73 13,266.30 13,652.65 BPI 103.34 109.20 87.21 Globe 9,764.17 10,109.60 12,236.30 Globe 5.94 - 5.00 MWC 2,118.45 1,924.02 2,084.55 MWC 51.67 26.67 31.84 IMI 6,763.17 6,971.61 9,319.86 IMI 0.50 0.50 0.65 AC Infra 21.62 26.45 24.81 AC Infra - 0.03 - AC Energy 24.84 51.71 115.00 AC Energy - - - AC Automotive 576.80 900.31 1,416.73 AC Automotive - - - AC Healthcare 1.14 22.60 34.03 AC Healthcare - - - HCX 359.47 211.96 123.15 HCX - - - AffinityX 838.69 885.09 1,003.76 AffinityX 0.40 0.03 0.04 AC Education 30.37 42.07 47.05 AC Education - 0.22 0.20 AC Ventures - - - AC Ventures - - - Total 37,738.00 39,870.51 45,027.10 Total 287.86 221.46 167.62
ECONOMIC VALUE GENERATED, DISTRIBUTED AND RETAINED (201-1) PAYMENTS TO PROVIDERS OF CAPITAL - DIVIDENDS AND GROUP-WIDE ECONOMIC INTEREST IN MILLION PESOS 2015 2016 2017 PERFORMANCE IN MILLION PESOS 2015 2016 2017 ALI 12,663.03 14,375.60 15,041.67 Economic Value Generated 362,123.09 402,338.02 463,842.87 BPI 18,329.97 20,552.11 22,226.30 Payments to Suppliers - Operating 171,274.96 191,682.98 235,037.69 Costs Globe 14,236.35 15,504.30 17,538.90 Payments to Employees - Wages and 37,738.00 39,870.51 45,027.10 MWC 3,497.49 3,514.33 2,444.69 Benefits IMI 470.73 595.08 768.65 Payments to Providers of Capital - 49,695.86 55,138.44 58,238.45 AC Infra - - - Dividends and Interests AC Energy - - 40.34 Payments to Government - Taxes 33,881.21 34,302.27 38,718.50 AC Automotive 88.85 112.47 144.81 Payments to Communities 287.86 221.46 167.62 AC Healthcare - - - Economic Value Distributed 292,877.89 321,215.66 377,189.37 HCX - - - Economic Value Retained 69,245.20 81,122.37 86,653.50 AffinityX 409.46 484.55 33.10 AC Education - - - AT THE PARENT COMPANY - AYALA CORPORATION IN MILLION PESOS 2015 2016 2017 AC Ventures - - - Economic Value Generated 193,759.79 217,610.27 259,656.58 Total 49,695.86 55,138.44 58,238.45 Operating Costs 111,893.58 132,761.25 168,029.26 Employee Wages and Benefits 20,320.08 17,161.38 21,274.78 PAYMENTS TO GOVERNMENT - Payment to Providers of Capital 18,126.41 19,108.19 20,025.44 TAXES IN MILLION PESOS 2015 2016 2017 Payment to Government 44,959.85 44,528.39 50,492.09 ALI 9,537.44 11,200.97 13,146.88 Payment to Communities 608.51 406.72 254.89 BPI 11,978.32 12,115.17 13,578.03 Economic Value Distributed 195,908.43 213,965.93 260,076.46 Globe 8,162.11 7,209.10 8,020.10 Economic Value Retained (2,148.64) 3,644.34 (419.88) MWC 2,852.76 2,981.09 2,878.52 IMI 451.72 515.85 682.25 AC Infra 17.47 14.06 18.34 AC Energy 232.03 69.89 167.86 AC Automotive 614.76 141.78 206.50 AC Healthcare 1.68 12.50 2.79 HCX 6.42 2.27 1.85 AffinityX 26.47 31.11 15.02 AC Education 0.02 8.46 0.37 AC Ventures - - 0.30 Total 33,881.21 34,302.27 38,718.50
188 2017 Ayala Corporation Integrated Report
INDEPENDENT ASSURANCE STATEMENT 2017 INTEGRATED REPORT OF AYALA CORPORATION
Introduction Ayala Corporation (“Ayala Corp.”) engaged DNV GL Business Assurance Philippines Branch (“DNV GL”), part of DNV GL Group to undertake independent assurance of sustainability/non-financial disclosures in Ayala Corp.’s 2017 Integrated Report (the “Report”) for the year ended 31st December 2017. This assurance engagement was planned and carried out using DNV GL’s assurance methodology VeriSustainTM1 (Version 5.0) which is based on our professional experience, international assurance best practice including the International Standard on Assurance Engagement 3000 (ISAE3000) Revised2 and the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines. Scope of Assurance The scope of assurance included a review of sustainability disclosures and performance data from Ayala Corp. and its business units in the Philippines. The boundary of the Report for identified material topics and topic-specific disclosures are set out in ‘About this report’ section, the respective chapters and Materiality section. We evaluated the Report for adherence to the reporting principles for defining the sustainability report content as set forth in the GRI Standards and the guiding principles in the International
Basis of our opinion To test the reliability of data and the robustness of the data aggregation process including related management approach for identified material topics, a multi-disciplinary team of sustainability and assurance specialists performed the work at Ayala Corp.’s headquarters (in Makati City) and its business units in the Philippines, from February to March 2018. As part of the verification, we planned and performed our work based on DNV GL’s Risk Based Approach to obtain the evidence that we considered necessary to provide a basis for our assurance opinion. Within the framework of our assessment, we performed the following procedures and other activities including;
1 The VeriSustain protocol is available on request from www.dnvgl.com. 2 Assurance Engagements other than Audits or Reviews of Historical Financial Information
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• conducted interview with data owners from Ayala Corp. and its business units including Ayala Land, Inc., Manila Water Company, Inc., Globe Telecom, Inc. and Integrated Micro-Electronics Inc., Bank of the Philippine Islands, AC Infrastructure Holdings Corporation, AC Automotive Holdings Corporation, AC Energy Holdings, Inc., AC Health, AC Education and Ayala Foundation to understand the key processes and controls for reporting business units’ performance data; • assessed the robustness of the underlying data and information flow and controls; • performed data analysis using a risk-based approach and materiality; and • challenged the sustainability-related disclosure, statements and claims; • performed limited testing on a sampling basis of the selected information at corporate Headquarters, at business units’ Headquarters and at facilities operated by business units to check that the selected environmental and social data had been properly measured, gathered, recorded, collated and reported.
We also performed the following activities to assess the adherence to reporting principles; • interviewed senior managers and representatives responsible for sustainability management and made enquiries to determine their understanding of stakeholder engagement and materiality; • reviewed the current sustainability issues that could affect Ayala Corp. and could be of interest of stakeholders.
Conclusion Based on the work undertaken, we provide a limited level of assurance over non-financial disclosure presented in Ayala Corp.’s 2017 Integrated Report i.e. nothing has come to our attention that causes us to believe that the reported data and information disclosed in the Report does not give a fair representation of Ayala Corp.’s related sustainability performance. Without affecting our assurance opinion, we also provide the following observations regarding the adherence to the reporting principles for defining the sustainability report content and for defining report quality as defined in the GRI Standards and the guiding principles in
Stakeholder Inclusiveness (GRI), Stakeholder relationships (
Sustainability Context (GRI) The Report presents Ayala Corp.’s non-financial performance in the wide context of sustainability. Ayala Corp. commits to creating shared value and improving the impact on society and the environment in its Sustainability philosophy and updated 360° Sustainability framework. The Report explains how Ayala Corp. and its business units have created shared value with its core businesses and how various initiatives are aligned with achieving United Nations Sustainable Development Goals.
Materiality (GRI,
Reliability and Completeness (GRI,
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The Report has fairly attempted to disclose material topics and relevant topic-specific disclosures. Ayala Corp. has selected, compiled and reported information in a relatively consistent manner. The presentation within the Report enables stakeholders to analyze changes in the sustainability performance over time. Data owners could demonstrate the origin and interpretation of the data in a reliable manner. The Report covers global sustainability disclosures of Ayala Group for the identified material topics.
Strategic focus and future orientation (
Connectivity of information (
Conciseness (
Consistency and Comparability (GRI and
Balance (GRI and
Accuracy (GRI) The data measurement techniques and basis for calculations have been duly described to us and can be replicated with same results. We have evaluated the accuracy of the selected data and information by sampling. Any errors or misstatements identified during the engagement were communicated for correction prior to the Report being published. Certain restatements are provided to changes in historical disclosure. Ayala Corp. has rolled out data collection portal which enables data collection process faster and easier and reduces risk of human error during collating, compiling and computing process, however some historical activity data provided by respective business units were found not accurate, which causes restatement of disclosures. Ayala Corp. together with its business units could establish robust internal check process to improve the quality and integrity of data. Any errors or misstatements identified during the assurance engagement were communicated for correction prior to the Report being published.
Timeliness (GRI) Ayala Corp. is committed to disclose its sustainability performance on annual basis and this is the second Integrated Report from Ayala Corp. reporting its sustainability performance in the annual integrated report.
Clarity (GRI)
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The information is presented in the Report in a simple and logical manner and consolidated non-financial data tables help to make the information understandable. All the information in this report will be made available to stakeholders through printed hard copies and pdf soft copies which will be made accessible through the Ayala Corporation website.
Limitation Our assurance relies on the premise that the data and information provided by Ayala Corp. to us as part of our review procedures have been provided in good faith and free from misstatements. Because of the selected nature (sampling) and other inherent limitation of both procedures and systems of internal control, there remains the unavoidable risk that errors or irregularities, possibly significant, may not have been detected. The engagement excludes the sustainability management, performance and reporting practices of Ayala Corp.’s associated companies, suppliers, contractors and any third-parties mentioned in the Report. The company position statements, the statements for the management approach, and case studies and examples are excluded from the scope of our work. We did not interview external stakeholders as part of this assurance engagement. The reported disclosures related to Economic performances are based on the financial disclosures and data, which were cross-checked with internal documents and the audited consolidated financial statements. Limited depth of evidence gathering including inquiry and analytical procedures and limited sampling at lower levels in the organization were applied as per agreed scope of engagement. The baseline data for Environmental and Social performance are verified with samples randomly taken by and the aggregated data at the corporate level are used for the verification. The procedures performed in a limited assurance engagement vary in nature and timing, and are less in extent than for a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained if a reasonable assurance engagement had been performed. We expressly disclaim any liability or co-responsibility for any decision a person or an entity may make based on this Assurance Statement.
Statement of Competence and Independence DNV GL applies its own management standards and compliance policies for quality control, in accordance with ISO/IEC 17021:2011 - Conformity Assessment Requirements for bodies providing audit and certification of management systems, and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. We have complied with the DNV GL Code of Conduct3 during the assurance engagement and maintain independence where required by relevant ethical requirements. This engagement work was carried out by an independent team of sustainability assurance professionals. DNV GL was not involved in the preparation of any statements or data included in the Report except for this Assurance Statement. DNV GL maintains complete impartiality toward stakeholders interviewed during the assurance process. DNV GL has provided assurance to Ayala Land, Inc., Globe Telecom, Inc and Manila Water which are business units of Ayala Corp. In our opinion, there is no conflict of interest in the assurance engagement provided to the business units. DNV GL did not provide any services to Ayala Corp. during 2017 that could compromise the independence or impartiality of our work.
For and on behalf of DNV GL Business Assurance AS Philippines Branch
6 April 2018 / Manila, Philippines Seung Hyun Kwak Nandkumar Vadakepatth Lead Assuror Assurance Reviewer Head – Regional Sustainability Operations Region India and Middle East DNV GL Business Assurance India Pyt. Ltd. India
------DNV GL Business Assurance is a global provider of certification, verification, assurance, assessment and training services, helping customers to build sustainable business performance. www.dnvgl.com
3 The DNV GL Code of Conduct is available from DNV GL website (www.dnvgl.com)
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192 2017 Ayala Corporation Integrated Report GRI CONTENT INDEX (102-55) This report has been prepared in accordance with the GRI Standards: Core option
The GRI Content Index below indicates the reported disclosures, the location of information in this report, and reference pages to the independent assurance statement for relevant indicators.
GRI 101: FOUNDATION 2016 GENERAL DISCLOSURES GRI Standard Disclosure Page number or direct answers GRI 102: General Organizational Profile Disclosures 2016 102-1 Name of the organization Ayala Corporation 102-2 Activities, brands, products, and services 6-7 102-3 Location of headquarters 6-7 102-4 Location of operations 10-11 102-5 Ownership and legal form 167 102-6 Markets served 6-7,10-11 102-7 Scale of the organization 86,184 102-8 Information on employees and other workers 86,184 102-9 Supply chain 82, Refer to Ayala Integrated Report 2016, p. 104 102-10 Significant changes to the organization and its supply chain 76-77 102-11 Precautionary Principle or approach 52-58 102-12 External initiatives Founding Member of UN Global Compact Network Philippines 102-13 Membership of associations Membership to other associations and advocacy organizations are held in a personal capacity by AC citizens. Strategy 102-14 Statement from senior decision-maker 20-31 102-15 Key impacts, risks, and opportunities 52-58 Ethics and integrity 102-16 Values, principles, standards, and norms of behavior 4,169 Governance 102-18 Governance structure 158 102-19 Delegating authority 52 102-20 Executive-level responsibility for economic, environmental, and social topics 34, 165 102-21 Consulting stakeholders on economic, environmental, and social topics 59-61 102-22 Composition of the highest governance body and its committees 163 102-23 Chair of the highest governance body 160 102-24 Nominating and selecting the highest governance body 164 102-27 Collective knowledge of highest governance body 161 102-28 Evaluating the highest governance body’s performance 160 102-29 Identifying and managing economic, environmental, and social impacts 62-69 102-30 Effectiveness of risk management processes 52 102-31 Review of economic, environmental, and social topics 70-71 102-32 Highest governance body’s role in sustainability reporting 3
INTO THE FUTURE 193 (102-55)
Stakeholder Engagement 102-40 List of stakeholder groups 59-61 102-41 Collective bargaining agreements 88, 185 102-42 Identifying and selecting stakeholders 59-61 102-43 Approach to stakeholder engagement 59-61, 83, 94 102-44 Key topics and concerns raised 59-61 Reporting practice 102-45 Entities included in the consolidated financial statements 172-175 102-46 Defining report content and topic Boundaries 176-177 102-47 List of material topics 176-177 102-48 Restatements of information 178-179 102-49 Changes in reporting 176-177, 178-179 102-50 Reporting period 2 102-51 Date of most recent report 2 102-52 Reporting cycle 2 102-53 Contact point for questions regarding the report 3 102-54 Claims of reporting in accordance with the GRI Standards 2 102-55 GRI content index 193-197 102-56 External assurance 2
MATERIAL TOPICS
ECONOMIC GRI Standard Disclosure Page number or direct answers Economic Performance GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components 75,81-82,176-177 103-3 Evaluation of the management approach 20-31 GRI 201: Economic 201-1 Direct economic value generated and distributed 75-76, 187-188 Performance 2016 201-2 Financial implications and other risks and opportunities due to 81 climate change Indirect Economic Impacts GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components 77-81 103-3 Evaluation of the management approach Indirect economic impacts of Ayala Corporation have been increasing due to acquisitions of new companies, and growth of existing businesses in the group. GRI 203: Indirect 203-1 Infrastructure investments and services supported 80-81 Economic Impacts 2016 203-2 Significant indirect economic impacts 77-78, 79-81 Procurement Practices GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components 82 103-3 Evaluation of the management approach IMI does not track the spending on local suppliers due to the diverse supply chain of its global sites. Data collection for this aspect is still being established by the companies. Globe and AC Energy are yet to track total procurement budget for all their sites. GRI 204: 204-1 Proportion of spending on local suppliers 82, Manila Water spent 99 percent of its total procurement budget to local Procurement suppliers. Practices 2016 ENVIRONMENT Materials
GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components 106 103-3 Evaluation of the management approach 106
194 2017 Ayala Corporation Integrated Report (102-55) GRI 301: Materials 301-1 Materials used by weight or volume 106, 180 2016 Energy GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components 97-99 103-3 Evaluation of the management approach Expanded operations and energy efficiency initiatives across the group led to only a minimal increase in energy consumption. Also, data collection for fuel consumption of IMI sites abroad is still being established. GRI 302: Energy 302-1 Energy consumption within the organization 98-99, 182-183, Electricity consumption was based on electric bills issued by 2016 distribution utilities. Fuel consumption was also based on receipts from fuel purchases for company-owned vehicles and equipment. 302-2 Energy consumption outside of the organization 183, Electricity consumption was based on electric bills of tenants. Fuel consumption was also based on receipts from fuel purchases for outsourced vehicles and equipment. 302-3 Energy intensity 98-99, 182 302-4 Reduction of energy consumption 97-98 Ayala specific Total power generated 96-97 disclosures Total power generated from renewable energy sources 96-97 Water GRI 103: 103-1 Explanation of the material topic and its Boundary 103-105, 176-177 Management Approach 2016 103-2 The management approach and its components 103-105 103-3 Evaluation of the management approach 103 GRI 303: Water 2016 303-1 Water withdrawal by source 103-105, 181 303-2 Water sources significantly affected by withdrawal of water 103-105 303-3 Water recycled and reused 181 Ayala specific Volume of water delivered (billed volume) 101 disclosures Water loss (non-revenue water) 102 Biodiversity GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components 104-105 103-3 Evaluation of the management approach 105 GRI 304: 304-1 Operational sites owned, leased, managed in, or adjacent to, 105 Biodiversity 2016 protected areas and areas of high biodiversity value outside protected areas 304-3 Habitats protected or restored 104-105 304-4 IUCN Red List species and national conservation list species with 105 habitats in areas affected by operations Emissions GRI 103: 103-1 Explanation of the material topic and its Boundary 99, 176-177 Management Approach 2016 103-2 The management approach and its components 99-101 103-3 Evaluation of the management approach 100, Setting groupwide GHG targets is being explored. GRI 305: Emissions 305-1 Direct (Scope 1) GHG emissions 99, 183, Standards used for the computation are based on the GHG Protocol 2016 Corporate Accounting and Reporting Standard. The gases reported include carbon dioxide, methane and nitrous oxide. 305-2 Energy indirect (Scope 2) GHG emissions 99, 183, Standards used for the computation are based on the GHG Protocol Corporate Accounting and Reporting Standard. Location-based grid emission factors are based on the Department of Energy (Philippines) and Institute for Global Environmental Strategies (global sites). The gases reported include carbon dioxide, methane and nitrous oxide. 305-3 Other indirect (Scope 3) GHG emissions 99, 183, Standards used for the computation are based on the GHG Protocol Corporate Accounting and Reporting Standard. Location-based grid emission factors are based on the Department of Energy (Philippines). The gases reported include carbon dioxide, methane and nitrous oxide. 305-4 GHG emissions intensity 99, 183 305-5 Reduction of GHG emissions 97-98 Effluents and Waste GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components 103, 106-107 103-3 Evaluation of the management approach All local companies are compliant with DENR laws on transportation and treatment of hazardous waste by hiring an accredited third party transporter and treater. GRI 306: Effluents 306-1 Water discharge by quality and destination 102-103, 181 and Waste 2016 306-2 Waste by type and disposal method 106-108, 180-181 306-4 Transport of hazardous waste 107-108, 180-181
INTO THE FUTURE 195 (102-55) Supplier Environmental Assessment GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components 82, 108, IMI does not track the number of suppliers due to the diverse supply chain of its global sites. Data collection for this aspect is still being established by the companies. Only the management approach and criteria is reported this year. 103-3 Evaluation of the management approach 108, Environmental impacts in the supply chain were identified and managed accordingly. GRI 308: Supplier 308-2 Negative environmental impacts in the supply chain and actions 108 Environmental taken Assessment 2016 SOCIAL Employment GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components 83-84 103-3 Evaluation of the management approach 83-84 GRI 401: 401-1 New employee hires and employee turnover 86, 185 Employment 2016 401-3 Parental leave 187 Occupational Health and Safety GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components 84-85 103-3 Evaluation of the management approach 84-85 GRI 403: 403-2 Types of injury and rates of injury, occupational diseases, lost days, 84-85, 187 Occupational and absenteeism, and number of work-related fatalities Health and Safety 2016 Training and Education GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components 85-86 103-3 Evaluation of the management approach 85-86 GRI 404: Training 404-1 Average hours of training per year per employee 86,186-187 and Education 2016 404-2 Programs for upgrading employee skills and transition assistance 85-86 programs Diversity and Equal Opportunity GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components 86-87 103-3 Evaluation of the management approach Male:female employee ratio has narrowed to 1:1.33 from 1:37 in 2016. GRI 405: Diversity 405-1 Diversity of governance bodies and employees 86-87, 184-185 and Equal Opportunity 2016 Non-discrimination GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components An Employee Development and Industrial Relations Policy can be viewed at www.ayala.com.ph. Moreover, non-discrimination is observed by the group. 103-3 Evaluation of the management approach Existing management approach is successful as no cases were filed against the Ayala group for discrimination in the workplace. GRI 406: Non- 406-1 Incidents of discrimination and corrective actions taken No incidents reported, no aspect of operations within our organization was discrimination 2016 identified to have existence of discrimination Freedom of Association and Collective Bargaining GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components 88 103-3 Evaluation of the management approach Existing management approach is successful as no parts of operations and suppliers were found to be at risk of violating right to freedom of association and collective bargaining GRI 407: Freedom 407-1 Operations and suppliers in which the right to freedom of No incidents reported, no aspect of operations within our organization and of Association association and collective bargaining may be at risk suppliers were found to be at risk of violating right to freedom of association and Collective and collective bargaining Bargaining 2016 Child Labor GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components A Policy on Child Labor and Forced or Compulsory Labor can be viewed at www.ayala.com.ph. Moreover, the group ensures that child labor is non- existent in the companies and supply chain. 103-3 Evaluation of the management approach Existing management approach is successful as no cases were filed against the Ayala group for child labor in the workplace.
196 2017 Ayala Corporation Integrated Report (102-55) GRI 408: Child 408-1 Operations and suppliers at significant risk for incidents of child No incidents reported, no aspect of operations within our organization was Labor 2016 labor identified to have existence of child labor Forced or Compulsory Labor GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components A Policy on Child Labor and Forced or Compulsory Labor can be viewed at www.ayala.com.ph. Moreover, the group ensures that forced or compulsory labor is non-existent in the companies and supply chain. 103-3 Evaluation of the management approach Existing management approach is successful as no cases were filed against the Ayala group for forced or compulsory labor in the workplace. GRI 409: Forced or 409-1 Operations and suppliers at significant risk for incidents of forced No incidents reported, no aspect of operations within our organization was Compulsory Labor or compulsory labor identified to have existence of forced or compulsory labor 2016 Security Practices GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components 94-95 103-3 Evaluation of the management approach Management approach is successful as there were no reported cases of security personnel violation of human rights. GRI 410: Security 410-1 Security personnel trained in human rights policies or procedures All of our security personnel undergo trainings with topics touching on Practices 2016 policies and procedures on human rights. Local Communities GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components 95 103-3 Evaluation of the management approach 95 GRI 413: Local 413-1 Operations with local community engagement, impact 95 Communities 2016 assessments, and development programs Supplier Social Assessment GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components 82 103-3 Evaluation of the management approach Social impacts in the supply chain were identified and managed accordingly. GRI 414: Supplier 414-2 Negative social impacts in the supply chain and actions taken There were no reported cases of negative social impacts in our companies’ Social Assessment supply chain. 2016 Customer Privacy GRI 103: 103-1 Explanation of the material topic and its Boundary 176-177 Management Approach 2016 103-2 The management approach and its components 95 103-3 Evaluation of the management approach Our Privacy policy can be viewed at ayala.com.ph/privacy-policy GRI 418: Customer 418-1 Substantiated complaints concerning breaches of customer privacy 95, Ayala Corporation has not identified any substantiated complaints. Privacy 2016 and losses of customer data
INTO THE FUTURE 197 BOARD, BOARD COMMITTEE MEETINGS, AND DIRECTORS’ ATTENDANCE
Board Directors Composition No. of Meetings % Present Attended/Held1 Jaime Augusto Zobel de Ayala Chairman (ED) 7/7 100 Fernando Zobel de Ayala Vice Chairman (ED) 7/7 100 Delfin L. Lazaro Non-Executive Director (NED) 7/7 100 Xavier P. Loinaz Independent Director (ID) 7/7 100 Ramon R. Del Rosario, Jr. Independent Director (ID) 7/7 100 Antonio Jose U. Periquet Independent Director (ID) 7/7 100 Yoshio Amano2 Non-Executive Director (NED) 3/3 100 Keiichi Matsunaga2 Non-Executive Director (NED) 4/4 100
Finance Committee Members Designation No. of Meetings % Present Attended/Held 1 Delfin L. Lazaro Chairman (NED) 10/10 100 2 Antonio Jose U. Periquet Member (ID) 9/10 90 3 Jaime Augusto Zobel de Ayala Member (ED) 10/10 100 4 Fernando Zobel de Ayala Member (ED) 10/10 100
Corporate Governance and Nomination Committee Members Designation No. of Meetings % Present Attended/Held 1 Ramon R. Del Rosario, Jr. Chairman (ID) 3/3 100 2 Antonio Jose U. Periquet Member (ID) 3/3 100 3 Xavier P. Loinaz Member (ID) 3/3 100
1 In 2017 and during the incumbency of the director 2 Mr. Keiichi Matsunaga was elected to be a member of the Board, replacing Mr. Yoshio Amano, on April 21, 2017 3 May not be members of the Board of Directors
198 2017 Ayala Corporation Integrated Report Audit Committee Members Designation No. of Meetings % Present Attended/Held 1 Xavier P. Loinaz Chairman (ID) 4/4 100 2 Ramon R. Del Rosario, Jr. Member (ID) 4/4 100 3 Yoshio Amano2 Member (NED) 2/2 100 4 Keiichi Matsunaga2 Member (NED) 1/2 50
Risk Management and Related Party Transactions Committee Members Designation No. of Meetings % Present Attended/Held 1 Antonio Jose U. Periquet Chairman (ID) 3/3 100 2 Ramon R. Del Rosario, Jr. Member (ID) 3/3 100 3 Yoshio Amano2 Member (NED) 2/2 100 4 Keiichi Matsunaga2 Member (NED) 1/1 100
Personnel and Compensation Committee Members Designation No. of Meetings % Present Attended/Held 1 Ramon R. Del Rosario, Jr. Chairman (ID) 1/1 100 2 Delfin L. Lazaro Member (NED) 1/1 100 3 Yoshio Amano2 Member (NED) 1/1 100
Committee of Inspectors of Proxies and Ballots Members3 Designation No. of Meetings % Present Attended/Held 1 Solomon M. Hermosura Chairman 2/2 100 2 Catherine H. Ang Member 2/2 100 3 Josephine G. De Asis Member 2/2 100
INTO THE FUTURE 199 REPORT OF THE AUDIT COMMITTEE TO THE BOARD OF DIRECTORS FOR THE YEAR ENDED 31 DECEMBER 2017
The Board-approved Audit Committee Charter defines the duties and responsibilities of the Audit Committee. In accordance with the Charter, the Committee assists the Board of Directors in fulfilling its oversight responsibilities to the shareholders with respect to:
• Systems of internal controls, risk management and governance process of the Company • Integrity of the Company’s financial statements and the financial reporting process • Performance of the internal auditors and the external auditors • Compliance with Company policies, applicable laws, rules and regulatory requirements
In compliance with the Audit Committee Charter, we confirm that:
• The Chairman and another member of the Committee are independent directors;
• We had four (4) regular meetings and executive meetings with the external and internal auditors;
• We recommended for approval of the Board and endorsement to the shareholders the reappointment of SGV & Co. as the Company’s 2017 external auditor and the related audit fee;
• We have reviewed and discussed the quarterly unaudited consolidated financial statements and the annual audited consolidated financial statements of Ayala Corporation and Subsidiaries, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations, with management, internal auditors and SGV & Co. as the Company’s external auditors. We also reviewed and discussed the annual Parent Company Financial Statements. These activities were performed in the following context: - Management has the primary responsibility for the financial statements and the financial reporting process; and - SGV & Co. is responsible for expressing an opinion on the conformity of the Ayala Corporation’s audited consolidated financial statements with the Philippine Financial Reporting Standards.
• We have approved the overall scope and the respective audit plans of the Company’s internal auditors and SGV & Co. We have also discussed the results of their audits, their assessment of the Company’s internal controls, and the overall quality of the financial reporting process including their management letter of comments;
• We have reviewed the reports and updates of the internal auditors ensuring that management is taking appropriate corrective actions in a timely manner, including addressing internal control and compliance issues. Based on the assurance provided by the internal audit as well as SGV & Co. as a result of their audit activities, the Committee assessed that the Company’s system of internal controls, risk management, and governance processes are adequate;
• We have reviewed and approved all audit, audit-related and non-audit services provided by SGV & Co. to Ayala Corporation and the related fees for such services. We have also assessed the compatibility of non-audit services with the auditors’ independence to ensure that such services will not impair their independence;
• We have conducted an annual assessment of our performance and confirm that the Committee had satisfactory performed its responsibilities based on the requirements of its Charter; and
• We reviewed and reassessed the Audit Committee Charter to ensure that it is updated and aligned with regulatory requirements. The revised Charter was approved by the Board of Directors in December 1, 2017.
Based on the reviews and discussions undertaken, and subject to the limitations on our roles and responsibilities referred to above, the Audit Committee recommends to the Board of Directors that the audited consolidated financial statements be included in the Annual Report for the year ended December 31, 2017 for filing with the Securities and Exchange Commission and the Philippine Stock Exchange. We are also recommending the re-appointment of SGV & Co. as Ayala Corporation’s external auditor and the related audit fee for 2018 based on their performance and qualifications.
March 7, 2018
XAVIER P. LOINAZ RAMON R. DEL ROSARIO, JR. KEIICHI MATSUNAGA Chairman Member Member
200 2017 Ayala Corporation Integrated Report REPORT OF THE RISK MANAGEMENT AND RELATED PARTY TRANSACTIONS COMMITTEE TO THE BOARD OF DIRECTORS FOR THE YEAR ENDED 31 DECEMBER 2017
The Risk Management and Related Party Transactions Committee assists the board in fulfilling its oversight mandate in the areas of risk governance and related party transactions. Its objectives are to ensure that there exists a sound risk management framework and culture within the company and to screen all material related party transactions for their fairness to shareholders.
The Committee held three meetings in 2017, during which it:
• Reviewed management’s adopted risk management framework and its ongoing programs to instill a culture of risk awareness within the Ayala group.
• Was briefed on sources of downside risk and their possible effects on the company, as identified by management and the Group Risk Management and Sustainability Unit.
• Evaluated proposed investments, asset sales, and leases involving related parties, and recommended them for either approval or modification in accordance with fairness to the company’s shareholders.
• Reviewed its committee charter for relevance.
There were no emergencies that required the calling of any special committee meeting during the year.
March 5, 2018
ANTONIO JOSE U. PERIQUET RAMON R. DEL ROSARIO, JR. KEIICHI MATSUNAGA Chairman Member Member
INTO THE FUTURE 201 2017 DISCLOSURES
In 2017, the company filed, among others, unstructured disclosures involving the following:
2017 UNSTRUCTURED DISCLOSURES • Notice of interest payment for all outstanding • Ayala Corporation’s second P10 billion issuance in its corporate bonds. fixed rate bond program rated PRSAaa • Annual and quarterly press statements on the • AC Health invests in MedGrocer ePharmacy service financial and operating results • Ayala acquires 43.3 percent stake in Zalora • Declaration of cash dividends to outstanding Philippines Common and Preferred Shares • Ayala group allots P185 billion capex in 2017 • Setting of the 2018 Annual Stockholders’ Meeting • AYC Holdings transfers ownership in Integrated • AC Energy acquires renewable energy development Micro-Electronics to AC Industrials platform • Ayala and Ant Financial Services Group invest in • AC Energy completes acquisition of Chevron’s Globe Fintech Innovations, Inc. Indonesia geothermal assets • SEC’s approval of the Amended Articles of • AC Infrastructure and SM Investments Corporation Incorporation (Extension of Corporate Term) submit unsolicited proposal for C3 Elevated • Board Approval of ESOWN Grants Expressway • Results of the 2016 and 2017 ESOWN Grant • AC Energy and UPC Renewables to develop small • Results of Annual Stockholders’ Meeting and island power projects in Indonesia Organizational Board of Directors’ Meeting • AC Energy Consortium transfers interest in Philippine BidCo to AllFirst Equity Holdings, Inc. • Redemption of AC’s P10 billion 7.20 percent fixed • AC Energy and UPC Renewables to develop small rate putable bonds due 2017 island power projects in Indonesia • Participation of directors and officers in Corporate • AC Energy Consortium transfers interest in Philippine Governance seminars BidCo to AllFirst Equity Holdings, • Retirement of an Officer • Financial close of GNPower Dinginin Unit 2 • Shelf registration with the SEC of up to P30 billion • AYC Holdings transfers ownership in Integrated debt securities Micro-Electronics to AC Industrials • Ayala Corporation successfully launches US$400 • AC Industrials acquires MT Misslbeck Technologies million senior unsecured and guaranteed fixed for life perpetual notes • Notice and agenda of the 2017 Annual Stockholders’ NEWS CLARIFICATIONS Meeting with detailed explanation of the agenda • AC Energy eyes P7.489 billion RE investment deal in items Indonesia • Attendance of the Board of Directors in 2017 • Ayala to expand healthcare business • Top 100 Stockholders’ Reports • Ayala also looking at logistics business • Notices of Analysts’ Briefing • Ayala also keen on rehab of MRT3 • Public Ownership Reports • Certification of Nominees for Independent Directors • MetroPac offers P12 billion MRT3 rehab • Updates on Annual Corporate Governance Report for • Big Consortium to Rebuild NAIA the year 2017
202 2017 Ayala Corporation Integrated Report CHANGES IN SHAREHOLDINGS Summarized below are the reported trades in Ayala Securities of the directors and officers in 2017: Security Balance as of Acquired Disposed Of Balance as of December 31, 2016 December 31, 2017 Directors Jaime Augusto Zobel de Ayala Common 136,396 165,037 79,427 222,006 Preferred B Series 1 20,000 0 0 20,000 Voting Preferred 543,802 0 0 543,802 Fernando Zobel de Ayala Common 177,846 180,290 130,000 228,136 Voting Preferred 554,983 0 0 554,983 Keiichi Matsunaga Common 1 0 0 1 Delfin L. Lazaro Common 30,807 21,429 24,400 27,836 Voting Preferred 258,297 0 0 258,297 Xavier P. Loinaz Common 126,614 0 0 126,614 Voting Preferred 65,517 0 0 65,517 Antonio Jose U. Periquet Common 1,200 0 0 1,200 Preferred B Series 2 400,000 0 0 400,000 Ramon R. Del Rosario, Jr. Common 1 0 0 1 Officers Jose Rene Gregory D. Almendras Common 10,800 28,545 0 39,345 Catherine H. Ang Common 10,209 5,987 0 16,196 Voting Preferred Shares 5,290 0 0 5,290 Arthur R. Tan Common 256,538 56,753 0 313,291 Alfredo I. Ayala Common 152,697 33,936 14,087 172,546 Paolo Maximo F. Borromeo Common 26,420 29,034 16,480 38,974 Cezar P. Consing Common 46,609 30,435 0 77,044 Ma. Cecilia T. Cruzabra Common 9,714 7,740 0 17,454 Josephine G. De Asis Common 9,201 7,329 0 16,530 Ferdinand M. Dela Cruz Common 0 39,755 0 39,755 Bernard Vincent O. Dy Common 0 9,567 0 9,567 Ernest Lawrence L. Cu* Common 75,205 28,569 0 103,774 John Eric T. Francia Common 81,516 61,341 9,090 133,767 Solomon M. Hermosura Common 96,993 69,358 44,010 122,341 Voting Preferred Shares 53,583 0 0 53,583 Jose Teodoro K. Limcaoco Common 163,688 76,689 13,700 226,677 Ruel T. Maranan Common 5,155 7,884 0 13,039 John Philip S. Orbeta Common 471,659 61,178 0 532,837 Dodjie D. Lagazo Common 0 0 0 0 Joanne M. Lim Common 0 0 0 0 TOTAL 3,790,741 920,856 331,194 4,380,403
*Not a reportable officer of Ayala Corporation but a member of the Ayala Group Management Committee
INTO THE FUTURE 203 AYALA GROUP MANAGEMENT COMMITTEE MEMBERS CEZAR P. CONSING Marketing and Sales of ALI. He also holds 2007 and has been a member of the Ayala Filipino, 58, is a Senior Managing Director the following positions in other publicly- Group Management Committee since of Ayala Corporation and has been a listed Companies: Chairman of Prime 2002. He has been the Chief Executive member of the Ayala Group Management Orion Philippines, Inc. and Director of Cebu Officer of Integrated Micro-Electronics, Committee since April 2013. He has Holdings, Inc., Cebu Property Ventures Inc., a publicly-listed company, since April been the President and CEO of Bank of and Development Corporation, and MCT 2002. He was the President of IMI from the Philippine Islands since April 2013, Bhd of Malaysia. His other significant April 2002 to June 23, 2016. Concurrently, one of the Ayala Group’s publicly-listed positions include: Chairman of Ayala he is also the Chairman of the Board and companies. He also holds the following Property Management Corporation, Chief Executive Officer of PSi Technologies positions in other publicly-listed companies: Makati Development Corporation, Amaia Inc., President and Chief Executive Officer Independent Director of Jollibee Foods Land Corporation, AyalaLand Commercial of Speedy-Tech Electronics Ltd.; and Corporation and Chairman of National Reit, Inc., Bellavita Land Corporation, President and Chief Executive Officer of Reinsurance Corporation of the Philippines. Ayagold Retailers, Inc., Station Square AC Industrial Technology Holdings, Inc. His other significant positions are: President East Commercial Corporation, Aviana Prior to IMI, he was the Northeast Area of Bancnet, Inc., Director of LGU Guarantee Development Corp., Cagayan De Oro Sales Manager and Acting Design Center Corporation, Filgifts.com., The Rohatyn Gateway Corp., BGSouth Properties, Manager of American Microsystems Group, Sqreem Technologies, and Endeavor Inc., BGNorth Properties, Inc., BGWest Inc. (Massachusetts, USA), from 1994 to Philippines. He is also a board director of Properties, Inc., Portico Land Corp., and 1998, of which he became the Managing the US-Philippines Society, trustee of the Philippine Integrated Energy Solutions, Director for Asia Pacific Region/Japan Manila Golf Club Foundation, and a member Inc.; Vice Chairman of Ayalaland Estates, from 1998 to 2001. He graduated with of the Trilateral Commission. He served as Inc., Ayala Greenfield Development B.S. in Electronics Communications an independent director of CIMB Group Corporation, Alviera Country Club, Inc., Engineering degree from Mapua Institute Holdings from 2006 to 2013 and First Gen and the Junior Golf Association of the of Technology in 1982 and attended post- Corporation from 2005 to 2013. Prior to Philippines; Director and President of graduate programs at the University of being President of BPI, he first worked for Bonifacio Land Corporation, Emerging City Idaho, Singapore Institute of Management, BPI’s corporate planning and corporate Holdings, Inc., Columbus Holdings, Inc., IMD, and Harvard Business School. banking from 1980 - 1985. He worked for J.P. Berkshires Holdings, Inc., Fort Bonifacio Morgan & Co. in Hong Kong and Singapore Development Corporation, Aurora ERNEST LAWRENCE L. CU from 1985 – 2004 and became the co-head Properties Incorporated, Vesta Property Filipino, 57, has been a member of the of the firm’s investment banking business in Holdings, Inc., Ceci Realty Inc., Alabang Ayala Group Management Committee Asia Pacific from 1997 – 2004 and President Commercial Corporation, and Accendo since January 2009. He is the President of J.P. Morgan Securities (Asia Pacific) Commercial Corp.; President of the Hero and Chief Executive Officer of Globe Ltd. As a senior Managing Director of J.P. Foundation Incorporated and Bonifacio Telecom, Inc., a publicly-listed company. Morgan, he served as a member of the firm’s Art Foundation, Inc.; Director of Alveo He is a trustee of Ayala Foundation, Inc. global investment banking management Land Corp., Amicass Process Solutions, and Hero Foundation, Inc. Prior to joining committee and its Asia Pacific management Inc., Whiteknight Holdings, Inc., AyalaLand Globe, he was the President and CEO of committee. He was a partner at The Rohatyn Medical Facilities Leasing, Inc., Serendra, SPI Technologies, Inc. In 2017, he was Group from 2004 – 2013, ran its Hong Kong Inc., Alveo-Federal Land Communities, adjudged Best CEO by Finance Asia. A office, and its private investing business Inc., ALI Eton Property Development second for Cu, he first received the award in Asia, and was a board director of its real Corporation, and Nuevocentro, Inc.; in 2010. Also in 2017, for the fifth straight estate, and energy and infrastructure private Trustee of Ayala Foundation, Inc. and year, Cu was recognized as one of the equity investing subsidiaries. He graduated Ayala Group Club, Inc. In 2015, he was 100 most influential telecom leaders with a degree of A.B (Accelerated Program) inducted as member of the Advisory worldwide by London-based Global- Economics (Magna Cum Laude) from De La Council of the National Advisory Group for Telecoms Business Magazine Power 100. Salle University in 1979 and M.A. in Applied the Police Transformation Development Frost & Sullivan Asia Pacific has also named Economics from the University of Michigan, of the Philippine National Police. He him CEO of the Year twice, first in 2012, and Ann Arbor, in 1980. earned a degree of B.B.A Accountancy again in 2017. He earned a degree in BS from the University of Notre Dame in 1985 Industrial Management Engineering from BERNARD VINCENT O. DY and took his Master’s Degree in Business De La Salle University in 1982 and took his Filipino, 54, is a Senior Managing Director Administration in 1997 and in International Master’s Degree in Business Administration of Ayala Corporation and has been a Relations in 1989, both at the University of at the JL Kellogg Graduate School of member of the Ayala Group Management Chicago. Management in 1984. Committee since April 2014. He is the President and Chief Executive Officer ARTHUR R. TAN FERDINAND M. DELA CRUZ of Ayala Land, Inc. Prior to this post, he Filipino, 58, has been a Senior Managing Filipino, 50, has been a Managing Director was the Head of the Residential Business, Director of Ayala Corporation since January since 2011 and a member of the Ayala Commercial Business, and Corporate Group Management Committee since
204 2017 Ayala Corporation Integrated Report April 2017. He is the President and CEO Strategy for the International Renewable of Nueva Caceres; and Trustee of Ayala of Manila Water Company, Inc. Prior to his Energy Agency held in Abu Dhabi. In Foundation, Inc. He is also a Trustee of election as President of MWC, he was the the same year, the Philippines became Philippine Business for Education (PBEd). Chief Operating Officer for Manila Water a rotating member of the Executive He has an MBA from the Harvard Graduate Operations; and President of Manila Water Board of the International Energy Forum. School of Business Administration and Total Solutions Corporation and Manila Last September 2013, after stepping B.A. in Development Studies (Honors) and Water Foundation. He joined MWC in July down as Energy Secretary, Rene was Economics from Brown University. 2011 as the East Zone Business Operations awarded ASEAN Individual Excellence Group Director and was concurrently in Energy Management by his fellow PAOLO MAXIMO F. BORROMEO Group Director for Corporate Strategic Energy Ministers during the 31st ASEAN Filipino, 40, has been a Managing Director Affairs. Before joining MWC, he was the Ministers on Energy Meeting and ASEAN since January 2016 and a member of head of the Consumer Sales Group of Energy Awards, which was another 1st the Ayala Corporation Management Globe Telecom for two years, and was for the Philippines. In June 2013, he was Committee and the Ayala Group head of its Wireless Business Group from given the rare privilege of addressing Management Committee since September October 2002 to June 2009. Prior to that, the United Nations Economic and Social 2014. He has served as Group Head of he was the President and General Manager Council at the Palais des Nations, Geneva Corporate Strategy and Development of of Kraft Foods (Philippines) Inc. for more and then again in December 2013 for the Company since September 2014. In than a year and the same company’s the United Nations’ Special Meeting his role, he oversees the overall corporate Country General Manager for its various of the ECOSOC in New York. He was planning process, portfolio strategy, operating companies in Indonesia. He the President and CEO of Manila Water group-wide innovation projects, and also held senior leadership roles in ALI, Company, Inc. before he decided to new business development initiatives. San Miguel Brewing Philippines, Inbisco serve the government in 2010. During In addition, he leads Ayala Corporation’s Philippines, and Unilever Philippines. his term, the company was awarded as healthcare businesses. He sits on the He graduated cum laude with a degree one of the Best Managed Companies in board of Ayala Healthcare Holdings, Inc. in BS Mechanical Engineering from the Asia, the Best in Corporate Governance, and the Generika Group of Companies. He University of the Philippines. He is a board one of the Greenest Companies in the also sits on the board of AC Education, Inc., top-notcher and a licensed Mechanical Philippines, and hailed as the world’s Affordable Private Education Center, Inc., Engineer. Most Efficient Water Company. In June AC College of Enterprise and Technology 2016, a Presidential Award, Order of Holdings, Inc., LINC Institute, Inc., AC JOSE RENE GREGORY D. ALMENDRAS Lakandula, Rank of Gold Cross Bayani, Ventures Holding Corp., AC Industrial Filipino, 57, has been a Managing Director highest honor given to a civilian by the Technology Holdings Inc., HCX Technology and member of the Ayala Corporation Republic of the Philippines, was awarded Partners, Inc., Ayala International Holdings Management Committee and the to him by President Benigno S. Aquino III, Limited, AG Holdings Limited, and LiveIt Ayala Group Management Committee for his remarkable performance during Investments, Ltd. Prior to joining Ayala, since August 2016. He is currently the the Aquino administration. He obtained he was a Principal at Booz & Company, President of AC Infrastructure Holdings his Bachelors of Science in Business a global strategy consulting firm, based Corporation; Chairman of Light Rail Management degree from the Ateneo de in San Francisco, California, USA. He Manila Holdings 6, Inc., and MCX Tollway, Manila University in 1981. He attended obtained his Bachelors of Science degree Inc.; and Executive Vice President of the Strategic Business Economics Program in Management Engineering from the Asiacom Philippines, Inc. He also serves from University of Asia & the Pacific in Ateneo de Manila University and his as a member of the Board of Directors 1999. Master’s in Business Administration with of the following companies within the honors from the Wharton School at the Ayala Group: Light Rail Manila Holdings, ALFREDO I. AYALA University of Pennsylvania. Inc., Light Rail Manila Holdings 2, Inc., Filipino, 56, has been a Managing Director AC Energy, Inc., and A2 Airport Partners, of Ayala Corporation and a member of JOHN ERIC T. FRANCIA Inc. On a concurrent basis, he heads the the Ayala Group Management Committee Filipino, 46, has been a Managing Director Public Affairs Group of Ayala Corporation. since June 2006. He is the President and a member of the Ayala Corporation He served as Secretary of Foreign Affairs and Chief Executive Officer of LiveIt Management Committee and the Ayala for the Republic of the Philippines from Investments Ltd. and of AC Education, Group Management Committee since March to June 2016. He also served as Inc. which are Ayala Corporation’s holding January 2009. He is the President and the Cabinet Secretary under the Office companies for its business processing Chief Executive Officer of AC Energy, Inc. of the President from November 2012 outsourcing and educations investments, In his previous role as Head of Ayala’s to March 2016. Prior to his appointment respectively. Currently, he also holds the Corporate Strategy and Development as Cabinet Secretary, he served as the following positions: Director of Affinity group, he led Ayala’s entry into the energy Secretary of the Department of Energy Express Holdings, Ltd., Affinity Express and transport infrastructure sectors in from July 2010 to October 2012. Under Philippines, Inc., and Azalea International 2011. Under his leadership, Ayala invested his leadership, the Department of Energy Venture Partners Limited.; Chairman and in over 1,000MW of attributable capacity ranked as one of the Top 10 Performers, President of AC College of Enterprise in the energy sector, and secured over in a survey among government agencies and Technology, Inc. and LINC Institute; $1 billion worth of PPP projects in the on government performance specifically Chairman of Affordable Private Education transport infrastructure space. He is a in ensuring integrity in public service. Center, Inc. and Newbridge International Director of Manila Water Company, Inc., In 2011, he became the co-chair of the Investments Limited; Vice Chairman, a publicly-listed company. He is also a high-level discussion on the Long Term President, and CEO of the University member of the Board of Directors of the
INTO THE FUTURE 205 following companies within the Ayala independent director of SSI Group, Inc, Outstanding Employer of the Year by the group: Purefoods International Limited, also a publicly-listed company. He is the People Management Association of the Ayala Healthcare Holdings, Inc., AC Chairman of Darong Agricultural and Philippines. Mr. Maranan earned his AB Education, Inc., AC College of Enterprise Development Corporation, Zapfam Inc., Social Sciences degree from the Ateneo and Technology, Inc., AC Ventures Holding and Arlington Mariveles Philippine GP de Manila University and his law degree Corp., Ayala Aviation Corporation, Zapfam, Corporation. He is the President and CEO from the University of Santo Tomas. The Inc., Northwind Power Development of AC Ventures Holding Corp. He is the Vice latter institution has recently granted Corporation, North Luzon Renewable Chairman of Lagdigan Land Corporation. him the UST 2016 Outstanding Alumni Energy Corporation, Light Rail Manila He is the President of Liontide Holdings, Award under Private Sector. He has also Corporation, AC Infrastructure Holdings Inc. and of Philwater Holdings Company, completed the Leadership Management Corporation, MCX Tollway, Inc., and various Inc. He is a Director of Ayala Hotels, Inc., Program under Harvard. other companies. Prior to joining Ayala, AC Energy, Inc., Ayala Aviation Corporation, he was a senior consultant and member AC Education, Inc., Asiacom Philippines, JOHN PHILIP S. ORBETA of the management team of Monitor Inc., Ayala Group Legal, Michigan Holdings, Filipino, 56, has served as a member of Group, a strategy consulting firm based Inc., AC Industrial Technology Holdings, the Ayala Corporation Management in Cambridge, Massachusetts, USA. Prior Inc., Kauswagan Power GP Corp., A.C.S.T Committee since May 2005 and the Ayala to consulting, he spent a few years in the Business Holdings, Inc., LICA Management Group Management Committee since field of academe and media. He received Inc., and Just For Kids, Inc. He is the April 2009. He is currently the Managing his undergraduate degree in Humanities Treasurer of Ayala Retirement Fund Director, Chief Human Resources Officer, and Political Economy from the University Holdings, Inc. He joined Ayala Corporation and Group Head for Corporate Resources, of Asia & the Pacific, graduating magna as a Managing Director in 1998. Prior to covering Strategic Human Resources, cum laude. He then completed his Masters his appointment as CFO in April 2015, he Knowledge Management, Information & Degree in Management Studies at the held various responsibilities including Communications Technology, AC Synergy, University of Cambridge in the United President of BPI Family Savings Bank, and Corporate Support Services at Ayala Kingdom, graduating with First Class President of BPI Capital Corporation, Corporation. He is currently the Chairman Honors. Officer-in-Charge for Ayala Life Assurance, of Ayala Aviation Corporation; Chairman Inc. and Ayala Plans, Inc., Trustee and and President of HCX Technology Partners, SOLOMON M. HERMOSURA Treasurer of Ayala Foundation, Inc., Inc.; and Vice Chairman of Ayala Group Filipino, 55, has served as Managing President of myAyala.com, and CFO of Club, Inc. Mr. Orbeta also serves as a Director of Ayala Corporation since 1999 Azalea Technology Investments, Inc. He Board Director of Ayala Group Legal, and a member of the Ayala Corporation has held prior positions with JP Morgan & AC Industrial Technology Holdings, Inc., Management Committee since 2009, and Co. and with BZW Asia. He graduated from Ayala Healthcare Holdings, Inc., Ayala the Ayala Group Management Committee Stanford University with a BS Mathematical Retirement Fun Holdings, Inc., BPI Family since 2010. He is also the Group Head Sciences (Honors Program) in 1984 and Bank, Inc., ALFM Growth Fund, Inc., ALFM of Corporate Governance, and the Chief from the Wharton School of the University Money Market Fund, Inc., ALFM Peso Legal Officer, Chief Compliance Officer, of Pennsylvania with an MBA (Finance and Bond Fund, Inc., ALFM Dollar Bond Fund, Corporate Secretary, and Data Protection Investment Management) in 1988. Inc., ALFM Euro Bond Fund, Inc., and the Officer of Ayala Corporation. He is the Philippine Stock Index Fund Corp. Mr. CEO of Ayala Group Legal. He serves as the RUEL T. MARANAN Orbeta previously served as the President Corporate Secretary and Group General Filipino, 55, has been a Managing Director and CEO of AC Industrial Technology Counsel of Ayala Land, Inc., and Corporate of Ayala Corporation since January 2015. Holdings, Inc. (formerly Ayala Automotive Secretary of Globe Telecom, Inc., Manila He has also served as President of Ayala Holdings Corporation) and Automobile Water Company, Inc., Integrated Micro- Foundation, Inc. since March 1, 2015. Central Enterprise, Inc. (Philippine importer Electronics, Inc., and Ayala Foundation, Inc. He is also a member of the board of of Volkswagen), and the Chairman and He also serves as a Corporate Secretary directors of Asticom Technology, Inc. and CEO of Honda Cars Makati, Inc., Isuzu and a member of the Board of Directors of a member of the board of representatives Automotive Dealership, Inc., and Iconic a number of companies in the Ayala group. of CIFAL Philippines. He was the Group Dealership, Inc. Prior to joining Ayala He served as a Director of the Bank of the Director of Manila Water Company, Inc.’s Corporation, he was the Vice President Philippine Islands from April 18, 2013 to Corporate Human Resources Group from and Global Practice Director of the Human April 9, 2014. He graduated valedictorian 2004 to 2014. Before joining MWC, he Capital Consulting Group at Watson Wyatt with Bachelor of Laws degree from San was part of various organizations such as Worldwide (now Willis Towers Watson), Beda College in 1986 and placed third in Globe Telecom, Inc., Vitarich Corporation, overseeing the firm’s practices in executive the 1986 Bar Examinations. and Integrated Farm Management, compensation, strategic rewards, data among others. In MWC, he introduced services, and organization effectiveness JOSE TEODORO K. LIMCAOCO numerous innovations in human around the world. He was also a member Filipino, 55, has been the Chief Finance resources management, rallying behind of Watson Wyatt’s Board of Directors. He Officer and Finance Group Head of Ayala the company’s being the first Filipino graduated with a degree in A.B. Economics Corporation since April 2015. He is also the company to win the prestigious Asian from the Ateneo de Manila University in Chief Risk Officer and Sustainability Officer Human Capital Award in 2011, an award 1982. of Ayala Corporation. He is a director of sponsored by the Singapore Ministry Globe Telecom, Inc. and Integrated Micro- of Manpower, CNBC Asia-Pacific, and Electronics, Inc., two of the publicly-listed INSEAD. Through his leadership in human companies of the Ayala Group; and an resources, MWC was vested the 2006
206 2017 Ayala Corporation Integrated Report SENIOR LEADERSHIP
MANAGING DIRECTORS ASSOCIATE DIRECTORS CONSULTANTS / ADVISERS Emmanuel A. Aligada* Yla Patricia G. Alcantara Patrice R. Clausse* Gil B. Genio* Maria Susana C. Bables Simon C. Mossesgeld* Ginaflor C. Oris* Robert Michael N. Baffrey* Luis Juan B. Oreta* Virgilio C. Rivera, Jr.* Antonio Joselito G. Lambino II Marciano A. Paynor, Jr. Jaime E. Ysmael* Erwin P. Locsin* (retired Dec 31, 2017) Guillermo M. Luz EXECUTIVE DIRECTORS Gabino Ramon G. Mejia* Josette Adrienne A. Abarca* Aditas Vivian L. Santamaria Fatima P. Agbayani* Ma. Victoria A. Tan Catherine H. Ang Gabriel Q. Villaluz III Ruby P. Chiong* Ma. Cecilia T. Cruzabra Josephine G. De Asis Emily C. De Lara Rosallie A. Dimaano* Maria Corazon G. Dizon* Felipe Antonio P. Estrella III Romualdo L. Katigbak* Noel Eli B. Kintanar* Monina C. Macavinta* (retired Dec 31, 2017) Michael C. Montelibano Jenara Rosanna F. Ong* Maria Angelica B. Rapadas Alfonso Javier D. Reyes* Ma. Victoria P. Sugapong* Sheila Marie U. Tan* Norma P. Torres*
*seconded to subsidiaries
INTO THE FUTURE 207 AYALA GROUP NETWORK
AYALA CORPORATION GLOBE TELECOM Sustainability 34F Tower One The Globe Tower E-mail: [email protected] Ayala Triangle, Ayala Avenue 32nd Street corner 7th Avenue Makati City 1226 Philippines Bonifacio Global City AC INDUSTRIALS Tel: +632 908 3000 Taguig 1634 Philippines Fax: +632 848 5846 Tel: +632 730 2000 (Trunk Line for INTEGRATED MICRO- www.ayala.com.ph Corporate Office) ELECTRONICS, INC. +632 730 1000 (Customer Care) North Science Avenue, Special Investor Relations +632 730 1010 (Sales) Export Processing Zone E-mail: [email protected] +632 730 1300 (Loyalty) Laguna Technopark, Biñan Mobile: 211 Laguna 4024 Philippines Sustainability www.globe.com.ph Tel: +632 756 6840 E-mail: [email protected] Fax: +6349 544 0322 Investor Relations www.global-imi.com AYALA LAND E-mail: [email protected] 31F Tower One Investor Relations Ayala Triangle, Ayala Avenue Sustainability E-mail: [email protected] Makati City 1226 Philippines E-mail: [email protected] Tel: +632 908 3000 Sustainability Fax: +632 848 5336 MANILA WATER E-mail: [email protected] www.ayalaland.com.ph 2F MWSS Administration Building 489 Katipunan Road, Balara AC AUTOMOTIVE Investor Relations Quezon City 1105 Philippines 11F Bonifacio One Technology Tower E-mail: [email protected] Tel: +632 917 5900 3030 Rizal Drive West corner 31st Hotline: +632 1627 Street Sustainability www.manilawater.com Bonifacio Global City E-mail: [email protected] Taguig 1634 Philippines Investor Relations Tel: +632 459 4504 BANK OF THE PHILIPPINE ISLANDS E-mail: [email protected] 6768 Ayala Avenue Sustainability Makati City 1226 Philippines Sustainability E-mail: [email protected] Tel: +632 818 5541 to 48 E-mail: [email protected] Express Phone Banking: +632 89 100 HONDA CARS MAKATI, INC. www.bpiexpressonline.com AC ENERGY 1 Pres. Sergio Osmeña Highway 4F 6750 Building Magallanes Investor Relations Ayala Avenue Makati City 1232 Philippines E-mail: [email protected] Makati City 1226 Philippines Tel: +632 902 9393 Tel: +632 730 6300 Fax: +632 852 1158 Sustainability www.acenergy.com.ph www.hondamakati.com.ph E-mail: [email protected]
208 2017 Ayala Corporation Integrated Report ISUZU AUTOMOTIVE AC EDUCATION DEALERSHIP, INC. 33F Tower One Ayala Triangle Alabang-Zapote Road corner Acacia Ayala Avenue Avenue Makati City 1226 Philippines Ayala Alabang Tel: +632 744 5370; +632 908 3455 Muntinlupa City 1780 Philippines Fax: +632 892 5112 Tel: +632 807 1788 www.aceducation.ph Fax: +632 809 5053 www.isuzuautodealer.com.ph Sustainability E-mail: joyce.samaniego@apecshools. AUTOMOBILE CENTRAL edu.ph ENTERPRISE, INC. 11F Bonifacio One Technology Tower AC VENTURES 3030 Rizal Drive West cor. 31st Street 33F Tower One Ayala Triangle Bonifacio Global City Ayala Avenue Taguig City 1634 Philippines Makati City 1226 Philippine Tel: +632 459 4555 www.volkswagen.com.ph AYALA FOUNDATION 8F 111 Paseo Building AC INFRASTRUCTURE Paseo de Roxas corner Legaspi Street 32F Tower One Ayala Triangle Legaspi Village Ayala Avenue Makati City 1229 Philippines Makati City 1226 Philippines Tel: +632 717 5800 Tel: +632 908 3000 Fax: +632 813 4488 Fax: +632 759 4881 www.ayalafoundation.org www.acinfra.com.ph Sustainability Sustainability E-mail: [email protected] E-mail: [email protected]
AC HEALTH 3F Makati Stock Exchange Bldg. 6767 Ayala Avenue Makati City 1226 Philippines Tel: +632 745 2508 www.achealth.com.ph
Sustainability E-mail: [email protected]
INTO THE FUTURE 209 2017 AWARDS AND RECOGNITIONS
Ayala ranked 2nd in FinanceAsia’s Best Managed Companies, Most Committed to Corporate Governance, and Best at Corporate Social Responsibility polls; 5th for investor relations; and 3rd for Best CEO
Ayala ranked 18th in Forbes Magazine’s Global 2000: World’s Best Employers list, the only Philippine company in the Top 20
Chairman and CEO Jaime Augusto Zobel de Ayala named a UN SDG Pioneer for his leadership of Ayala’s sustainable business strategy and operations
President and COO Fernando Zobel de Ayala awarded the Andrea Palladio International Prize at the 10th Dedalo Minosse, which recognizes the role of clients in architectural achievements
CFO Jose Teodoro K. Limcaoco awarded CFO of the Year by the Financial Executives Institute of the Philippines and ING Bank NV
Ayala’s US$400M fixed-for-life perpetual bond issuance named Philippine Capital Market Deal of the Year by Thomson Reuters’ IFR Asia and Best Corporate Bond in the Philippines at The Asset’s Triple A Country Awards
Ayala won Enterprise Risk Program of the Year at the StrategicRISK Awards
Generika won the inaugural ASEAN Inclusive Business Award at the ASEAN Business Awards
AC Energy named Fastest Growing Energy Platform by International Finance Magazine
Best Annual Report at IR Magazine’s Awards (Southeast Asia), and placed second for Best in Sector-Financials
Shortlisted finalist for the Sustainability Team of the Year Award at the Ethical Corporation’s 8th Annual Responsible Business Awards
Shortlisted finalist for Asia’s Best Integrated Report and Best Reporting on the SDGs at CSRWorks’ Asia Sustainability Reporting Awards
Shortlisted finalist for the Best Investor Relations, Best Sustainability Program, and Best in Governance at the Philippine Stock Exchange’s Bell Awards for excellence in corporate governance
210 2017 Ayala Corporation Integrated Report AYALA SYNERGIES IN MOTION 1
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1 The Ayala Innovation Excellence Awards recognize outstanding efforts from across the group. 5 2 ICT practitioners gather at the ICT Summit with Ayala’s Chairman and CEO.
3 Team Ayala wins first place in the streetdance competition of the JZA Cup.
4 Ayala CEOs Bong Consing (BPI), Ernest Cu (Globe), and Ferdz de la Cruz (Manila Water) speak at a panel during the Ayala HR Summit.
5 Chief Human Resource Officer JP Orbeta, Chief Legal Officer Atty. Mon Hermosura, and Independent Director 6 of Manila Water and Generika Sherisa Nuesa join the Ayala group internal auditors at the 2nd Chief Audit Executive Forum and 19th Annual AGIAN Conference.
6 The Corporate Support Services group organized the first Ayala Security Summit in November 2017.
INTO THE FUTURE 211 AYALA IN MOTION Throughout its history, Ayala has been a prime mover in the Philippine business landscape: entering new industries, innovating its products and services to bring about positive disruption to society. As we work to achieve our 2020 goals, we strive to ensure the long-term sustainability of our businesses and create more value for all our stakeholders.
In the 2017 unified group annual and integrated reports, we present our continued evolution: an Ayala always in motion.
AYALA AYALA LAND BANK OF THE PHILIPPINE ISLANDS GLOBE TELECOM
TRANSFORM TOMORROW
MANILA WATER IMI AYALA FOUNDATION
212 2017 Ayala Corporation Integrated Report CORPORATE INFORMATION
Stakeholder Inquiries Shareholder services and assistance Ayala Corporation welcomes inquiries from analysts, the For inquiries regarding dividend payments, change of financial community, institutional and retail investors, address and account status, and lost or damaged stock customers, media, and the general public. Please contact: certificates, please write or call:
Investors: [email protected] BPI Stock Transfer Office Sustainability: [email protected] 16F BPI Building Governance: [email protected] 6768 Ayala Avenue Data Privacy: [email protected] Makati City, 1226, Philippines Customers: [email protected] Media: [email protected] Tel +632 816 9067 and 68 Careers: [email protected] +632 816 9321 +632 816 9898 About the Cover Our cover photo was shot in the Makati Central Business Fax +632 845 5515 District, and features a KTM Duke 390, which is locally [email protected] assembled in IMI’s Laguna facility. [email protected] [email protected] Financial Statements Ayala’s 2017 Financial Statements are available for download About our paper on its website: www.ayala.com.ph The Ayala Corporation Integrated Report cover and main pages were printed on Toccata 270g and 100g White, Developed and produced by Ayala Corporation Investor both of which are FSC Certified papers. Primex Printers, Relations and Sustainability units. Inc. utilized a carbon neutral XL 75 offset press in the production of this report. Concept and design by Medium3 Layout by Publicis JimenezBasic
Portraits and cover photography by Cyrus Panganiban Operational photography by Rolly Barayang www.heidelberg.com/co2 · 100000 Other additional photographs from the Ayala group of companies