1998 First Semester Performance

August 6, 1998 PSE CIRCULAR FOR BROKERS NO. 1832-98 August 5, 1998 Securities & Exchange Commission Director Linda A. Daoang Money Market Department S.E.C Building, EDSA Mandaluyong City Philippine Stock Exchange Disclosure Department Listings and Disclosure Group 4/F Philippine Stock Exchange Center PSE Center, Exchange Road Ortigas Center, Pasig City SUBJECT : 1998 First Semester Performance Gentlemen : We are pleased to inform you of the highlights of the consolidated financial performance of Ayala Corporation (the "Corporation") for the first semester of 1998, to wit: LLpr Ayala Corporation reported a consolidated net income of P4.08 Billion for the first semester of slightly over the P3.98 Billion income it reported for the same period in 1997. The Corporation's income stream remains resilient despite the problems hounding various sectors of the economy due to the Asian contagion. The Corporation's consolidated balance sheet has grown by 24% to P119 Billion from a year-ago-level of P96 Billion. Cash and cash equivalents amounting to P18 Billion has provided the Corporation with greater flexibility to continually address opportunities. The Corporation has Kept its current ratio at 2.62 and gearing remains manageable with debt to equity ratio at 0.93:1. Ayala's real estate subsidiary, Ayala Land, Inc., posted a consolidated net income of P1.48 Billion. The company's leasing operations cushioned the effects of the property market slowdown enabling Ayala Land to generate a healthy stream of recurring rental income. A balance sheet of P50.7 Billion, with cash levels at P5.2 Billion supports the company's initiatives on selectively pursuing strategic projects and landbanking activities despite the downturn in the property market. With minimum (Illegible portion in PSE file) The Bank of the Philippine Islands registered a net income of P2.79 Billion for a return on equity of 22% and return on assets of 2.7%. The Bank's total resources amounted to P212 Billion for a growth of 13% year-on-year. A slight contraction in loan growth was experienced bringing its loan portfolio to P106 Billion. As of end of June, BPI'S non-performing loans was estimated at 5% which compares favorably with the industry average of 9.7%. Globe Telecom remains on track in pursuing its second financial milestone of a positive Earnings Before Interest and Taxes in 1998. The company posted a net income of P5 Million for the first half of 1998, a reversal from a net loss of P528 Million for the same period last year. The momentum for future growth continues with the company's focus on building and strengthening both its infrastructure and subscriber base. The company posted revenues at P2 Billion which is twice the level of the same period last year while Earnings Before Interest, Tax. Depreciation and Amortization (EBITDA) registered at P785 Million, up significantly from negative P20 Million in 1997. Ayala's insurance group recorded a net income of P149.4 Million. Total life insurance revenues increased by 16% to P620 Million with gross premiums growing by 7%. The health care and pre-need plans generated stronger results with a growth of 36% in membership fees and a 46% increase in realized gross profit for Ayala Plans. Pure Foods Corporation incurred a net loss of P38.8 Million for the first semester. While sales exceeded last year's level by 10% higher cost of raw materials resulting from a weak peso has kept the company's operating margins low. Integrated Micro-Electronics' first half performance resulted in a net income of P126 Million. IMI continues to focus on expanding its customer base and strengthening its relationships with key technology companies for additional new lines to strengthen its current manufacturing base. The focus of Ayala Corporation for the rest of the year will remain unchanged. By far the most important factor in the Corporation's performance is its emphasis on two core objectives - preserving the quality of its balance sheet and further consolidating the Group's competitive position in its various lines of business. Even as the Group expanded dramatically in recent years. Ayala has maintained the soundness of its balance sheet, with liquidity preserved and corporate debt maintained at manageable levels. For your reference and information, we attach herewith a copy of the Corporations unaudited consolidated balance sheets and statements of income and unappropriated retained earnings, for the period ending at June 30, 1998. The regular quarterly and semestral financial reports will be submitted to the SEC and PSE in due course as required by the rules. The foregoing is submitted in compliance with the rules of the SEC and the PSE. Very truly yours, (SGD.) RENATO O. MARZAN Managing Director June 30 1998 1997 ASSETS Current Assets: Cash and cash equivalents 18,198,950 19,072,216 Accounts and noted receivable-net 8,627,367 8,445,653 Inventories 1,832,780 1,512,288 Subdivision land salable within one year 4,945,582 2,513,834 Condominium and residential units for sale 3,740,634 3,267,182 Deferred income tax and other current assets 1,948,570, 537,262 Total Current Assets 39,293,883 35,348,435 Noncurrent Accounts and Notes Receivable 3,632,708 1,573,279 Land and Improvements 11,932,596 8,058,700 Investments 37,350,041 29,943,161 Property, Plant and Equipment-net 5,967,045 4,813,329 Total Insurance Assets 13,322,799 11,439,022 Other Assets 7,813,575 4,786,020 119,312,647 95,961,946 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued expenses 9,767,300 5,267,455 Income tax payable 114,345 353,721 Loans payable 2,798,504 3,685,731 Current portion of: Long-term debt 1,509,673 2,516,360 Estimated liability for land and property development 692,021 1,231,900 Other current liabilities 121,580 1,250,793 Total Current Liabilities 15,003,423 14,305,960 Long-Term Debt 33,735,522 23,890,964 Total Insurance Liabilities 8,120,777 5,803,882 Other Noncurrent Liabilities 8,192,095 2,524,273 Estimated liability for land and property development 1,031,199 2,208,362 Minority Interest 12,232,958 9,267,455 Stockholders' Equity 40,996,673 37,961,050 119,312,647 95,961,946 June 30 1998 1997 REVENUES Sales and Services 9,803,760 10,190,654 Interest, rental and investment income 5,481,278 3,407,183 Insurance premiums and commission income 1,196,033 1,130,198 Equity in net earnings of affiliates 817,516 1,088,117 Others 216,476 388,939 17,515,063 16,205,091 COST AND EXPENSES Cost of sales and expenses 6,522,287 6,054,275 General and administrative 2,814,208 2,238,040 Insurance underwriting deductions 1,093,514 907,116 Provision for income tax 801,868 964,670 Interest and other financial charges 1,758,673 1,292,372 12,990,550 11,456,473 INCOME BEFORE NET EARNINGS APPLICABLE TO MINORITY INTEREST 4,524,513 4,748,618 NET EARNINGS APPLICABLE TO MINORITY INTEREST 441,772 769,037 NET INCOME 4,082,741 3,979,581 UNAPPROPRIATED RETAINED EARNINGS AT BEGINNING OF PERIOD 25,756,217 20,017,765 Stock dividends 20% in 1998 and 25% in 1997* (292,269) 0 Cash Dividends (200,805) (247,127) Preferred shares at 9.5851% on March 2 and (146,092) (74,145) 20.0575% on June 1, 1998 and 11.5254% on March 3 and 11.4741% on June 2, 1997. UNAPPROPRIATED RETAINED EARNINGS AT END OF PERIOD 29,199,792 23,676,074