1998 Performance

February 26, 1999 PSE CIRCULAR FOR BROKERS NO. 351-99 February 25, 1999 Securities & Exchange Commission Director Linda A. Daoang Money Market Department S.E.C. Building, EDSA Mandaluyong City Philippine Stock Exchange Disclosure Department Listing and Disclosure Group 4/F PSE Center, Exchange Road Ortigas Center, Pasig City SUBJECT : 1998 Performance Gentlemen : We are pleased to inform you of the unaudited results of the consolidated financial performance of Ayala Corporation for the year ending December 31, 1998, to wit: Ayala Corporation reported a consolidated net income of P6.57 billion for 1998, representing a slight growth over last year's P6.39 billion. Consolidated revenues of P36 billion grew by 15% from year-ago levels as all major revenue components posted increases despite the general slowdown in the economy. Sales and services of P22.9 billion, which accounted for 64% of total revenues, registered an increase of 10%. Interest, rental, and investment income at P8.9 billion rose by 43%, insurance revenues of P2.5 billion was up 7%. Ayala's consolidated assets as of end-1998 stood at P117.1 billion with current assets constituting 32% of its total resources. Cash and cash equivalents amounted to P12.4 billion and accounted for 11% of consolidated assets. Stockholders' equity grew by 17% to P42.9 billion from the 1997 year-end level of P36.6 billion. The strong equity base coupled with debt servicing during the year reduced the company's gearing ratio to 0.85 from 0.99 the previous year. LLjur There exists challenges in the economic environment that will fully test the Company's capabilities as an institution, and Ayala Corporation took steps to cushion the impact of the volatile environment in 1998 while reinforcing the foundations needed for long term success. The main aim is to adjust to the new environment while continuing to invest in the platform needed for growth when business conditions in the region and the country begin to improve. Ayala's real estate subsidiary, Ayala Land, Inc., posted a consolidated net income of P2.57 billion. Strong leasing operations, which were reinforced with the opening of Glorietta 4, cushioned the effects of the real estate market slowdown as it contributed 24% to total consolidated revenues. The excellent take-up of the Westgrove Heights and Ayala Heights Cebu residential subdivisions, projects launched despite a weak property market, demonstrates ALI's strong brand equity and customer loyalty. Ayala Land's fundamentals continue to be healthy with consolidated assets of P53.4 billion, cash reserves of P6 billion and a low gearing ratio of 0.27. The Bank of the Philippine Islands registered a consolidated net income of P4.60 billion for a return on equity of 17% and return on assets of 2.2%. Loan portfolio of P106 billion contracted by 8%, but its portfolio mix improved further with a larger portion allocated to top tier corporates. This ensured a better balance on risk and stability of revenues. BPI's year-end non-performing loans was at 6.3%, lower than industry average of 10.4%. As of end-1998, BPI'S resources expanded by 7% to P218.9 billion. The Bank's large deposit base, which grew by 12% to reach P176.1 billion, continues to provide a source of stable and low-cost funding. With its stockholders' equity at P27.6 billion, capital adequacy remained high at 23%, versus the minimum BIS standard of 8%. Globe Telecom posted a net income of P22.9 million in 1998, a complete turnaround from 1997's loss of P870 million. Its subscriber base, which increased by 139%, fueled the growth of revenues to P5.5 billion compared to 1997's P2.6 billion. Cellular subscribers reached 121,288 for post paid and 90,114 for prepaid while fixed line subscribers totaled 140,095. Globe has managed to keep the quality of revenue stream high with receivable turnover at only 60 days. The Company recorded positive EBITDA and EBIT levels of P2 billion and P308 million, a huge improvement from year-ago levels of P84 million and negative P751 million, respectively. Globe Telecom's balance sheet remains strong with total assets growing by 52% to P24.7 billion. Stockholders' equity increased to P12.6 billion with the full receipt of proceeds from its recently concluded P6.1 billion rights offering and advance subscriptions of P2.3 billion from the detachable warrants. LexLib Pure Foods' net income in 1998 amounted to P910.5 million, substantially higher than the previous year's P157.5 million. Income from regular operations grew by 49% to P235 million with the continued strong performance of its meats business and the improvement in its poultry business. For the year, the company recognized one-time gains of P675 million from the spin-off of its meats division. Revenues for the year aggregated P9.8 billion, 11% higher than 1997. Pure Foods' hotdogs captured a market share of 51%, its highest in three years, while its canned and refrigerated meats continue to maintain its leading position in the meats category. Integrated Microelectronics, Inc. experienced another profitable year despite industry contraction in volume demand as it registered a net income of P363.6 million. Consolidated revenues of P3.3 billion were posted with the Special Businesses Group (SBG), accounting for 69% of total peso sales. The slight dip in SBG sales was compensated by incremental revenues from new and non-Asian based existing clients. IMI's subsidiary, Electronic Assemblies, Inc. generated P1 billion in revenues, posting a 59% increase from the 1997 level. Ayala Insurance Holdings Corp. posted a net income of P303.9 million, lower than 1997's P406.3 million. Life premium generation grew by 7%, health care membership fees increased by 48% while pre-need plans posted a 65% growth in gross profit. The sluggish performance of the capital market, however, reduced the company's gain from investment operations. From an overall perspective, Ayala's financial strength and fiscal prudence equip it well for the challenges and opportunities ahead. The Group has built diversified lines of businesses which have remained market leaders in their respective sectors and well-recognized for their performance. cdlex The audited financial statements of Ayala Corporation for the year ending December 31, 1998 will be submitted to the SEC and PSE in due course. The foregoing is submitted in compliance with the rules of the SEC and the PSE. Very truly yours, (SGD.) RENATO O. MARZAN Managing Director