PSE Circular for Brokers No. 358-99

February 26, 1999 PSE CIRCULAR FOR BROKERS NO. 358-99 February 25, 1999 Securities and Exchange Commission SEC, Building, E. Delos Santos Avenue Mandaluyong Metro Manila Attention: Director Erlinda Daoang Money Market Operations Department Gentlemen : We submit herewith Ayala Land's unaudited financial results for the year ended December 31, 1998. Despite the market slowdown, the Company generated consolidated revenues of P10.44 billion in 1998 and P2.57 billion in net income. prLL Revenues derived from land sales amounted to P2.68 billion, contributing 26% to total consolidated revenues. Ayala Land demonstrated its ability to exploit pockets of opportunity even in a weak market through the successful launch of high-end residential subdivision projects such as Westgrove Heights and Ayala Heights Cebu in the second half of the year. Strong take-up was registered for the 403 lots launched in Phase 1 of Westgrove Heights, prompting the Company to launch early in 1999 another III lots in Phase 2. The equally successful launch of Phase 1 of Ayala Heights Cebu, a high-end residential subdivision, likewise boosted the Company's land sales. Despite the weakened industrial property market, the Company managed to book sales in Phases 4 and 5 of the Laguna Technopark. LexLib Rental revenues continued to insulate the Company from the weak market. Ayala Land's total rental revenues amounted to P2.52, billion, accounting for 24% of 1998 consolidated revenues. This represents a 14% growth over the previous year. The Glorietta 4 retail component was substantially completed in 1998 with 79% of shops in operation, supplementing rental revenues. Ayala-related undertakings such as Food Choices, a 100%-held trend-setting foodcourt, Timezone, a 50%-owned family entertainment center, and Wamer Brothers Studio Stores, a wholly-owned franchise operation, significantly improved tenant mix and customer traffic of the Ayala Center. Meanwhile, construction of she Company's joint venture project with Extraordinary Development Corporation, the Pavillion Mall in Bian, Laguna, proceeded as scheduled and is targeted for completion by May 1999. While the high-end condominium sector continued to be a problematic sector, the Company's ongoing projects proceeded as scheduled. Revenues from condominium sales amounted to P1.50 billion, representing 14% of Ayala Land's consolidated revenues. cdlex The Company successfully launched in August 1998 the 51-unit Phase 1 of the Ferndale Homes, a Mediterranean-themed house and lot subdivision in Quezon City. Ferndale Company's first offering of a high-end single-detached housing project. The Ayala Life-FGU Center in Makati, a 32-storey office building has been completed in the first half of 1998 while The Regency at Salcedo, a 35-storey residential building, was substantially completed by year-end. Construction of One Roxas Triangle of the Roxas Triangle Towers proceeded as scheduled and is targeted for completion by mid-2000. Through wholly-owned Makati Development Corporation (MDC), the Company generated P1.15 billion of revenues from construction projects, accounting for 11% of Ayala Land's consolidated revenues. This was realized notwithstanding a slowdown in the construction sector. LLpr Amidst difficulties faced by the hotel industry due to the full impact of the Asian economic crisis, revenues from hotel operations of Ayala Hotels Inc. (AHI) managed to post an 8% growth to P989 million. This represents a 9% contribution to Ayala Land's consolidated revenues in 1998. A moderate increase in Hotel InterContinental Manila's average effective room rates cushioned the impact of lower occupancy. The Insular Hotel Davao continued to be the market leader among the first-class hotels in Davao City. The grand opening of the Cebu City Marriott Hotel in February 1998, also accounted for the growth in hotel revenues. The 306-room serviced apartments, AHI's joint venture with Rodamco N.V. of the Netherlands, is scheduled for a soft opening by the fourth quarter of 1999 and is expected to further increase revenues of Ayala Hotels. In the middle-income housing sector, Ayala Land, through wholly-owned Laguna Properties Holdings, Inc. (LPHI), generated revenues amounting to P415 million equivalent to 4% of the Company's consolidated revenues. This was realized against an environment characterized by relatively high interest rates and uncertain employment prospects. In 1998, LPHI continued to market projects launched in previous years: Santarosa Estates in Santa Rosa, Laguna; San Isidro Village in Tabangao, Batangas; San Antonio Heights in Sto. Tomas, Batangas; Santa Isabel Village in Tayabas, Quezon; and San Francisco Village in Naga, Camarines Sur. Recently, LPHI announced a new housing project in Mandaue City, Cebu. This joint undertaking with the Aboitiz family will involve the development of a 2.4-hectare residential community. Ayala Land's key affiliates remained on track with their undertakings. Alabang Commercial Corporation, 50%-owned by the Company, is on schedule with the construction of the Alabang Town Center's 30,000 sqm expansion. Cebu Holdings Inc. (CHI), 47%-owned, posted higher occupancy rates at the Ayala Center Cebu and completed the Ayala Life-FGU Center Cebu in 1998. Early this year, CHI, jointly with Ayala Land, launched the City Sports Club Cebu within the Cebu Business Park. Demand for the club shares has been strong as indicated by the long list of prospective buyers and full-take-up of the 340-share initial offering. Pilipinas Makro Inc., 28% owned by Ayala Land, saw the full year operations of its third warehouse, enabling it to generate higher revenues and increased store memberships. Cdphil Ayala Land,'s overall financial position remained strong as evidenced by its healthy balance sheet. Total assets, posted at P53.37 billion as of end-1998, grew by 11% year-on-year. Stockholders' equity registered at P30.24 billion, 20% higher than end-1997 level. Such increase in equity base was partly on account of the 206-million new share issuance to Ayala Corporation. With prudent financing strategies, the Company kept its borrowings at low levels resulting to a low bank debt (including commercial papers) to-equity ratio of 0.27:1 and net debt-to-equity of 6% at the close of 1998. Ayala Land's cash conservation program and prudent receivables management kept the Company in a highly-liquid position. Cash level stood at P6.18 billion while current ratio was at a comfortable level of 2.38:1 by 1998 year-end. Positioning cautiously, Ayala Land, as a parent company, made capital investments amounting to P5.8 billion, slightly below the P6.0 billion capital expenditure budget for 1998. These investments included the acquisition of strategic land parcels, development of residential subdivisions, expansion of commercial centers, completion of condominium projects and equity infusion to key subsidiaries. For your information. Very truly yours, (SGD.) MERCEDITA S. NOLLEDO Executive Vice President, Treasurer and Corporate Secretary