Ayala Land, Inc. (ALI) Earnings Call Transcript & Summary

We will now start with the proceedings led by our Chairman, Mr. Fernando Zobel de Ayala.

Good morning. The meeting will now come to order. It is my pleasure to welcome our stockholders to the 2021 Annual Stockholders Meeting of Ayala Land. Each year, we look forward to this opportunity to engage with you all. Because of restrictions to address the COVID-19 pandemic and the utmost importance that we place on the health and wellbeing of our employees, our stockholders and partners, we're holding this meeting in a fully virtual format. Of course, in whatever format we hold our stockholders meeting, we do everything to ensure that our stockholders can freely exercise their right to vote and to be informed. Our stockholders may vote using the electronic voting in Absentia and shareholder system until the end of the meeting, and questions may be sent to [email protected]. Joining me in this meeting as presenters are Jaime Augusto Zobel de Ayala, our Vice Chairman; Bernard Vincent Dy, our President and CEO; Augusto Bengzon, our CFO, Treasurer and Chief Compliance Officer; Solomon Hermosura, our Corporate Secretary; June Vee Monteclaro-Navarro, our Assistant Corporate Secretary; Anna Margarita Dy, Head of our Strategic Landbank Management Group and President of Cebu Holdings, Inc.; Michael Anthony Garcia, Head of our Investor Communications and Compliance Division; Cesar Purisima, Chair of the Audit Committee; and Sherisa Nuesa, Chair of the Corporate Governance and Nominations Committee of our Board. The other members of the Board, namely Antonino Aquino, Art Corpuz, Rizalina Mantaring, and Rex Mendoza. And members of our management committee, other officers of our company and representatives of SyCip Gorres Velayo & Company, our external auditor, are also in attendance at this meeting. Before we proceed, let us establish that this meeting is duly convened. Mr. Secretary, have the stockholders been duly notified of this meeting?

Yes, Mr. Chairman, our stockholders have been duly notified of this meeting. On March 31, 2021, we sent to our stockholders of record as of March 5, 2021, the notice of the Annual Stockholders' Meeting and the definitive information statement in 3 ways: first by e-mail to all stockholders who have provided us with their e-mail addresses; second, by posting on our corporation's website; and third by disclosure in the Philippine Stock Exchange. In addition, Mr. Chairman, the notice was published in print and online format in the Philippine Daily Inquirer and The Philippine Star for 2 consecutive days on March 30 and 31, 2021. Accordingly, Mr. Chairman, we have notified our stockholders of this meeting in accordance with our bylaws and applicable rules, including our internal guidelines on participation in the stockholders' meeting by remote communication and voting in Absentia.

Thank you. Do we have a quorum at this meeting?

Yes, we have a quorum, Mr. Chairman. And this meeting may proceed. Present in this meeting are stockholders participating by remote communication by proxy or by voting in Absentia owning at least 23,918,294,571 shares, representing 86.05% of the 27,796,890,358 total outstanding shares. Mr. Chairman, we will reflect in the minutes the breakdown of the stockholders present in terms of their mode of attendance and the percentage of the outstanding shares that they own as well as the number of those joining us in the live webcast of the meeting.

Thank you. Though we are holding this meeting in a virtual format, we have strived to provide our shareholders the opportunity to participate in this meeting to the same extent possible as in an in-person meeting. Our Corporate Secretary, Mr. Hermosura, will now share the rules of conduct and voting procedures for this meeting.

Mr. Chairman, the rules of conduct and voting procedures are set forth in the definitive information statement and in the explanation of agenda items, which form part of the notice of the Annual Stockholders Meeting. I will just like, Mr. Chairman, to highlight to our stockholders who are joining us on our live webcast the following points. Number one, the agenda for this meeting covers a range of matters requiring stockholders' vote and was included in the notice sent to stockholders for this meeting. Stockholders were provided an opportunity to propose matters for inclusion in the agenda, pursuant to applicable laws, rules and regulations and our internal guidelines; stockholder -- number two, stockholders who registered under the voting in Absentia and shareholder system or VIASH or who notified the company by e-mail to [email protected] by April 12, 2021 of their intention to participate in this meeting by remote communication may send their questions or comments to the same e-mail address; third, Mike Garcia, the Head of our Investor Communications and Compliance Division, will read the questions or comments received before 8:30 a.m. during the Q&A period -- received before 9:30, Mr. Chairman, during the Q&A period, which will take place after other matters under Item 10 of the agenda. Management will reply to questions and comments not taken up during the meeting by e-mail; fourth, as indicated in the ballot for the voting of shareholders, there are 7 resolutions proposed for adoption by the stockholders in this meeting. Its proposed resolution will be shown on the screen as the same is being taken up; fifth, stockholders would cast their votes on these proposed resolutions and in the election of directors beginning March 31, 2021 through our VIASH system. Stockholders participating today may cast their votes using the same system. The polls will remain open until the end of this meeting for stockholders who have successfully registered in the VIASH system; sixth, we have provided the stockholders the option to appoint the Chairman as proxy; seventh, we have tabulated the votes cast as of close of business of April 19, 2021. Those votes are from stockholders owning 23,909,113,885 voting shares, representing 99.96% of the total voting shares represented in this meeting, and 86.01% of the total outstanding voting shares. I will be referring to the results of this tabulation when I report the voting results throughout this meeting. The results of the final tabulation of votes with full details of the affirmative and negative votes and abstentions will be reflected in the minutes of this meeting. We thank our stockholders who have voted through our VIASH system and by proxy. And encourage all our stockholders who are with us in this meeting to vote using the VIASH system, which will remain open until the end of this meeting. Thank you, Mr. Chairman.

Thank you. The next order of business is the approval of the minutes of the Annual Stockholders Meeting held on April 22, 2020. An electronic copy is available on the website of the corporation. I will now ask our Secretary to present the proposed resolution and the voting results in the item.

Mr. Chairman, management is proposing the adoption of resolution #S-01-2021 for the approval of the minutes of the annual meeting on April 22, 2020. The resolution is shown on the screen. Stockholders owning 23,869,805,385 shares or 99.80% of the total voting shares represented in this meeting, both are in favor of resolution #S-01-2021. Therefore, the resolution has been approved, Mr. Chairman.

Thank you, Mr. Secretary. The next item in the agenda is the annual report, which consists of the message from the Chairman, the President's report and an audiovisual presentation. At this point, allow me to deliver my pre-recorded message. To my fellow shareholders, good morning. 2020 was certainly an unprecedented year for the country and for the broader global community. These disasters continue to be largely unparalleled in scale and impact to both the country and Ayala Land. While the Philippines is no stranger to calamities, no one could have foreseen the successive emergencies that we had to collectively face last year. Early in January 2020, we first had to deal with the eruption of Taal volcano. And a few weeks later, COVID-19 started to spread in our country, resulting in strict quarantines and one of the longest lockdowns faced by any country. In the latter part of the year, typhoons Rolly and Ulysses battered Luzon, which caused huge damage and suffering. The material impact of all these to our stakeholders, including the loss of lives and livelihood have been documented. However, perhaps equally significant is the effect these emergencies had on our people's overall wellness and emotional and mental health, which is difficult to fully measure. For the Philippines, at a macroeconomic level, the varying stages of quarantine we had to undergo caused the economy to contract by 9.5%, which was worse than the contractions we experienced during the 1980s. With limited mobility and business operations, unemployment likewise increased to 8.7%. A point of resilience, however, were overseas Filipino remittances, which remained solid despite lockdowns in other countries, down only 0.8% to USD 29.9 billion. Due to these developments, Ayala Land's revenues and net income significantly dropped 43% lower to PHP 96.3 billion and 74% lower to PHP 8.7 billion, respectively. Several plans and projects were indefinitely postponed, canceled altogether or significantly changed. We reduced capital expenditures by 59% to PHP 63.7 billion from PHP 108.7 billion in 2019 as we prioritize liquidity. Our estates, malls, offices and hotels had to quickly institute extraordinary safety measures to protect our employees, tenants and customers. Despite this period of difficulty, Ayala Land remained committed to support our stakeholders. I am encouraged that a strong sense of malasakit drove our leadership teams and associates to adapt and meaningfully assist our employees, partners, government and the public at large in any and every way that we could. Just to give a snapshot of our ongoing support efforts. The Ayala Group has deployed a total of PHP 13.1 billion so far in the campaign against COVID-19. I am proud that Ayala Land continues to be a significant part of this initiative, contributing close to PHP 7.2 billion across several projects. We provided very significant and timely assistance to our merchants through major rent combinations and marketing and sales support through the many digital platforms by our Ayala Malls Group. We're also very grateful that Ayala Land employees, through their Ayala Land Pays It Based Forward campaign, generated PHP 82.6 million worth of employee donations. Ayala Land, through its wholly owned construction business, Makati Development Corp., was also instrumental in the conversion of the World Trade Center into one of the country's largest quarantine centers. We also helped construct and upgrade testing and treatment facilities for the Red Cross and the whole Ayala Group through QualiMed, the Ayala Group Employee Care Center in Nuvali and the Vertis North Swabbing Center. It is our hope that these and the many other ongoing support initiatives will be vital pieces of a holistic all of country drive to beat back the virus and place ourselves on a path towards full recovery. Stepping back and reflecting on what has been a tumultuous 2020, it is inspiring that Ayala Land has progressed in several areas despite the many challenges. Without downplaying the adverse impact of last year's calamities, Ayala Land reached high levels of agility, boldness, digitalization and innovation that we otherwise could not have achieved as quickly. For instance, our successful launching of AREIT expressed our continuing confidence in the economy and helped strengthen our capital markets. Our digitalization efforts through Zing and the Ayala Malls Neighborhood Assistant are laying the groundwork for a transformation of our commercial spaces. Through these and many other projects, I believe that we are steadily building a strong platform for recovery and ultimately sustainable growth, guided by creativity, innovation and a genuine concern for our stakeholders. As we move forward in 2021, there remains much uncertainty on when the pandemic and its effects will significantly subside. Ayala Land remains dedicated to be a positive contributor to our recovery efforts through continuing stakeholder support, transformation of our properties into meaningful, safe and healthy spaces for all and significant and impactful investments into the local economy. I am hopeful that we can accelerate our recovery and growth through the strong bonds of trust we have developed between different institutions over the past year, which all found life in the many collaborative efforts the public and private sector launched last year. Indeed, we have shown that no challenge is insurmountable when we have a shared commitment and combine it with the strengths of a community. I believe that we have the critical elements to sustain this momentum. To our management team and employees, I would like to thank each and every one of you for everything that you have done and continue to do during this very challenging period. Your professionalism, empathy for our fellow Filipinos and willingness to go over and beyond the call of duty has become a distinguishing mark of Ayala. With the steady rollout of our ambitious national vaccination program of which the Ayala Group and especially Ayala Land would play a critical role, I believe that we can start to show signs of recovery by the second half of this year. Let us continue to steer Ayala Land towards greater resilience during this time, while keeping in mind our commitment to our stakeholders. To my fellow Board members, I am deeply grateful for your wisdom and deep insights. You have all served as valuable guides to our organization as we continue to navigate these uncertain times. To our shareholders, I thank you for your continued trust in Ayala Land. Rest assured that your company is and will remain resilient throughout this challenge. Together, I am confident that our organization will continue to evolve and chart a clear path towards greater stability and growth. Thank you very much, and a good day to all. I now turn you over to our President and Chief Executive Officer, Mr. Bernard Vincent Dy.

Thank you, Mr. Chairman. Good morning, everyone. Please allow me to present my report, which has also been prerecorded. Members of the Board, fellow shareholders, my colleagues at Ayala Land, ladies and gentlemen, good morning. As I address you today, many of us in the Philippines and around the world are still coping with the COVID-19 pandemic, the most profound global crisis our generation has ever faced. Our resilience as individuals and as a company continues to be tested and our values, character and culture as an organization have become even more crucial at this time as we face disruption and uncertainty. Indeed, the past year was unlike any other. When our country went into enhanced community quarantine, or ECQ, on March 17, 2020, overnight majority of our businesses were forced to scale back operations. We quickly shifted our mindset to one of growth, a plan that we've been executing since the aftermath of the 2008 global financial crisis to one of stability, strength and solidarity. The first order of business was to secure the safety of our people and reassure them of their welfare. We minimized as best we could any interruption in employment and provided our frontliners with the required resources to safely serve our customers and communities. Our digital platforms enabled work-from-home arrangements and shuttle services were arranged for those who were affected by the suspension of public transportation. Our employees were provided access to PCR testing and were given the proper endorsement to clinics and hospitals when needed. We supplemented our employee health insurance to fully cover COVID-related expenses. We created a task force to implement health and safety protocols, address reported cases and mitigate the spread of the virus across the Ayala Land Group. We converted the Nuvali Visitor Center into a temporary quarantine facility for Ayala Group employees in partnership with Ayala Corporation, Makati Development Corporation, or MDC, and QualiMed. We firmly believe that our company can only be successful if our country moves forward and is able to address this health pandemic. We, therefore, brought together the entire organization to help during this crisis. Through our employees' generosity in Ayala Land Pays it Forward campaign, we raised PHP 82.6 million to provide medical supplies and personal protective equipment to 3 COVID-19 designated treatment hospitals, the Philippine General Hospital, the Lung Center of the Philippines, and Dr. Jose Rodriguez Memorial Hospital. We solicited PHP 425 million from our partners for Project Ugnayan, a fundraising initiative by the business community focused on food distribution to marginalized communities. This was spearheaded by Ayala Corporation in cooperation with the Philippine Disaster Resilience Foundation. As a company, we allocated PHP 600 million in financial assistance to more than 70,000 no work, no pay contingent personnel during the critical first weeks of the quarantine. Recognizing the difficulties experienced by our mall merchants, particularly MSMEs, we waived PHP 6.15 billion in rent, shifted to a variable rental scheme and granted significant discounts for fixed paying merchants to assist in their economic viability. In addition, MDC constructed COVID-19 facilities, the World Trade Center Metro Manila, the Philippine Red Cross Biosafety Laboratory, the Santa Ana Hospital Molecular Testing Laboratory and 296 swabbing booths in several key locations. MDC was also instrumental in setting up the QualiMed Santa Rosa Triage and PCR Testing Facility, testing laboratories of QualiMed in San Jose Del Monte, Iloilo, and Tanauan. Meanwhile, AirSWIFT conducted 75 flights for stranded tourists in local destinations to Manila and Clark in cooperation with the Department of Tourism and foreign embassies. Free shuttle services were also provided to medical frontliners in BGC. With the economy contracting at an unprecedented rate, we focused on preserving the value of our company by keeping our assets, mainly prime real estate and commercial properties, intact. To achieve this objective, we implemented a 3-pillar strategy of maintaining adequate liquidity to service all our obligations, keeping our businesses operating while ensuring that cash inflows support our expenses. And lastly, strengthening our balance sheet for added margin of safety given the uncertain duration of this health crisis. As a result, we deferred plans to acquire new land, tempered project launches and rationalized spending. Capital expenditures were reduced to PHP 63.7 billion from the initial budget of PHP 100 billion. And projects launched were only at PHP 10.6 billion. Direct operating expenses were scaled back by PHP 11.9 billion, amounting to a 42% reduction from previous year. We tightened our general and administrative expenses that led to a 14% reduction from a year ago. equivalent to PHP 1.4 billion in savings. Furthermore, we refinanced some of our loans to take advantage of record low interest rates. Overall, these efforts enabled Ayala Land to maintain its financial strength. We ended the year with a net debt-to-equity ratio of 0.74:1 and an average borrowing cost of 4.7%, an improvement from 0.78:1 and 5.2%, respectively, in 2019. Moreover, we had the capacity to disperse dividends amounting to PHP 4 billion. The market rewarded our efforts as our share price bounced back to PHP 40.90 by year-end from a low of PHP 22.95 at the early stages of the pandemic in March. The most challenging period of 2020 began in the second half of March and lasted until the end of May when the strictest lockdown, ECQ, was enforced. The limited economic and consumer activity caused our property development business, malls, hotels and resorts to contract. Only our real estate logistics and office leasing businesses remained relatively resilient. Beginning in June as the economy gradually reopened with a less restrictive general community quarantine that allowed public transport, construction and mall and hotel operations to resume within prescribed government guidelines, we saw continuous improvement in our performance for the remainder of the year. Reservation sales reached a low point of PHP 13.6 billion in the second quarter but grew by 66% to PHP 22.5 billion in the third quarter and generated another PHP 21.1 billion in the fourth quarter. This brought full year sales to PHP 81.9 billion or 56% of 2019 levels. The foot traffic across our 32 shopping centers averaged 8% of pre-COVID levels in May but accelerated to 45% by December. We redeployed more than 32,000 construction workers, representing 48% of the workforce across 174 sites. The reopening fostered sequential growth in the succeeding quarters. From PHP 12.8 billion in the second quarter, revenues grew 73% in the third quarter to PHP 22.1 billion and another 49% to PHP 32.9 billion in the fourth quarter. Net income, on the other hand, registered at PHP 197 million in the second quarter and increased to PHP 1.8 billion and PHP 2.4 billion in the last 2 quarters. Summing up our performance. We closed the year with total revenue of PHP 96.3 billion and a net income of PHP 8.7 billion, a decline of 43% and 74%, respectively, compared to 2019. I am proud of how our people acted quickly to adapt to the new normal. Our residential brands maximized digital assets to reach out to buyers. This resulted in 17% of reservation sales originating from online channels. A total of 36% of our completed units were turned over to buyers in virtual format, providing a comprehensive 360-degree view of the finished products. Despite construction difficulties, we handed over 6,635 residential units wherein 98% were accepted without rework. Our malls were kept open to make essential goods and services available to consumers. To facilitate contactless purchases, Ayala Malls updated its Zing app, introduced Ayala Malls Neighborhood Assistant, a personal shopper service, and DriveBuy!, a curbside pickup option. Our offices, industrial parks and warehouses likewise remained open to allow uninterrupted operations for BPO companies, corporates, manufacturers, and trading businesses. Meanwhile, our hotels served as quarantine facilities for returning overseas Filipinos. With the support of the Department of Tourism and the local government of Palawan, our resorts hosted 41 tourism bubbles, serving more than 2,000 guests, ensuring safe and sustainable travels with no single positive COVID-19 case recorded. When we piloted the program in the third quarter, the Department of Tourism recognized it as a model for the safe reopening of the tourism sector. During the ECQ, our property management business, Ayala Property Management Corporation, or APMC, ensured that all 253 managed properties remain safe and were provided essential services. More than 5,000 personnel stayed in on-site, supervised by a safety council assigned to each property. We received many commendations and letters of appreciation from residents of our communities for APMC's unwavering commitment to ensuring their welfare during this challenging period. Given the imperative for contactless interaction, we completed 41 digital initiatives involving automation and process improvements to enhance customer engagement and efficiency. We also accelerated the industrialization initiatives of MDC by expanding its prefab, prefinish and volumetric construction to increase productivity and augment limited on-site manpower deployment. Currently, approximately 30% of our construction work is completed in MDC's off-site manufacturing facilities. Notwithstanding the pandemic, we continued to introduce products into the market. We launched our 30th estate, South Coast City, a 26-hectare mixed-use development located in South Road Properties, Cebu City. The project in partnership with the SM Group is in addition to be the entertainment capital of the Visayas region. We also launched 13 residential projects across our different brands. Moreover, we completed commercial leasing projects. We added 2 office buildings with a total of 66,000 square meters of gross leasable area in BGC and Cebu. We made available additional 345 hotel rooms with the completion of Seda Central Bloc in Cebu, and opening of rooms in Seda Residences Ayala North Exchange and Seda BGC. We expanded the gross leasable area of our standard factory buildings and warehouses under the ALogis brand with 32,000 square meters of new space. More than a decade after the passage of the Real Estate Investment Trust law, or REIT, we embarked on the landmark public listing of AREIT, the first REIT in the country and a new asset class that aims to provide stable dividend income and build confidence in the Philippine capital markets amidst the challenging environment. The proceeds of PHP 12.3 billion from the initial public offering provided additional funding for our local projects. We remain steadfast in advancing our carbon neutrality target by 2022. With still 2 years remaining, we offset 91% of our carbon emissions with 57 properties utilizing renewable energy, 586 hectares of forest protected and more than 100,000 native trees planted since 2018. In addition to our circular waste management system, we diverted from landfills 28 metric tons of plastic, equivalent to 2.8 million PET bottles and converted these into eco-friendly construction products for our residential and estate developments in Luzon. We are honored to be recognized for significant milestones in 2020. The AREIT IPO was recognized as Deal of the Year for Southeast Asia, by Finance Asia; Best IPO in the Philippines at the Asset 2020 Country Awards; and Equity Deal of the Year at the Annual International Finance Law Review Awards. We are encouraged by the recognition we received from the ASEAN Capital Markets Forum, the Securities and Exchange Commission, and the Institute of Corporate Directors for our unwavering adherence to strict corporate governance practices. Ayala Land is now 1 of the top 3 publicly listed companies in the Philippines and 1 of the top 20 in the ASEAN region based on the ASEAN Corporate Governance Scorecard. Ayala Land remains to be the only Philippine company included in the SAM Sustainability Yearbook by S&P Global since 2017. Together with Ayala Corporation, it is 1 of only 2 Philippine companies on the S&P Dow Jones Index. We also received an A- leadership rating on climate change and recognition as one of the most improved companies in Southeast Asia in 2020 by the Carbon Disclosure Project for its commitment to climate action and carbon neutrality. I'm grateful to our various business units who's enduring dedication to excellence, enabled us to achieve these milestones on top of other recognitions. Although we are still in the middle of the pandemic, we are hopeful that the economy would continue to improve as the vaccine rollout gains traction in 2021. We believe this health crisis has inevitably caused temporary and permanent shifts in consumer behavior, affecting our business lines in numerous ways. Each business unit is carefully adjusting their strategies and practices to strengthen our market position and reinvent some of our business models to adapt to the new environment. We are working towards a V-shaped recovery, and I'm confident that we have the institutional capability, required resources and a strong balance sheet to achieve this objective. Our view is that it will take 2 to 3 years to revert to our 2019 performance. To set this recovery in motion, we allocated PHP 88 billion in capital expenditures and PHP 100 billion worth of residential products for launch in 2021. With 30 estates across the country and more than 12,000 hectares of land bank, we face the year confident in our ability to seize new opportunities in an evolving business climate. In the midst of this pandemic and period of uncertainty, I've never been prouder and more privileged to be working with each and every one of you. To our Board of Directors, I'm grateful for your engagement, wisdom and guidance. Your collective experience and knowledge provided our management team with insights that help navigate our company during this pivotal year. To our shareholders, thank you for your trust as we carve new paths for Ayala Land to build communities, enrich more lives and remain a catalyst for growth in our country. To all my colleagues at Ayala Land, thank you for keeping our businesses operating, our properties secure, our people safe and for helping our various stakeholders during this difficult period. Your dedication and commitment showed our ability as a team and as one family to adapt and overcome the challenges brought about by this health crisis. As ONE Ayala Land, we remain united in our efforts to create a more empowering and prosperous future for generations to come. At this point, I would like to invite everyone to watch our corporate video. Once again, thank you, and good morning. [Presentation]

May I now ask the Secretary to present the proposed resolution on this item and the voting results.

Mr. Chairman, our management is proposing the adoption of resolution #S-02-2021. for the noting of the company's annual report and the approval of the consolidated audited financial statements of the company and its subsidiaries as of December 31, 2020, as audited by its external auditor, SyCip Gorres Velayo & Company. The resolution is shown on the screen. Stockholders owning 23,864,984,885 shares or 85.85% of the total outstanding voting shares and 99.78% of the shares represented in this meeting have voted for the adoption of the resolution. Therefore, Mr. Chairman, resolution number #S-02-2021 has been approved.

Thank you, Mr. Secretary. We now move to the next item in the agenda, the ratification and approval of all the acts of our Board of Directors and officers since our Annual Stockholders Meeting on April 22, 2020, until today. Mr. Hermosura will explain this matter and present the proposed resolution together with the voting results thereon.

Mr. Chairman, our Board of Directors and management seek ratification of all the acts and resolutions of the Board, the Executive Committee and other Board committees exercising powers delegated by the Board which acts and resolutions were adopted from April 22, 2020 until today. These acts and resolutions are reflected in the minutes of the meetings, and they include: the election of officers and members of the various Board committees and independent advisers to the Board; designation of lead independent directors; ratification and confirmation of the actions of the Board committees; appointment of authorized representatives and bank signatories; budget and funding plan; 2021 key result areas; renewal of short-term credit facilities; declaration of dividends; increase in sale of accounts receivable limits; increase in share allocation for employee stock ownership grants; debt refinancing and project launches; and matters covered by disclosures to the Securities and Exchange Commission and the Philippine Stock Exchange. Stockholders' ratification is also sought for all the acts of our officers performed in the general conduct of our business or in accordance with the resolutions of the Board, the Executive Committee and other Board committees and of our bylaws from April 22, 2020 to date. These acts were performed to implement the resolutions of the Board or its committees or as part of the corporation's general conduct of its business. We are showing on the screen resolution #S-03-2021. On the voting results, Mr. Chairman, stockholders owning 23,784,146,909 shares or 85.56% of the total outstanding voting shares and 99.44% of the shares present in this meeting have voted for the adoption of resolution #S-03-2021. Therefore, the resolution has been adopted.

Thank you, Mr. Secretary. The next item in the agenda is the approval of the merger of the company and Cebu Holdings, Inc., Asian I-Office Properties, Inc., Arca South Commercial Ventures Corp. and Central Block Developers with the company as the surviving entity. Ms. Anna Margarita Dy, Head of our Strategic Landbank Management Group and the President of Cebu Holdings would present the plan of merger.

Good morning, everyone. I will be presenting the merger of Ayala Land or ALI; with Cebu Holdings, Inc., or CHI; Asian I-Office Properties or AiO; Arca South Commercial Ventures Corporation, or ASCVC; and Central Block Developers Inc., or CBDI, with Ayala Land as the surviving entity. Based on the chart, as projected, Ayala Land owns 71.1% of CHI. Both are publicly listed companies. Meanwhile, CHI owns 100% of AiO and 55% of CBDI, while Ayala Land owns the remaining 45% stake in CBDI. Similarly, Ayala Land wholly owns ASCVC. The rationale of this merger is to allow Ayala Land and CHI to consolidate its Cebu portfolio under 1 listed vehicle, thereby creating a unified story and platform for our Cebu investments. This internal restructuring will also result into operational synergies, efficient funds management and simplified reporting to government and regulatory agencies. Here is the summary of the benefits of the merger. First, it will simplify the ownership structure across the constituent corporations involved in the merger, specifically addressing the complicated ownership structure of certain Cebu joint venture companies, as well as centralized certain leasing assets into Ayala Land. Second, reducing to 1 listed company will minimize our administrative and holding costs such as man hours, meetings and fees. Lastly, the merger will allow Ayala Land to maximize operational synergies from streamlined operations, efficient funds management and simplified reporting to government and regulatory agencies. With the rationale and benefits discussed in the previous slides, we present for approval the plan of terms of the Ayala Land, CHI, AiO, ASCVC, CBDI merger with Ayala Land as the surviving entity. We have computed for the adjusted net asset values of Ayala Land and CHI based on their existing market values as well as the income generated from their assets, and came up with a swap ratio of 0.19 ALI share for every 1 CHI share. This means that everyone CHI share owned by a CHI shareholder will be issued an equivalent of 0.19 ALI share. We would like to note that a third-party fairness opinion from PricewaterhouseCoopers, Isla Lipana & Co. was sought on the swap transaction, following the rules of the Securities and Exchange Commission, or SEC, and the Philippine Stock Exchange or PSE. Their valuation resulted to a swap ratio range of 0.1866 to 0.1911 ALI share for every 1 CHI share. Following this, PwC is of the opinion that the swap ratio set by the management of 0.19 share of ALI per 1 CHI share is fair from a financial point of view. With the 0.19 swap ratio, Ayala Land will issue an additional 409,783,760 ALI common shares to CHI shareholders out of its unissued shares. Ayala Land being the majority owner of CHI will be issuing 291,463,784 common shares to itself, which will be classified as ALI treasury shares. In addition, Ayala Land will issue 199,842,591 common shares to itself in exchange for AiO, ASCVC and CBDI equity to be likewise classified as ALI treasury shares. This will result to a total of 609,626,351 ALI common shares to be issued out of its unissued common shares following the merger. Net of the total of 491,306,375 ALI treasury shares, new ALI common shares to be issued emanating from the merger will be at 118,319,976 common shares. Once approved or voted for by 2/3 of our shareholders today, the plan of merger and all required documents will be submitted to SEC for approval. The effectivity date of the merger will be upon SEC approval. This merger will also require the approval of other relevant agencies, such as the Bureau of Internal Revenue or BIR, PSE and the Philippine Economic Zone Authority or PEZA. The last portion of this presentation is an illustration of the capital structure of Ayala Land before and after the merger. Following the issuance of 118,319,976 ALI common shares to the CHI shareholders excluding the ALI shares, which ALI will issue to itself, the resulting outstanding common shares of ALI post-merger will be 14,848,715,575. Top shareholder remains to be Ayala Corporation, or AC. But its pre-merger ownership in ALI common shares of 44.4% will be diluted to 44.1% post-merger. Meanwhile, the public float of ALI post-merger will increase to 55.9% from 55.6%. Including the preferred shares, AC's premerger stake in ALI of 67.3% will reduce to 67% post-merger. That concludes my presentation on the merger of Ayala Land and Cebu Holdings and the other constituent corporations. Thank you. And once again, good morning.

Thank you, Ms. Dy. May I now ask the Secretary to present the proposed resolution on this item and the voting results.

Mr. Chairman, our management is proposing the adoption of Resolution #S-04-2021 for the approval of the plan of merger, as Ms. Dy just explained to us. The resolution is shown on the screen. Stockholders owning 21,667,270,065 shares or 77.95% of the total voting outstanding shares and 90.59% of the voting shares represented in this meeting have voted for the adoption of Resolution #S-04-2021 for the approval of the plan of merger. Therefore, Mr. Chairman, the resolution has been adopted.

Thank you. The next item on the agenda is the approval of the amendment of the company's employee stock ownership plan. May I call Mr. Augusto Bengzon, our CFO, Treasurer and Chief Compliance Officer, to present this item.

Greetings to all our stockholders and stakeholders. Allow me to present to you this morning the proposed amendment to Ayala Land's Employee Stock Ownership or ESOWN Plan. We seek your approval to increase the share allocation for ESOWN grants from the current limit of 2.5% to 3% of the company's authorized capital stock, equivalent to an additional 100 million common shares, bringing the total allocation from 500 million to 600 million common shares. The rationale for this proposed amendment to the ESOWN Plan is as follows: first, the ESOWN is an effective incentive mechanism that has enabled the company to attract, reward and retain key talents in the organization; second, we believe that this ensures an alignment of interests between Ayala Land employees and our shareholders and stakeholders; finally, under the ESOWN Plan, as approved by the Securities and Exchange Commission in 1991, Ayala Land is authorized to issue an aggregate of 2.5% of its authorized capital stock equivalent to 500 million common shares for its stock ownership program. To date, or 30 years after the SEC's approval, Ayala Land has already issued a total of 494.8 million common shares from its ESOWN allocation, leaving a balance of 5.2 million shares. Hence, there is a need to replenish the number of shares available for future ESOWN grants. This concludes my presentation on the proposed amendment to Ayala Land's ESOWN plan. Thank you, and good morning.

Thank you, Mr. Bengzon. May I now ask the Secretary to present the proposed resolution on this item and the voting results.

Mr. Chairman, management is proposing the adoption of Resolution #S-05-2021 for the approval of the amendment of the company's employee stock ownership plan, as Mr. Bengzon just explained. The resolution is shown on the screen. On the voting results, stockholders owning 23,528,852,351 shares or 84.65% of the total voting outstanding shares and 98.3% of the voting shares represented in this meeting have voted for the adoption of resolution #S-05-2021. Therefore, the resolution has been adopted, Mr. Chairman.

Thank you. The next order of business is the election of the 9 members of the Board of Directors for the ensuing year. Ms. Sherisa P. Nuesa, Chairman of the Corporate Governance and Nomination Committee, will explain this item.

Thank you, Mr. Chairman. Ayala Land is committed to maximizing long-term stockholder value and recognize that this begins with the proper mix of directors. A well-balanced and diverse Board that addresses the needs of the corporation and with the necessary expertise, experience and fresh perspective ensures proper performance of the Board's role particularly in guiding management and managing risks. In turn, this assures Ayala Land's long-term sustainability in a dynamic business landscape. Further, Ayala Land believes in Board independence. With this, Mr. Chairman, in accordance with our bylaws, the revised manual of corporate governance and the charter of the Board of Directors, the Corporate Governance and Nomination Committee of the Board has ascertained that the following 9 duly nominated stockholders, including the nominees for independent directors, can add value and contribute independent judgment to the formulation of sound corporate strategies and policies for the company and are qualified to serve as directors of the corporation for the ensuing term. Fernando Zobel de Ayala; Jaime Augusto Zobel de Ayala; Bernard Vincent O. Dy; Antonino T. Aquino; Arturo G. Corpuz; Rizalina G. Mantaring; Rex Ma. A. Mendoza; Cesar V. Purisima; and yours truly, Sherisa P. Nuesa. Mr. Mendoza, Ms. Mantaring, Mr. Purisima, and yours truly, have been nominated as independent directors. All the nominees have given their consent to their respective nominations.

Thank you, Ms. Nuesa. Mr. Secretary, we have the results of the election. May we have the results?

Mr. Chairman, I'm pleased to report that each of the 9 nominees for directors has garnered at least 23,010,980,065 votes. Given this, I certify, Mr. Chairman, that each of the nominees has received enough votes for election to the Board and that resolution #S-06-2021 for the election of the 9 nominees to the Board has been approved. We are showing Resolution #S-06-2021 on the screen, Mr. Chairman.

Thank you. The next item in the agenda is the election of the company's external auditor. For this, may I ask Mr. Cesar Purisima, Chairman of the Audit Committee, to present.

Thank you, Mr. Chairman, and good morning. The external auditor plays a key role in undertaking an independent audit of the corporation, and in providing an objective assurance on the company's financial statements. The Audit Committee exercises oversight over the company's external auditors, including assessing their integrity and independence and the effectiveness of their audit process. Mr. Chairman, in the performance of this oversight function, the Audit Committee evaluated the performance of our present auditor, the firm of SyCip Gorres Velayo & Company during the past year and the committee was satisfied with their performance. The committee and the Board of Directors have thus agreed to endorse for our stockholders' approval, the election of SyCip Gorres Velayo & Company as our external auditor for 2021 for an audit fee of PHP 4,412,370 exclusive of value-added tax and out-of-pocket expenses. Thank you.

Thank you, Mr. Purisima. Mr. Secretary, kindly present the proposed resolution on this item and the voting results.

Mr. Chairman, our management is proposing the adoption of resolution #S-07-2021 for the election of our corporation's external auditor and fixing of its remuneration. The resolution is shown on the screen. On the voting results, I'm pleased to report, Mr. Chairman, that the stockholders owning 23,695,506,075 shares or 99.0% of the total voting shares represented in this meeting, voted for the adoption of resolution #S-07-2021. Therefore, Resolution #S-07-2021 has been approved, Mr. Chairman.

Thank you, Mr. Secretary. Mr. Secretary, are there other matters that require consideration by the stockholders?

There is none, Mr. Chairman. If I may mention, we notified our stockholders that they may propose items for inclusion in the agenda, but we did not receive any proposal, Mr. Chairman.

Okay. If that's the case, then we can now address the questions and comments from the stockholders. Our Investor Communications and Compliance Division Head, Mr. Garcia, will read aloud the questions and comments together with the names of the stockholders who sent them. As mentioned by Mr. Hermosura earlier, management will reply by e-mail to questions and comments not taken up during this meeting. Thank you.

Mr. Chairman, the first question is from Anthony Gilbert Antiquera. "What would be the benefit to minority shareholders of the planned merger between Ayala Land and Cebu Holdings as well as the increased employee stock ownership plan?"

Thank you. May I request Bobby Dy to respond to Mr. Antiquera's question.

Thank you, Mr. Chairman. Let me first address the benefits of the ALI and CHI merger. This was actually extensively discussed by Ms. Anna Margarita Dy in her presentation a while ago. But let me just provide a brief summary. The merger basically will simplify our ownership structure and thereby minimize administrative and holding costs. In addition, the merger also streamline operations, allow us to manage funds more efficiently and simplify our regulatory reporting requirements. Ultimately, this will lead to synergies that will enhance our operating margins and financial performance but that will now benefit all our shareholders. In relation to the increased employee stock ownership plan. This was also covered a while ago by our CFO, Mr. Augusto Bengzon. But let me just provide again a brief summary. As Mr. Bengzon mentioned, we've had this plan now for around 30 years and what we found is it has been an effective system to attract, retain and reward key talents in our organization. It also allows us to align shareholder interest with employees to grow the company and increase shareholder value. In addition, what we found is employees who actually own Ayala Land shares increase their commitment as they now become owner managers. And finally, it encourages our employees to build long term careers with Ayala Land. Thank you, Mr. Chairman.

Thank you. Mike, can we have the next question?

Yes, Mr. Chairman. The second question comes from Asila Larizabal. "Does Ayala Land have its own COVID-19 vaccination program?"

The whole Ayala Group will be working with AC Health, our subsidiary, in health care issues. And we've launched a program called the Ayala Vaccine and Immunization Program. So in coordination with DOH and IATF, we will be providing vaccines to all our employees for free. Go ahead, Mike, with the next question, please.

We have a few more questions, Mr. Chairman. The third question is from Mr. James Erwin Villarin. "With restrictions due to the community quarantines, are you expecting any construction delays? If so, how are you addressing these?"

Could we ask Mr. Dan Abando to answer that as Head of MDC?

Thank you, Mr. Chairman. Yes, we are experiencing construction delays due to insufficient manpower, lower productivity due to physical distancing and work stoppages. However, we are trying to push on these existing delays and mitigate any further delays by implementing and updating our COVID-19 protocols aligned with government guidelines to prevent COVID spread and to manage our active cases. We also built on-site live-in facilities and now operating about 36,000 bed spaces for our workers and providing these workers incentives so that they will use these facilities. In addition, we are granting productivity-based incentives to enhance output. And these incentives are competitive with other contractors in the company. We are engaging additional subcontractors, and we have expanded our vendor base as well as strengthening our arrangements with them so that we can lock in on their manpower resources. And for our suppliers to effect on-time delivery and sufficiency of quantities of critical materials. We are supporting them by proposing and offering shorter payment cycles, especially to our micro and small subcontractors. We are deploying, as far as site management is concerned, we are deploying additional well-experienced and seasoned project managers and supervisors. And to improve our speed of execution and reducing manpower requirement, we are increasing the use of highly mechanized methods and ramping up on our off-site prefabrication capabilities for our building systems and components. In general and strategically, we are accelerating our initiatives to industrialize construction. Our digital transformation is continuing and adopting other innovations in construction technology. Thank you, Mr. Chairman.

Thank you, Dan. Mike, we can go to the next question, please.

Yes, Mr. Chairman. The fourth question comes from Dia Lim. "Under the whistleblowing policy of ALI, the ALI Audit and Risk Committee investigates whistleblowing reports through the ALI Internal Audit division. In situations where a legitimate whistleblowing complaint is not fairly acted upon by the committee what protocols would be followed? Are there mechanisms available to the whistleblower in such event?"

Could I ask our Chief Compliance Officer, Toti Bengzon, to respond to this?

Thank you, Mr. Chairman. Pursuant to the company's whistleblowing policy, employees, third-party business partners and other stakeholders are free to report any fraud violation of laws, rules and regulations or misconduct within the company through our business integrity channels without fear of retaliation. These secured channels provide the concerned individuals with all possible means to come forward and report their concerns whether anonymously or not, either through electronic mail, telephone, website or face-to-face discussions. The business integrity channels are overseen by the ALI Ethics Committee. And the Ethics Committee has a direct reporting line to the Audit Committee. It is chaired by the Head of our Human Resource division and composed of selected members from our internal audit division, risk management division and Ayala Group Legal. The ethics committee evaluates and resolves concerns received via these business integrity channels in accordance with the whistleblowing policy and ensures just and prompt resolution. Once the investigation is completed, the ethics committee submits the report to the respondent's human resource department for its immediate action and resolution in accordance with the applicable Ayala Land policies and procedures. And when appropriate, imposes the sanctions in line with its chart of offenses. Now since the establishment of the company's whistleblowing policy in 2012, the company has received a total of 306 reports, all of which have been resolved or completed with the exception of the 5 reports which are still currently undergoing investigations. In particular, our record show that for reports investigated and completed from 2018 to March of 2021, 60% have resulted in sanctions, which include verbal reprimands, written warnings, suspensions and terminations. A whistleblower can check the status of this report, whether it is open, under investigation or closed and resolved via the website using the unique ticket number and link generated by the website and which was provided to the whistleblower during the time the report was lodged. Thank you.

Thank you, Toti. Can we go to the next question, Mike?

Yes, Mr. Chairman, the fifth question we received is from Antoinette Valdez. "What is your outlook moving forward? And when can we expect a recovery?"

Bobby, could you handle this, please?

Thank you, Mr. Chairman. As I mentioned in my President's report, our plan is to work towards a V-shaped recovery starting this year. Our target is to get back to our 2019 performance in the next 2 to 3 years. Of course, the key assumption here is the health crisis will somehow be addressed, and there's an effective rollout of the vaccine. And therefore, we hope that the economy will continue to reopen and there's a meaningful growth in our GDP. The recovery, or our recovery, will be led by our biggest businesses, mainly estate development and residential business. All things considered over the last year, demand continues to be encouraging for commercial lots and residential products. And with anticipated recovery and continued low interest rate environment, we expect demand to continue to improve. Offices and real estate logistics also continue to be quite resilient. And we expect some growth in those segments given construction completion of new projects. Finally, for our malls, hotels and resorts, we believe that this will lag in the recovery and will only fully recover when mobility restrictions are fully lifted and the pandemic is fully addressed. To kick off our V-shaped recovery, as I mentioned in my report a while ago, we've allocated PHP 88 billion in capital expenditures in 2021 and PHP 100 billion in residential launches this year. Thank you, Mr. Chairman.

Thank you, Bobby. Mike, are there any more questions?

We have no more questions, Mr. Chairman. Thank you.

Thank you. That concludes this morning's proceedings. The meeting is hereby adjourned. The link to the audio and video recording of this meeting will be posted on our website. Stockholders may raise any issue, clarification and concern about this meeting within 2 weeks from the posting of the link by sending an e-mail to [email protected]. Thank you very much for joining us today. 2020 was a difficult year, which taught all of us to be resilient, creative, compassionate and adapt to new realities. As we move forward, Ayala Land, its employees and its partners will continue to persevere and work together to respond to the raging pandemic. Let us look ahead for better times and new opportunities. I wish everyone continued good health. Please take care and keep safe.