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The Board of Directors of Ayala Corporation approved on February 10 2006, the reclassification of the unissued Preferred shares and redeemed Preferred shares of the Corporation, into 5.8 billion new class of Preferred shares with a par value of P1.00 per share or an aggregate par value of P5,800,000,000.

The new Preferred shares, to be known as Preferred “B shares”, will have the following features :

1. Optional redemption by the Corporation;

2. Issue value, dividend rate and declaration thereof to be determined by the Board of Directors;

3. Cumulative in payment of current dividends as well as any unpaid back dividends, and non-participating in any other further dividends;

4. Non-convertible into common shares;

5. Preference over the holders of common stock in the distribution of corporate assests in the event the dissolution and liquidation of the Corporation and in the payment of the dividend at the rate specified at the time of issuance;

6. Non-voting except in those cases specifically provided by law;

7. No pre-emptive rights to any issue of shares, Common or Preferred; and

8. Reissuable when fully redeemed.

 The Board likewise approved the amendment of Article VII of the Amended Articles of Incorporation of the Corporation to reflect the aforesaid reclassification of preferred shares.

The foregoing acts of the Board will be submitted for the ratification of the stockholders during the annual stockholders’ meeting of the Corporation on 07 April 2006.

The above information was submitted by Ayala managing director for corporate governance and legal affairs Renato O. Marzan in compliance with the disclosure requirements of the Securities and Exchange Commission and the Philippine Stock Exchange.

Ayala Corporation has sold and transferred all its 50,600 outstanding shares of Aon Philippines Inc. (formerly Ayala Aon Risk Services, Inc.) in favor of Aon Holdings B. V. for the aggregate purchase price of P65.7 million. The above information was submitted on January 17, 2006 by Ayala managing director for corporate governance and legal affairs Renato O. Marzan in compliance with the requirements of the Securities and Exchange Commission and the Philippine Stock Exchange.

Businesses can use their core competencies to come up with sustainable corporate social responsibility programs that help uplift the lives of the underprivileged.

This new paradigm of how business can do good was put forward by Globe Telecom president and CEO Gerardo C. Ablaza, Jr. at the recently concluded Corporate Social Responsibility (CSR) Week Expo organized by the 59-strong League of Corporate Foundations.

Ablaza said that by including social issues into the development and execution of core business strategies, companies have the opportunity to contribute to the development of marginalized sectors of society and turn them into consumers and active participants in nation building. This way, CSR efforts go beyond promoting good public relations and become sustainable solutions to social problems.

The Ayala group, for instance, has integrated CSR in its corporate strategy. The parent company actively manages its portfolio to ensure that investments in property, banking, telecommunications, water infrastructure, electronics and information technology deliver innovative and high quality products and services to its stakeholders.

“In the Ayala group, we believe that the daunting task of leading our country to progress does not rest solely on the shoulders of government,” explained Ablaza, “One of the better ways of participating in national development is the effective use of our core products and services to uplift the lives of the Filipino.”

Meanwhile, programs driven by the Ayala Foundation and Ayala subsidiaries and affiliates are focused on education, information technology, livelihood, microfinance, and community development”‚”areas that not only reflect the companies” core values but also form part of their core competencies.

In the case of Manila Water, its flagship program Tubig Para Sa Barangay has not only improved water supply, addressed health and environmental issues, and enhanced the quality of life in underserved communities, it has also reached a substantial market and reduced revenue losses from illegal connections and leaks.

Bank of the Philippine Islands has extended credit of over P60 million to non-profit institutions, cooperatives and micro-entrepreneurs. BPI Foundation also trains small and medium enterprises to help improve viability and profitability.

Ayala Land’s Dagdag Kita sa Pamilya program conducts livelihood training for the unemployed. This also helps ensure that its property developments would continue to have vibrant neighboring communities.

At Globe Telecom, the Bridging Communities, or BridgeCom program is focused on community leadership and development, education, information technology, and livelihood.

Ablaza cited the case of Brgy. Bolton, a farming and fishing community eight hours away from Davao City that has begun to struggle with increasing unemployment and migration of its skilled workers to the city. Globe Telecom, in partnership with ABS-CBN Foundation, created the BridgeCom sa Bayan training program in local governance and business development. As an offshoot of this, three store owners have started a Globe Autoload Max business and community leaders have defined their own micro-enterprise plans.

In another case, G-Cash, a service that allows payments and fund transfers through mobile phones, is now being tapped by the Rural Bank Association of the Philippines to facilitate loan amortizations and deposits for its microfinance borrowers.

According to Ablaza, BridgeCom addresses the needs of two major underserved sectors: the entrepreneurial poor who have the capacity to become successful business people using the Autoload Max platform, and micro-credit institutions and cooperatives through G-Cash. While these cases are unique to the Ayala group, Ablaza said that businesses can follow similar paradigms that deliver returns for its investors as well as society at large. By shifting CSR from charity and ad hoc forms of support to more strategic programs, business can make a real and lasting impact on society.

As Ablaza said: “Nothing brings greater joy and fulfillment than the knowledge that we have offered our talents and efforts in helping others stand on their feet and live their lives with dignity.”

Bridging Communities

Bank of the Philippine Islands (BPI), the financial arm of the Ayala group of companies, has continued to show strong performance after posting a P2.3 billion net profit during the second quarter, bringing its first semester profit to P4.3 billion. The bank’s second quarter profit, up 23 percent from P1.9 billion a year earlier, was driven by higher interest and fee-based incomes. As a result, the bank’s return on equity (ROE) also rose to 15.9 percent from 13.3 percent during the second quarter last year, while return on assets stood at 2 percent compared to 1.8 percent last year. BPI’s total assets amounted to P473.7 billion, of which total deposits comprised P366.9 billion. The bank’s total capital was at P55.9 billion. With a market capitalization of P108.8 billion, BPI is the highest capitalized bank listed in the Philippine Stock Exchange.

After disposing of P8.6 billion worth of non-performing loans (NPLs) last year, BPI again sold P2.4 billion worth of NPLs last July, thus improving considerably its overall financial condition. The recent sale of the NPLs brought down its year-to-date NPL ratio to 4.6 percent from 5.6 percent last year, making BPI one of the strongest banks in the industry.

On the ROPOA side (real and other properties owned or acquired), BPI managed to make a 26 percent increase in retail sales during the first semester compared to the same period last year. As of end-June 2005, BPI had sold over P998 million worth of foreclosed properties vs. P794 last year. To complement this in-house initiative, the bank is also planning to put some properties in south Luzon in the auction block.

As it celebrates its 154th year, BPI is pursuing an expansion strategy based on organic growth (growth from within) and mergers and acquisitions (growth through consolidations) to keep its market leadership. At present, BPI also leads in consumer banking through its thrift bank subsidiary, BPI Family Savings Bank, which holds the largest share of the market.

Last July 27, BPI signed a memorandum of agreement to acquire Prudential Bank, a medium size universal bank. This is BPI’s first acquisition since its merger with Far East Bank and Trust Company in 2000 and DBS Bank Philippines in 2001. Shortly before it signed the agreement to acquire Prudential Bank, BPI also offered to buy the semi-private Philippine National Bank, one of the major banks in the country. In view of its renewed financial strength, BPI has been on the lookout for some good acquisitions in order to bolster its position as a rising regional financial powerhouse.

In June 2005, the College of the Holy Spirit (CHS) of Manila will open its doors to a unique group of students in their freshman high school year.

Sixty-nine bright, young students from poor families, chosen for their potential for academic success and given a special public school learning environment, will soon be among the 200 or so elementary school graduates who will get their secondary education at CHS.

These children were until recently students of the Center of Excellence of Public Elementary Education, or Centex, a groundbreaking program of the Ayala Foundation in cooperation with several private companies and the Department of Education (DepEd). It is a program that stemmed from a desire to provide children from disadvantaged families with quality education and help change the course of their lives and that of their community.

Seven years since the first school was created in Tondo, Manila, Centex has produced its first batch of graduates of 71 confident, talented achievers who not only surpass their counterparts in government-administered tests among public and private schools but also exhibit a consciousness that can only come from their direct experience of poverty.

These results drew the College of the Holy Spirit to forge a partnership with Ayala Foundation that would continue to provide Centex students with a similar kind of learning environment, one that challenges their intellect and fosters their sense of social duty. It was providential, too, that the 92-year old Catholic college began to offer high school education again beginning 2004.

The CHSM-Centex High School is a coeducational institution that vows to provide good, values-based education. For the coming academic year, CHSM-Centex is expeting around 200 students from Centex and from other “feeder schools” and neighboring elementary schools. And like its parent institution, the high school gives equal importance to developing core values as well as academic excellence.

CHS Manila president Sr. Eufracia Marcojos explained, “Our vibrant community celebrates diversity, nurtures spirituality, encourages experessions of divergent thinking, and prepares the next generation for leadership and service towards the promotion of justice.”

Holistic approach
This development harks back to the beginnings of the College of the Holy Spirit, which in 1913 was established by missionary sisters as a primary school and later developed into a college school for women. Sr. Marcojos said that the creation of the secondary school last year was an expression of their belief that basic education plays a critical role in the integral formation of our youth.

At Centex, children are also given a holistic learning enviroment. They are taught under a special curriculum that incorporates the latest educational trends and research and is crafted by DepEd representatives and a team of volunteer educators from local schools as well as the United States.

The two Centex schools in Tondo, Manila and Bauan, Batangas are equipped with various facilities that the children are free to use. Textbooks, uniforms, and transportation subsidies are provided. The young scholars are served lunch every day to supplement their nutritional needs. In addition, parents are offered parenting workshops and livelihood training, extending the benefits of the program to immediate families and the community at large.

“Centex improves the physical, financial, and human resources of an ordinary public elementary school” said Ayala Foundation president Victoria P. Garchitorena. “In so doing, we ultimately give children of poor families quality education otherwise denied this sector of Philippine society.”

 Though within the purview of the Department of Education and the local government, Centex is able to provide these benefits through endowment funds created by private companies and managed by Ayala Foundation. Ayala Land funded the first school in Tondo, and Globe Telecom and Pure Foods Corporation helped create the Centex school in Batangas. Respected artists such as Bencab, Romulo Galicano, Anita Magsaysay-Ho, and Malang have also supported the schools by allowing their artworks to be featured in fundraising merchandise.

Shared mission
Over the years this unique program has shown encouraging results. Centex consistently tops the DepEd’s achievement tests given to all public schools in Manila. Students also lead competitions in math, literacy, and the arts among public and private schools and are constantly exceeding expectations of their parents, teachers, and those who witness the dramatic change in their lives. Two of the recent graduates will soon be studying in the country’s leading science high schools.

The Missionary Congregation of the Servants of the Holy Spirit that manages the College of the Holy Spirit is eager to welcome the 69 Centex students into their community.

Said Sr. Eufracia: “We will provide these students quality education that addresses the strengthening of both Gospel and Filipino values. We want to help create among our youth, servant leaders, discerning persons equipped with excellent skills, who are nurturers of their environment and proud to be Filipino.”

With shared goals for the younger generation, the College of the Holy Spirit and the Ayala Foundation through Centex, believe that their partnership can help make a just, peaceful, and empowered society in the years to come.

The College of the Holy Spirit of Manila (CHSM) and the Center of Excellence in Public Elementary Education (Centex) have formed a partnership to provide high school education to the first batch of graduating students of Centex.

The CHSM-Centex High School will open its doors in June to students from Centex Tondo, Manila, as well as more than a hundred students from other “feeder schools” and neighboring elementary schools.

Centex is a program of the Ayala Foundation in cooperation with private companies and the Department of Education (DepEd). With two campuses in Tondo and Bauan, Batangas, Centex provides children from disadvantaged families with quality education equal to that of the country’s best public and private schools.

The school is set to honor its first batch of graduates in simple ceremonies on March 29 at the Onstage Theater in Greenbelt 1, Makati City.

The Missionary Congregation of the Servants of the Holy Spirit which manages the 92-year-old Catholic college is eager to welcome the Centex students into its community. The CHSM-Centex High School will be a coeducational institution that seeks to challenge young Filipinos’ intellect and foster their sense of moral and social duty.

Said CHS Manila president Sr. Eufracia Marcojos: “We will provide these students quality education that addresses the strengthening of both Gospel and Filipino values. We want to help create among our youth, servant leaders, discerning persons equipped with excellent skills, who are nurturers of their environment and proud to be Filipino.”

With these shared goals, the College of the Holy Spirit and Ayala Foundation’s Centex, believe that their partnership will produce generations of young Filipinos who will help build an empowered Philippine society in the years to come.

The country’s leading companies were recognized by business leaders across the Asia-Pacific in the annual Asian Wall Street Journal 200 (AWSJ 200) survey.

Now on its 12th year, the AWSJ 200, formerly known as Review 200, polls senior management, business owners, executives and professionals on the financial and corporate performance of 157 multinational companies and between 30 and 40 local companies each in 12 countries. The AWSJ 200 rates the overall leadership of these companies based on reputation, quality of products and services, management’s long-term vision, innovativeness in responding to customer needs, and financial soundness.

In the Philippines, Jollibee Foods Corporation retained its leadership ranking for the seventh consecutive year, followed by companies in the Ayala group including Ayala Land, Bank of the Philippine Islands (BPI), Ayala Corporation, and Globe Telecom in the top five.

Ayala Land, which was a new entrant to the top ten in 2003, rose from seventh to second place and was also recognized as first in reputation and management vision. It was cited for its strategy to address the needs of the lower and middle-income markets.

BPI, which led recent polls and awards of various regional financial publications, also climbed to third place from sixth place. The strong performance of the two companies underscored the strategic direction of parent company Ayala Corporation. Its telecommunications company Globe Telecom continued to be considered favorably in fourth place.

Other companies that made it to the top ten in the Philippines were Mercury Drug (sixth), GMA Network (seventh), ABS-CBN Broadcasting Corporation (eighth), San Miguel Corporation (ninth), and Smart Communications (10th).

In addition to the company leadership rankings, respondents were also asked for their business outlook for the year. More than half of them expressed confidence that business will improve in 2005 and more than 48 percent said they will increase company budgets. And while the AWSJ200 survey was conducted before the late December tsunami, the report said that the disaster wasn’t expected to pose a grave threat to Asian economies. Instead, issues of corruption, bureaucracy, and pollution were listed as having greater impact on national economies, and rising costs and poor economy were considered as serious threats to business success.

The United World Colleges (UWC), an international educational institution, in coordination with the UWC Philippine Alumni Network and the Ayala Foundation, Inc., is searching for a top-caliber fourth-year high school student interested in pursuing a two-year international baccalaureate course in Canada.

The selected student will be sent on full scholarship to the Lester B. Pearson College of the Pacific in Victoria, Canada.

Applicants must belong to the top 10 percent of their high school graduating class. Applicants and their parents must also attend the orientation session to be conducted by the Philippine Alumni Network on February 13 and 20, 2005 from 10 A.M. to 12 P.M. at Ayala Foundation, 10th Floor, BPI Main Building, Ayala Avenue corner Paseo de Roxas, Makati City.

For more details, interested parties may call Jen Perez of the UWC Philippine Alumni Network at (0919) 8442603 or Tito Rivera of the Ayala Foundation at 894-5620 local 104. Email inquiries may also be sent to the UWC Philippine Alumni Network [uwcphilippines@yahoo.com or info@ph.uwc.org] and tito@ayalafoundation.org. You may also visit the Philippine website at www.ph.uwc.org. For general information on the UWC movement, please visit the UWC site at www.uwc.org.

The US Agency for International Development/Philippines has awarded US$4.2 million (P231 million) to a multi-sectoral program that seeks to improve the quality of education and enhance the life and employment skills of young Filipinos in Mindanao.

The program, Education and Livelihood Skills Alliance (ELSA), is a three-year initiative of the International Youth Foundation (IYF) in cooperation with an alliance of Filipino non-government organizations, foundations, and private corporations. The USAID grant has been earmarked for project components of ELSA in support of the Department of Education and the local government of the Autonomous Region in Muslim Mindanao (ARMM).

In addition to addressing the educational and job training needs of out-of school youth, ELSA partners will provide teacher training, improve school infrastructure, enhance opportunities for employment and entrepreneurship, and assist national and local government officials in implementing education policy reform. The program will benefit the ARMM provinces of Tawi-Tawi, Suli, Basilan, Maguindanao, and Lanao del Sur as well as the Zamboanga peninsula, Lanao del Norte, Cotabato City, Cotabato, South Cotabato, and Sarangani.

“There is a need to present a range of opportunities to help young people in Mindanao develop skills needed to become more active participants in a productive economy,” said Michael Yates, USAID/Philippines mission director. “This program will support local initiatives and build on the considerable local expertise and experience we are so fortunate to have in the Philippines.”

ELSA builds on IYF’s nearly 15 years experience working on development challenges related to children and youth in the Philippines, in close partnership with key local organizations. The alliance created through the ELSA program includes the following partners:

1. Ayala Foundation will develop a leadership training program that will encourage high school youth to implement community projects and participate in learning sessions and interfaith dialogues.

2. Consuelo Foundation will provide non-formal basic and technical education to out-of-school youth.

3. Petron Foundation and Philippine Business for Social Progress (PBSP) will construct or repair 87 classrooms and provide equipment and facilities to target schools as well as educational assistance, teacher training, and health and nutrition programs.

4. South East Asian Ministers of Education Organization Regional Center for Educational Innovation and Technology (SEAMEO INNOTECH) will help improve the learning skills of students and instructional skills of teachers using technology-based learning strategies.

With the support of IYF and through collaboration with Mindanao based organizations, these key partners will develop and implement sustainable partnerships to increase access to quality education and livelihood skills. These programs will result in the increase of community-based learning opportunities, reintegration of out-of-school youth, expansion of teacher capabilities in the areas of Math, Science, and English, and school reform within the Mindanao region.

“IYF recognizes that multi-stakeholder partnerships have a greater impact in bringing about long-term improvements in young people’s lives,” said David W. Hornbeck, president and CEO of IYF. “With ELSA, we have established a strong core Alliance that will continue to address the education and livelihood challenges that affect this region.”

 The ELSA initiative also builds on IYF’s leadership over the past two years in collaborating with global, regional and local partners, including the Ayala Foundation and SEAMEO INNOTECH, to design and implement the successful Bridgeit program. Known as text2teach in the Philippines, this program is an initiative of IYF, Nokia, United Nations Development Programme, Pearson, and the Philippines Department of Education that employs the use of new technologies to improve the quality of teaching in learning in the Philippines.

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About the International Youth Foundation

The International Youth Foundation (IYF) is dedicated to supporting programs that improve the conditions and prospects for young people where they live, learn, work, and play. Since its founding in 1990, IYF has worked with hundreds of companies, foundations, and non-governmental organizations to scale up existing programs and build long-term strategic partnerships. Currently operating in more than 60 countries and territories, IYF and its partners have helped millions of young people gain the skills, training and opportunities critical to their success. More information on IYF can be found at www.iyfnet.org.

About USAID

Philippines USAID assists Philippine partners in five areas: economic reform and governance; conflict resolution in Mindanao and other areas vulnerable to violence; family planning, maternal and child health, HIV/AIDS and infectious diseases; environmental governance and energy; and access to quality education. USAID/Philippines also responds to humanitarian emergencies such as natural disasters. Over the past several years, USAID bilateral and other assistance to the Philippines has averaged $90 million per year. About 60 percent of the bilateral program is allocated to Mindanao.

Thirty-two artworks by 27 Filipino artists, many of which have never been seen by the Philippine public, are now on exhibit at the Ayala Museum.

Crossings: Philippine Works from the Singapore Art Museum chronicles close to one hundred years of Philippine art from Fabian de la Rosa’s portrait of Jose Rizal in 1902, the works of Fernando Amorsolo, H.R. Ocampo, Galo Ocampo, and Carlos “Botong” Francisco, to Nunelucio Alvarado’s Crossing in 2000.

The exhibit was officially launched on November 8 at a gala for Ayala Museum partners and donors highlighted by the signing of the memorandum of understanding between Ayala Foundation chairman Jaime Zobel de Ayala and Singapore Ambassador-at-Large and chairman of the National Heritage Board Prof. Tommy Koh. Crossings is the beginning of a five-year collaboration between the Ayala Foundation and Singapore’s National Heritage Board which aims to strengthen cultural ties between the Philippines and Singapore.

Commenting on the significance of the exhibit and partnership, Zobel said: “We are pleased to have helped pioneer a first: the return to our shores, if only for a limited time, of the Filipino artworks considered meritorious by the Singapore Art Museum. They are the ambassadors of the Filipino genius in the arts and of our collective Southeast Asian contribution to the arts of the world.”

The select number of paintings and sculpture from the permanent collection of the Singapore Art Museum represent three critical periods in the Philippines’ progress as a nation: before and after World War II (1930s-1960s), Martial Law (1972-1986), and post-EDSA 1 (1986-2000). Supported by the Embassy of the Republic of Singapore, Crossings is also part of Zero-In Transitions, the annual multi-sited exhibition consortium of the Ateneo Art Gallery, Ayala Museum, the Lopez Memorial Museum and Museo Pambata ng Maynila.

Prof. Koh noted that the title of the exhibition is appropriate because the artworks have crossed many boundaries from the time they left the Philippines to their exhibition at Ayala Museum and their eventual return to Singapore.

“Our Philippine art collection has always been displayed in a regional context,” Prof. Koh explained. “The works presented in this exhibition thus reflect the many choices that we have made in our attempts to understand Philippine art in relation to the art of the region. We hope that the collection will grow to enable Singaporeans to appreciate the richness and dynamism of Filipino artists and their art.”

Crossings is open to the public until June 12, 2005. The exhibition is accompanied by a 150-page full color exhibition catalog that is available for sale at the Museum Shop.

Ayala Museum was dedicated to the Filipino people in October as the high point of Ayala’s 170th anniversary. It is open on Tuesday to Friday from 9 AM to 7 PM and on Saturday and Sunday from 10 AM to 6 PM. For inquiries, please call 757-7117 to 21 or visit www.ayalamuseum.org.