Independent Auditor's Report Isla Lipana & Co.

To the Board of Directors and Shareholders of Ayala Plans, Inc.

11th Floor, Ayala Life - FGU Center
Ayala Avenue, Makati City
Report on the Financial Statements
Our Opinion
In our opinion, the accompanying financial statements present fairly, in all material
respects, financial position of Ayala Plans, Inc. (the "Company") as at December 31,
2016 and 2015, and its financial performance and its cash flows for the years then
ended in accordance with Philippine Financial Reporting Standards (PFRSs).
what we have audited
The financial statements of the Company comprise:
• the statements of financial position as at December 31, 2016 and 2015;
• the statements of income for the years ended December 31, 2016 and
2015;
• the statements of total comprehensive income for the years ended December
31, 2016 and 2015
• the statements of changes in equity for the years ended December 31, 2016
and 2015
• the statements of cash flows for the years ended December 31, 2016 and 2015
• the notes to the financial statements, which include a summary of significant
accounting policies
Basis for Opinion
We conducted our audits in accordance with Philippine Standards on Auditing
(PSAs). Our responsibilities under those standards are further described in the
Auditor's Responsibilities for the Audit of the Financial Statements section of our
report.
We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Independence
We are independent of the Company in accordance with the Code of Ethics for
Professional Accountants in the Philippines (Code of Ethics), together with the ethical
requirements that are relevant to our audit of the financial statements in the
Philippines, and we have fulfilled our other ethical responsibilities in accordance with
these requirements and the Code of Ethics.
Responsibilities of Management and Those Charged with Governancefor the
Financial Statements
• Management is responsible for the preparation and fair presentation of the
financial statements in accordance with PFRSs, and for such internal control as
management determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, management is responsible for assessing the
Company's ability to continue as a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless management
either intends to liquidate the Company or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the Companys financial
reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor's report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with PSAs will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with PSAs, we exercise professional judgment and
maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements,
whether due to fraud or error, design and perform audit procedures responsive
to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal.
• Obtain an understanding of internal control relevant to the audit in order to
design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Companys
internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness
of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern
basis of accounting and, based on the audit evidence obtained, whether a
material uncertainty exists related to events or conditions that may cast
significant doubt on the Company’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in
our auditor's report to the related disclosures in the financial statements or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor's report.
However, future events or conditions may cause the Company to cease to
continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial
statements, including the disclosures, and whether the financial statements
represent the underlying transactions and events in a manner that achieves fair
presentation.
 •Ayala Plans, Inc.
•Statements of Cash Flows
•For the years ended December 31, 2016 and 2015
•(All amounts in Philippine Peso)
Notes 2016 2015
CASH FLOWS FROM OPERATING ACTIVITIES (599,512,823)
Cash absorbed by operations 20 393,905 750,304
Dividend received 55,528,458
Interest received (784,786)
Benefits paid 17 (57 ,607
Final income taxes paid 19 ,459)
Net cash used in operating activities (710,166, 182)
CASH FLOWS FROM INVESTING ACTIVITIES Net
3
withdrawals from trust funds Acquisitions of: 713,967,954 539, 195,204
Available-for-sale securities 4
Property and equipment (82,163,614) (73,455,487)
7
Proceeds from: (791,872) (2,163,157)
Disposal of available-for-sale securities 4
Held to maturity security 87,630,121 127,572,436
5
Sale of asset held-for-sale
8
Sale of property and equipment
7 372,000 16,850
Net cash from investing activities
NET INCREASE (DECREASE) IN CASH (960,518)
CASH
Janua 1 14,192,240
December 31
 Ayala Plans, Inc.
Statements of Changes in Equity
For the years ended December 31, 2016 and 2015
(All amounts in Philippine Peso)

Accumulated
 Ayala Plans, Inc.
Statements of Total Comprehensive Income
For the years ended December 31, 2016 and 2015
(All amounts in Philippine Peso)

Notes 2016 2015

NET LOSS FOR THE YEAR (54,931,619)
OTHER COMPREHENSIVE LOSS 11
Items that may be subsequently reclassified
to profit or loss
Fair value gain transferred to profit or loss
(12,951,889)
Changes in fair value of available-for-sale financial
assets
(50,479,579)
Item that will not be reclassified to profit or loss
17
Remeasurement loss on retirement benefit obligation (188,665) (1,442,612)
OTHER COMPREHENSIVE LOSS FOR THE YEAR (63,620, 133)
 Ayala Plans, Inc.
Statements of Financial Position
December 31, 2016 and 2015

(All amounts in Philippine Peso)

Notes 2016 2015

CASH ASSETS
23,040,647
INVESTMENTS IN TRUST FUNDS 2,10
AVAILABLE-FOR-SALE SECURITIES 3,10 14, 192,240
Company-managed 4,10 5,360,637,639
Insurance premium fund 35,4811398
LOANS AND RECEIVABLES, net 39,998,237
6,10
PROPERTY AND EQUIPMENT, net 5, 706,485
7 1 527,707
OTHER ASSETS 8,10 2,250,669
Total assets 4,948 838,772 5,468,856,894
LIABILITIES AND
PRE-NEED RESERVES EQUITY
INSURANCE PREMIUM RESERVES 3
4 4,335,859,525 4,798,395,823
DUE TO RELATED COMPANIES 30,539,298 35,994,227
21
ACCRUED EXPENSES AND OTHER 2,535,296 2,983,642
LIABILITIES 9
Total liabilities 10 4,736,844,292
SHARE CAPITAL 11
SHARE PREMIUM
DEFICIT
ACCUMULATED OTHER COMPREHENSIVE 11 (594,249,545)
(5,
LOSS (68,755,975) 135,842)
Total equity 211 330,546,232
Total liabilities and e uit 4,948,838,772
 Ayala Plans, Inc.
Statements of Income
For the years ended December 31, 2016 and 2015
(All amounts in Philippine Peso)

Notes 2016 2015

INCOME
Premium income, gross of trust fund contribution of
P105,700 (2015 - PI

Trust fund income, gross of provision for income tax of (2015 - 3

432,719, 194
Gain on sale of investments 4 695,674
Interest income 13 1,570,574
Dividend income 21 393,905 750,304
Policy income 24,870 83,746
Others 2,474,433 6,394,795
313,181,369 447,288,373
EXPENSES
Other costs of contracts issued 14
Plan benefits
Decrease in pre-need and insurance premium reserves
Documentary stamp taxes and SEC registration fees
Other direct costs and expenses 15
I nsurance 6,983,869 8, 134,282
General and administrative expenses
Salaries, wages and employee benefits 16 11 ,651 ,926
Outsourcing services 21 10,335,168
Repairs and maintenance 3,205,290
Rent and utilities 18 1 ,405, 995 1 ,347 ,943
 Audit opinion is the statement that express by independence
auditors to their client’s financial statements as the result of auditor’s
examination. Audit opinion is very important for stakeholders because
it let them know whether or not the information in the financial
statement that they are using is correct or not. The audit opinion also
indirectly inform to the users of the financial statement how is the
integrity of senior management of the entity. ISA 700 is used to form
unmodified audit opinion and ISA 705 is guidance that should used by
the auditor to issue modified opinion.
 The end product of the financial statement audit is an audit
report that contains unmodified opinion about the fair presentation of
the financial statements. This is the most common type of audit report.
This type of opinion is issued when the auditor concludes, based on
audit evidence obtained, that the financial statements are presented
fairly , in all material respects in accordance with the applicable
financial reporting framework. In order for the auditor to issue
unmodified opinion, the following must be satisfied;
• The was conducted in accordance with PSA
• The financial statement have been prepared in accordance with the
the applicable financial reporting framework.
Since the above requirements have been satisfied, as required by the standard ,
the auditors issued unmodified opinion on the client’s financial statement. The
opinion embodies the assumptions that the company observed compliance
with generally accepted accounting principles (GAAP) and statutory
requirements. It merely states that Ayala’s financial report is transparent and
thorough and has not hidden important facts. Yet, if the financial statement
have some problem, auditors need to use 705 to form their opinion based on
those problems.

Therefore, the submitted Financial Statements (Statements of Financial

Position as at December 31, 2016 and 2015, Statements of Income for the years
ended 2016 and 2015, Statements of Comprehensive Income for the year
ended 2016 and 2015, Statements of Changes in Equity for the years ended
2016 and 2015, Statements of Cash Flows for the years ended 2016 and 2015,
and the Notes to Financial Statement which includes a summary of significant
policies) of the Ayala Plans, Inc. (the “Company”)
we, group 3, are supporting the opinion expressed by the independent auditors (Isla
Lipana & Co.), who conducted the audit in accordance with Philippines Standards on
Auditing, with the responsibilities under those standards which are further described
in their Auditor’s Responsibilities in the Audit of the Financial Statements of their
report, and who are an independent company who performed the audit in
accordance with the Code of Ethics for Professional Accountants in the Philippines,
that the accompanying Financial Statements of the Ayala Plans, Inc. (the “Company”)
have been presented fairly, in all material respects, and is in accordance with the
applicable Philippine Financial Reporting Standards (PFRSs)