WITH EVERY STEP THE MCMICKING MEMORIAL Located at the eponymous McMicking Courtyard of the Ayala Triangle Gardens, the McMicking Memorial was inaugurated on October 2, 2017. Designed by Leandro V. Locsin Partners in collaboration with Ayala Land and the Zobel family, the memorial’s portal and water elements represent the union of Colonel Joseph McMicking and Mrs. Mercedes Zobel McMicking. Colonel McMicking was widely recognized as the visionary of Makati’s urban development while Mrs. McMicking was the quiet force behind the growth of Ayala in the 20th century. AYALA LAND IS MOVING TO PROVIDE MORE FILIPINOS WITH A BRIGHTER FUTURE With each community we develop, we enrich lives and enable relationships to flourish. With each new estate we build, we enhance land for future generations to enjoy. With every step, we provide more Filipinos with a brighter future. Integrated Report 2017 2017 Theme: In Motion About this Report The Ayala group is moving closer to its Ayala Land’s annual report is released We present our corporate governance 2020 goals, as captured in the cover to stockholders and other stakeholders practices based on metrics defined images of the 2017 Integrated Reports on the day of the Annual Stockholders’ by the ASEAN Corporate Governance of the various Ayala companies. Meeting which takes place in the month Scorecard (ACGS) to provide of April every year. The 2016 report was shareholders with an organized and The McMicking Memorial, unveiled at released on April 19, 2017. detailed reference that is aligned and the Ayala Triangle Gardens in October consistent with ASEAN standards. 2017, provides an eloquent backdrop to This current report was made available the strides that Ayala Land is currently to the public on April 18, 2018. It was This integrated report was externally taking, providing enriching and prepared in accordance with the assured by DNV-GL, an independent sustainable real estate solutions to a International Integrated Reporting assurance provider. They were not people and a city constantly in motion. <IR> framework, developed by the involved in the preparation of any International Integrated Reporting statement or datum included in the Council, and with the Global Reporting report except for the external assurance Initiative (GRI) Standards: Core Option. statement. The sustainability indicators were externally assured using the DNV-GL The financial and non-financial Report Verification Protocol (VeriSustain), information discussed in this report covering economic, environmental, cover Ayala Land’s operations in estate governance and social indicators. development, property development, commercial leasing, construction, To download a copy of this report, property management, and its other please visit https://ir.ayalaland.com.ph businesses for the calendar period ending December 31, 2017. In case of questions regarding this report or its contents, please contact Except for employee data, the Ayala Land Investor Communications sustainability indicators exclude and Compliance through the email information on the operations of address [email protected] subsidiaries that provide support services, and new businesses such as QualiMed, Airswift, and Merkado Supermarket. The specific boundary and business units to which certain performance indicators are most material and applicable are specified in the GRI Content Index, consistent with the topic boundaries reported in previous periods. 2 2017 Integrated Report, Ayala Land, Inc. CONTENTS 4 ABOUT THE COMPANY 9 PERFORMANCE HIGHLIGHTS 10 MESSAGE FROM THE CHAIRMAN 14 PRESIDENT’S REPORT 20 CFO'S REPORT 27 BUSINESS REVIEW 47 OUR LEADERSHIP TEAM 61 THE BUSINESS MODEL 87 CORPORATE GOVERNANCE 133 RISK MANAGEMENT 149 FINANCIALS 171 REFERENCES WITH EVERY STEP 3 ABOUT THE COMPANY Ayala Land, Inc. Ayala Land is the largest property We pioneer standards and practices developer in the Philippines with that reflect the value we place on a solid track record in developing sustainability in all our developments. large-scale, integrated, mixed- As a responsible corporate citizen, use, sustainable estates that are we act with integrity, foresight now thriving economic centers and prudence. in their respective regions. Focused on our vision of “enhancing Following the success of the Makati land and enriching lives for more Central Business District (Makati CBD), people,” we empower our employees Ayala Alabang, Cebu Park District, to deliver quality products and Bonifacio Global City (BGC), and services and build long-term Nuvali, we continue to increase our value for our shareholders. footprint by building estates that reach and benefit more people. With 10,285 hectares in our land bank, 24 estates, and presence in 55 growth centers across the country, we offer a balanced and complementary mix of residential developments, shopping centers, offices, hotels and resorts, and other businesses. Construction and property management services are led by subsidiaries, Makati Development Corporation and Ayala Property Management Corporation, respectively. 4 2017 Integrated Report, Ayala Land, Inc. Our Vision Our Operating Principles Enhancing land, We Build a Strong Brand enriching lives for more people There is an Ayala Land in each of us. We represent the brand. The brand exemplifies integrity, professionalism and excellence. We design, build and operate quality products, and create enriching experiences for our customers. Our Values We Empower Our People Leadership We develop and support our people, while holding them accountable and building a We allow people to make decisions strong sense of ownership for delivering our products and services. within their limits of authority and to be accountable for their actions. We Make Things Simple and Easy We do things in a straightforward manner and put more value in efficiently delivering Integrity quality products and effective solutions. We do the right thing. We Create Value for the Community Vision Beyond delivering fair returns, we create value over time for our communities so they We build with the future in mind. can enjoy a well-lived life for generations to come. Excellence We are Stewards of the Business We give our best in all that we do. We invest and use company resources prudently. We take care of what is entrusted to us. Malasakit (Compassion) We care enough to go the extra mile. WITH EVERY STEP 5 ABOUT THE COMPANY Our Business Lines Estate Development Established Estates in Estates in Estates in Estates Metro Manila Luzon Visayas and Mindanao Makati CBD (950 ha) Arca South (74 ha) Altaraza (109 ha) Abreeza (10.1 ha) Makati MM, 1948 Taguig MM, 2014 San Jose Del Monte Davao City Bulacan, 2014 Davao Del Sur, 2011 Ayala Alabang (670 ha) Circuit Makati (21 ha) Muntinlupa MM, 1970 Makati MM, 2012 Alviera (1,800 ha) Atria Park District (20 ha) Porac Pampanga, 2014 Mandurriao Iloilo, 2012 Bonifacio Global City (240 ha) Cloverleaf (11 ha) Taguig MM, 2003 Quezon City MM , 2015 Evo City (236 ha) Azuela Cove (25 ha) Kawit Cavite, 2017 Davao City Cebu Park District (78 ha) South Park District (6.6 ha) Davao Del Sur, 2017 Cebu City, 1990 Muntinlupa MM, 2012 Vermosa (700 ha) Imus and Dasmariñas Capitol Central (9 ha) Nuvali (2,290 ha) Vertis North (29 ha) Cavite, 2015 Bacolod Santa Rosa Laguna, 2009 Quezon City MM, 2012 Negros Occidental, 2015 Tourism Estates Centrio (3.7 ha) Cagayan De Oro Lio (325 ha) Misamis Oriental, 2012 El Nido Palawan, 2014 Gatewalk Central (17.5 ha) Sicogon Island (1,100 ha) Mandaue Cebu, 2016 Iloilo, 2016 North Point (215 ha) Talisay Negros Occidental, 2011 Seagrove (13.6 ha) Mactan Cebu, 2017 6 2017 Integrated Report, Ayala Land, Inc. Property Development Commercial Leasing Services Residential Malls Makati Development Corporation Luxury 1.80M sqm GLA 62 shopping centers 206 construction projects Upscale Offices Ayala Property Middle Income 1.02M sqm GLA Management Corporation 6 headquarter-type offices Entry-level 57 BPO offices 227 managed properties Socialized Hotels and Resorts 2,583 rooms Office for Sale Branded hotels (961 rooms) Equity Investments Makati, BGC, and Cebu Holiday Inn, Fairmont and Raffles, and Marriott Commercial and Industrial Lots Seda hotels (1,301 rooms) Cebu Holdings, Inc. Abreeza, Atria Park, BGC, 71.96% Alviera Capitol Central, Centrio, Arca South Nuvali and Vertis North OCLP Holdings, Inc. Nuvali 22.01% Westborough Town Center Resorts (321 rooms) Westborough Park Square El Nido, Lio and Sicogon Prime Orion Philippines, Inc. 51.07% Cavite Technopark Clock In Laguna Technopark Makati Stock Exchange MCT Bhd (Malaysia) 405 sqm GLA,107 seats 32.95% BGC Technology Center 733 sqm GLA, 214 seats Bonifacio High Street 601 sqm GLA, 179 seats WITH EVERY STEP 7 8 2017 Integrated Report, Ayala Land, Inc. PERFORMANCE HIGHLIGHTS FINANCIAL HIGHLIGHTS 2015 2016 2017 STATEMENT OF INCOME (in thousand pesos) Revenues 107,182,940 124, 628,795 142,296,952 EBITDA* 34,345,489 41,191,644 47,436,107 Net Income (Attributable to equity holders of ALI) 17,630,275 20,908,011 25,304,965 STATEMENT OF FINANCIAL POSITION (in thousand pesos) Cash and Cash Equivalents** 19,540,241 22,641,089 25,820,801 Total Assets 442,341,800 536,432,995 573,992,334 Total Borrowings 130,996,111 159,801,337 174,385,756 Stockholders’ Equity 149,825,411 172,683,187 192,263,358 STATEMENT OF CASH FLOWS (in thousand pesos) Net Cash Provided by Operating Activities 20,181,733 33,040,297 25,699,762 Net Cash Used in Investing Activities (48,887,550) (57,806,847) (35,372,264) Net Cash Provided by Financing Activities 19,115,925 26,583,490 9,800,657 CAPITAL EXPENDITURES (in billion pesos) 82.19 85.35 91.38 FINANCIAL RATIOS (in thousand pesos) Current Ratio 1.14 1.12 1.18 Debt-to-Equity Ratio*** 0.87 0.93 0.91 Net Debt-to-Equity Ratio**** 0.74 0.79 0.77 Return on Equity (Average Equity) 14.7% 14.9% 16.1% Return on Assets (Average Assets) 5.0% 5.0% 5.1% STOCK INFORMATION (in thousand pesos) Market Capitalization (in billion pesos) 506 471 657 Stock Price (per share, as of year end of 2017, in pesos) 34.45 32.00 44.60 Earnings per Share (in pesos) 1.20 1.43 1.71 OPERATIONAL HIGHLIGHTS 2015 2016 2017 Sales Reservations (in billion pesos) 105.34 108.05 121.96 Malls GLA (in thousand sq.