About the cover Our cover quote is taken from the Message of our President, Antonino T. Aquino, which begins on page 8. From residential homes to office buildings, from shopping districts to hotels and resorts, our cover image illustrates the focus of our development process. While every undertaking in Ayala Land begins with a vision, rigorous planning and a firm commitment to deliver quality in everything we do ensures that we remain the largest and most diversified property developer in the Philippines. About this Integrated Annual and Sustainability Report This fully integrated Annual and Sustainability Report is a testament to our commitment to sustainable business practices. This year, we continue to report our financial performance together with the sustainability initiatives that we have adopted, as we believe these two are invariably linked. More and more, sustainability has become relevant to our business, and your Company has likewise progressed in assimilating various systems to ensure that our business will continue through the years and that our buildings make the least impact to the environment. For this reporting period, we tracked our performance on 79 Global Reporting Initiative (GRI) indicators, 39% more than the indicators tracked in 2010, making this self-declared report compliant with GRI application level A guidelines. The sustainability section of this report covers the performance of Ayala Land, Inc., Alveo Land Corporation, Avida Land Corporation, and Ayala Property Management Corporation. This report, together with our past publications, may be downloaded from our websites at www.ayalaland.com.ph and ir.ayalaland.com.ph. We would appreciate any feedback you may want to share in order for us to further improve our sustainability practices. You may also contact us about this report via e-mail at [email protected]. Enhancing Land and Enriching Lives, for More People Our vision is to enhance our standing and reputation as the Philippines’ leading real estate developer and to be a strong partner in nation building. By developing integrated, masterplanned and sustainable mixed-use communities in vibrant growth centers all over the country, we strive to continually elevate the quality of life for all of our customers. We shall be a responsible corporate citizen and act with integrity, foresight and prudence. We shall empower our employees to deliver products that exceed our customers’ expectations and build long-term value for our shareholders. Table of Contents 2011 in Review Sustainability Report 2 Year in Summary 52 Letter from the Sustainability Committee 6 Chairman’s Letter 53 Management Approach 8 President’s Message 55 Sustainability Framework 16 CFO and Compliance 56 Environmental Stewardship Officer’s Report and Impact Reduction 63 Community Stewardship Our Businesses and Social Development 67 Personnel Development, Health, 22 Property Development and Safety 28 Commercial Leasing 71 Market Shaping 30 Hotels and Resorts 73 Awards and Recognition 32 Services 74 Stakeholders’ Commentaries 75 GRI Index Corporate Governance 36 Board of Directors 40 Management Committee Financial Review 42 Corporate Governance Report 80 Management’s Discussion 48 Risk Management Report and Analysis of Financial Results 83 Report of the Audit and Risk Committee 84 Statement of Management’s Responsibility 85 Report of Independent Auditors 86 Financial Statements 93 Notes to Financial Statements 160 Subsidiaries and Affiliates 162 Key Officers and Consultants year in summary How did we do? Return On Equity 12% 1 We increased our cash 10% 10% 10% dividend by 58% and the dividend payout ratio from 8% 30% to 35%. 12% 07 08 09 10 11 return on equity profitability capital expenditure (in million pesos) 2 3 (in million pesos) 7,140 29,914 5,458 4,812 20,055 4,368 18,893 4,039 15,413 16,233 07 08 09 10 11 07 08 09 10 11 We achieved a record We spent P29.9 billion net income of P7.1 in capital expenditure billion, 31% higher (CAPEX), a new record P 7.1B that was 49% higher P29.9B than 2010. Netnet Income income After Tax than 2010. capex 2 2011 Integrated Annual and Sustainability Report we continued to build on our initial gains as we posted another record year in terms of net income and revenues. NUmber of residential leasable commercial area 4 units launched 5 (in thousand square meters) Shopping Offices 20,613 Centers 11 1,080 449 10 1,007 397 10,115 09 993 359 year in Summary 5,182 4,238 08 975 216 2,229 07 972 138 07 08 09 10 11 We doubled We expect an additional Messages our number of 274,000 sqm. of shopping residential units center GLA and 91,000 20,613 launched, setting a sqm. of BPO office GLA residential Units Launched 1.5MSQUARE METERS OF to come on stream in the new all-time high. GROSS LEASABLE AREA next two years. Our Businesses (GLA) sustainability Indicators tracked 6 79 governance 57 A-Level sustainability report sustainability 37 23 We progressed to A-level, 16 reporting this year with 79 sustainability indicators, 22 (or 39%) more than 2010. financial review 07 08 09 10 11 Ayala Land, Inc. 3 growth VALUE OF PROJECTS LAUNCHED (IN BILLION PESOS) P70B 62 70 worth of projectS 10 launcheD 09 10 11 The Company’s growth objectives are anchored along the three elements of geographic expansion, product diversity, 6 NEW and market diversification. Last year, we entered into and strengthened our presence in six new areas out of the 31 growth GROWTH CENTERS centers that we identified. These include prime locations within ADDED TO THE PORTFOLIO Metro Manila and nearby areas, as well as strategic properties in the provinces. These new growth centers will soon showcase Ayala Land’s mixed-use projects where we integrate our diverse portfolio of residential, leasing, and hotel products within a single development. In line with our 5-10-15 Plan, we launched a total of 67 projects worth P70 billion in 2011. We likewise continued to innovate as we unveiled new product concepts in our residential business to diversify our portfolio. The Company broadened its reach towards the base of the economic pyramid with the official launch of our fifth residential brand, BellaVita, which will cater to the socialized housing segment. I have no doubt that our Company will continue to grow and achieve our goal to reach P10 billion in net income and a 15% return on equity by 2014. 6 2011 Integrated Annual and Sustainability Report chairman’s letter My Fellow Shareholders, The Philippine economy was resilient in 2011 even amidst the challenges that confronted the global environment. Philippine domestic consumption remained robust, partly underpinned by the sustained growth of overseas Filipino (OF) remittances which increased by 7% during the year. The country’s fiscal position remained healthy, driving interest rates to lower levels and reducing over-all perceived risk for the country. This in turn improved our country’s credit rating to just below investment grade. Liquidity and credit both remained supportive of growth, benefitting many domestic businesses across various sectors, particularly real estate. It was against this backdrop that your Our leasing business likewise reported and achieve our goal to reach P10 Company posted another record- good results as we expanded billion in net income and a 15% return breaking year in 2011. As the property our footprint to take advantage of on equity by 2014. This confidence sector experienced sustained demand increasing disposable incomes from is drawn from our Company’s highly across the residential, retail, office, and OF remittances and rising employment capable and talented management hotel sectors, Ayala Land continued and revenues in the business process team, our steadfast adherence to our its aggressive investment plan, which outsourcing (BPO) sector. We Company’s values of integrity and began in earnest in 2010. completed several projects in provincial excellence, and our firm commitment areas like Laguna, Negros Occidental, to sustainable business practices. year in Summary We followed through in 2011 with Iloilo, Baguio, Cebu and Davao. We These enduring values will constantly a number of successful product also made significant headway in steer our Company as we face the launches in the residential segment building our hotels and resorts portfolio challenges and cycles of a competitive under the Ayala Land Premier, Alveo as we increased capacity in our real estate market. and Avida brands. In addition to this, Pangulasian Island Resort in Palawan we expanded our reach to cover new and broke ground in two additional sites Allow me to close by expressing my Messages geographies and capture consumers for our own hotel brand, Kukun. heart-felt gratitude to the Board of in even lower income segments. Directors, the management team and Through our Amaia brand, we launched As a result of this aggressive our colleagues at Ayala Land. I also six projects and introduced two new expansion, our Company posted thank our shareholders, partners and Our Businesses formats—Amaia Steps and Amaia a record net income of P7.1 billion loyal customers who have been with Skies. These completed our offering in 2011, a 31% increase over the us for many years. Our achievements in the economic housing segment. previous year. Combined with better would not have been possible We further expanded our reach in this capital efficiency, we also increased without your constant guidance and end-user market and launched our fifth our return on equity to 12%. During the unwavering support. residential brand under BellaVita which year, we declared and paid out cash governance shall cater to the socialized housing dividends amounting to P1.9 billion, Thank you. segment. These two brands, Amaia which translates to a higher pay-out and BellaVita, will allow us to diversify ratio of 35%.