Ayala Land (the real estate arm of Ayala Corporation) is firmly committed to good corporate governance as a critical element in creating and sustaining shareholder value, while considering and balancing the interests of all other stakeholders.

Ayala Land’s corporate governance practices are principally contained in our Articles of Incorporation and By-Laws, their amendments and our Manual of Corporate Governance (revised in 2010). Together, these articulate the principles of good and transparent governance that we adhere to.

This Report describes our corporate governance framework and discusses initiatives taken by the Company in 2010 to further strengthen our commitment to integrity, transparency, the equitable treatment of all shareholders, and a well-functioning Board and management team that are closely aligned in representing and working for the interests of our various stakeholders.

BOARD OF DIRECTORS

The Board establishes the vision, strategic objectives, key policies and procedures for the management of the Company, as well as the mechanism for monitoring and evaluating management’s performance. The Board also ensures the adequacy of internal controls and risk management practices, accuracy and reliability of financial reporting, and compliance with applicable laws and regulations.

Ayala Land is led by a Board consisting of nine members who hold office for a minimum of one year and may be re-elected until such time that their successors are nominated, qualified, and elected in accordance with the By-Laws of the Company.

The Board represents a mix of general business, industry, legal, and finance competencies, with each director capable of adding value and rendering independent judgment in relation to the formulation of sound corporate policies. All Board members have undergone training in corporate governance and have been certified by the Institute of Corporate Directors (ICD).

The ICD is a professional organization that is based in the Philippines and is accredited by the Philippine Securities and Exchange Commission (SEC) and the Philippine Stock Exchange (PSE). The ICD works closely with the Organisation for Economic Co-operation and Development (OECD), the Global Corporate Governance Forum, and the International Corporate Governance Network and is committed to promoting world-class corporate governance principles in the East Asia region.

The ICD releases an annual survey based and independently verified “scorecard” rating of corporate governance for publicly listed companies in the Philippines. In 2009, Ayala Land topped the ICD Corporate Governance ratings with a score of 98%, the 3rd successive year it had placed in the top-five with a score of at least 95%. The average score of the 214 companies in the 2009 survey was 73%. (Note: 2010 survey results have not yet been released as of the date of this report).

The roles of the Chairman and the Chief Executive Officer (CEO) are separate to ensure Board independence from management, an appropriate balance of power and increased accountability. Of the nine members of the Board, only the President and CEO is an executive director. The rest are non-executive directors who are neither officers nor consultants of the Company.

As a company listed on the PSE, Ayala Land exceeds the regulatory requirement of having at least two independent directors on the Board. Of the nine current directors, three are independent directors, or 33% of the entire board membership. The Company defines an independent director as one who holds no interests in or relationships with the Company that may hinder their independence from the Company or its management and which would interfere with the exercise of independent judgment in carrying out the responsibilities expected of a director. If the beneficial ownership of an independent director in the Company or in its related companies exceed a 10% limit, or if the director appointed or elected as an independent director subsequently becomes an officer or employee of the Company, the director shall cease to be designated or characterized as an independent director.

Board Performance

Regular meetings of the full Board are held at least once every quarter. In 2010, the Board had five regular meetings. The average attendance rate of members of the Board was 95%, while individually complying with the SEC’s minimum attendance requirement of 50%.

Board members have separate and independent access to the Corporate Secretary who, apart from being a member of the Board, oversees the adequate flow of information to other Board members prior to meetings and serves as an adviser to the directors on their responsibilities and obligations. Discussions during Board meetings are open, and independent views are encouraged and given due consideration.

One of the tools used by the Board to monitor and improve its performance is an annual self-assessment. This is administered in the form of a formal questionnaire that is answered by each member of the Board individually and where members of the Board are able to rate their individual performance and that of the Board as a whole. The results are compiled by the Compliance Officer and submitted back to the Board for discussion and appropriate action through the Corporate Secretary. These self-assessment survey questions are reviewed regularly based on best practice research and cover four broad areas of Board performance: Fulfilment of the Board’s Key Responsibilities, Quality of the Board–Management Relationship, Effectiveness of Board Processes and Meetings, and the Performance of Individual Board Members. The self-assessment survey questions were last updated in 2010 and the questionnaire is administered every May (after the Annual Stockholders’ Meeting). The Board also conducts its annual assessment of the President and CEO. An assessment of the Board committees will be added in future surveys.

Five committees support the Board in the performance of specific governance functions. These committees – including its members, specific responsibilities and 2010 accomplishments – are discussed below.

Director and Senior Executive Compensation

Non-executive directors receive remuneration consisting of a fixed annual retainer fee of Php500,000 and a fixed per diem of Php100,000 for each regular Board meeting attended. There were a total of five regular Board meetings in 2010. In addition, non-executive directors are also entitled to a per diem of Php20,000 per Board Committee meeting attended. The remuneration of non-executive directors was approved and ratified during the 2003 Annual Stockholders’ Meeting and has not increased since then.

The total compensation paid to the CEO and key officers of management is disclosed in the Definitive Information Statement sent to all shareholders. The total annual compensation reported includes the basic salary and other variable pay, such as performance-based cash bonuses and the exercise of previously granted Employee Stock Option Plans or the current Executive Stock Ownership Plan (ESOWN), if any.

MANAGEMENT

In addition to the various Board-level committees, the Company has also put in place various management committees to guide the critical decision making and key governance processes required at the management level in overseeing individual business units, projects and support functions. These include the Management Committee, the Investment Committee, the Corporate Working Group, the Technical Council, the Bidding Committee, the Information Technology Steering Committee, the Sustainability Council, the Crisis Management Committee and the Anti-Money Laundering Act (AMLA) Compliance Committee.

Management places high importance on having clear policies, adopting best practices and maintaining strong internal controls in support of effective corporate governance.

Along with the members of the Board, the Company requires members of the Management Committee and other key officers to receive periodic training in corporate governance. As of year-end 2010, 12 of the 14 members of the Management Committee and an additional nine key officers, including the Treasurer, the Head of Corporate Strategy and the Deputy Compliance Officer were certified by the ICD for having attended an accredited corporate governance training program. The Company remains committed to continued corporate governance training for the Board and key members of the management team. In 2010, we rolled out an internal training module for corporate governance within our own in-house training curriculum. This was attended by select mid-level managers and all new employees of the Company to effectively broaden their awareness of the principles of good corporate governance.

We seek to consistently improve the Company’s business fundamentals and prospects in order to deliver increasing value to our shareholders’ investments in the Company over time. Our strategies, business models and operating plans are all oriented towards the achievement of consistent progress in our operating and financial results and, therefore, the underlying determinants of firm value. Specific targets relating to key metrics such as growth, profitability, return on equity, asset efficiency and total shareholder return are set and incorporated into the management team’s Key Result Areas on a corporate, divisional and individual basis. These are approved by the Board, measured, tracked and form the basis of management promotions, the allocation of a performance-based cash bonus, and ESOWN grants. This process ensures optimal alignment of incentives between shareholders and management.

The Board and Management Team remain firmly committed to the effective management and mitigation of strategic, operational, financial and compliance-related risks throughout the organization. A key joint responsibility of the Board and the Management Team is to ensure the presence of adequate and effective organizational and procedural controls, supported by management information systems and a risk identification, mitigation, monitoring and reporting system.

ACCOUNTABILITY AND AUDIT

The Audit and Risk Committee provides oversight to external and internal auditors.

Independent Public Accountants

The principal accountant and external auditor of the Company is the accounting firm of SyCip, Gorres, Velayo & Co. (SGV), with Ms. Lucy L. Chan as the Partner-in-Charge for the 2010 audit year. The Company and its various subsidiaries and affiliates paid SGV a total of Php10.3 million and Php8.1 million (inclusive of VAT) for audit and audit-related fees in 2010 and 2009, respectively. No other fees have been paid for assurance and other related services for the past two years. Meanwhile, tax consultancy services are secured from entities other than the appointed external auditor.

Internal Audit

The Internal Audit Division (IAD), headed by a Chief Audit Executive, reports to the Audit and Risk Committee of the Board. The IAD provides independent and objective assurance and advisory services to the Company with the following objectives: review the adequacy of controls established to manage identified risks, identify opportunities for process and control improvements, monitor compliance with laws and regulations, share best practices, and enhance the operations and shareholder value of the Company, its subsidiaries and affiliates. Through the Audit and Risk Committee, the IAD assists the Board in the discharge of its duties and responsibilities as provided for in the SEC’s 2009 Revised Code of Corporate Governance.

The IAD executed its audit activities for 2010 in accordance with the risk-based and process-focused audit approach. This approach is in accordance with the Institute of Internal Auditors’ International Standards for the Professional Practice of Internal Auditing (Standards) and likewise complies with the SEC’s 2009 Revised Code of Corporate Governance.

Following an external assessment opinion by Manabat, Sanagustin & Co. (KPMG) in 2007 that the Company’s internal audit activities generally comply with the Standards and Code of Ethics, the IAD introduced strategic changes to the positioning, people management system and processes of the function in support of overall business goals. “Generally complies” means that KPMG has concluded that the relevant structures, policies, and procedures of the activity, as well as the processes by which they are applied, comply with the requirements of the Standards and Code of Ethics in all material respects. Per Internal Auditing Standard 1312, external assessments must be conducted by a qualified independent reviewer or review team from outside the Company at least once every five years.

We believe that our long-term success rests on the support and contribution of different stakeholders, including our shareholders, customers, business partners, employees, the communities impacted by our developments, the government, non-government  organizations (NGOs) and the media.

Shareholders

We are committed to providing our shareholders and the broad investment community with timely, accurate and materially relevant information about the Company, its governance and management structures, its financial and operating results, and its future business prospects.

Annual Stockholders’ Meeting. Stockholder meeting and voting procedures are a critical component of the framework established to safeguard the rights and interests of all our shareholders. Shareholders are informed at least fifteen (15) business days in advance of the scheduled date of the Annual Stockholders’ Meeting (ASM). Notices of regular or special meetings contain, in addition to the date, hour and place of the meeting, a statement of the matters to be discussed and voted upon at each meeting. The notice to shareholders also set the date, time and place of the validation of proxies which is prescribed to be no less than five business days prior to the ASM.

The Company adheres to the “one share, one vote” principle in that each share of stock entitles the person in whose name it is registered in the books of the Company to one vote, provided the conditions as regards payment have been complied with. The results of voting on each matter taken up during the ASM are posted on our Investor Relations website immediately after the ASM. The Company allows for proxy voting on separate items on the agenda, including the election of directors, ratification of all acts and resolutions of the Board of Directors and of the Executive Committee, and the election of the independent auditors and their approved remuneration. We also continued the practice of allowing proxy voting for individual nominees for the Company’s Board of Directors.

Shareholder Communication. We believe in open and transparent communication with all our shareholders in order to build investor confidence and ultimately reduce our cost of capital. Through our Investor Communications and Compliance Division, which reports directly to the Chief Finance Officer (CFO), we address the various information requirements of the investing public in general, and minority shareholders in particular. We have continually enhanced the volume and quality of operating and financial information disclosed to enable the investing public to better understand the Company’s business prospects and valuation.

Aside from disclosures to the SEC, PSE and Philippine Dealing and Exchange Corporation (PDEx), we conduct quarterly analyst briefings for both equity (buy-side and sell-side) and credit analysts and communicate directly with institutional and individual investors through one-on-one meetings, written communications such as emails, and conference calls. Analysts not able to attend our quarterly briefings in person are also invited to participate through a teleconference facility. We also have a continuing program of enhancing our Investor Relations website, which includes podcasts of our quarterly briefings. A playback facility on our website is available for three business days after each briefing.

Throughout the year, our CEO, CFO, Head of Investor Communications and Compliance, and other members of the Management Committee (where appropriate) make themselves available for meetings with institutional investors through prearranged company visits, teleconferences, analyst briefings and attendance in local and international investor conferences, corporate days and non-deal roadshows. In 2010, senior management met with institutional investors and fund managers in 12 conferences and corporate day events held in Manila, Singapore, Hong Kong, Tokyo, New York, San Francisco and London.

Customers

Our customers play an integral part in the success of our Company. Over many years, we have endeavoured to build the trust and confidence of our customers by consistently delivering on-spec, on-time, and best-in-class products and services. Over the past few years, we have continually sharpened customer focus and accountability and have significantly improved our service levels across all our customer-facing business units through dedicated customer service and relationship management teams.

Business Partners

We endeavor to build long-term, mutually-beneficial relationships with our business partners through fair dealings and adherence to a high level of moral and ethical conduct.

We recognize and respect the rights of creditors as stakeholders and are committed to honoring our contracted financial obligations and any financial covenants these may contain. We believe in maintaining their confidence as key to ensuring timely availability of credit, at favorable terms. We provide creditors with ready access to essential information about the organization and its projects needed to assess the Company’s credit quality. We also invite credit analysts to regularly attend our quarterly analyst briefings.

Our procurement organization subscribes to the Principles and Standards of Ethical Supply Management Conduct set by the Institute for Supply Management. Strategic and operational procurement activities are guided by principles and standards of ethical conduct which include providing equal opportunities to and promoting fair and open competition among vendors and trade partners, and by continually practicing best practices that result in the highest level of productivity, efficiency, quality, and cost-competitiveness.

All of the Company’s purchasing requirements are reviewed and negotiated directly by separate Project and Commodity Bidding Committees. These Bidding Committees are chaired by senior executives of the Finance Group who are not directly involved in procurement and supply-chain management. The main function of the Bidding Committees is to achieve the lowest possible procurement cost for the Company for all its purchasing requirements while maintaining transparency and fairness with all suppliers and retaining its independence from possible internal or

external influence.

Employees

We endeavor to provide a suitable environment for continuous learning and development for our people. We provide optimal training opportunities and custom-fit programs that enable our employees to strive for excellence and perform at their best. These training programs cover business and technical knowledge, skill-building, values, ethics and corporate governance. We view these to be building blocks for each individual’s professional development and the Company’s growth. Under the Individual Development Plan (IDP) process, our employees actively collaborate with their managers and our human resource specialists to determine skills, knowledge and experience needed in their current and prospective future roles. A training program for each individual is designed within the IDP process and progress against the plan is regularly monitored within each division and group.

The Company has also implemented a “Professionals-in-Development” (PID) program for developing staff and management talent. The PID is a career development program where top graduates from the best universities are brought into the organization and developed in a fast-track and systematic approach. The program aims to provide new hires with a comprehensive understanding of its business models, processes and unique approach to developing and implementing projects, thus facilitating quick integration into any strategic business unit of the Company.

Communities

As a leading and responsible land and community developer, we recognize that our projects have a significant impact on the communities in which we operate. We are committed to improving the quality of life not only of our customers but also of the families and people in the communities that surround our developments, and society as a whole.

Government

The Company recognizes and is committed to its role in economic development and nation building. We regularly engage the government, both at the national and local levels, to find business solutions to environmental and social issues. We constantly seek to partner with the public sector in developing business models, platforms and infrastructure solutions that may serve as catalysts for social development and contribute to raising the standard of living of people in the communities we serve.

Non-Government Organizations (NGOs)

We partner with reputable NGOs and corporate foundations for their expertise in providing meaningful and effective engagement with the communities we serve. We also provide additional resources to enhance their capabilities and increase their potential impact. Since 2007, our partnership with I-Serve, a tenuredNGO with expertise in community organization, has allowed us to address some of the needs of the communities surrounding NUVALI through livelihood programs and employment opportunities. We also continue to partner with the Ayala Foundation for ways to enhance the educational pportunities of students in public schools around the country.

Media

We work closely with the media to provide timely and accurate news and information on the Company’s activities to the general public. We consider the media as partners in our open and transparent approach to communication. Our Corporate Communications Division engages the media on a regular basis through various channels such as media conferences and briefings, news releases and fact sheets, social gatherings, one-on-one meetings, and through third-party consultants. We occasionally support media-initiated causes and events that are aligned with our advocacies and initiatives.

DISCLOSURE AND TRANSPARENCY

We are committed to the highest standards of disclosure, transparency and fairness in information dissemination. We provide the public with strategic, operating and financial information through adequate and timely disclosure filings submitted to the regulatory authorities. Along with regular periodic reports, we disclose any and all material information about the Company that may have an impact on the Company’s valuation and therefore its stock price and the trading volume of its securities. All disclosures submitted to the SEC, PSE and PDEx are immediately posted on our Investor Relations website.

Ownership Structure

We disclose quarterly and annually the top 100 holders of our common and preferred shares, the security ownership of beneficial owners having more than 5% of the Company’s total outstanding stock, and the security ownership of members of the Board of Directors and key management officers in the Company. This information is relayed quarterly through postings on our Investor Relations website and annually in the Definitive Information Statement sent to our shareholders. We also disclose the percentage of foreign ownership in the Company on a monthly basis.

Ayala Corporation owned 53.2% of the Company’s common shares (75.3% of the total equity shares, including outstanding preferred shares issued in 2007) as of December 31, 2010. None of our Directors or key officers own 2.0% or more of our outstanding capital stock. There are currently no cross or pyramid shareholdings within the Company’s capital structure.

Financial Reporting

Our financial statements comply with Philippine Financial Reporting Standards (PFRS), which are in general compliance with International Accounting Standards. The accounting policies adopted in 2010 are consistent with those of the previous financial year, except for the implementation of new and amended PFRS and Philippine Interpretations of International Financial Reporting Interpretations Committee (IFRIC) interpretations which became effective January 1, 2010.

DEALINGS IN SECURITIES

We continue to implement policies governing securities transactions that comply with existing government regulations against insider trading.

Reporting of Transactions and Trading Black-outs

Any change in personal shareholdings in the Company of Directors and key officers resulting from open market transactions (either acquisition or disposal) or the grant of shares from incentive-based schemes implemented by the Company are reported to the SEC, PSE and PDEx within five days from the date of the transaction. The Company strictly enforces, and monitors compliance with, a policy on insider  trading which prohibits the buying or selling of Company securities during prescribed periods by covered persons or those considered to have knowledge of material facts or changes in the affairs of the Company, or any of its subsidiaries and affiliates, which have not been disclosed to the public. Covered persons include members of the Board of Directors, all members of the Management Team, consultants, advisers, and other employees who have been made aware of undisclosed material information with respect to the Company and its operations. This restriction is expanded to include the immediate families of the parties mentioned.

The trading black-outs cover 10 trading days before and three trading days after the date of disclosure of quarterly and annual financial results. For other cases of non-structured disclosure of other material information, the black-out covers three trading days before and after the date of disclosure. All members of the Company’s Management Team are required to submit an annual certification signifying that they have not transacted in the Company’s shares during any of the previous year’s trading black-out periods. This process of certification is conducted during the month of January of each year.

Insider Trading

We continue to implement a policy on securities transactions in compliance with existing government regulations against insider trading. There has not been any case of insider trading involving company directors or management in the past five years.

ANTI-MONEY LAUNDERING

As a covered institution, the Company complies with all the rules, regulations and directives issued by the Bangko Sentral ng Pilipinas and its Anti-Money Laundering Council (AMLC). These cover general information and documentation requirements for customers, record-keeping standards, and the reporting of covered and/or suspicious transactions. We have an internal Anti-Money Laundering Compliance Committee that meets at least quarterly to review and discuss specific transactions (if any), possible changes in the regulatory environment, enhancements to the documentation and front-liner training, and other issues. We cooperate fully with any investigation proceedings or request for documentation or information initiated by the AMLC. We also engage them regularly in productive discussions on how we can enhance our participation in the prevention of money laundering activities further.

COMPLIANCE OFFICER

Jaime E. Ysmael, who is our Chief Finance Officer and holds the position of Senior Vice President, is the Compliance Officer designated to ensure adherence with corporate governance best practices as well as compliance with all regulations that cover the Company. Alfonso Javier D. Reyes, who is our Head for Investor Communications and Compliance Division, is our Deputy Compliance Officer.