While the ever changing economic climate has prompted some organizations to alter their sustainability strategies, we at Alcoa and Alcoa Foundation recognize that now, more than ever, we all must continue to play an active community role. That’s why in 2011 we increased our commitment, contributing more than USD$21 million to nonprofit organizations in the communities where we operate.

The theme for 2011: We got engaged! was inspired by Alcoa Chairman and CEO Klaus Kleinfeld, who often says, “No one is perfect but a team can be.” That's the essence of our company culture and the message of Alcoa Foundation's annual report. We got engaged because we know that we are stronger when we work - and serve - together.

Our accomplishments can be credited to great teamwork – not only within Alcoa Foundation but, importantly, through the active involvement of our nonprofit partners and colleagues who gave their experience, expertise and muscle. By leveraging the knowledge, passion and commitment of all our stakeholders, we sharpened our mission, initiated bold new programs, broke records for volunteerism, and put metrics and scorecards in place to measure our outcomes and progress over time.

In the following pages, you will read about the impressive contributions that Alcoa employees, retirees, friends, families and communities made in 2011. You will learn about our nonprofit and NGO partners and programs, how we measured success, and what we have accomplished. I hope these stories will inspire you to action – whether you’re a nonprofit with a great idea to increase recycling, or an employee who wants to organize a large tree planting project, or a retired Alcoa engineer who has extra time to mentor a young person…we know that if we work together, we do make an impact.

On behalf of the Alcoa Foundation team, I want to thank our nonprofit partners and non-governmental organizations who helped us advance our goals. I’d also like to thank the Alcoa Foundation Board of Directors for their leadership and contributions. Most importantly, I’d like to thank Alcoa employees, Alcoa retirees, friends and family who gave back with such enthusiasm! We are proud and grateful for the difference they made in 2011.

Regards,

Paula Davis, President, Alcoa Foundation

Sustainability is in the DNA of Alcoa – intrinsic in our miracle metal, embedded in our processes and valued by our people. Aluminum is an important part of the solution as industries from transportation and aerospace to building construction and consumer packaging look to reduce the environmental footprint of their products. In Alcoa’s own operations, we “walk the talk” by setting ambitious targets to reduce our energy usage and emissions. And we take steps to create and live by a culture of sustainability – rewarding employees who offer ideas to improve our environmental record and incorporating environment, health and safety goals into our leaders’ incentive compensation formulas. These efforts make Alcoa, our customers and communities more sustainable.

Within Alcoa Foundation, we focus on environment because as a mining, manufacturing and engineering company, we can contribute our expertise, resources and people to reduce, recycle, replenish and set standards. We invest in Science, Technology, Engineering and Math education and workforce development in manufacturing because these pursuits are fundamental to the long-term success of companies like Alcoa and to societies around the world. Importantly, we also encourage and support community service, offering programs and resources to employees to get involved and make a difference.

As we often say at Alcoa – no one is perfect but a team can be. The following stories will show you just how true that is.

Klaus Kleinfeld, Chairman of the Board and Chief Executive Officer, Alcoa

In 2011, Alcoa Foundation was honored to be recognized for our work
and corporate citizenship across the globe.

Alcoa Foundation’s assets are considered to be a perpetual pool of capital. The investment strategy has been designed with the goal of preserving the real (inflation-adjusted) value of the assets to maintain the real value of its program spending over the long term to support the goal of contributing five percent of the value of its assets each year.

The portfolio’s investment strategy has changed substantially over the last few years to better weather the challenging financial market environment. The focus has been on optimizing investment returns on a risk-adjusted basis over the longer term by significantly increasing asset and risk factor diversification and reducing the risk of significant drawdowns. Specifically, we meaningfully reduced the allocation to public equities and increased the allocation to macro and hedged equity strategies, U.S. inflation protected securities and long duration U.S. Treasury securities.

Due to these changes, the portfolio rate of return in 2011 was 6.9 percent, which outperformed our internal performance benchmark by 3.5 percent, which preserved USD$20 million of the Foundation’s total corpus. Our investments in long U.S. Treasury securities, macro and equity hedge strategies and U.S. inflation protected securities added value while our investments in U.S. and developed market equities detracted value.

As a result of the newly executed investment strategy, Alcoa Foundation contributed more than USD$21 million to nonprofit organizations throughout the world, focusing on improving the environment and educating and training individuals for careers in STEM and manufacturing.

Alcoa Foundation supported multiple partnerships and initiatives in 105 communities in 23 countries.
Alcoa Foundation invested in 483 nonprofit partners who are active in the following areas.