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2015 Corporate Governance Report

How does a company deliver on its promise to create long term value for its stakeholders?

For Aboitiz Equity Ventures, Inc. (AEV), this requires a constancy of focus and a continuous drive to pursue and achieve our corporate strategic objectives. The Company is guided in its pursuit of its corporate mission by AEV’s four strategic pillars: Grow the business, Engage stakeholder, Execution excellence, and Build human capital.

In 2015, we focused not just on building human capital, but building a Sustainable Leadership, as the driver for sustained growth and breakthrough performance. Like any living organism, AEV’s organization needs to be nurtured in order to live up to constantly changing stakeholder expectations. Our Company’s commitment requires development of our team leaders and members who learn how to lead by example, to mentor and foster teamwork, create a work environment that fosters speaking out, and to deliver the sustainable resulting growth.

Leadership Succession

We are pursuing the Group’s succession management program and casting a wider net for our key talents across the Group. One of the 2015 milestones of Aboitiz Group, was the setting up of a clear succession and management transition plan for the CEOs and COOs of AEV and AboitizPower - a transition that makes sense to the entire organization. A transition plan is now in place to address the future retirement of our C-suite executives.

Sustaining leadership is one of our commitments to our stakeholders as we move forward in our Aboitiz growth journey. This leadership brand focuses on creating shared value in every community, sector and society that our Company serves. AEV will pursue growth in its core businesses of power, banking and financial services, food, land, and infrastructure, while at the same time aiming to drive economic and social development alongside its communities.

According to Innosight, the average lifespan of corporates on the S&P index is shrinking from an average life span of 60 years in the 60’s to a 7-year rolling average lifespan in the current times. Creative disruptive forces of today pose challenges for our companies. In the face of disruptive technologies that are reshaping how businesses are being conducted, our organization is taking the bold step to set a new benchmark for diversification and sustainable growth, in the same way the first generation of Aboitiz leaders blazed the trail over a 100 years ago when they established the Aboitiz standards of doing business.

AEV’s brand of leadership is driven by our Aboitiz BetterWorld mindset. As we continue to build and strengthen our organization’s bench, the Company will nurture leaders from among the ranks. In 2015, the Company successfully pursued its groupwide leadership coaching, mentoring and development program of our people resources. From the start of the program in 2015, 168 team leaders out of a target of 249 leaders in the Aboitiz organization have completed coaching and mentoring courses.

As the Company today prepares its future leaders, the management teams are all united in one goal: to build a sustainable enterprise that can be entrusted to future generations. Today and in the future, the Aboitiz story will be told by our own people and our stakeholders, and it will be a story of the good that the Company and the organization will have created for society.

Aboitiz Power Corporation (AboitizPower) and its business units are also aligned to AEV Corporate Center’s strategic pillars. AboitizPower’s vision is “A Better Future and its mission is: To find Better Solutions”. The company’s corporate brand attributes are pro-active, expert, and responsible. AboitizPower considers the following as its responsibilities: to provide reliable and ample power supply needed by the country; to ensure that supply of electricity is provided at a reasonable and competitive price, and with the least adverse effect on the environment and communities.

The management of AboitizPower is “trooping the colour” as it rallies from 2015 thorough to 2016 to stay ahead of the game; and pursue with execution excellence the ambitious goals we have set. AboitizPower has been constantly striving to be the best at operations, maintenance, capacity and supply optimization, as well as project execution. Under the 1AP organizational brand, we have been working on transforming a good AboitizPower organization into a great organization - with policies and standards that promote cost efficiency and steady growth, and service levels intended to improve stakeholder engagement. The year 2015 was quite a productive year for the AboitizPower organization as we engaged the entire organization under Project Forward to take a great leap in continuous improvements in systems and operations. Through Project Forward, AboitizPower established and documented important internal business processes for operational efficiency.

AEV’s and AboitizPower’s health, safety, and environmental track records are generally very good. This is clear and measurable proof that businesses can be aligned both to the principles of sustainability yet make good economic sense.

The Boards of AEV and AboitizPower conscientiously ensured that they kept abreast of developments in the industries and business environment and shared their expertise and insights with Management. As team leaders and members of AEV and AboitizPower, we collectively set and pursued our 2015 strategic goals and business objectives without losing sight of the vision and mission of the companies. On the other hand, the respective Boards worked tirelessly to ensure accountability of past and current company actions through review of corporate strategies and reports to shareholders, legal and regulatory compliance reports, audit reports, financial results and budgets, and contemporaneous events that affect the business of AEV and AboitizPower.

Aboitiz Corporate Governance Guiding Principles

The Aboitiz governance structure is grounded on its core values of integrity, teamwork, innovation, and responsibility. These values, together with the Group’s brand attributes of being driven, driven to lead, driven to excel, and driven to serve, provide a moral guide for meeting the challenges of everyday business and in satisfying various stakeholder interests and concerns. These core values, attributes, vision, and mission constitute the Aboitiz DNA. More importantly, these values constitute the strong foundation for the organization’s corporate governance structure.

The Aboitiz Group continues to believe in and adopt the following core principles and practices: (i) the Company’s personality is independent from that of its Board, officers and employees; (ii) the Company has its own distinct rights and duties; (iii) the Board has the original power to decide on the Company’s policies; (iv) the Company can demand loyalty from its Board, officers and employees; (v) the Company’s business must be pursued through a long-term sustainability strategy; (vi) shareholders and stakeholders must be treated equitably and with fairness; (vii) a system of accountability; (viii) transparency in corporate operations and company reports; (ix) an ethical business; (x) creating shared value (CSV); and most importantly, (xi) sustainability and environmental compliance.

In 2015, AEV and AboitizPower Boards also set in motion the review and updating of the respective companies’ Code of Ethics and Business Conduct, engaged a gap analysis study of FCPA practices, and a study for a group wide related parties transaction manual that would be relevant as a conglomerate as well as operating business units. The Board Risk & Reputation Committee and the Board Audit Committee have embedded regular assurance procedures for the Aboitiz risk universe. Today, Aboitiz Group Audits are now Risk-based. These are intended to preserve and protect the rights of shareholders, to ensure shareholders’ equitable treatment by the companies, to enhance the stakeholder value, to promote continuous improvement of stakeholders’ engagement, and to make timely and responsive corporate disclosures balanced with the requirements for confidentiality in a competitive business environment. The Boards receive regular updates on the top residual risks of their companies.

In 2015, our management team enhanced the IT Committee leadership and its organizational structure to ensure that the Group’s IT system and policies sustain or support our group strategy and objectives. Our group also focused on important IT Governance initiatives that encompassed cloud computing policies, mobile device policies, cyber risk and threat responses, among others.

Responsibilities of the Board

The Boards of Directors under the Aboitiz Group are fully engaged Boards. The Boards are composed of highly professional directors that work under environments of respect and collegiality, where candidness and robust discussions are not only encouraged, but are the norm.

The AEV and AboitizPower Boards are each composed of three independent directors, and independent-minded executive and non-executive members who have diverse professional backgrounds, such as economics, corporate finance, engineering, accounting, audit, chief executive and chief operations experience, investment banking, private, government sector and multilateral agencies sector, as well as experience in policy-making bodies.
The selection process involves the nomination of directors by both controlling shareholders and minority shareholders who actively participate in the process. Minority shareholders nominated the independent directors for the 2015 - 2016 term. The criteria for selection of the nominated independent directors include, not only their expertise and professional backgrounds, but also their track record for being independent minded, their strategic thinking, and their understanding of the drivers of our companies’ businesses. The Board Corporate Governance Committee believes that this contributes to the successful execution of our vision as a conglomerate doing business in our specific industries. The Board Corporate Governance Committee, sitting in its capacity as a Nominations and Compensation Committee then approves the nomination by shareholders of executive and independent directors for endorsement to the shareholders for their vote at the annual shareholders meeting.

Directors are elected at the Annual Stockholders’ Meeting by personal vote or by proxy. A Proxy Validation Committee validates all proxies prior to the annual shareholders meeting. Voting at the Annual Stockholders’ Meeting is done through an electronic platform and the results are immediately disclosed to the assembly within a few minutes of the completion of the voting.

The directors lend their broad experience and expertise to the Board and the Management team in all relevant matters affecting the Aboitiz Group. AEV and AboitizPower are continually reviewing the roles and responsibilities of their Boards to assess the propriety and value of existing and proposed Board and Board Committee protocols, systems and policies. All directors have been carefully selected, nominated, and elected based on their credentials as well as their ability to contribute and share their expertise in all relevant matters affecting the business units of AEV and AboitizPower.

The existing company policies of AEV and AboitizPower, such as those found in the By-Laws, the Amended Manual of Corporate Governance, the Code of Ethics and Business Conduct, Board protocols, other Board secretariat guidelines, and the Aboitiz Information Management System protocols, ensure excellence in the performance of the directors’ roles and responsibilities.

In 2015, the Independent Directors of both AEV and AboitizPower worked closely with the internal audit teams in the performance of their functions as members of the Board Audit Committee.
To broaden the directors’ depth of knowledge and industry competence, AEV and AboitizPower organized seminars, lectures and orientations on highly technical topics unique to or relevant to the Aboitiz Group’s businesses. These include discussions on changing regulatory oversight of the energy market and their impact to AboitizPower, analysis and review of Aboitiz risk maturity index results up to 2015, top residual risks of the Aboitiz Group, cyber risks, political and country risks and the World Economic Forum Global Risks, mandatory corporate governance seminar, Philippine economic briefings, and a review of the Aboitiz Group’s strategic objectives and identified business strategies.

AEV and AboitizPower each have three Board committees that assist their respective Boards in their oversight responsibility over the Aboitiz business units. These committees are the Board Corporate Governance Committee (incorporating the former Nomination and Remuneration Committee), the Board Risk and Reputation Management Committee, and the Board Audit Committee. Three Independent Directors sit on the Board Corporate Governance and Board Audit Committees, comprising a majority of the membership of these Board Committees. In the Board Risk and Reputation Management Committee, while not constituting the majority of the committee membership, two Independent Directors sit in the respective Board Committees.

2015 was a hectic year for the directors with their attendance and active participation at regular and special meetings. They were diligent in the performance of their duties. They had an attendance score of above 96.3% and 92.59%, respectively a Board appraisal average score of 3 on a scale of 1-5.

Rights of Shareholders

The rights of shareholders are unequivocally recognized in the AEV and AboitizPower By-laws, Code of Ethics and Business Conduct, and Company’s Manual on Corporate Governance. The policy statements found in these documents reflect the commitment of AEV and AboitizPower to ensure protection of shareholder interests and concerns, as well as the free exercise of these rights. These include the rights to receive notices and attend shareholders’ meetings, to participate and vote in meetings on the basis of the one-share, one-vote rule, to cumulate their votes, to inspect corporate books and records, to vote in person, in absentia or by proxy, to receive dividends, to nominate and elect directors to the Board, and to ratify corporate action, among others.

The Aboitiz Group believe that the rights and interests of shareholders are aligned to that of the controlling shareholders, not only in terms of returns on their investments, but also in the sustainability of the businesses. AEV and AboitizPower take exceptional efforts in ensuring that shareholders receive timely public information affecting the businesses they have invested in, and that every one receives their dividends in accordance with the established dividend policy.
The commitment of AEV and AboitizPower to their shareholders’ rights is shown in their well-defined and published dividend policy, the regular holding of the Annual Stockholders’ Meetings, and the timely and accurate disclosures with the Securities and Exchange Commission, the Philippine Stock.

Exchange and the Philippine Dealing Exchange. The Board Secretariats of AEV and AboitizPower liaise with and provide directions to the companies’ stock transfer agent to ensure appropriate responses and the immediate resolution of shareholders’ queries and requests brought to their attention.

Equitable Treatment of Shareholders and Fair Dealings for All Shareholders

All shareholders, regardless of the amount of their shareholdings, are given the right to participate in company decision-making, pursuant to the one-share one-vote policy of AEV and AboitizPower.
As a matter of policy and practice, to ensure that directors, officers, and even majority shareholders do not take advantage of their position of knowledge in AEV and AboitizPower Group, related party transactions and amounts are disclosed. The related party transactions of the Group are reported in the consolidated annual Audited Financial Statements. AEV and AboitizPower also strictly enforce their respective Policies on Trading of Company Securities, which regulate insider -trading, and impose a trading blackout policy to prevent insider opportunism. The management teams of both companies are quite vigilant in ensuring that insider trading and trading blackout rules are followed by the team leaders and team members who are privy to sensitive transactions.

All shareholders likewise receive notices of all shareholders’ meetings and all agenda items to be discussed and decided upon during the said meetings are set out in the notices and that no new agenda item will be taken up during the meeting. For the guidance of shareholders, the rationale of agenda items subject to shareholder approval is included in the notices to shareholders’ meetings.

As long as shareholders provide their contact details, AEVand AboitizPower send out notices to all shareholders of record for all annual shareholders’ meetings, as well as provide them with copies of the Annual Report. The agenda items are listed in the notices and are discussed and voted upon at the annual shareholders’ meetings. At the meetings, the Board of Directors, the chief executive officer (CEO), chief financial officer, the auditors, the stock transfer agent, and other key officers of AEV and AboitizPower attend and make themselves accessible and available for any questions that shareholders and investors may have. Questions from shareholders on the floor are encouraged by the CEO.

AEV and AboitizPower strictly enforce their Codes of Ethics and Business Conduct. The Codes outline the general expectations of and set standards for directors, and employee behavior and ethical conduct. The Codes encompass prohibited practices involving conflicts of interest, proper dealings with proprietary and confidential information, and truthful disclosures of material information with transparency in the best interests of the customers, the companies, the shareholders, and the public.

Role of Stakeholders

The business model of AEV and AboitizPower is anchored on the sustainable growth of the Group’s businesses with full engagement of its stakeholders. The key stakeholders include the team leaders and team members who work toward achieving business strategies; the host communities of the companies and business units; the local government units that support and host the Group’s businesses; the regulators of the businesses; the customers whom they serve, and the environment that sustains growth.

The Group recognizes that corporate governance principles revolve around relationships between and among these stakeholders and the Group’s goals. Together, they contribute to the successful pursuit of business goals. AEV and AboitizPower corporate governance practices include policies and procedures that promote awareness and observance of stakeholders’ rights at the company level. Indeed, stakeholder engagement is one of the strategic pillars and part of the Aboitiz corporate culture.

The Aboitiz Group is committed to the principles of sustainability to balance the interests of people, planet, and profit. By following this rule, the Group has obtained and maintained a good health, safety, and environmental track record, a clear proof that a business can align itself to the principles of sustainability while operating a profitable business.

The Group launched its Sustainability Policy in 2013, in the belief that all stakeholders must be treated with fairness and that corporate social responsibility is an integral part of doing business. In 2014, AEV and AboitizPower continued to implement this policy and as an initiative for the year, jointly launched the BetterWorld campaign to encourage all stakeholders to adopt this policy for sustainability. In 2015, the Group began its journey on the Creation of Shared Value as a corporate culture. (See Sustainability Report at www.aboitizfoundation.org). Through Aboitiz Foundation Inc. (Aboitiz Foundation), our Group is pursuing concrete projects to fulfill eight out of the 17 Global Goals for Sustainable Development, namely: No poverty; Zero Hunger; Good Health & Well Being; Quality Education; Responsible Production & Consumption; Climate Change; Life Below Water; and Life on Land.

As a commitment to its employees, both AEV and AboitizPower embarked on a transformational leadership program across the organization through the creation of Leadership Circles. As a result of the Leadership Circle initiatives, both organizations committed to six leadership dimensions that would characterize the way the leaders of AEV and AboitizPower would lead.

The leadership dimensions are mentoring and development, fostering teamwork, courageous authenticity, achieving results, sustaining growth, and integrity. These are intended to create a deep bench in the Aboitiz organization with the objective of achieving sustainable breakthrough performance. Both companies recognize the value of their respective people resources. The team members have also been encouraged to craft their own individual development plans and career path as a way to ensure the fit of people in the right jobs. The right fit ensures a truly engaged team and consequently a sustainable leadership.

The Aboitiz Group is especially proud of its track record in corporate social responsibility (CSR) commitments. AEV and AboitizPower, through their business units and through the Aboitiz Foundation, Inc., have long standing and deeply rooted practices, commitments, and partnerships in the field of CSR. Over the last five years, the Group has allocated more than P2 billion for its various CSR projects that are focused on education, enterprise development, and the environment.

For 2015, the Aboitiz Foundation budgeted around P415 million for its CSR projects. These projects were funded by AEV and AboitizPower business units. (See Aboitiz Foundation Report on its website). Indeed, a recent March 2016 Forbes magazine article noted that based on publicly available financial statements, the Aboitiz Foundation (together with the Ramon Aboitiz Foundation Inc.) is collectively the biggest social initiatives giver in the Philippines.

Disclosure and Transparency

The Boards and Management of AEV and AboitizPower believe that good governance practices, especially in the areas of disclosure and transparency, elicit the trust and confidence of stakeholders. The Aboitiz Group puts a high premium to its collective reputation and work at keeping this well earned trust gained from its dealings with stakeholders over the years.
AEV and AboitizPower exert effort and time to consistently maintain their legal compliance and good corporate governance track records. In 2015, there was no deviation from or violation of the rules set forth in the Manual on Corporate Governance, other company governance and compliance policies, and protocols. Below is a quick view of the 2015 PSE Governance Disclosure Report of AEV and AboitizPower.

Pursuant to the Group’s commitment to transparency and accountability, AEV and AboitizPower continue to improve their respective dedicated corporate governance web pages on their websites (www.aboitiz.com) and (www.aboitizpower.com). These web pages contain company information such as the annual corporate governance reports, annual reports, company disclosures and reports, the Board Committees, the Manual on Corporate Governance, Code of Ethics and Business Conduct, minutes of the Annual Stockholders’ Meetings, Investor Relations information, and other relevant information to stakeholders. The pages serve as a resource center for stakeholders and the public.

The Aboitiz business model integrates the principle of Sustainability by way of business practices that ensure a long term corporate life, through an organization that focuses on the creation of shared value and takes concrete responsibility for the environment, and through execution excellence not only in business operations but also the implementation of corporate social responsibility programs that deliver on promises.

(Visit www.aboitiz.com for the full AEV and AboitizPower Corporate Governance Report with more details on current corporate governance practices, corporate achievements, milestones, and initiatives for the year 2015).

2015 AEV and AboitizPower Awards


We in AEV and AboitizPower have consistently maintained our core values and conformed to corporate governance principles in the face of evolving stakeholder concerns and demands in an ever-changing business environment. Our Group’s dedicated and steadfast adherence to these values and principles is clear proof of the value of the Aboitiz business motto: We can do well by doing good.

AEV and AboitizPower, along with subsidiaries and affiliates, have been consistently recognized in local and international surveys, assessments, and scorecards, as among the Philippines’ best-managed companies. In 2015, both companies received many awards, especially in the field of corporate governance and stakeholder engagement. AEV was ranked among the top 50 ASEAN public companies in the inaugural launch of ASEAN Corporate Governance Scorecard during the November 2015 APEC Summit in Manila. The company was also recognized as one of the awardees of Top Philippine Publicly-Listed Companies in the 2015 PSE Bell Awards. These awards were given in recognition of the companies‘ commitment to corporate governance best practices.

RIGHTS OF SHAREHOLDERS

Basic Shareholder Rights
The Right to Receive Dividends


The right to receive dividends is a basic shareholder right. The Company promotes this basic shareholder right by adopting a clear and transparent dividend policy.

The Company maintains an annual cash dividend payment ratio of approximately one third of its consolidated net income from the preceding fiscal year, subject to the requirements of applicable laws and regulations and the absence of circumstances that may restrict the payment of cash dividends. This is disclosed in the Operational and Financial Information section of the Annual Report, in the Information Statement, in the Report of its CFO and disclosures on the Company website if changes are made. These circumstances could include major projects and developments requiring substantial cash expenditure or restrictions on cash dividend payments under its loan covenants. (Visit www. aboitiz.com for the Management’s Discussion and Analysis or Plan of Action in the Annual Report).

The Company pays annual dividends in an equitable and timely manner. All shareholders are treated equally, receiving an amount of dividends per share that is proportionate to his shareholdings. The period for payment of dividends is based on trading requirements or constraints of the SEC and PSE after being declared and approved by the shareholders in the Company’s annual shareholder meetings.

All acts of the Board of Directors, corporate officers and management in the previous year up to the date of Annual Stockholders’ Meeting (ASM) is duly disclosed with the SEC, the PSE and the PDEX, including the declaration of the annual cash dividend. These acts are submitted to the shareholders for ratification in the interest of transparency and as a matter of customary practice or procedure in every ASM.

In the last five (5) years, the Company has paid the following dividends:​

The Company has consistently paid its dividends within 30 business days from its declaration date pursuant to existing best practices.

The Right to Participate in Fundamental Corporate Changes

The Company recognizes and upholds the importance of a genuine exercise of shareholders’ rights as granted by the Corporation Code of the Philippines, by other related laws and by its corporate covenants under the Company’s By-Laws and the Company’s Manual on Corporate Governance as amended. One important corporate governance practice followed by the Company is an assurance that shareholders enjoy all the rights granted by the Corporation Code of the Philippines. The Board and management team ensure the promotion of these rights and have been mandated to institute remedial measures to swiftly address any violation or transgressions.

As a matter of policy, the Company encourages active participation from shareholders in corporate decisions, such as the amendments of the Company’s constitution, authorization of additional shares and transfer of all or substantially all assets, which in effect results in the sale of the Company.

If there are actions requiring shareholders’ approval, the Company calls for a Special Stockholders’ Meeting or includes these proposed actions in the ASM. Prior to the meeting, the Company distributes to the shareholders entitled to participate in the meeting, the Information Statement which contain the details of the proposed actions to be approved by the shareholders. The agenda of the meeting also contains an explanation why the Company wishes to undertake these proposed actions.

At the ASM, the Board of Directors of the Company presents and submits to the shareholders the proposed actions for approval. The shareholders are also given an opportunity to ask questions regarding the proposed actions during the meeting. Only upon the receipt of the affirmative vote of shareholders representing at least 2/3 of the issued and outstanding capital stock of the Company will such action be considered as duly approved by the shareholders.

Effective Participation in Shareholders’ Meetings

The Company strives to maintain a transparent and fair conduct of its Annual and Special Stockholders’ Meetings and believes that accurate and timely information should be made available to the shareholders to enable them to make a sound judgment on all matters brought to their attention for consideration or approval. The Information Statement, distributed prior to and during the Annual Stockholders’ Meeting and available from the Company’s website, include the highlights and summary of the financial condition of the Company. The Information Statement filed with the PSE, PDEx and SEC is prepared with the objective of providing full and accurate information enabling stakeholders to make informed decisions. Shareholders are provided with individual profiles of new and returning directors, as well as a summary of the Board meeting attendance and performance record of its directors. Agenda items are included in the notices with a corresponding rationale.

Approval of Directors’ Remuneration and Per Diem

The Company has a policy on transparency of compensation for its Directors and key executives. Information on the basis of Board remuneration is readily accessible through the Company’s SEC Form 17-A (Annual Report), the Annual Corporate Governance Report, and its Board Corporate Governance Committee minutes. The Board Corporate Governance Committee ensures that the Directors’ and executives’ remuneration are consistent with the Company culture, strategy and business policies at a level sufficient to attract and retain directors and officers who are needed to run the Company successfully. The Company rewards its individual Directors and Officers based on ability to execute their duties and responsibilities. It is the Company’s philosophy to reward officers and employees based on individual performance measured through established Human Resources management metrics. Performance is evaluated and compensation is reviewed on an annual basis. The Company ensures that it pays its directors and officers competitively by comparing rates with other Philippine based companies through participation in and access to market salary surveys.

During the 2015 ASM, the shareholders approved the increase in the directors’ monthly allowance. As explained by the Chairman of the Board, the purpose of the increase in the monthly allowance of directors is to ensure that the Company directors’ remuneration is well within industry standards. This would ensure that the Company continues to attract highly qualified and exceptional talent to its Board of Directors.

The proposal to increase in the directors’ monthly allowance was also disclosed in the Company’s Information Statement. (See page 21 of the 2014 Definitive Information Statement of the Company and the notice of the agenda of the 2015 ASM).

All proposed changes in Board remuneration are approved by the shareholders and disclosed to the public in a timely manner through PSE and SEC disclosures and the Company’s Sec Form 17-A (Annual Report). The Company reviews Board remuneration by benchmarking against other Philippine publicly listed companies.  It also participates in market surveys to benchmark board remuneration.

The non-executive directors do not receive any additional compensation, options, performance shares or bonuses from the Company.

Nominations of Board of Directors and the Right to Elect Directors Individually

All shareholders are given the right to nominate individually all the members of the Board. Nominations for the position of Board of Director are received by the Corporate Secretary in accordance with the Company’s By-Laws and Guidelines for the Nomination and Election of Independent Directors, which rules are readily accessible through the Company’s website. The process of nomination is clearly set out in the Company’s Information Statement, Annual Report, Guidelines for the Nomination and Election of Independent Directors, and these information are readily accessible through the Company’s website. The gist of the Nominations guidelines is also broadcast to the shareholders at every Annual Stockholders’ Meeting.

Disclosure of ASM Voting Results and Tabulation Procedures

The exercise of a shareholder’s voting right is encouraged by the Company to ensure meaningful participation in all shareholders’ meetings. The Board is directed to remove excessive costs and other administrative or practical impediments to a shareholder’s right to vote. The counting of shareholders’ votes is done in accordance with the general provisions of the Corporation Code. The Office of the Corporate Secretary supervises the electronic counting of votes.

The voting methods and vote-counting systems employed by the Company during every shareholders’ meeting are disclosed in the Information Statement and clearly explained by the Corporate Secretary to shareholders in attendance to ensure during the shareholders meeting the intelligent exercise of the shareholders’ right to vote.

The Company follows the system of cumulative voting for the election of directors, to allow shareholders an opportunity to elect each member of the Board of Directors individually. Other matters are also decided through voting by shares of stock. The Company adheres to the One-Share, One-Vote policy for the same class of shares. Proxy voting is allowed at all meetings and is facilitated through proxy voting forms. In its regular board meeting last November 12, 2010, the Board of Directors of the Company approved the deletion of the notarization requirement of proxy forms to be used in all shareholders’ meetings of the Company. This is to facilitate easy voting by shareholders, in line with the Company’s efforts to promote shareholder engagement and to improve corporate governance practices.

The Company makes the results of the votes publicly available the next working day.

Opportunity to Ask Questions, Questions and Answers Raised During the ASM as Documented in the Minutes of Meeting

The Office of the Corporate Secretary ensures that all Minutes of annual and special meetings of shareholders clearly and satisfactorily reflect all matters taken up during these meetings. All shareholders are encouraged and given the right to participate in the meetings.  The opportunity to ask questions or raise issues, the questions, answers, issues and motions raised, the agreements and resolutions arrived at, the corporate acts approved or disapproved, and the voting results are reported in the Minutes.  The Company also discloses to PSE, PDEx and the SEC the items approved at the Annual Stockholders’ Meeting based on the agenda items provided to all shareholders, no later than the next business day after the annual shareholders’ meeting. The voting results including quorum and summary of resolutions approved are made publicly available by the next working day through the Company’s website under Annual Stockholders’ Meeting in the Investor Relations page.

At every Annual Stockholders’ Meetings, the Company ensures the effective exercise of the rights of its shareholders.  There are no barriers or impediments preventing shareholders from consulting or communicating with one another, with the Directors and with the Corporate Secretary.

Attendance of the Board of Directors, Management and Committee Members During the ASM

The Chairman and members of the Board of Directors, the Chief Executive Officer, the Chairmen of the various Board Committees particularly the Board Audit Committee, and the Company Corporate Secretary all attend the ASM of the Company to answer any questions shareholders may have concerning the Company. Likewise, all members of the Board of Directors and other key officers are present at the shareholders’ meeting to give shareholders opportunity to interact with the Board and top Management on the current state of the Company’s business and affairs and to ask any questions from the Directors and Officers.


The minutes of the ASM available in the Company’s website also documents the attendance and participation of the Board of Directors, Management and the members of the different Board committees. The full list of board, management and committee members who attended the 2015 ASM is in “Annex B”.

Shareholders’ Meeting Venue Accessibility

The Company’s ASM is usually held at the current principal place of business of the Company.  The chosen hotel venue is an easy to reach location and easily accessible to majority of the shareholders. The Company’s 2015 Annual Stockholders’ Meeting was held at the InterContinental Manila, Ayala Avenue, Makati City, Metro Manila, where the principal place of business of the Company is located. The venue was considered easily accessible and convenient to the shareholders as it is situated in the heart of the central business district of Makati. The Company also provides the location map of the venue of the Annual Stockholders’ Meeting in the Company’s website under Investor Relations page.

Voting by Proxy

The shareholders may vote in person or by proxy. Arrangements for proxy voting or voting in absentia are in line with existing rules and regulations. The Company provides shareholders with a copy of the proxy form through the following: (1) printed copy enclosed in the Definitive Information Statement; (2) digital copy inserted in the CD kit containing the soft files of the Information Statement; and (3) downloadable form from the Company’s website.

In its regular board meeting last November 12, 2010, the Board of Directors of the Company approved the deletion of the notarization requirement of proxy forms to be used in all Stockholders’ Meetings of the Company. This is to facilitate easy voting by shareholders, in line with the Company’s efforts to improve corporate governance practices.

In 2015, a Proxy Validation Committee, consisting of representatives from senior management, was formed by the Company in order to validate and count proxies received for the Annual Stockholders’ Meeting.

An independent auditor, Luis Cañete & Company, has been appointed as independent inspector/scrutiners for the validation of votes at the 2015 ASM.

Voting by Poll

Voting during the Annual Stockholders’ Meeting is done by poll, under the supervision of the Company’s Corporate Secretary and Stock and Transfer Agent, and validated by the Proxy Validation Committee and an independent third party inspector of votes. The Board Secretariat also uses an electronic platform to record the votes.

Appointment of Independent Party Inspector to Validate Vote at the ASM

In the Annual Stockholders’ Meeting, the Company engages an independent third party to assist in the validation of proxy and the counting of votes. In the 2015 ASM, a Proxy Validation Committee, consisting of representatives from senior management, was formed by the Board Secretariat in order to validate and count proxies received for the meeting. Luis Canete & Co., an independent third party, provided the proxy and vote validation functions for the 2015 ASM.

Disclosure of the Results of the ASM

The Company made publicly available by the next working day the results of the votes taken during the most recent ASM for all resolutions.  The minutes of the 2015 meeting of shareholders were uploaded to the Company’s website the day after the ASM or on May 19, 2015.  The minutes can be accessed on the Company’s website at www.aboitiz.com.

Agenda for the Stockholders’ Meeting
Rationale and Explanation for Each Agenda Item

The Company provides at least 30 days prior notice of the meeting and information on all proposed resolutions and rationale thereof with corresponding explanation for each agenda item requiring shareholders’ approval in the notices of the ASM. The Company also publishes notices of the shareholders’ meetings in national newspapers of general circulation.

Each resolution relates to only one agenda item, and a brief rationale or explanation for its inclusion in the ASM is provided. The Company does not include any additional and unannounced agenda item in the ASM if not disclosed prior to the ASM.

Appointment of Independent Party in cases of Mergers, Acquisitions or Takeovers

The Company has no merger or acquisition cases at present. However, in the event of mergers/ acquisitions or takeovers, as a practice, the Company engages an independent third party to provide a fairness evaluation. These corporate actions are approved or rejected by the shareholders in accordance with the provisions of the Corporation Code.

Policies and Practices to Encourage Effective Exercise of Ownership Rights

The Company strives to maintain a transparent and fair conduct of its Annual and Special Stockholders’ Meetings and believes that accurate and timely information should be made available to the shareholders to enable them to make a sound judgment on all matters brought to their attention for consideration or approval. The Information Statement and the Aboitiz Integrated Annual Report, distributed prior to and during the Annual Stockholders’ Meeting and available from the Company’s website, include the highlights and summary of the financial condition of the Company. The Information Statement filed with the PSE, PDEx and SEC is prepared with the objective of providing full and accurate information enabling stakeholders to make informed decisions. Shareholders are provided with individual profiles of new and returning directors, as well as a summary of the Board meeting attendance and performance record of its directors. Agenda items are included in the notices and recently includes rationale for agenda items.

The Company continues to exert efforts to extend the communication channels between the Company and the institutional shareholders through its Investor Relations Office and to the nominee registered shareholders through the PCD Nominee Corporation. The Legal and Corporate Secretarial team reach out and provide copies of the Notice and Agenda of the Annual Stockholders’ Meeting, sample proxy forms, the Information Statement and the Aboitiz Integrated Annual Report prior to the shareholders’ meeting for dissemination to the brokers to ensure that institutional investors are properly represented during the shareholders’ meeting. As a matter of policy, the Company does not solicit proxies.

 

EQUITABLE TREATMENT OF SHAREHOLDERS

Shares and Voting Rights​​

 

AEV Ownership Structure

The share capital of the Company consists of one class of listed common shares and a class of non- listed preferred shares.

According to the share register kept by the Stock Transfer Service, Inc., the Company’s stock and transfer agent, as of December 31, 2015, the Company had 9,328 shareholders. Aboitiz & Company, Inc. owned, as of the same period, 2,735,600,915 shares or 49.25% of the 5,554,266,807 the total outstanding common shares entitled to vote. Of the publicly-held shares, 21.14% are owned by institutions and/or are nominee-registered (11.30% Filipino & 9.84% Foreign), i.e., held of record by banks, brokers and/or nominees, such as the PCD Nominee Corporation. This means that the actual shareholder is not reflected in the share register or included in shareholding statistics. Although the Company has exerted efforts to reach the ultimate shareholders, the result of having these shares in PCD Nominees is that the ultimate shareholder of such nominee-registered shares may likely not participate in shareholder votes and other actions, unless otherwise represented.


Voting Rights of Common and Preferred Shareholders

All common shares are voting following the rule of One-share, One-vote. The preferred shares are non-voting, non-participating, non-convertible, cumulative, re-issuable shares and may be issued from time to time by the Board in one or more series. These preferred shares which are usually issued to financial institutions or financial market intermediaries are treated as debt instruments by the Company in its books, in conformity with the Philippine Accounting Standards, which adopt the International Financial Reporting Standards as implemented by SEC. (See Management’s Discussion and Analysis or Plan of Action and the Company’s Financial Statements in the Annual Report at www. aboitiz.com).

The voting rights of the common and preferred shares are fully disclosed in the Company’s Definitive Information Statement.

Notice and Agenda of Annual Stockholders’ Meeting

The Company consistently provides all shareholders with the notice and agenda of the Annual Stockholders’ Meeting at least thirty (30) days before a regular meeting and twenty (20) days before a special meeting. This is to give the shareholders sufficient time to go over information and to contact their proxies for appropriate instructions. The Company also publishes the notices of shareholders’ meetings in national newspapers of general circulation and in its company website. Under the Company’s By-Laws, shareholders may call a Special Stockholders’ Meeting and submit a proposal for consideration. The Company makes it a point that the external auditor and other relevant individuals attend the ASM to answer shareholder questions in such meetings. The Office of the Corporate Secretary ensures that all relevant questions during the ASM are answered and recorded.

Each resolution relates to only one agenda item, with a brief rationale or explanation for its inclusion in the ASM, when necessary. The Company does not include any additional and unannounced agenda item in the ASM if not disclosed prior to the ASM.

The Notices, Minutes, and other Corporate Documents of the Company are written in English, an official language in the Philippines; and generally known and understood by the Company’s shareholders.

​Details of the Notice and Agenda

Together with the notice, the profiles of the nominees for the position of Board of Directors and the current key officers of the Company are provided to shareholders through the Information Statement which is distributed to shareholders before the Annual Stockholders’ Meeting. The profiles of the nominees, members of the Board and its key officers include their qualifications, work experience, age, and positions and offices heId for the past five years, date of first appointment, and other directorships currently and previously held in other listed companies. For more information on the profiles of the nominees, members of the Board and key officers, please refer to the Aboitiz website at www.aboitiz.com.

The auditors seeking for appointment or re-appointment are clearly identified in the Company’s disclosures and in the Information Statement of the Company.

The Company has a clear and transparent dividend policy. The Company maintains an annual cash dividend payment ratio of approximately one third of its consolidated net income from the preceding fiscal year, subject to the requirements of applicable laws and regulations and the absence of circumstances that may restrict the payment of cash dividends. The dividend policy and the amount of final dividends to be paid are disclosed in the Operational and Financial Information section of the Annual Report, in the Information Statement, in the Report of its CFO and disclosures on the Company website if changes are made. These circumstances could include major projects and developments requiring substantial cash expenditure or restrictions on cash dividend payments under its loan covenants.

The Company allows and encourages proxy voting all shareholders’ meetings. Forms for proxy voting are attached to the notices of the meeting distributed to all shareholders. In keeping with best practices, these proxies are not required to be notarized.

The Company provides shareholders with a copy of the Proxy form through the following: (1) printed copy enclosed in the Definitive Information Statement; (2) digital copy inserted in the CD kit containing the soft files of the Definitive Information Statement; and (3) downloadable form from the Company’s website.

Prohibition on Insider Trading and Abusive Self-Dealing
Fair Dealings for All Shareholders

As a publicly-listed holding company, the Company is subject to numerous laws and regulations. It is the responsibility of everyone within the organization to know and understand the laws applicable to their job functions and to comply with both the letter and spirit of these laws and regulations to avoid actual misconduct and any appearance of impropriety. Every employee is responsible for fair dealings with the Company’s suppliers, customers, creditors, analysts, market intermediaries and participants. The Company also has a policy requiring full disclosure of details of related-party transactions in public communications.

The Company’s Code of Ethics and Business Conduct outlines the general expectations of, and sets standards for, employee behavior and ethical conduct. Board members, the Management Team and all other employees are oriented on the Code and are advised of the strict adherence required by the Company.

The Code encompasses prohibited practices involving conflicts of interest, the proper way of dealing with proprietary and confidential information, and truthful disclosures in the best interests of the clients, the Company, and the public.


The Company’s General Trading Policy

The Company strictly enforces a Policy on Trading of Company securities. The Trading Policy imposes a trading blackout on AEV securities beginning ten trading days before and until two full trading days after the release of the quarterly or annual earnings of the Company and two days for other material current events. The Compliance Officer sends out notices requiring the strict observance of the trading blackout via various media (email and short messaging services), to all the Directors, Officers and pre-identified key employees of the Company during any relevant blackout period. Directors and key officers are required to regularly report their beneficial ownership of shares in the Company and any dealings in AEV shares must be reported to the Corporate Secretary within one day from the sale or purchase of AEV shares. In addition, the Company discloses beneficial ownership in its Annual Corporate Governance Report to the SEC including trading of Company shares of its directors and key officers. Non-compliance with the policy may carry criminal and civil liabilities as well as reputational damage to the Company, the Board, the Management and the Office of the Compliance Officer strictly enforce compliance with the Trading Policy.

The Company’s Policy on Insider Trading

Insider trading is strictly prohibited under the Code of Ethics and Business Conduct, the Manual on Corporate Governance, and under the PSE and SEC rules. The Company’s Manual on Corporate Governance prohibits every member of the Company’s organization, from any misuse of inside information. All team members of the Company are mandated to exercise prudence in handling material non-public information in the course of their work and in relation to the trading or dealing with AEV securities. The Company also has in place a trading blackout and insider trading policy to curtail opportunistic dealings in the Company’s shares. Any violations are required to be reported to the Board Corporate Governance Committee.

For purposes of compliance with these rules, the Office of the Corporate Secretary conducts corporate governance seminars for all employees, from top management to team members. The seminars cover the rules prohibiting insider trading among many other topics on corporate governance rules of the Company. In 2013, this seminar was converted into a mandatory e-learning module for better employee convenience.

Dealing in Company Shares

The Company has an existing policy requiring the Board of Directors and the officers to report to the Office of the Corporate Secretary any transaction related to the purchase and disposal of Company shares within one (1) business day from the date of the transaction. The Company discloses the direct and indirect (deemed) ownership or shareholdings of major and/or substantial shareholders and the details of the subsidiaries, associates, joint ventures and special purpose enterprises/vehicles. The Company’s Information Statement and Public Ownership Report regularly filed by the Company likewise show the direct and indirect ownership of the Company’s shareholders, which include its Board, the Management Team, and employees. Regular disclosures to the PSE, PDEx and SEC are made in the event of any dealings in Company shares.

There has been no violation and conviction of insider trading and abusive self-dealing by directors, management and employees in the past five years that the Trading Policy has been in place.

Related Party Transactions

The Company has in place policies on transactions with related parties requiring the full disclosure thereof in the Company’s financial statements and in other Company reports. The Company’s related party transactions include, among others, written service level agreements with its affiliates and subsidiaries for human resources, internal audit, legal, treasury and corporate finance services, for guarantees of credit accommodations of subsidiaries and affiliates and intercompany advances for working capital requirements of subsidiaries and affiliates. The Company does not set thresholds for disclosure of related party transactions, but rather fully discloses all related party transactions regardless of amounts in full compliance with existing Philippine financial accounting standards. The Company also ensures that they have the character of arm’s length transactions consistent with, among others, existing rules on transfer pricing. These disclosures are made in the Company’s Annual Audited Financial Statements and Management Report.

In 2014, the Company conducted a comprehensive transfer pricing study and assessment of current practices and policies to ensure compliance with stricter transfer pricing rules, policies and best practices and for continuous improvement of processes.

The Company strictly adheres to the Philippine Corporation Code’s rules on voting for specific corporate acts where approval of specific types of related party transactions in the Board and in shareholders’ meetings may be required. The Company’s Independent Directors and the Board Audit Committee play an important role in reviewing significant related party transactions as it does in the regular course of its work. The Company’s related party transactions are typically agreements entered into in the ordinary course of business to maximize efficiencies and realize cost synergies. These are reported to the Board as they are entered into.

Definition of Related Party and Related Party Transaction

Under IAS 24, a “related party” is a person or entity that is related to entity that is reporting its financial statements. In the case of the Company, it fully discloses intragroup transactions, the levels of financial support provided by the Company and its subsidiaries and affiliates.

The Company defines “Related Party Transactions” pursuant to IAS24 (and PAS 24). Related Party Transactions are accounted for in accordance with the requirements of IAS 24. Accordingly, related party transactions and outstanding balances, including commitments and names of related entities, in both the consolidated and separate financial statements are fully disclosed in the Company’s financial statements.

RPT Policy

It is the policy of the Company that Related Party Transactions between the Company and related parties shall be subject to review and approval to ensure that (1) they are at arm’s length and pass the test of transfer pricing rules; (2) the terms are fair, or are based on market practices, and (3) they will inure to the best interests of the Company and its shareholders.

The Group Internal Audit is mandated to conduct regular audits of the Company’s related party transactions to ensure there are no conflicts of interests, the transactions are within the approval levels of financial transactions, that they are approved by the boards of directors of the related parties and are fully documented. The Group Internal Audit determines and audits transactions which are in the regular course of business and those that are subject to a conflict of interest or are unusual.

As a procedure, the Company’s external auditors also review all Related Party Transactions of the Company as part of the preparation of the audited financial statements. Material and Significant Related Party Transactions are then presented to, discussed, reviewed and approved by to the Board Audit Committee.

The Company’s related party transaction policy is also stated in the Board Audit Charter. Significant or Material Related Party Transactions, other than the routinary shared services transactions, are reviewed by the Board Audit Committee, where the majority of the members are the Independent Directors.

On March 1, 2016, the Board Corporate Governance Committee of the Company approved and endorsed to the full Board the Company’s Related Party Transaction (RPT) Policy which institutionalizes the Company’s practices in dealing and reporting of RPTs. The Board of Directors of the Company reviewed the RPT Policy and has proposed revisions to align with the Company’s policy on shareholder protection, disclosure, transparency, and SEC Corporate Governance Road Map.

RPT Disclosures

The nature and extent of transactions with affiliated and related parties are disclosed annually to shareholders through the Company’s Information Statement, Annual Report and Audited Financial
Statements.

The Company and its subsidiaries enter into related party transactions consisting of payment of shareholder advances, professional fees and rental fees. These are made on an arm’s length basis and at current market prices at the time of the transactions. Service and management contracts are also entered into with subsidiaries and affiliates for corporate center services, such as human resources support services, internal audit services, legal and corporate compliance services, treasury, corporate finance services, and technology infrastructure services. These shared services are obtained from the Company to enable the Aboitiz group of companies to realize cost synergies. The Company maintains a pool of highly qualified professionals with in-depth business expertise specific to the businesses of the AEV organization. Transactions are priced on a cost recovery basis. In addition, transaction costs are always benchmarked to third party rates to ensure competitive pricing. Service Level Commitments and Agreements are executed to ensure quality and timeliness of services.

The Company is currently conducting an inventory of all related party transactions of the Group and setting up the RPT Committee consisting of independent directors.

The SEC issued updated disclosure guidelines on retirement benefit funds. These guidelines enumerate the minimum disclosure requirements under PAS 24, Related Party Disclosures. The guidelines prescribe additional disclosure requirements on any information that would provide an understanding on the transactions of retirement funds with an entity whose employees are the beneficiaries and other investments in securities of the related entity. These disclosure guidelines took effect and became applicable to all annual financial statements for the period ending December 31, 2014 there after. The Company has always disclosed its transactions in its Annual Report and will continue to disclose them in accordance with the existing guidelines.

No Non-Compliance Incidents


There has been no reported case of non-compliance with the laws, rules and regulations pertaining to significant or material related party transactions in the past three years. Since the Company is a conglomerate, it has to consolidate the financial statements of the Group. It exerts best efforts to try to obtain its audited financial statements within the schedule required by the SEC. The Company’s audited financial statements reflect a true and fair representation of the financials that are affirmed by the Board of Directors and relevant officers of the Company. There have been no revisions and restatements of the financials approved by the Board Audit Committee prior to the approval of the Board.

Policy on Conflict of Interest Situations

The Company promotes a culture of service, excellence and leadership. The Company believes that this is an environment that promotes the recognition of a duty for employees and officers to advance AEV’s interest and that of its stakeholders. No employee, officer or director may use his position or corporate property or information for personal gain, and no employee, officer or director may take for himself Company opportunities for sales or purchases of products, services or interests. Protection of proprietary and confidential information generated and gathered in the conduct of business is considered the obligation of every member of the AEV organization. Everyone is also expected to respect the property rights of other companies.

AEV’s employees and officers are encouraged to promptly report any potential relationship, action or transaction that may give rise to a conflict of interest to the Human Resources Department or to the Compliance Officer. Directors are under the obligation to disclose any actual or potential conflicts of interest to the Chairman of the Board and the Compliance Officer. The Company expects that Directors inhibit themselves from any Board discussion or decision on matters that affect or have relevance or relation to their personal, business or professional interests. Legal proceedings involving Directors and Officers that could affect their ability and integrity to serve the Company are required to be disclosed to the Chief Compliance Officer. In the past or recent years, there have been no issues relating to related party transactions or conflict of interests that have been raised to the Board or to Management.

Protection of Minority Shareholders

In 2015, the Company has no RPTs that can be classified as financial assistance to entities other than wholly-owned subsidiaries.

The nature and extent of transactions with affiliated and related parties are disclosed annually to shareholders through the Company’s Information Statement, Annual Report and Audited Financial Statements.

Related Party Transactions with Wholly Owned Subsidiaries

The Company and its subsidiaries enter into related party transactions consisting of payment of shareholder advances, professional fees and rental fees.  These are made on an arm’s length basis and at current market prices at the time of the transactions.  Service and management contracts are also entered into with subsidiaries and affiliates for corporate center services, such as human resources support services, internal audit services, legal and corporate compliance services, treasury and corporate finance services, technology infrastructure services. These services are obtained from the Company to enable the Aboitiz Group of companies to realize cost synergies.   The Company maintains a pool of highly qualified professionals with in-depth business expertise specific to the businesses of its corporate organization. Transactions are priced on a cost recovery basis. In addition, transaction costs are always benchmarked to third party rates to ensure competitive pricing. Service Level Commitments and Agreements are executed to ensure quality and timeliness of services.

Disclosure and Approval of Related Party Transactions

The nature and extent of transactions with affiliated and related parties are disclosed annually to shareholders through the Company’s Information Statement, Aboitiz Integrated Annual Report and Audited Financial Statements.

The Company has entrenched policies on transactions with related parties requiring the full disclosure thereof in the Company’s financial statements and in other Company reports. The Company’s related party transactions include, among others, written service level agreements with its affiliates and subsidiaries for human resources, internal audit, legal, treasury and corporate finance services, for guarantees of credit accommodations of subsidiaries and affiliates and intercompany advances for working capital requirements of subsidiaries and affiliates. The Company does not set thresholds for disclosure of related party transactions, but rather fully discloses all related party transactions regardless of amounts in full compliance with existing Philippine financial accounting standards. The Company also ensures that they have the character of arm’s length transactions consistent with, among others, existing rules on transfer pricing. These related party transactions are disclosed in the Company’s Annual Audited Financial Statements and Management Reports. These reports are approved during the Annual Stockholders’ Meeting of the Company.

 

 

ROLE OF STAKEHOLDERS

Stakeholder engagement is one of the four strategic pillars of the Company. AEV is committed to positively engaging its stakeholder through establishment of the necessary or appropriate communication and strategic relationships. The Company’s stakeholders are team members, team leaders, the host communities, regulators, customers, its shareholders and investors, its Board of Directors, the lenders, financing providers and intermediaries, and the national and local government units.

In 2014, the Reputation Team conducted a reputation survey for the Aboitiz Group, involving a total of 520 respondents consisting of customers, employees, suppliers, investors, communities, media, and government regulators. The survey results showed that 96% of all stakeholders view Aboitiz’ overall reputation positively, of which 49% viewed the Aboitiz reputation as excellent. On delivery of promise, 88% of all stakeholders view Aboitiz as delivering on the 7 key dimensions of reputation (Products/ Services, Innovation, Workplace, Governance, Citizenship, Leadership, Financial Performance), of which 44% viewed Aboitiz as excellent in the delivery of its promise. Positive emotion level was at 96%, with 56% of stakeholders definitely trusting, admiring, feeling good and having the highest esteem for Aboitiz. Lastly, 57% of the respondents said that they will definitely support the Group by recommending, buying and investing in Aboitiz.

The Company has a long and deep corporate social responsibility culture and program. The Company has established and pursued its Sustainability Program through its Reputation/CSR/Sustainability Council. The Council is the primary leader in the Aboitiz Group for developing strategy and group- initiatives related to CSR and sustainability sets the policies and oversees the implementation of the Aboitiz Group’s projects.
 
It is committed to living the principles of sustainability as these relate to the Company’s businesses. Its affiliates, SN Aboitiz Power- Benguet, Inc. and Hedcor Sibulan, Inc. lead in the country’s successful registration of their hydroelectric power plants under the Clean Development Mechanism (CDM) or carbon trading by the United Nations Framework on Climate Change. This is the Company’s contribution to the international response to climate change and a promotion of hydroelectric power projects as a major source of renewable energy for the country. CDM is a mechanism agreed in the Kyoto Protocol to enable industrialized countries to reduce greenhouse gas, to invest in climate change friendly projects in developing countries, and to allow them to develop emission reduction projects to earn carbon emission credits. (Visit www.aboitiz.com for the full AEV Sustainability Report)
 
In 2015, the Company recognizes that corporate governance principles revolve around relationships between and among the many stakeholders and the goals for which a corporation is governed. The Company’s principal stakeholders, the shareholders, management teams, employees, Board of Directors, lenders, financing providers and intermediaries, regulators and the community, together contribute to the successful pursuit of the Company’s business goals. Good corporate governance requires policies and procedures that promote awareness and observance of stakeholders’ rights at the company level. This is why the Company makes sure that its various stakeholders concerns are addressed and relationships nurtured with fairness and honestly, consistent with its mission and vision and its commitment to service.
 
The Company formed the Reputation Steering Committee. The Committee will champion the stakeholder engagement strategy, drive the process in the Corporate and Business units, and look at best practices. At this point, the Company is at the implementation phase of the strategy wherein it will conduct stakeholder relationship management workshops to provide a deeper understanding of the principles and processes of stakeholder engagement, as well as to equip the team with the skills in understanding people and building relationship with stakeholders thru communication.
The Company expects to celebrate more milestones as it pursues relentless execution of its strategic plans guided by a BetterWorld sustainability mindset: we can do well by doing good, always making the right long-term decisions that balance the interests of people, planet, and profit. We are ready to confront the challenges of a changing world – addressing climate change, preserving our limited resources, and creating inclusive growth for everyone. The Aboitiz Group is now at the cusp of creating shared value, redefining the role of its businesses in its communities and society-atlarge, as it aims to drive economic and social development together. While the Company will capitalize on the opportunities that comes its way, it will always stay true to its mission of creating long-term value for all its stakeholders.

Relations with Shareholders, Customers, Suppliers, Business Partners and Financing Providers

The Company believes in the value of its shareholders and ensures that its shareholders and investors receive timely, relevant, balanced, high-quality and understandable information about the Company. The Investor Relations Office assures shareholders and investor/shareholders’ of an easy and direct access to officially designated spokespersons for clarifying information and issues as well as dealing with investor concerns. AEV’s commitment to its shareholders is reiterated annually through its comprehensive reports on its operations, particularly the Company’s annual reports to its shareholders and through its investors’ briefings, investor conferences, non-deal road shows and one-on-one meetings. The Company continually updates website content to regularly keep its shareholders updated on the latest Company developments.


Customers as Stakeholder
Better Customer Service

In 2015, the Company’s financial services group, through PETNET, Inc. significantly expanded its branch network. The existing and soon-to-open branches will be utilized to provide greater access and convenience for UnionBank and CitySavings customers.
 
For the Company’s food arm, 2015 did not come without hurdles with volatile commodity and forex markets threatening its costs and thinning out margins. The first year of the ASEAN integration has created a borderless business environment, which has increased competition, challenging its hold in the markets that it operates. However, Pilmico took these as an opportunity to be better at buying its raw materials and become a preferred brand to its customers through better products and services. Pimico’s new Pier 2 at its Iligan complex supplements its existing international port facility and hastens the unloading of raw materials for faster distribution of finished goods to its customers.
 
2015 saw City Savings Bank meeting its financial and business expectations amid intensifying competition. It continued to delight its teacher-partners and expanded to new markets through the deployment of simpler processes coupled with a superior brand of service. Moving forward, City Savings Bank will break new ground in service and technological excellence, putting into production its Loan Ranger program, bringing the bank closer to its clients. It will continue to develop its mobile platform and optimize its processes, building capacity to support its fast-growing business.
In 2016, Unionbank will continue to stay grounded on its purpose as articulated in the FOCUS 2020 roadmap, that is to “Make Da Diff” in the lives of others by connecting and enabling communities through Smart Banking in the spirit of Ubuntu. For AboitizLand, it will continually fulfill its brand promise of creating enduring, assuring, and nurturing communities and further strengthen its relationship with customers and partners.

Aboitiz Integrated Management System (AIMS)

The Company successfully merged its two recognized management systems – Information Security Management System (ISMS) ISO 27001:2005 and the Quality Management System (QMS) ISO 9001:2008. This created a simplified and unified approach to data security, quality services and products, with the objective of attaining company sustainability, transparency, and ultimately investor and customer satisfaction.

Data Center ISO Certification Promotes Quality Processes & Stakeholder Protection

The Company Data Center was certified for ISO 27001:2005 in 2009. Since then, the Company has passed its regular surveillance audits. It has continually implemented and maintained a coherent set of policies, processes and systems to manage risks of the Company’s information assets, thus ensuring acceptable levels of information security risk. The Company also recognizes the need for a well-documented system for non-IT assets and processes that ensure consistency and improvements of working practices including the products and services produced.
The Company’s Data Center was re-certified for the 27001:2005 at the end of 2013, for which it received an ISO/IEC 27001:2005Certification on Information Security Management System from TUV Rheinland, an international certifying body based in Cologne, Germany. This was again re-certified in December 2014.
 
The Company introduced and launched the QMS in 2011-2012 in pilot groups. The functional units underwent the preparation exercise for the ISO 9001:2008 certification. The initial pilot group’s work has paved the way for better accountability and quality of the management services and business solutions provided to the Aboitiz Group of Companies. Throughout 2013 and 2014, all teams in corporate center drafted and rolled out their corresponding matrices of responsibilities, and QMS processes, as a step in improving and institutionalizing business processes and protocols.
In 2015, the Company successfully completed the certification audit for ISO 9001:2008, or the QMS Certification from TÜV Rheinland. QMS defines the process interfaces of the corporate service units with respect to with all activities of the organization, beginning with the identification of customer requirements and ending with their satisfaction, at every transaction interface. It provides consistency and satisfaction in terms of methods, materials, equipment, and other items.


QMS Certification Protects Customers, Lenders and Stakeholders Rights

The Company is committed under the AIMS to achieving Customer Confidence and Satisfaction, Continual Improvement, Measurable Processes, Confidentiality, Integrity, and Availability of Information. The 2015 QMS certification, which certified the Company’s Treasury Group, Human Resources, Legal and Corporate Services, Corporate Finance, Group Internal Audit, Computer, IT & Information Services Group and Accounting is the concrete way for the Company to ensure customer, lenders and stakeholder protection and satisfaction since a QMS certification requires a rigorous process and strict compliance to quality standards, processes, and customer feedback. The Treasury Department of the Company strictly adheres to its QMS documented processes to protect creditors’ rights.
 
Representatives from different departments have been sent to training on process documentation, document management, internal audit and establishing corrective and preventive actions to ensure that every team is prepared to embark on this more stringent platform.
 
With the integration of the ISMS and QMS systems under the AIMS in every department, the Company has become more disciplined in defining precise procedures, responsibilities and documentation. The Company will also gain a better insight of the system and can identify the improvement areas easily. Through the AIMS, the Company adopted the eight management principles of Customer Focus, Leadership, Involvement of People, Process Approach, System Approach to Management, Continual Improvement, Factual Approach to Decision Making, and Mutually Beneficial Supplier Relationships.
 

Suppliers/Contractors as Stakeholder

In dealings with its customers, suppliers and business partners, the Company abides by the Fair Dealing Policy found in its Code. The basis of the policy is the Company’s objective to out-perform its competition fairly and honestly through superior performance. Every employee, officer and director therefore always prioritizes the best interests of the Company’s clients and endeavours to deal fairly with suppliers, competitors, the public and one another. No one should take unfair advantage of anyone through manipulation, abuse of privileged information, misrepresentation of facts or any other unfair dealing practice.
 
In dealings with suppliers and other business partners, the Company likewise ensures that they are compliant with the laws, for example, requiring appropriate certificates of registration from the Bureau of Internal Revenue. Another example is the detachment of the Board, management and employees from any conflict of interest as mandated in the Company’s Code. All directors are prohibited from participating in any Board discussion or decision affecting their personal, business or professional interests. All employees, officers and directors have an obligation to act in the best interests of the Company.


Creating Shared Value

The Company delivers value to its stakeholder communities where its businesses are located by focusing its corporate social responsibility activities on education, enterprise development, and environment. In times of calamities, the Company through its business units as well as through the Aboitiz Foundation, are always ready to help, aiming to be among the first to respond.
 
The Aboitiz mindset is that ”We can do well by doing Good”. The continuing journey towards an Aboitiz BetterWorld is anchored on the Aboitiz Group’s sustainability mindset that “we can do well by doing good”, always making the right long-term decisions that balance the interests of people, planet, and profit. AboitizPower is doing good by living out its core values of responsibility through its CSR initiatives.
 
Over the past 26 years since the Aboitiz Foundation was established by the Aboitiz Group, it has proven its commitment to the mission of helping people help themselves and pursuing the vision to be the neighbor of choice. (See Aboitiz Foundation Annual Report and the Aboitiz Sustainability Report for details of specific programs for the communities on education, community development and environmental sustainability on the website.)
 
The Aboitiz BetterWorld Framework serves as the Group’s guide in monitoring, measuring and improving its impact on people, planet and profit. Through this, the various business units subscribe to a common set of focus areas that are applicable across the Group. These focus areas are: team member engagement and development, customer focus, disaster resilience, corporate social responsibility, carbon emissions reduction, waste management, resource efficiency, renewable energy, financial return and financial growth. The Group’s performance in these focus areas are monitored and reported through its sustainability report, which uses the widely accepted G4 reporting framework of the Global Reporting Initiative (GRI).
 
The Aboitiz Group was one of the first local businesses to support the United Nation’s 17 Sustainable Development Goals (SDG). Central to the new set of global goals is the idea of caring for the planet and for the world’s poorest citizens, which is also at the heart of the Aboitiz BetterWorld. Whenever applicable, Group wide communications align with the SDG especially in areas where current CSR and sustainability programs can contribute to the attainment of specific SDG areas that cover, but may not be limited to, quality education, reducing poverty, zero hunger, good health and well-being, protecting life above land and under the water, climate resilience, sustainable food production and financial inclusion.


2015 Sustainability Highlights
 

In response to the call to combat climate change, Aboitiz signed the 2015 Manila Declaration and joined the Water Alliance as one of its pioneering members. The Manila Declaration is the private sector’s statement of solidarity to lower emissions, to help increase the resiliency of communities against the consequences of climate change and to address collective sustainable development challenges while embedding sustainability into its business processes. Meanwhile the Water Alliance is the sector’s response to addressing the adverse effect of the El Nino phenomenon.
Cleanergy is AboitizPower’s brand for clean and renewable energy, providing Filipinos with more sustainable and reasonably priced power supply that leaves a lighter impact on the environment. AboitizPower is among the major producers of renewable energy in the country with close to 40% Cleanergy in its energy mix. It manages and operates 29 hydroelectric and geothermal power generation facilities. With several other renewable energy power plants in the pipeline and the addition of the 59-MWp Solar Power Project in Negros Occidental to its portfolio of renewable power generating assets, Aboitiz is delivering on its Cleanergy promise.

In pursuit of its goal to leave a planet that can be enjoyed by future generations, Aboitiz Group increased its A-Park target from 3 million trees to 9 million trees, to be achieved by 2020. As the Group’s contribution to the National Greening Program, a Memorandum of Agreement (MOA) with the Department of Environment and Natural Resources (DENR) was signed on July 22, 2015. This makes the Aboitiz Group as one of the biggest private partners of the government in its countrywide reforestation program.
 
In celebration of Earth Day, the Aboitiz Group inaugurated the Aboitiz Cleanergy Park last April 23, in Davao City. The Park is a partnership between the Aboitiz Group through Davao Light and Aboitiz Foundation and its stakeholders in Mindanao that include the Davao City local government, Barangay Council of Matina Aplaya, DENR-Biodiversity Management Bureau, the academe and research communities. It is an 8-hectare outdoor biodiversity park with a diverse ecosystem, giving the public the opportunity to explore a different learning experience on environmental conservation and protection. It is a nesting sanctuary for the critically endangered Hawksbill turtle or pawikan with close to 2,000 hatchlings released to the sea by December 2015. The entire Park itself is home to 66 species making it an important marine life sanctuary in Mindanao. A nursery and botanical garden has been set up to propagate 29 native tree species. The Park is host to the automated weather station (AWS) of WeatherPhilippines Foundation (WeatherPhilippines or WPF) as part of its contribution to beefing up the disaster preparedness of Davao City.
 
The Race to Reduce (R2R) program underpins the Group’s commitment to manage its resources efficiently and minimize its operational footprint. Business units are encouraged to reduce their consumption on 3 finite resources, water, electricity and paper. In 2015, there were 261 enrolled facilities across the Group.
 
The Wealth on Waste (WoW) is the Group’s action to support Republic Act 9003 better known as the Ecological Solid Waste Management Law, which promulgates the proper management of wastes using the 3Rs – reduce, reuse and recycle. Twenty-three (23) business units of Aboitiz practice waste management following their respective environmental, health and safety policies. One of the WoW project which has been running for the past 4 years in Cebu City is the Green Fashion Revolution (GFR). It is an intercollegiate green design competition that challenges students to create clothing, footwear, and accessories that make use of recycled materials. The competing schools gather waste materials like flour sacks, tarpaulins, metals and papers and are used in designing their clothing and accessories collection. Last year’s GFR used a total of 200 kilos of wastes gathered from the different Aboitiz business units. In January 2016, GFR was held in Manila for the very first time, bringing the Group‘s own sustainable fashion design competition to a national audience and engaging more young stakeholders in its advocacy for the 3Rs.
 
With the goal of updating and standardizing the health, safety and environmental management practices of the power business units, AboitizPower launched its Safety, Health, Environment and Quality (SHEQ) Policy in the third quarter of 2015. The Policy is in response to the Project Forward program of AboitizPower, aiming to bring up its SHEQ practices to world-class standards.
Ensuring sustainable entrepreneurship for farmers is at the center of Pilmico’s drive to be Partners for Growth. Through its advocacy program, Mahalin Pagkaing Atin (MPA), it continues its strong support for sustainable livelihood and backyard farming. In 2015, it donated 736 piglets, 215 egg machines benefitting 373 families, and conducted 20 MPA events nationwide. The event includes technical and social trainings assisting local farmers with their concerns and helping them grow their businesses.

 

2016: Towards Creating Shared Value
 

As the Group pursues further growth, it is facing greater expectations to help address a variety of society’s challenges, from socio-economic inequality to building resilient communities. While it is already doing many things right now, it understands that the business will also adapt to the changing needs of its stakeholders. Therefore, the Group’s evolution will continue onwards to creating shared value (CSV), which is about generating value for business and society by addressing societal needs as a core part of business strategy.
 
To bring everyone to the same level of understanding and appreciation of CSV, an executive coaching session was held in January 2015 tapping the services of Incite, a shared value advisory network and an affiliate of the Shared Value Initiative. The first run gathered the Reputation Council and other senior executives of the different strategic business units.
 
An expanded second run will be held in March 2016 as part of the corporate governance training of the Board of Directors. The updated coaching sessions will likewise be participated by senior officers and executives of the Group, this time with the goal of leveraging the benefits of the CSV framework in business strategy formulation. The Group is looking at Pilmico’s Mahalin Pagkaing Atin campaign, WeatherPhilippines’ WeatherWiser Nation campaign, AboitizPower’s Cleanergy brand and CitySavings’ teachers’ loan program as nascent CSV models in Aboitiz Parallel to this, the Group wide CSR strategy for 2016 will see the building up of its earlier efforts to bring the practice of CSR to level 2.0, following the strategic pillars of the Aboitiz Foundation, namely: program development, stakeholder engagement and capability building. This embeds CSR and sustainability deeper into the organizational culture.
 
The R2R program under the focus area on resource efficiency will be further enhanced in 2016 to highlight how important managing the planet’s limited resources is at the team member level. Bringing down the conscious practice of conserving electricity, water and paper help Aboitiz team members become more aware of their capability to contribute to the global climate action. A pocket of events will be implemented such as the Water Conservation Challenge, Earth Hour participation, and No Impact Week. The Significant Energy Users study done by students from the University of Santo Tomas will be the basis for the formulation of resource efficiency policies and guidelines.
 
In the area of disaster resilience, WeatherPhilippines will engage more partners to to help build a #WeatherWiser Nation. Platinum Donors agreed to increase their annual donation to P3.5 million each to support the initiative. To encourage more partners to invest on weather technology and knowledge, it will institutionalize value-adding development initiatives for donors, sponsors and LGU partners. It will fully utilize its communication platforms to seamlessly provide localized weather information for the Filipino public, from its free mobile application to the weather 101 videos available for viewing in its website www.weather.com.ph and Facebook page.

 

Gearing up for Sustainable Growth

The Aboitiz Group takes to heart a time-honored mission – to create long-term value for all its stakeholders. The Group will need to gear up for the challenges of a world facing environmental challenges and social inequality. Through Aboitiz BetterWorld, the Group has already laid down the foundations to take on these challenges, ready to embrace and live out the determined belief that it can do well by doing good.
 

Community Interaction
Corporate Social Responsibility Commitment

 

The Aboitiz Group’s commitment to sharing with the less fortunate is a philosophy that traces its roots over a century ago when its forefathers first established their business in Leyte. This legacy continues and is being passed on through generations of its corporate history.
 
Since the 1980s the Company’s initiatives have evolved from a CSR 1.0, which involves simple philanthropic activities, to a CSR 2.0, which engages projects that are more sustainable for its beneficiaries and at the same time aligned to its businesses. Moving forward, it intends to carefully select projects that would help it reach its goal of achieving CSR 2.0.
 
As the Aboitiz Group businesses continue to grow, the Company’s role is to lead by doing good and making a difference. It takes on bigger challenges as it move towards the next level of CSR and sustainable development. The programs have evolved to deliver longer-term benefits, involving bigger projects with positive sustainable impact of national scope, and stronger stakeholder engagement. Now, the Company’s CSR efforts are focused on education, enterprise development, environment, and health and well-being.
 
The Company continues to address the social and economic development needs of the less privileged through community empowerment activities through The AboitizFoundation and through its business units. The Company’s business units have been able to obtain the Free Prior and Informed Consent from the Indigenous Communities in areas where its power generation companies operate because of the well-entrenched corporate social responsibility programs of the group. The Company prioritizes programs in education, such as but not limited to, scholarship plans, construction or renovation of school buildings, and computer and library kit donations. These programs help improve the learning development of students from all levels in the community. It implements programs that promote environmental preservation as well as social and economic development in the communities where its business units operate. As part of its CSR, the Company also engages in enterprise development, microfinance operations and primary health and child care services to improve the quality of life of its beneficiaries through the AboitizFoundation. (Visit www.aboitizfoundation.org for the 2015 AboitizFoundation Report.)
 

Education

In 2015, the Department of Education recognized the Aboitiz Group as its biggest private partner not only for its Adopt-A-School program but also across all its education-related initiatives. The Company firmly believes that education is where it can create the greatest impact; and thus, it will pursue and advance its efforts in this area because a better-educated youth means a better Philippines.
 

Rebuilding Public School Classrooms

In 2015, the AboitizFoundation repaired and constructed a total of 57 classrooms. Through the help of the Aboitiz group’s distribution utilities, the AboitizFoundation have also rewired 1,741 classrooms in 2015. The aim is to make old schools safer by replacing the old wires. Since 1998, Aboitiz Foundation has built a total 890 classrooms. Aboitiz and AGAPP have spent over P124 million to build 216 Silid Pangarap classrooms in 108 schools nationwide, benefitting 40,320 preschoolers since 2011. AEV and AboitizPower team members participated in these CSR efforts.
Brigada Eskwela and Adopt-a-School-Program. The Brigada Eskwela, is a nationwide effort to clean-up and repaint public school buildings geared towards helping improve basic education. The Group’s regular Adopt-a-School Program, brings its professional volunteers to public schools to teach public school students outside formal classes. These programs and activities are in addition to following scholarships granted by the AboitizFoundation to students across the country. In 2015, the AboitizFoundation have supported 3,302 scholars. These scholars come from all levels: pre-school, elementary, secondary, tertiary, post-graduate, and technical vocational. To date, Aboitiz Foundation supported a total of 29,842 scholars.
 

Environment
Reforestation Program

In June 5, 2015, AboitizFoundation signed a partnership with the Department of Environment and Natural Resources, which enrolled its A-Park trees under its National Greening Program. The Aboitiz Group is now the agency’s biggest partner in its nationwide reforestation program. The Aboitiz Group have already planted 3.8 million trees as of December 2015 and its target is to plant 6 million more by 2020, or a total of 9 million trees planted by 2020, firming up its commitment to build a BetterWorld through sustainable environmental practices.
 
The seedlings planted are mostly of native or indigenous species as well as of the fruit bearing variety. This supports Aboitiz Group’s policy of sustainability of businesses being an integral part of the way the Company conducts its businesses in its host communities. An ingrained CSR agenda is part of the Company’s contribution to enriching the lives of its neighboring communities as well as a legacy to the country. (See AboitizFoundation Annual Report at www.aboitizfoundation.org)


Cleanergy Center – A renewable energy learning facility

The AboitizPower maintains two Cleanergy Centers at the MakBan Geothermal Complex in Bay, Laguna. The center aims to firm up its long standing commitment to responsible energy development and education in the areas it operates. The Cleanergy Center taken from the words “clean energy” and named after AboitizPower’s brand for clean and renewable energy — is the country’s first renewable energy learning facility. The Cleanergy Center is being maintained by AP Renewables, Inc. It provides environmental awareness and enery education through the use of audio visual presentations, interactive displays, and a tour of a working geothermal plant.

Cleanergy Biodiversity Park

Davao Light, in partnership with the Aboitiz Foundation, launched a biodiversity park focusing on turtle management and habitat conservation; mangroves and coastal forest development and preservation with information tagging; seedling nursery and botanical garden; weather station observatory; and marine species breeding and preservation. The Aboitiz Cleanergy Park is an 8-hectare property owned by the Aboitiz Group located at Sitio Punta Dumalag, Matina Aplaya, Davao City. The park’s premises and its surrounding areas have a rare and diverse ecosystem consisting of a mangrove forest, coastal forest, marine turtle habitat and nesting area, shoal, coral reefs, see grasses and a fish sanctuary. This area has been declared as a protected marine area.
 
A a scientific baseline research and biodiversity assessment was conducted by a group of professors from University of the Philippines Mindanao and the University of South Eastern Philippines to ensure sustainability of this ecosystem. The research project covered the following: (1) turtle habitation behaviors and habitat conservation; (2) biodiversity assessment and baseline inventory of thriving species; (3) impact of human settlement and activities surrounding the site; (4) overall ecological status; and (5) recommendations for resource management and biodiversity enhancement.
 
Early in 2015, Davao Light provided a turtle sanctuary view deck, a mangrove boardwalk, a weather station and learning center, and a seedling nursery and botanical garden to enhance the visitor’s learning experience. In May 2015, Davao Light employees conducted a tree planting and coastal clean- up activity at the Cleanergy Park in Davao City. The park hosts educational tours to many students.

Wildlife Preservation
 

As part of the Aboitiz Group’s commitment to nurturing the environment and conserving the Earth’s diminishing resources, AbotizPower adopted a female Philippine Eagle, and named her Pangarap or Hope. Pangarap’s home is at the Philippine Eagle Center in Calinan, Davao City. By providing Pangarap food and shelter, the group hopes to protect the Philippine Eagle, one of the most endangered species in the world. It is the hope that Pangarap can successfully give birth to offsprings in the future, and contribute to saving the Philippine’s national bird from extinction.

EMS Certification of Hydroelectric Power Plant

In March 2014, Ambuklao Hydroelectric Power Plant which is owned by the Company’s affiliate, SN Aboitiz Power-Benguet (a joint venture between SN Power Norway and AboitizPower), secured a favorable certification audit for its Environmental Management System (EMS) conducted by TUV Rheinland. An EMS certification indicates a company’s commitment to monitoring, managing and improving its environmental performance, which means that the company has identified significant environmental aspects of its operations and that it is taking steps to manage them through effective means.
 
The Company’s affiliates, the SN Aboitiz Power Group, also implemented a wide range of CSR projects. The CSR projects consisted of various types of projects that focused on their host communities’ needs. The wide array of projects included medical, health and sanitation related projects, construction of disaster preparedness facilities, educational buildings, and of road and bridges infrastructure, environmental projects, water system projects, and barangay and community halls. Total project cost is estimated at about ₱22 mn.
 
In May 2014, AEV’s subsidiary, Pilmico Foods Corporation, launched its “Mahalin Pagkaing Atin” advocacy program in support of backyard farmers. Although initially launched in disaster- stricken areas of Ormoc, Cebu, Bohol, and Tacloban, the program’s thrust is to go beyond providing rehabilitation and livelihood programs for backyard farmers. Last August 28, 2014, the Company organized the Sustainability Forum participated by Sustainability Stewards and Sustainability Council members. This annual forum is conducted to sustain the Group’s momentum and build on sustainability successes and practices. Invited guest speakers talked about effective Strategies for Sustainability Communication and Embedding sustainability in Business Processes and Corporate Culture.

 
The Company continues to reaffirm its commitment to do its share to protect and enrich this Planet Earth and to uplift the well-being of our communities through the implementation of the various sustainability and CSR projects, whether as lead company or through its subsidiaries and affiliates. The Company is constantly finding efforts to ensure that its value chain is environmentally friendly and is consistent with promoting sustainable development.
 

Enterprise Development

The AboitizFoundation continue to partner with different cooperatives in implementing various small-to-medium livelihood projects nationwide. As an accredited technical training provider, the Foundation also conducts skills training for cooperative members to ensure the long-term viability of their entrepreneurial pursuits. Through the years, the Foundation has helped 23,118 beneficiaries through the help of 91 partners. It has approved approximately P164 million worth of microfinance loans.
 

 Record Release of Benefits to Host Communities

In 2014, the Company’s distribution utility businesses obtained on behalf of its rural communities in their franchise areas, a record release of funding under Energy Regulations 1-94 (ER 1-94). ER 1-94 funds is a trust fund collected by the Department of Energy (DOE) from generation and distribution companies for the benefit of the environment and the host communities. The funds consist of, among others, funds for the livelihood of communities and for rehabilitation of the environment. Release of the funds is at the sole discretion of the DOE, upon application by the host communities. Twelve (12) Barangays in Visayan Electric Company’s franchise area benefited from a ₱24 million funding. In Davao, 79 rural projects worth ₱37.2 million were completed by Davao Light from the ER 1-94 funding, benefiting a total of 1,450 households. The release was worked on and assisted by the Company. In a nutshell, the Company’s Compliance Committee with health, safety and environmental standards is aligned to its Sustainability Program. (See www.aboitiz.com for Sustainability Report)
 

Health and Well-being
Weather Awareness and Education

WeatherPhilippines Foundation, Inc. (WPF) continued to conduct its Weather 101 and Tropical Cyclone 101 trainings for private organizations to increase people’s knowledge of weather for timely response to adverse weather conditions and climate changes. WPF also organized numerours trainings for the Company’s subsidiaries and affiliates, including WPF’s partners, Visayan Electric Company, Davao Light and Power Company, Inc., Cotabato Light and Power Company, SN Aboitiz Power Group and the Center for Disaster Emergency Response. The Company, through WPF, now provides accurate, live weather forecasts throughout the entire country. (See WeatherPhilippines website at www.weather.com.ph)
 
On June 2015, WPF launched its Mobile Application which is downloadable for free from Google Play and App Store application. The application provides accurate and localized weather information and a 5-day forecasts for each location. WPFcontinues to expand its network of Automated Weather Stations (AWS) nationwide. As of December 2015, WPF were able to deployed 777 weather stations across the Philippines.

WPF’s platinum donors have agreed to increase their annual donation to ₱3.5 million each to support the foundation. This generosity and support will enable the foundation to sustain its operations and knowledge-sharing initiatives over the next 10 years. WPF enables businesses to utilize weather technology and knowledge for business continuity and operations management. WPF also enhances the private sector’s disaster-risk reduction capability through weather information and training. WPF will continue to provide timely and up-to-date weather reports to all its stakeholders via all its digital channels: Website, Mobile Application, Email and in Social Medias.

Medical Missions

In 2015, Aboitiz Foundation conducted several medical, dental, and optical missions in various missions in communities nationwide that benefited 15,780 patients. In partnership with the provincial government, SN Aboitiz Power Magat, Inc., and other organizations conducted the Handog Kalusugan 2015: Doctors to the Ifugao Barrios. VECO also conducted a dental and medical mission in Budlaan, one of Cebu City’s mountain barangays.
 

Weather-related Disaster Risks Forecasting

The Aboitiz Group is working together with donors in the private sector, to support the Philippine Government in its efforts to reduce weather-related disaster risks in the country through Weather Philippines Foundation. The Aboitiz Group co-founded WeatherPhilippines to operate a premiere weather forecasting system across the country with the installation of automated weather stations (AWS) across the country. WPF secured its accreditation from the Philippine Council for NGO and from the Bureau of Internal Revenue as a donee institution in 2014.
In 2015, WPF completed the installation of more than 700 AWS across the country.



Through these weather stations, WPF provides accurate and reliable weather forecasts throughout the whole country. The ultimate goal of WPF is to complement the Department of Science and Technology’s Project NOAH (Nationwide Operational Assessment of Hazards). WPF also operates a portal, “www.weather.com.ph” featuring a wealth of weather information transmitted through telecommunications and other multi-media accessible to all persons. The portal is continually upgraded to include integration of the severe weather warning map with color- coded alerts, integration of the severe warnings on the detail weather page, and activation of two weather models for better forecasting.

Programs Committed to Environment and Sustainability

AboitizPower subsidiary Therma South, Inc., for instance, is working on the implementation of an Environmental Management system and attaining ISO 14000 Certification by 2015 as part of this commitment.
 
In pursuit of striking a balance between economic growth and sustainability, the Company implements programs that promote environmental preservation, such as the Mt. Apo Natural Park rejuvenation projects, and social and economic development in the communities where its businesses operate through the Aboitiz Foundation. The Company’s business units also implement their unique programs designed to make their operations more cost-efficient at the same time foster meaningful and long term partnerships with their host communities. The disbursement of record amounts of ER 1-94 funding for the local communities by the utilities in 2014 also shows the Company’s commitment to its host communities. The Company not only respects sustainability of the environment and natural resources, but also considers the immeasurable legacy and culture of indigenous peoples with its celebration and preservation of indigenous peoples’ cultural activities.
 
The policy of sustainability of businesses is now part of the Company’s corporate governance culture. The Company continues to engage in activities leading to sustainable development such as Race to Reduce and Participation in the annual to Earth Hour. (Visit www.aboitizpower.com for the full 2015 Sustainability Report) The Company believes that for it to continue to grow and flourish, it has to operate within a rational financial model, with a collaborative community, and within sustainable ecological framework. As the Company looks to the providing better solutions for a better future, it remains cognizant of its power to uplift the future of its host communities.
 

Anti-Corruption Policy

As a publicly listed company, AEV is subject to numerous stringent laws and regulations. All Company employees are made aware of their responsibility to know and understand the laws applicable to their respective job responsibilities and are directed to comply with both the letter and the spirit of these laws. All employees are expected to behave properly within the bounds of law and are also cautioned to avoid any appearance of impropriety. The Company ensures that all stakeholders are aware of these various laws operating within its own environment, and adopts policies to encourage participation and prevent any violation of these laws. One such policy is the non-acceptance of gifts from persons who have beneficial relationship with the Company. The Company makes it a point that employees know that gifts and special favors may create an inappropriate expectation or feeling of obligation. It is a policy of the Company that business gifts to, and entertainment of, non- government employees in connection with business discussions or the development of business relationships are only appropriate if they are in the ordinary course of business and their value is modest.
 
In dealings with suppliers and other business partners, the Company likewise ensures that they are compliant with the laws, for example, requiring appropriate certificates of registration from the Bureau of Internal Revenue. Another example is the detachment of the Board, management and employees from any conflict of interest as mandated in the Company’s Code. All directors are prohibited from participating in any Board discussion or decision affecting their personal, business or professional interests. All employees, officers and directors have an obligation to act in the best interests of the Company.
 
The Company’s Code of Ethics and Business Conduct, as well as other internal policies, not only require a disclosure of conflict of interest but also require a behavior to refrain from entering into transactions of the Company. All employees are required to take a corporate governance e-learning course dealing with the Company’s governance policies. At the Board level, directors are encouraged to disclose and refrain from participating or voting on matters that affect their personal, business or professional interests that are likely to give rise to conflicts of interest situation. All employees, officers and directors have an obligation to act in the best interests of the Company.

Safeguarding Investors’ and Creditors’ Rights

It is the Company’s policy to safeguard and protect creditor rights through prudent financial management of the Company, through transparency of its financial status, compliance with financial covenants, and strict adherence to the Company’s commitment to fulfilling its financial obligations.
 
The Company’s Treasury Services Group (TSG) is primarily responsible for addressing the Company’s short and long term funding requirements. These requirements are geared towards a sustained growth of the Company for the expansion of its business operations and pursuing new projects and acquisitions. TSG adopts best practices in cash management, funding and loan structuring. To ensure the long term viability of the Company’s business and to safeguard creditor’s interests, the TSG manages liquidating risks and maturing loan payment schedule risks through strict adherence to loan agreement covenants (financial and non-financial). The Company maintains close relationships with counterparties that are strong financial institutions (local and foreign).


ISO Certified Treasury Protocols for Safeguarding Creditors’ Rights

The recent ISO 9001:2008 certification of the Company on quality management systems requires that the TSG strictly follows its QMS financial risk management policies and protocols on: external placements, Standby Letters of Credit, Letters of Credit, Forex Trade, Interest Rate hedging and forwards, cash management, Loan portfolio management, Financial Information Management, Credit Facility Management, Treasury Operations Cash position, cashier cash position, check supply inventory, petty cash fund management and checkwriter processing, monitoring of financial ratios under loan covenants of the Company’s and that of its BUs. These protocols and procedures promote financial discipline and controls that in turn protect creditor’s and shareholders rights.
The Company through the TSG regularly holds a dialogue with its creditors and lenders. Every year, the Company organizes a Banker’s Night where senior officers of the Company meet the lenders for informal talks on any matter.
TSG also maintains open communications with its lawyers, its lenders and regulatory authorities (such as BSP and SEC). It provides its lenders with timely disclosures of all of the Company’s disclosures to PSE, PDEx, and SEC to its lenders. It also monitors the single borrowers’ limits of the Company in relation to its lenders.

Timely and Factual Disclosures

TSG also maintains open communications with its lawyers, its lenders and regulatory authorities (such as BSP and SEC). It provides its lenders with timely disclosures of all of the Company’s disclosures to PSE, PDEx, and SEC to its lenders. It also monitors the single borrowers’ limits of the Company in relation to its lenders.
 
In dealings with its customers, suppliers and business partners, the Company abides by the Fair Dealing Policy found in its Code. The basis of the policy is the Company’s objective to out-perform its competition fairly and honestly through superior performance. Every employee, officer and director therefore always prioritizes the best interests of the Company’s clients and endeavours to deal fairly with suppliers, competitors, the public and one another. No one should take unfair advantage of anyone through manipulation, abuse of privileged information, misrepresentation of facts or any other unfair dealing practice.


Transparency of Financials for Creditors

Its commitment to its shareholders is reflected in the Company’s comprehensive reports on its operations, particularly its report to shareholders in the Aboitiz Integrated Annual Report. Its senior financial officers, executive officers and directors endeavour to inform and assure shareholders of the timely discharge of financial responsibilities through the Aboitiz Integrated Annual Report of the Company. The Audited Financial Statements of the Company give a clear view of the Company’s financial condition. All pending legal and tax proceedings, tax assessment notices, and voluntary assessment program or tax relief availment that are potentially material to AEV’s business are disclosed through the Legal Proceedings section of the Information Statement of the Company.
 

PRS Aaa Rating for Company Debt

As proof of the importance given by the Company to its creditors’ rights, the Company secured the highest rating from local debt watcher Philippine Ratings Services Corporation for its issuance of π10 bn corporate bonds in 2013. The highest rating, rated as “PRS Aaa”, means that the obligation is of the highest quality with minimal credit risk, an indication of the extremely strong capacity of the Company to meet its financial commitment on the obligation. In 2014, its subsidiary, AboitizPower issued a P10 bn fixed rate retail bond offer to the public also with a “PRS Aaa” rating from PhilRatings.

 

Investor Relations Activities
 

The Investor Relations Office conducted investors’ briefings in March 11, 2015, May 8, 2015, July 30, 2015, October 28, 2015 providing forums for investors to discuss the Full Year 2014 Financial Operating Results, First Quarter 2015 Financial and Operating Results, Second Quarter 2015 Financial and Operating Results and Third Quarter 2015 Financial and Operating Results, respectively. The Investor Relations Office also regularly organizes Analysts Briefings where the CFO and other key officers discuss not only financial strategies but also directions and current issues affecting the Company.
 

Compliance with Health, Safety and Environmental Laws

The Company’s power generation and distribution operations are subject to stringent safety, health, environmental and other regulatory standards. For the year 2015, the Company, its subsidiaries and affiliates were fully compliant with the legal standards. AboitizPower and all its generation companies and distribution utilities were granted Certificates of Compliance from the relevant governmental agencies and bureaus requiring certification. The business units of the Company are committed to the needed expenditure and compliance requirements on occupational health and safety measures. The Company has a good reputation in the operation of its businesses with none or limited accidents, a clear demonstration of how the Company values health and safety measures in the work environment.
 
Existing regulations, in particular the DOE’s Energy Regulation 1-94 (ER 1-94), require the business units of the Company to allocate funds for the benefit of host communities. Compliance with the mandatory provisions of law is not only for the protection of the natural environment, but also for the upliftment of the neighbouring communities as well. The Company’s subsidiaries have gone beyond mere compliance with these regulatory requirements on these benefits to host communities as well as on health, safety and environmental laws.
 

Dedicated CSR and Sustainability Report

The Company began reporting its sustainability initiatives from a group perspective in 2009. Through the years, the company has communicated its commitment and initiatives on corporate governance and sustainability to engage team members and external stakeholders. Through its ‘BetterWorld” campaign, Aboitiz’s sustainability program aims to increase awareness among stakeholders about its existing initiatives supporting the triple bottom line of people, planet, and profit.
 
The Company also maintains a dedicated CSR website through the Aboitiz Foundation’s website as well as a separate web page for sustainability. (Visit www.aboitizfoundation.org and www.aboitiz. com/sustainability-csr for the full CSR and Sustainability Report.)


Stakeholders’ Opportunity to Obtain Effective Redress for Violation of Rights

The Investor Relations Officer and the Office of the Corporate Secretary have an established communication strategy and protocols to promote effective communication and liaison with shareholders.
The Company’s Investor Relations team provides a venue for shareholders to air out concerns, comments, and complaints for possible violation of their rights through company website’s “contact us” page. It also ensures that investors/shareholders‘ queries are responded to within three to five business days from date of query.
 
The Company welcomes suggestions, comments, and complaints from stakeholders through the Aboitiz website, www.aboitiz.com under the Contact Us page. There have been no major grievances for any alleged violation by the Company of shareholders’.


Employees as Stakeholder

To Build Human Capital is a strategic pillar of the Company that also resonates across the entire Aboitiz Group. The Company committed to fully engaging all its employees through innovative benefit schemes and skills and behavioural training.
 
The Aboitiz employee benefit package aims to foster a culture that recognizes rewards and celebrates the Aboitiz values and culture across the group. The Company’s HR Department recently launched an Inspired by Passion campaign to provide an organized and purposive framework for all HR Initiatives and promote a thematic communication plan coming from the HR pillars of Attraction, Retention and Optimization. The Company is committed to addressing its employees’ four basic needs in the organizations.
 
The Corporate HR’s mission is to “To Attract, Retain and Optimize our A-people and constantly adding value to our businesses”. This mission aims to expand the Company’s reach to identify talent and to continue to develop the Aboitiz Talent Management Program.
 
In 2014, in pursuit of its strategic objective to attract, retain and optimize A-People, the Company’s HR team cultivated “The Aboitiz Way” values, culture and CSR components through the BetterWays forum, the Recognition Night, the Trivia Night, Company Sports Fest, Family Day Movie Viewing, Brigada Eskwela, Christmas Outreach, Christmas Tree Lighting, Christmas Party and the group-wide tree planting.
 
In 2015, the company introduced BetterMe, a new program under the department’s forward looking human resource management strategies. This new program is a self-driven career management program that allows team leaders and members to take ownership of their career development in the organization. The program has four simple steps that will guide towards achieving their career goals: 1. Discover My Strengths 2. Set My Career Goals 3. Plan my Development 4. Monitor My Progress.
 
In response to the changing need for gender equality in the workplace, the Company makes sure that there is no discrimination for all types of employees based on the gender. The employees are hired and promoted on the basis of their qualifications, experiences, capabilities and merits relating to the performance of their jobs and not on the basis of gender or sexual preferences.
The table below shows the gender mix of female employees and male employees in the Company for the year 2015, indicating a fairly equal representation:



The Company believes in inspiring our employees, developing their talents and recognizing their value as business partners. The contribution of every employee is important to the fulfillment of the Company’s goals, consistent with the Aboitiz core values, such as respect for individuals and diverse cultures. The Company is committed to a workplace in which all individuals are treated with dignity and respect. The Code of Ethics and Business Conduct also promotes a safe and healthy working environment, an environment that provides equal employment opportunities and prohibits discriminatory practices.
 
Employees’ professional and personal growth is of paramount concern to the Company and the Company is keen to provide opportunities to deepen employees’ understanding of the Company’s value-creation proposition. The Company cultivates a culture of life-long learning through high value, relevant, quality training programs designed to support employee career development path and personal growth. Exemplary performers are nurtured through a talent management program designed for the development of the next generation of corporate leaders. Corporate HR has a Key Talent Retention Program for succession planning.
 
The Company maintains robust and open lines of communication between Management and employees and between and among the Board of Directors and the management team of the business units, allowing AEV’s employees to interact with top executives in the organization and provide opportunities for leadership role models and mentoring. This allows a free exchange of ideas and shared experiences, promoting teamwork, collaboration, cooperation, innovation and diversity within the organization. The Company holds an Annual Coffee with the President participated by all employees and officers as a venue for a cascade of management’s visions and for an exchange of ideas with the CEO of the Company. The Chairman of the Board and the CEO also organize regular formal and informal get together with the Board of the Directors and key officers across the Company and the business units providing invaluable interaction between the Board and the management team leaders.

Compliance with Employee Health and Safety

The Company is committed to the health, well-being and safety of its employees and has policies and benefits relating to these matters.
 
The Company establishes a working environment wherein employees can freely communicate their concerns about legal and unethical practices or behavior. The functions of the Compliance Officer, the Chief Legal Officer and the Legal and Corporate Services Team include providing the forum for checking, reporting and investigating any unethical behavior.
 
The Company has a Whistle Blowing Policy where all employees are provided the avenue to report unlawful or unethical conduct directly to the President or Chairman of the Board of Directors, in addition to other available avenues such as the employee’s immediate supervisor, the HR Department, and the Legal Department. This policy does not allow for any kind of retaliation for reports or complaints by employees regarding the misconduct of others that were reported in good faith. The Company considers the protection of employees from retaliation as vital to its continued success. The Policy can be viewed on the Company’s website.

Balanced Scorecard for Performance

The Chief Strategy Officer oversees the performance monitoring of AEV’s teams and service units through the bi-annual review of the Team’s performance scorecard on the teams’ strategic initiatives. The review of the 2015 Performance Scorecard is made at the start of 2016. The rationale for the scorecard is the conviction that adoption of challenging, stretched but realistic goals improve the quality of the organization’s capability to support the Company’s businesses, promotes the core values and the leadership dimensions, and the marshalls the overall group effort in the execution of corporate strategies.
 
These corporate strategic goals and the initiatives of all departments in meeting these goals represent non-financial performance indicators of the Company. The Company believes that its overall growth, sustainability and successful pursuit of corporate objectives promote a great organization that is able to strive and thrive in changing business environments. The Productivity Scorecard is a means of measuring the performance and achievement of team goals and the basis for an annual productivity bonus for team members and team leaders.

Company’s Health and Sports Initiatives
Employee Medical Plan

The Company maintains a self-insured medical plan for employees that covers more than the required needs of an employee, while an HMO plan for employee dependents has a coverage that is equal or above its peers in the market. More importantly, through its health benefits and initiatives, the Company encourages employees to maintain their good health and well-being. To supplement this drive, the Company funds the team’s annual medical check-up.
 
In 2015, 155 of Company’s team leaders and team members availed of the Company’s medical benefits. 95% of the team members were able to avail of the Good Health Bonus, a reward for keeping oneself healthy, for staying healthy.
 
The safety of the employees are also at the forefront of the crisis and disaster management program of the Company. Through the leadership of the Risk and Reputation Management Team, a well defined emergency response plan and procedure have been put place by the Company.
 

Training and Development

Corporate HR has a Universal Training Passport program for all employees, which include the Seven Habits of Highly Effective People, Creating the Future Organization, Basic Quality Awareness, Working Program, to name just a few technical in-house training skills. The Company adheres to a merit- based performance incentive pay compensation package that includes some form of employee stock ownership plans, merit increase schemes and the productivity bonus to reward team performance. The Company offers not only statutory benefits but also additional internal benefit programs to enhance the quality of life of our employees.
 
In 2015, the Company achieved a 94% compliance rating for employee trainings within and beyond its universal training program. The Company had a total of 247 employees with average training hours of 33.26 hours per employee. This equates to a total of 8,214 training hours for the Company’s employees for 2015.
 
In 2014, Corporate Center HR focused on the some of the following strategic initiatives as part of its performance scorecard: building a best in class talent management solution platform through the implementation of Employee Central, a Career Worksheet, optimizing social media platform (such as career and professional websites), creation of an Individual Development Plan Library, and assisting Team Leaders to better embrace their HR Role as a Leader. More significantly, the HR team worked on bringing leadership development to the next level through the completion of the Leaders Journey 1, the Aboitiz Way launch in July 2014, the business units Communication Cascades, the Coaching and Mentoring Course Design development, the Stepping Stones in Progress program, the Better Ways and Better Me program and the business units’ Leaders Journey Clusters.
 
The Leaders Journey clusters started with the Leadership Circle Program designed by Catalyst Leadership. The program created leadership circles within the Aboitiz Group. The aim was to shape and develop the creative leadership competencies that are characteristics of a high performing world class organization. The leadership circles then agreed on six leadership dimensions that would define the way Aboitiz leaders lead. These dimensions are: Mentoring and Developing; Fostering Teamwork; Courageous Authenticity, Achieving Results, Sustaining Growth; and Integrity.
 
In 2015, the Company’s food arm, Pilmico launched Project Me, a self-driven career management program. It aims to build better leaders with team members taking charge of their own development through continuous education, experiences, and exposure. Project Me was supported by the launch of AHEAD, the Pilmico Learning Hub. The Farm Academy was the first module rolled out under AHEAD in 2015. It featured a structured and purposive developmental program dedicated to continuous learning, education, and competency building of our team members in the areas of veterinary medicine and farm management. The Company’s ability to select the right talent and develop its employees are keys to its success. In 2015, we launched the Pilmico Junior Veterinary & Animal Science Congress, the first of its kind in the industry, which gathered 40 of the brightest veterinary medicine and animal science students in the country. This is one of its talent attraction programs for our Farms and Feeds businesses to support their aggressive expansion plans.
 

Emotional Safety and Integrity of Employees

The Company establishes a working environment wherein employees can freely communicate their concerns about legal and unethical practices or behavior. The functions of the Compliance Officer, the Chief Legal Officer and the Legal and Corporate Services Team include providing the forum for checking, reporting and investigating any unethical behavior.
 
The Company has an existing Whistleblowing Policy to encourage all employees and other stakeholders to report illegal and unethical practices in the Company directly to the President or Chairman of the Board of Directors, in addition to other available avenues, such as the employee’s direct supervisor, the Legal Department, or the Human Resources Department. AEV supports the disclosure of these practices as the Company believes it will support and further strengthen its competitive advantage. This policy does not allow for any kind of retaliation for reports or complaints by employees regarding the misconduct of others that were reported in good faith.

DISCLOSURE AND TRANSPARENCY

Transparent Ownership Structure
 

According to the share register kept by Stock Transfer Service, Inc., the Company’s stock and transfer agent, as of December 31, 2015, the Company had 9,328 shareholders. Aboitiz & Company, Inc. owned, as of the same period, 2,735,600,915 shares or 49.25% of the 5,554,266,807 the total outstanding common shares entitled to vote. Of the publicly-held shares, 21.14% are owned by institutions and/ or are nominee-registered (11.30% Filipino & 9.84% Foreign), i.e., held of record by banks, brokers and/or nominees, such as the PCD Nominee Corporation. This means that the actual shareholder is not reflected in the share register or included in shareholding statistics. Although the Company has exerted efforts to reach the ultimate shareholders, the result of having these shares in PCD Nominees is that the ultimate shareholder of such nominee-registered shares may likely not participate in shareholder votes and other actions, unless otherwise represented.



Aboitiz & Company, Inc. is a private company held by 232 shareholders as of December 31, 2015. While strictly speaking it is not a “publicly-held company” within the definition of the Securities Regulation Code, it is effectively a widely-held company with a sizeable shareholder base requiring its own corporate governance rules.


Monitoring of Insiders’ Share Ownership
 

While the Company encourages stock ownership by employees, to ensure ethical conduct, the Company through its Legal and Corporate Services and Board Secretariat, monitors the share ownership of directors, executives, officers and management team through the regular SEC disclosures of beneficial ownership (SEC Form 23-B), and further monitor compliance through the implementation of the Company’s Insider Trading Policy and Trading Black-out dates.
 
The Company is committed to elevating its standards of disclosure and transparency and the quality and depth of its corporate governance practices to enable the investing community to understand the true financial condition of the Company. Through the Investor Relations Office, the Office of the Corporate Secretary, the Annual Report, Aboitiz Integrated Annual Report, the Company website, the Company’s Information Statement and all disclosures to the PSE, PDEx and SEC, the Company publishes timely material information on all matters regarding the Company, including, the financial situation, performance, ownership, and governance of the Company. Regular disclosures include details of the Company’s subsidiaries, associates, joint ventures and special purpose vehicles, if any. There are no special arrangements enabling certain shareholders to obtain a degree of control disproportionate to their equity ownership that needs to be disclosed.


Identity of the Beneficial Owners Holding 5% or More
Disclosure of Direct and Indirect Shareholdings of Major/Substantial Shareholders

 

The Company periodically submits to the PSE a public ownership report detailing the extent of ownership of controlling shareholders, including the shareholdings of their subsidiaries and affiliates, and that of the Directors and Management. It submits to the PSE and PDEx a list of its top 100 shareholders every quarter. The Company also discloses its top 20 shareholders, including shareholders of record and beneficial owners owning more than five percent of the Company’s outstanding capital stock, and shareholdings of its Directors and Officers in the Company’s Information Statement, and sends this out to shareholders annually. The Company, however, has no control over outside shareholders who may choose to put their shares under nominee holding companies such as the PCD Nominee Corporation, and is thus unable to make any disclosure on details of that ownership.
 
As disclosed in the Company’s Definitive Information Statement, as of March 28, 2016 the identity of the beneficial owners of AEV owning 5% or more are as follows:



* PCD Nominee Corporation (Filipino and Foreign) is not related to AEV. The beneficial owners of the shares held through a PCD participant are the beneficial owners thereof to the extent of the number of shares registered under the respective accounts with the PCD participant. AEV has no record relating to the power to decide how the shares held by PCD Nominee Corporation (Foreign and Filipino) to be voted. Of the 627,519,566 shares held by PCD Nominee Corporation (Filipino), at least 345,287,457 share or 6.22% of the voting stock of AEV are for the account of Papa Securities Corporation (PapaSec). AEV is not related to PapaSec.

Disclosure of Direct and Indirect Shareholdings of Directors and Senior Management
 

The Company discloses beneficial ownership in its Annual Corporate Governance Report to the SEC including trading of Company shares of its directors and key officers. Non-compliance with the policy may carry criminal and civil liabilities as well as reputational damage to the Company, the Board, the Management and the Office of the Compliance Officer strictly enforce compliance with the Trading Policy.
 
The Company has an existing policy requiring the Board of Directors and the officers to report to the Office of the Corporate Secretary any transaction related to the purchase and disposal of Company shares within one business day from the date of the transaction. The Company discloses the direct and indirect (deemed) ownership or shareholdings of major and/or substantial shareholders and the details of the subsidiaries, associates, joint ventures and special purpose enterprises/vehicles. The Company’s Information Statement and Public Ownership Report regularly filed by the Company likewise show the direct and indirect ownership of the Company’s shareholders, which include its Board, the Management Team, and employees. Regular disclosures to the PSE, PDEx and SEC are made in the event of any dealings in Company shares. These disclosures are available at the Company’s website and can also be accessed from the PSE portal.
 
Based on the Company’s Public Ownership Report which was filed with the SEC and PSE and subsequently posted in the Company’s website on January 14, 2016, below is the direct and indirect ownership of directors and senior management of the Company as of December 31, 2015:





The Company also disclose the beneficial ownership of the directors and the senior management in its 2015 Definitive Information Statement as of March 28, 2016.

Insider Trading Prohibition

Insider trading is strictly prohibited under the Code of Ethics and Business Conduct, the Company’s Manual on Corporate Govenrance, and under the PSE and SEC rules. The Company’s Manual on Corporate Governance prohibits every member of the Company’s organization, from any misuse of inside information. All team members of the Company are mandated to exercise prudence in handling material non-public information in the course of their work and in relation to the trading or dealing with AEV securities. The Company strictly enforces its trading blackout and insider trading policy to curtail opportunistic dealings in the Company’s shares. Any violations are required to be reported to the Board Corporate Governance Committee.

Reporting of Share Trades
 

The Company has an existing policy requiring the Board of Directors and the officers to notify the Company at least one (1) day before they deal in the company shares. Directors and key officers are required to regularly report their beneficial ownership of shares in the Company and any dealings in AEV shares must be reported to the Corporate Secretary within one day from the sale or purchase of AEV shares. In addition, the Company discloses beneficial ownership in its Annual Corporate Governance Report to the SEC including trading of Company shares of its directors and key officers. There has been no investigation of violation and conviction of insider trading and abusive self-dealing by directors, management and employees in the past five years that the Trading Policy has been in place.
 

Quality of Annual Report

The Company strives to publish a clear, comprehensive and informative Annual Report and Aboitiz Integrated Annual Report. The Messages from the Chairman, President and Chief Executive Officer, and Chief Financial Officer, and the Financial Highlights of the Aboitiz Integrated Annual Report discuss in detail the financial and operating results of the Company. Other non-financial matters are discussed in the Results of Operations section of the Aboitiz Integrated Annual Report. Operating risks, particularly major risks, are also discussed in the sections on Corporate Governance, Risk Management, and Audited Financial Statements, which also include discussions on the Financial Risk Management Objectives and Policies of the Company. These pieces of information are also posted on the Company’s website. (Visit www.aboitiz.com for the Annual Report and the Integrated Annual Report.)

The dividend, whistle-blowing and other company policies as well as profiles of the board of directors and their attendance during the board meeting are made available in the company website and annual report.

Disclosure on Key Risks in the Company’s Annual Report
 

An integral part of AEV’s enterprise risk management efforts is to understand and anticipate the risks that are crucial to the success of the businesses of AEV. AEV constantly strives to address the risks it may encounter in the businesses in which it is involved. The Group, undertakes an annual risk management process to identify and report on new and emerging risks, as well as changes to existing key risks, with special emphasis on treatment mechanisms relating to said risks.
The key risks disclosed in the Company’s Annual Report are: (1) Reputation Risk; (2) Competition Risk; (3) Regulatory Risk; (4) Financial Risk; (5) Commodity Price Risk; and (6) Project Risk.
The Company has an existing system of internal controls which refers to policies and procedures designed by management to (1) manage and mitigate known risks; (2) protect its assets from loss or fraud; (3) ensure reliability and integrity of financial information; (4) ensure compliance to laws, statutory and regulatory requirements; (5) promote efficient and effective operations; and (6) accomplish the company’s goals and objectives.

Corporate Objectives as Disclosed in the Annual Report
 

The Company’s 2015 Corporate Objectives are in the Aboitiz Integrated Annual Report. Mr. Stephen G. Paradies, the Company’s Chief Financial Officer, emphasized that about ₱60 billion in capital expenditures (capex), a significant increase from the ₱31 billion in 2014. The bulk of the of the capex will go to AboitizPower’s continuing efforts together with its partners, to increase total capacity by over 2,000 MW in the next five years. Meanwhile, he also mentioned that the Company’s food group, Pilmico, is expanding the scale of its feeds and farms divisions, including the recently acquired feed business in Vietnam. He also noted that part of the capex would be deployed to expand the land bank of AboitizLand along with ongoing projects that will grow its land development portfolio, and growing the branch network of UnionBank and CitySavings.
 
In the second quarter of 2016, the Company’s power generation group will welcome the first solar power project in San Carlos City, Negros Occidental and ongoing construction.


Disclosure of Financial Performance Indicators in the Annual Report

The Company’s Annual Report and the Aboitiz Integrated Annual Report contain the audited financial statements which reflect a true and fair representation of the financials that are affirmed by the Board of Directors and relevant officers of the Company. The Audited Financial Statements of the Company gives a clear view of the Company’s financial condition. There has been no event in the past 21 years where the Company and its external auditors or the handling partner had any serious or material disagreement with regard to any matter relating to accounting principles or practices, financial statement disclosure or auditing scope or procedure.

 

Disclosure of Non-Financial Performance Indicators in the Annual Report

At the end of 1994, the year the Company went public, the company’s market capitalization was ₱21 mn. By end of 2015, the Company’s market capitalization grew to ₱322 bn or a growth of 1,448%. The Company attributes its steady growth to the execution by the entire organization of collective corporate set strategies.
 
Below is a chart of the growth of the Company’s market capitalization. This is one of the company’s performance indicators:



In tracking the Group’s accomplishment of their strategic and tactical goals, the Company is optimizing the use of Success Factors, a web-based technology tool for the alignment of strategies and goals. These are visible from the CEO all the way down to the team leaders and members of the AEV organization, and even through to the business units. Success Factors Goal Management and Performance Review help the Aboitiz organization work as a cohesive team. lt is designed to improve goal alignment to enable two-way communications on AEV’s strategic and tactical goals by providing greater visibility. It strengthens accountability and promotes employee engagement. Team members’ assigned tasks are measurable and the clearly articulated goals become visible to Team Leaders. Managers and employees can see individual and broader goals to which they are linked to better understand how they contribute to the organization’s long term goals. Success Factors allows team members to reinforce goals every day to keep team members on track. Employees can make frequent updates, gauge probability of success, and provide comments on their goals, while managers can proactively identify and resolve issues. Through the use of this technology tool, each AEV employee can view his tangible contribution and alignment of his corporate and personal goals all the way through to top management whilst top management, i.e., the CEO, can also view the cascade of his goals to all employees. This accessible view provides a system for assessing achievement and performance of all goals of the Company.
 
Through this process of alignment and cascading, AEV’s vision, corporate and tactical strategies are transformed into actionable goals measured against a well-entrenched balanced scorecard discipline and framework. The accomplishments for key result areas are measured under the Balanced Scorecard approach in Success Factors model. The key result areas under Learning & Growth, Internal Business Processes, Cutting Edge Technology and Customer Service provide an additional framework for measuring success of the three areas of corporate competence, namely that of Knowledge Center, Business Partner and Governance.
 
Each corporate services unit of the Company set out goals in the areas of (1) Being the expert where it makes sense, (2) Instilling best practices, (3) Creating a culture of measuring and managing risk, (4) Protecting and enhancing reputation, (5) Attracting, retaining and optimizing A-people, and (6) Continuous improvement. Goals under these categories provide the non-financial performance indicators and benchmark for all teams’ strategic initiatives.
 
Additionally, the Board Corporate Governance Committee conducts the annual performance review and scorecard of the CEO by the members of the Board, the individual Board members, and the Board as a body. Corporate HR provides the numerous annual key officers, performance and competence assessment reviews, whether it be a 360-degrees survey, a Key Talent Review, a Success Factors Goals accomplishment review or other annual job performance measures, comparative Harrison Assessment testing for groups, among many others.

Disclosure on Dividend Policy in the Annual Report

The Company has a clear and transparent dividend policy. The Company maintains an annual cash dividend payment ratio of approximately one third of its consolidated net income from the preceding fiscal year, subject to the requirements of applicable laws and regulations and the absence of circumstances that may restrict the payment of cash dividends. This is disclosed in the Operational and Financial Information section of the Annual Report, in the Information Statement, in the Report of its CFO and disclosures on the Company website if changes are made. These circumstances could include major projects and developments requiring substantial cash expenditure or restrictions on cash dividend payments under its loan covenants.

Details on Whistleblowing Policy in the Annual Report

The Company has a Whistle Blowing Policy where all employees are provided the avenue to report unlawful or unethical conduct directly to the President or Chairman of the Board of Directors, in addition to other available avenues such as the employee’s immediate supervisor, the HR Department, and the Legal Department. This policy does not allow for any kind of retaliation for reports or complaints by employees regarding the misconduct of others that were reported in good faith. The Company considers the protection of employees from retaliation as vital to its continued success. The Policy can be viewed on the Company’s website.
 
In February 27, 2014, the Company also formally adopted its Whistleblowing Policy to encourage all employees to report any illegal or unethical practices in the Company. To provide employees several avenues to report illegal or unethical activities, the Policy allows reporting to any of the following: Chairman of the Board of Directors, Chief Executive Officer, Direct Supervisor, Human Resources Department, and Legal Department.

Disclosure of the Biographical Details of Directors in the Annual Report
 

The profiles of the Board of Directors and the current key officers of the Company are provided to the shareholders through the Aboitiz Integrated Annual Report that is distributed to shareholders before the Annual Stockholders’ Meeting. The profiles of the members of the Board and its key officers include their qualifications, work experience, age, and positions and offices heId by them for the past five years, date of first appointment, and other directorships currently and previously held in other listed companies. Such information are also made available in Company’s website and in the Company’s Annual Report which is submitted to the SEC 105 days from the end of the fiscal year.

Trainings and Seminars of Directors as Disclosed in the Annual Report
 

The AEV Board recognizes that, for an effective corporate governance system, senior executives must constantly review and assimilate the principles of corporate governance consistently with the commitment of the Board of Directors. Newly hired or newly transferred team leaders and team members are required to take the in-house corporate governance e-learning seminar mandated by the Board. In addition, all Directors, together with key officers of the Company, are also required to attend annual in-house corporate governance seminars in compliance with SEC Memorandum Circular No. 20-2013, issued on December 6, 2013. Directors and officers attended the Company’s SEC mandated Corporate Governance Seminar held in March 25, 2015 in partnership with the Institute of Corporate Directors. For 2016 the Company together AboitizPower conducted an In-House Mandatory Corporate Governance Seminar with 52 attendees, including the directors and key management of the Aboitiz Group’s business units.
 
The Board participates in an Annual Board Retreat and Strategy Refresh to discuss both the strategic roadmap and policies of the Company, and a review of the Company’s vision and mission. The Board together with key officers participated in a strategy workshop last December 4, 2015 , to refresh the Company’s vision, mission, strategy and, corporate initiatives and core businesses. As a result of this strategy refresh, the Company has now added a fifth leg to its core businesses; adding infrastructure to the existing lines of banking and financial services, power, real estate and land development and food.
 
As provided in the Company’s Board Protocol, the Company’s Independent Directors meet at least once a year for an Executive Session. The Independent Directors may also meet periodically in an executive session with no other Director or management present except for the Chairman of the Board Corporate Governance Committee who shall call for and preside the meeting. Topics for discussion during these executive sessions shall be determined by the Independent Directors, but actions of the Board generally should be taken separately during Board meetings. The Independent Directors met with the non-executive directors, including the Chairman of the Board Corporate Governance Committee, at Taguig City on July 23 and 29, 2015 for their informal discussion of issues.

Number of Board of Directors Meetings Held During the Year
Attendance of Board of Directors in Respect of Meetings Held

The company also discloses the number of board meetings held during the year as well as the attendance details of each director every meeting. The details of remuneration for each member of the board of directorsThe attendance of individual directors in Board meetings is reported to the Board Corporate Governance Committee by way of the Board Performance Report and to the SEC through the filing of the Certificate of Attendance. The attendance of the directors to the Company’s board meetings in 2015 was exemplary with an overall percentage of 96.30% attendance record for the nine (9) regular, special strategy meetings for each director and 96.30% presence of directors per meetings.


 

Disclosure of Remuneration of Each Director in the Annual Report
 

The Company has a policy on transparency of compensation for its Directors and key executives. Information on the basis of Board remuneration is readily accessible through the Company’s Annual Report, Annual Corporate Governance Report, and its Board Corporate Governance Committee minutes. The Board Corporate Governance Committee ensures that the Directors’ and executives’ remuneration are consistent with the Company culture, strategy and business policies at a level sufficient to attract and retain directors and officers who are needed to run the Company successfully. The Company rewards its individual Directors and Officers based on ability to execute their duties and responsibilities. It is the Company’s philosophy to reward officers and employees based on individual performance measured through established Human Resources management metrics. Performance is evaluated and compensation is reviewed on an annual basis. The Company ensures that it pays its directors and officers competitively by comparing rates with other Philippine based companies through participation in and access to market salary surveys.
 
Prior to the 2015 Annual Stockholders’ Meeting, all of AEV’s directors received a monthly allowance of P100,000.00, except for the Chairman of the Board who received a monthly allowance of P150,000.00.



 On May 18, 2015, the shareholders approved an increase in the directors’ monthly allowance to P120,000.00 for the members of the Board, and P180,000.00 for the Chairman of the Board.



The compensation of all the members of the board is illustrated in “Annex A”.

Corporate Governance Confirmation Statement in the Annual Report

The SEC, being both a company’s registry and a securities regulator, requires all publicly listed companies to adopt its model manual on corporate governance providing for minimum standards and provisions. The Company is compliant with these requirements.
 
The Office of the Corporate Secretary and the Chief Compliance Officer regularly monitor the Company’s compliance with the PSE, Philippine Dealing and Exchange Corp. (PDEx) and the SEC regulatory requirements. The PSE, PDEx and SEC compliance reports are regularly presented to the Board Corporate Governance Committee for review and discussion.
 
The Company presents its Compliance Report in the Annual Report in the Corporate Governance portion of the report. Below is the Company’s PSE, PDEx and SEC Reportorial Compliance Record for 2015.



 

Disclosure of Related Party Transactions

The nature and extent of transactions with affiliated and related parties are disclosed annually to shareholders through the Company’s Information Statement, Annual Report and Audited Financial Statements.
 
The Company and its subsidiaries enter into related party transactions consisting of payment of shareholder advances, professional fees and rental fees. These are made on an arm’s length basis and at current market prices at the time of the transactions. Service and management contracts are also entered into with subsidiaries and affiliates for corporate center services, such as human resources support services, internal audit services, legal and corporate compliance services, treasury, corporate finance services, and technology infrastructure services. These shared services are obtained from the Company to enable the Aboitiz group of companies to realize cost synergies. The Company maintains a pool of highly qualified professionals with in-depth business expertise specific to the businesses of the AEV organization. Transactions are priced on a cost recovery basis. In addition, transaction costs are always benchmarked to third party rates to ensure competitive pricing. Service Level Commitments and Agreements are executed to ensure quality and timeliness of services.
 
The Company has a related party transaction policy stated in the Board Audit Charter. Significant or Material Related Party Transactions, other than the routinary shared services transactions, are reviewed by the Board Audit Committee, where the majority of the members are the Independent Directors.
 
The SEC issued updated disclosure guidelines on retirement benefit funds. These guidelines enumerate the minimum disclosure requirements under PAS 24, Related Party Disclosures. The guidelines prescribe additional disclosure requirements on any information that would provide an understanding on the transactions of retirement funds with an entity whose employees are the beneficiaries and other investments in securities of the related entity. These disclosure guidelines took effect are became applicable to all annual financial statements for the period ending December 31, 2015. The Company has always disclosed its transactions in its Annual Report and will continue to disclose them in accordance with the existing guidelines.
 
There has been no reported case of non-compliance with the laws, rules and regulations pertaining to significant or material related party transactions in the past three years. Since the Company is a conglomerate, it has to consolidate the financial statements of the Group. It exerts best efforts to try to obtain its audited financial statements within the schedule required by the SEC. The Company’s audited financial statements reflect a true and fair representation of the financials that are affirmed by the Board of Directors and relevant officers of the Company. There have been no revisions restatements of the financials approved by the Board Audit Committee prior to the approval of the Board.
 
The Company has in place policies on transactions with related parties requiring the full disclosure thereof in the Company’s financial statements and in other Company reports. The Company’s related party transactions include, among others, written service level agreements with its affiliates and subsidiaries for human resources, internal audit, legal, treasury and corporate finance services, for guarantees of credit accommodations of subsidiaries and affiliates and intercompany advances for working capital requirements of subsidiaries and affiliates. The Company does not set thresholds for disclosure of related party transactions, but rather fully discloses all related party transactions regardless of amounts in full compliance with existing Philippine financial accounting standards. The Company also ensures that they have the character of arm’s length transactions consistent with, among others, existing rules on transfer pricing. These disclosures are made in the Company’s Annual Audited Financial Statements and Management Report.
 
In 2014, the Company conducted a comprehensive transfer pricing study and assessment of current practices and policies to ensure compliance with stricter transfer pricing rules, policies and best practices and for continuous improvement of processes.
 
The Company strictly adheres to the Philippine Corporation Code’s rules on voting for specific corporate acts where approval of specific types of related party transactions in the Board and in shareholders’ meetings may be required. The Company’s Independent Directors and the Board Audit Committee play an important role in reviewing significant related party transactions as it does in the regular course of its work. The Company’s related party transactions are typically agreements entered into in the ordinary course of business to maximize efficiencies and realize cost synergies. These are reported to the Board as they are entered into.

Directors Dealings in Shares of the Company

While the Company encourages stock ownership by employees, to ensure ethical conduct, the Company through its Legal and Corporate Services and Board Secretariat, monitors the share ownership of directors, executives, officers and management team through the regular SEC disclosures of beneficial ownership (SEC Form 23-B), and further monitor compliance through the implementation of the Company’s Insider Trading Policy and Trading Black-out dates.
 
The Company has an existing policy requiring the Board of Directors and the officers to report to the Office of the Corporate Secretary any transaction related to the purchase and disposal of Company shares within one business day from the date of the transaction. The Company discloses the direct and indirect (deemed) ownership or shareholdings of major and/or substantial shareholders and the details of the subsidiaries, associates, joint ventures and special purpose enterprises/vehicles. The Company’s Information Statement and Public Ownership Report regularly filed by the Company likewise show the direct and indirect ownership of the Company’s shareholders, which include its Board, the Management Team, and employees. Regular disclosures to the PSE, PDEx and SEC are made in the event of any dealings in Company shares.


External Auditor and Auditor Report

The Company’s Group Internal Audit team conducts the Company’s internal audit operations to make sure that all information are prepared and disclosed in accordance with high quality standards of accounting, financial and non-financial disclosure. The Board Audit Committee has oversight over the Group Internal Audit. The Group Internal Audit conducts its own internal audit, providing an
independent review of the Company’s internal organizational and operational controls and risk management policies to ensure its effectiveness and appropriateness, and that they are complied with. The Group Internal Audit reports to the Board Audit Committee.
 
With an independent audit function, the Group Internal Audit team provides reasonable assurance that the Company’s key organizational and procedural controls are effective, appropriate and complied with. The team is also responsible for identifying and evaluating significant risk exposures and thus contributes to the improvement of risk management and control systems. This is done by assessing adequacy and effectiveness of controls covering the organization’s governance, operations and information systems.
 
The Group Internal Audit team strictly adheres to establish professional standards and such standards promoted by the Institute of Internal Auditors’ Code of Ethics.
 
The Board Audit Committee assists the Board of Directors in its oversight responsibility of monitoring the quality and integrity of the accounting, auditing, legal, ethical and regulatory compliance, risk management and reporting practices of the Group and such other duties as directed by the Board. The Board Audit Committee assists the Board in fulfilling its broad responsibility of corporate governance. The role and responsibilities of the Board Audit Committee are clearly defined in the Company’s Manual on Corporate Governance, specifically the Board Audit Committee Charter. The Independent Director who acts as Chairman of the Board Audit Committee, signs off on all Board Audit Committee Reports.

Aside from an internal audit, an annual external audit of the Company is performed by SGV & Co., the Company’s duly engaged and qualified independent auditor. SGV has been serving as the Company’s external auditors for the last 20 years. Ms. Leovina Mae Villa-Chu is AEV’s audit partner for 2012 to 2015. She replaced Mr. Ladislao Z. Avila, Jr. who served as the audit partner in 2011. The external auditors also attend the Company’s annual shareholders meetings to respond to questions on the Company’s audited financial statements. SGV was present for the 2014 and the 2015 Annual Shareholders Meeting. The auditors also have the opportunity to make a statement during the meeting, if they deem it necessary. In instances when the external auditor suspects fraud or error during its conduct of audit, they are required to disclose and express their findings on the matter. SGV provides an external and objective assurance to the Board and shareholders that the financial statements fairly represent the financial position and performance of the Company in all material aspects.
 
There has been no event in the past 21 years where the Company and its external auditors or the handling partner had any serious or material disagreement with regard to any matter relating to accounting principles or practices, financial statement disclosure or auditing scope or procedure.
 
As a policy, the Board Audit Committee makes recommendations to the Board of Directors concerning the selection of the external auditor and pre-approves audit plans, scope and frequency before the audit is conducted. In 2015, the shareholders delegated to the Board the authority to appoint the external auditor.
 
Audit services of external auditors for the year 2015 were pre-approved by the Board Audit Committee. The Committee also reviewed the extent and nature of these services to ensure that the independence of the external auditors is preserved. In 2015, among the initiatives pursued, the Group Internal Audit undertook the standardization of audit measurement tools across the audit group: reviewed the Group Internal Audit operations, Risk Management Plan update; updated the Integrated Risk Management-Audit guidelines, and the implementation of the aligned vulnerability measure of Audit and Risk managements.
 
The fees paid to the external auditor for audit services are disclosed by the Company in its Information Statement. The external audit and other fees of the Company for the year 2014 and 2015 were as follows:



With the tremendous opportunities for growth and investments in ASEAN countries, the Company commissioned various studies by SGV on ASEAN regulatory reportorial and the framework. In 2014 and in 2015, the Company pursued investment opportunities, for which the item on other fees were paid.
 
The Group Internal Audit (GIA), together with the Board Audit Committee reviewed the scope of the audit and non-audit engagements and fee arrangements of the Company to ensure that there are no transactions with conflicts of interests, that the non-audit fees are reasonable, or promotes the best interests of the Company. In 2015, the Board Audit Committee approved both the audit and non-audit fees of the Company.

Audit Fees vs. Non Audit Fees

The AEV Group’s non-audit fees in 2014 and 2015 do not exceed audit fees as shown above.

Interface with External Auditor

The Board Audit Committee’s executive decision-making authority is defined in the Company’s Manual on Corporate Governance, the Audit charter and under such delegated authority as may be issued by the Board. By defined policy, the Board Audit Committee has the primary responsibility to recommend the appointment and removal of external auditors to the Board of Directors and pre- approves audit plans and the scope and frequency of audits before an audit is actually conducted. Services of external auditors for the past five years were pre-approved by the Board Audit Committee.
 
The Board Audit Committee also reviews the extent and nature of these services to ensure that the independence of the external auditors is preserved.

Medium of Communications

The Company uses channels of communications for disseminating information which provide for equal, timely and cost-efficient access to relevant information to its stakeholders.
Pursuant to the corporate governance principle of disclosure and transparency, information on the Company is made readily available. The Company provides shareholders with quarterly reports that include information about the Board of Directors and key officers, including relevant professional information on the Directors and Officers, their shareholdings and dealings with the Company and their aggregate compensation. These quarterly reports are filed promptly to the PSE, SEC and PDEx and can be accessed in the Company’s website.
The Company website contains updated corporate information of the Company, including details of its business operations and financial statements. The Investor Relations pages of the Company website provide financial highlights, recent press releases, audio recordings of media briefings, and information on the shareholding structure and organizational structure of the Company, among others.
 
The Investor Relations Officer and the Office of the Corporate Secretary have an established communications strategy and protocols to promote effective communication and liaison with shareholders.
 

Timely Filing and Release of Annual and Financial reports
Release of Annual Report after 120 days from financial year end

 

The Company’s Annual Report is filed with the SEC, PSE and PDEX within 105 days from end of the financial year end. The Annual Report is immediately uploaded in the Company website after submission to the SEC and PSE.
 
The Company’s Annual Audited Financial Statement (AFS) is filed within 120 days from the end of its fiscal year, as required by the SEC. The Company’s AFS reflects a true and fair representation of the financials that are affirmed by the Board of Directors and relevant officers of the Company. There have been no revisions and restatements of the financials approved by the Board Audit Committee prior to the approval of the Board. Copies of the AFS are given to all shareholders and are also available on the Company’s website.
The Company’s audited financial statements reflect a true and fair representation of the financials that are affirmed by the Board of Directors and relevant officers of the Company. There have been no revisions and restatements of the financials approved by the Board Audit Committee prior to the approval of the Board.

Company Website

The Company website contains updated corporate information of the Company, including details of its business operations and financial statements. The Investor Relations pages of the Company website provide financial highlights, recent press releases, audio recordings of media briefings, and information on the shareholding structure and organizational structure of the Company, among others.
 
The Company has a dedicated webpage for its corporate documents (Company’s Articles of Incorporation, By-Laws and General Information Sheet), corporate governance policies and practices in the Company website, which includes, among others, a description on the governance practices in the Company, its corporate and shareholding structure, its sustainability and corporate social responsibility initiatives, its company policies, and the awards it has garnered in recent years. An electronic copy of the Annual Report, the Aboitiz Integrated Annual Report including the Corporate Governance Report can also be downloaded from the website as well as the Notice, Agenda and Minutes of the Meeting. The Management regularly provides updated news on the Company website. The Company’s corporate governance initiatives, such as newly approved policies, circulars and board policies are also made available to the public on the Company website.
In addition, Management regularly uploads updated news and disclosures on the Company’s website. The Company’s corporate governance initiatives, such as newly approved policies, circulars and board policies are also made available to the public on the Company’s website at www.aboitiz.com/investor- relations/investors-kit.


Investor Relations

The Office of the Corporate Secretary, Company’s Investor Relations Office, its shareholder affairs contact person and its stock and transfer agent are also available for any communications, requests, inquiries or any clarifications. The Company discloses the contact details (e.g. telephone, fax, and email) of the officer / office responsible for investor relations. The contact details are provided in the Annual Report and in the Company’s website.
 
The Investor Relations team provides a venue for shareholders to air out comments or any suggestions and organizes regular analysts’ briefing for every disclosure of financial statements. It also ensures that investors/shareholders‘ queries are responded to within three to five business days from date of query. There have been no major grievances for any alleged violation by the Company of shareholders’ rights.

 
 

RESPONSIBILITIES OF THE BOARD

The Company believes that compliance with the principles of good governance begins with the Board of Directors.



The members of the Board strive to conduct themselves with utmost honesty and integreity in the discharge of its duties, functions and responsibilities. The Board is vital in setting the ethical tone of the Company, not only by its own actions, but also in appointing and overseeing key executives and management. The Board of Directors of the Company sets the standards for the Compoany’s corporate governance practices. The Board of Directors of the Company sets the standards for the Company’s corporate governance practives. The Board of Directors is committed to the adoption and observance of best practices in corporate governance as well as compliance with all relevant laws, regulations and codes of business practice.

In 2014, the Board of Directors approved additional policies and protocols recommended by the Board Corporate Governance Committee for continuous improvement of solutions to shareholder concerns. It is the Board’s responsibility to foster the long term success of the Company and secure its sustained competitiveness in a manner consistent with its fiduciary responsibility. It must exercise these duties for the best interests of AEV, its shareholders and other stakeholders. The Board is expected to perform the following functions on a recurring cycle.

The Company’s By-laws require that the quorum for valid board meetings is a majority of the members of the Board, in accordance with the Corporation Code of the Philippines. As a matter of long standing Board practice, decisions of the Company’s Board are always made with the consensus or vote of all of the Company’s independent directors and other directors resulting in at least 2/3 or a unanimous vote of all directors of the Board.

Below is the Company’s general organizational chart with a brief description of the roles and responsibilities of corporate service units and team leaders.




The Company’s overall business-focused strategy is for each of the core businesses, namely, Power, Food, Banking, Real Estate and Land Development, and Infrastructure, to be managed by a Group CEO. The Group CEO is responsible for the alignment of business strategies and strategy execution of the Company’s business units. Each Group CEO oversees the Strategic Business Units (SBUs).

In addition to the Board Committees, the Company also works through several committees that provide policy guidance and governance.

Disclosure of Company’s Corporate Governance Policy and Board Charter

The Company discloses its corporate governance policy through its Company’s Manual on Corporate Governance. To continuously keep itself up-to-date with current best practices, the Company regularly reviews and updates this manual. The Board amended the Company’s Manual on Corporate Governance on August 3, 2012, and also further amended on January 6, 2014 and July 24, 2014, to upgrade the Company’s corporate governance practices. The most recent amendment was to reinforce and recognize the rights of all stakeholders in compliance with SEC requirements. The Company’s Manual on Corporate Governance designates a Compliance Officer and defines his duties as well as outlines a Plan of Compliance revolving around the Board of Directors, its composition, qualifications, roles and responsibilities, the delineation of the roles of the Chairman and the CEO, conflict of interest and business interest disclosures, Board meeting quorum requirements, and adequate and timely information and accountability of audits. The Board Committees provide quality assurance that the Board functions are fulfilled.

The Company’s Manual on Corporate Governance also specifies the composition and duties of the newly-created and restructured board committees, the qualifications of the Corporate Secretary, an information security management policy, a sustainability policy, a risk management policy, communication process and training process, reportorial or disclosure system of the Company’s corporate policies, shareholders’ benefit statement and a monitoring and assessment system.

Disclosure of Decisions Requiring Board of Directors’ Approval

The Company regularly discloses all acts of the Board, corporate officers and management which are done in the regular course of business and operations of the Company and disclosed to the PSE, SEC and PDEX as may be required in accordance with applicable laws.

In the interest of transparency and as a matter of customary practice or procedure, the Company presents to its shareholders every annual shareholder’s meeting the board resolutions approved by the Board from the previous year to date. These resolutions, which are submitted to the shareholders for ratification during the meeting, are disclosed in the Company’s Definitive Information Statement.

Roles and Responsibilities of the Board of Directors

The roles and responsibilities of a member of the Board of Directors are clearly defined in the Company’s Amended By-Laws and in the Company’s Manual on Corporate Governance. The main purpose of the Board, as expressly stated in the manual, is to represent and protect the interests of the owners of the business, i.e., the internal shareholders, and all other key external stakeholders, regardless of category, in accordance with the Company’s corporate charter and applicable laws. To ensure a clear distinction of the responsibilities in the management of the Company’s business, the positions of the Company’s Chairman and CEO are held separately by different individuals.


Corporate Vision and Mission

As a publicly-listed company, AEV’s vision: is to focus on businesses that provide basic goods and services to meet the demands of a growing economy; develop and rely on the company’s core competencies, financial strength, and reputation to achieve its goals; and, to continuously maximize shareholder value and seek to become the premier investment company in the Philippines.

The Company’s mission is: To create long term value for all our stakeholders.

In line with the Company’s Vision and Mission statement the Board of Directors recognizes its role of providing leadership and stewardship to the Company, its shareholders, and all other stakeholders. The role of the Board is to represent and protect the interests of the owners of the business and other key external stakeholders, regardless of category, within the boundaries of its corporate charter, and all relevant statutes and legal regulations and rules. The primary purpose of the Company’s Board is to provide governance and oversight to the Company and its businesses in which it has direct or indirect interests. In addition, its responsibilities extend to other stakeholders in respect of compliance with regulatory standards; the provision of appropriate information and updates; and the effective representation and protection of the Aboitiz brand and reputation. The Board is responsible for the success of the Company through its supervision and oversight over affairs in a responsible and effective manner.


Review of Corporate Vision and Mission

The Company’s Board of Directors recognizes its role of providing leadership and stewardship to the Company, its shareholders, and all other stakeholders. The role of the Board is to represent and protect the interests of the owners of the business and other key external stakeholders, regardless of category, within the boundaries of its corporate charter, and all relevant statutes and legal regulations and rules. The primary purpose of the Company’s Board is to provide governance and oversight to the Company and its businesses in which it has direct or indirect interests. In addition, its responsibilities extend to other stakeholders in respect of compliance with regulatory standards; the provision of appropriate information and updates; and the effective representation and protection of the Aboitiz brand and reputation. The Board is responsible for the success of the Company through its supervision and oversight over affairs in a responsible and effective manner.

The Board participates in an Annual Board Retreat and Strategy Refresh to discuss both the strategic roadmap and policies of the Company, and a review of the Company’s vision and mission. The Board together with key officers participated in a strategy workshop last December 4, 2015 , to refresh the Company’s vision, mission, strategy and, corporate initiatives and core businesses. As a result of this trategy refresh, the Company has now added a fifth leg to its core businesses; adding infrastructure to the existing lines of banking and financial services, power, real estate and land development and food.

Monitoring and Board Oversight of the Corporate Strategy

The Company’s Board is fully compliant with the Company’s Manual on Corporate Governance for the year 2014. This manual clearly defines the Board’s responsibilities and the corporate governance policy of the Company. Proof of the Board’s strict adherence to the Manual on Corporate Governance is the Company’s compliance track record with SEC and PSE rules and regulations. The Manual on Corporate Governance was adopted with AEV’s vision and mission of providing the Filipino with the basic goods and services necessary to meet the demands of a growing economy in mind. The Company’s goal is to develop and rely on its core competencies, financial strength and reputation to achieve its business goals. The Company is committed to continuously maximize shareholder value and strive to become the premier investment Company in the Philippines.

To continuously keep itself up-to-date with current best practices, the Company regularly reviews and updates its Manual on Corporate Governance. The Board amended the Manual on Corporate Manual on August 3, 2012, and also further amended on January 6, 2014 and July 24, 2014, to upgrade the Company’s corporate governance practices. The most recent amendment was to reinforce

and recognize the rights of all stakeholders in compliance with SEC requirements. The Manual on Corporate Governance designates a Compliance Officer and defines his duties as well as outlines a Plan of Compliance revolving around the Board of Directors, its composition, qualifications, roles and responsibilities, the delineation of the roles of the Chairman and the CEO, conflict of interest and business interest disclosures, Board meeting quorum requirements, and adequate and timely information and accountability of audits. The Board Committees provide quality assurance that the Board functions are fulfilled.

The Company’s Manual on Corporate Governance also specifies the composition and duties of the newly-created and restructured board committees, the qualifications of the Corporate Secretary, an information security management policy, a sustainability policy, a risk management policy, communication process and training process, reportorial or disclosure system of the Company’s corporate policies, shareholders’ benefit statement and a monitoring and assessment system. The Compliance Officer coordinates with the regulatory officers of the Company’s business units to ensure compliance with other laws as well as to ensure the checks and balances and mitigating penalty measures are imposed.

The Company’s Corporate Secretary plays a significant role in supporting the Board in discharging its responsibilities through management of a Board Secretariat, through inputs to the agenda, review of reports and SEC compliance, through an oversight of investor concerns, oversight of stock and transfer agent, and active participation at Board meetings. The current Corporate Secretary is a member in good standing of the Philippines and New York State Bar and alumni of the Institute of Corporate Directors (ICD) and Professional Directors’ Program. The professional members of the Board Secretariat are lawyers and accountants who are also alumni of the Corporate Governance and Professional Director’s Program of the Institute of Corporate Directors.

The members of the Board have free access to the Chief Legal Officer of the Company and to the legal team in general. This line of communication supports effectiveness of governance practices. Recent global practices show that the governance effectiveness at any company benefits from the board of directors’ expanded interaction with the general counsel or chief legal officer. This enhanced interaction goes beyond the traditional practice of general counsel attendance at board meetings, responding to questions and presenting reports on specific agenda matters. Although the level of interaction has not reached a formal practice, AEV directors have informal opportunities to share perspectives with the legal team.

Board Structure

AEV’s Code of Ethics and Business Conduct
An Ethical Business

The Aboitiz Code of Ethics and Business Conduct adopted by the Company in 2002 sets out how the Executive Management, team leaders and team members can achieve and maintain ethical standards in the Company’s day to day operations and summarizes the Company’s fundamental policies and directives. All Directors, officers, management team and employees are required to comply with the Code.

The Code of Ethics and Business Conduct clearly sets the standards, policies and procedures on proper business conduct with co-employees, shareholders, investors, suppliers, customers, analysts, creditors and financial institutions, and on fair dealings, conflicts of interest and related party transactions, inappropriate gifts and favors, appropriation of corporate opportunities, dealing with proprietary and confidential information and Company system and assets, use and misuse of inside information, fair and truthful disclosures to the public, maintenance of accurate books and records, respect and dignity accorded to others, promotion of a safe and healthy working environment and the enforcement and administration of the Code. The detailed implementation of the Code is also delegated in the roles of the various functional teams of AEV Corporate Center.

To protect proprietary information of the Company, its subsidiaries and its affiliates, the Directors, Officers and Team Members of the Company sign a Non-Disclosure Agreement in accordance with the applicable provisions of the laws of the Philippines, the Company’s Articles of Incorporation and applicable rules and regulations issued by the regulatory bodies.

All directors, officers and employees have an individual responsibility to ensure that business practices adhere to the rules of the Code of Ethics and Business Conduct. In 2014, no employee or officer sought exemptions from the application of the corporate governance rules and guidelines of the Company. The Management Team actively encourages employees to adhere to the Code of Ethics and Business Conduct and exercise their sound judgment and decision in daily work as part of its commitment to the Aboitiz Way. There has been no incident of non-compliance with the Code.

The detailed implementation of the Code is also delegated in the roles of the various functional teams of AEV Corporate Center and defined in the Code of Ethics and Business Conduct of the Company.

In March 2016, the Board of Directors approved the amendments to the Company’s Code of Ethics and Business Ethics as endorsed by the Board Corporate Governance Committee. The key revisions to the Code of Ethics and Business Conduct include the adoption of a more defined anti-bribery and corruption policy and the inclusion of the existing sustainability and social media policies of the Company. The Company’s Code of Ethics is downloadable from its website at www.aboitiz.com.


Board Structure and Composition
Independent Directors

The Company is compliant with Section 38 of the Securities Regulation Code and Rule 38 of its Amended Implementing Rules requiring public companies to have independent directors constituting 20% of the total number of directors.

Independent Directors Independent of Management and Major Shareholders  

As defined in the Securities Regulation Code, an independent director “is a person other than an officer or employee of the corporation, its parent or subsidiaries, or any other individual having a relationship with the corporation, which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director”.

The Company’s Independent Directors are independent from Management. They are not encumbered with any management responsibility and are free from any business or other relationship with the Company. They are not major/substantial shareholders or hold shares in such amounts that could materially interfere with their exercise of independent unfettered judgment as members of the Board. More importantly, the Independent Directors chosen to the Company’s Board are independently- minded professionals. There is nothing in the Company’s By-Laws and in any shareholder agreements or arrangements that constrain the Independent Director’s ability to vote independently.

Independent Directors of the Company do not perform any management duties and do no perform any minor or substantial management work. The Independent Directors sit in the Board Committees and perform their functions as members of the various Committees, solely for oversight of the Company’s management team. The Company’s non-executive directors and Independent Directors meet at least once a year without the presence of the executive directors for an informal discussion of issues. The Independent Directors met with the non-executive Chairman of the Board for their annual executive sessions on July 23 and
29, 2015 at Taguig City for an informal discussion of issues.


Term Limits of Independent Directors

The Company also adopted SEC Memorandum Circular No. 9, Series of 2011, imposing term limits for Independent Directors aimed at enhancing the effectiveness of Independent Directors and at encouraging the infusion of fresh ideas to a Board of Directors. In compliance with the said Memorandum, the Board Corporate Governance Committee regularly monitors the tenure of the Company’s Independent Directors. The Company has adopted a 5-year tenure for its Independent Directors counted from the effectivity of the SEC Circular.


Limitation on Board Membership of Independent Directors

In the Company’s Manual on Corporate Governance, the Board Corporate Governance Committee shall consider among others, number of directorship/active memberships and officerships in other corporations or organizations in the selection of board of members. The same limitation applies to independent directors.

The Independent Directors of the Company do not sit in more than five (5) boards of publicly-listed companies (PLCs). Justice Jose C. Vitug (Ret.) sits as an Independent Director in only one other PLC, the, ABS-CBN Holdings Corporation. Mr. Stephen C. CuUnjieng sits on the board of SM Investments Corporation, Century Properties Group, and Mr. Raphael P.M. Lotilla sits on the board of Trans-Asia Petroleum Corporation. This is shown in the certification of affiliations required from each of the nominated Independent Directors. Likewise, executive directors do not generally sit on other boards of PLCs outside the Group, unless they have substantial interest in the said company or they have been asked to sit in the capacity as independent directors. The executive directors do not sit in more than two boards of listed companies outside the Aboitiz Group.

Executive Directors in the Boards of Other PLCs

Executive directors do not generally sit on other boards of PLCs outside the Group, unless they have substantial interests in those PLCs or they have been asked to sit in the capacity as independent directors.

The Company’s executive directors do not sit in more than two boards of publicly listed companies outside the Aboitiz Group. The Company’s Manual on Corporate Governance also provides that the CEO and other executive directors shall submit themselves to a low active limit on membership in other corporate boards.

The Board Committees

The Company’s Board Committees consist of the following: Board Audit Committee, Board Risk and Reputation Management Committee and Board Corporate Governance Committee.

Members of the Board Committees are the duly qualified aid elected directors of the Company’s Board of Directors as regular members and are assisted by key officers of the Company on ex-officio basis. These Board Committees hold meetings at least every quarter to ensure that sound strategies for the Company’s development are reviewed, monitored, executed and achieved.

The Board decided at its May 17, 2010 meeting to amend the Manual on Corporate Governance and have the functions of the Board Strategy Committee subsumed under the scope of functions of the full Board membership.

As a result, the Board regularly holds a special strategy Board meeting in addition to the strategy sessions at regular board meetings and the informal strategy meetings of the Directors.

The Board folded in the Board Nominations and Compensation Committee into the Board Corporate Governance Committee. On February 1, 2012, the Board Corporate Governance Committee endorsed the creation of an expanded Board Risk Management Committee into a Board Risk and Reputation Management Committee. Membership of Independent Directors to both Board Corporate Governance Committee and Board Risk and Reputation Committee was recently increased. Independent Directors now comprise 60% of the voting members of the Board Corporate Governance Committee, 60% for the Board Audit Committee, and 20% for the Board Risk and Reputation Management Committee.

The Board Corporate Governance Committee
(with Nomination and Compensation Committee)

The Board’s ability to make decisions with governance impact is supported by the work of the Board Corporate Governance Committee. The Board Corporate Governance Committee provides information and recommendations necessary for making good governance decisions.

The Board Corporate Governance Committee assists the Board but does not pre-empt any board responsibilities in making final decisions on corporate governance, nomination and compensation matters.

In performing its duties, the Board Corporate Governance Committee maintains effective working relationships with the Board and the Group’s senior leadership to enable it to perform its roles effectively. Each Committee member strives to obtain an understanding of the detailed responsibilities of Committee members as well as the Group’s businesses and operating environment.

The governance practices for the overall interests of the stakeholders.

Since the Board Corporate Governance Committee is a merger of the Nomination and Compensation Committees and the original Corporate Governance Committee, the Board Corporate Governance Committee formulates policies, guidance in selecting nominees for the Board of Directors, among others, in a coordinated way. In performing its duties, the Committee maintains an effective working relationship with the Board of Directors. The Board Corporate Governance Committee performs the functions of the Nominations and Remuneration Committee.

Pursuant to the merger of Board Committees, the Board Corporate Governance Committee performs the functions of the Nominations and Remuneration and the Board Corporate Governance Committees. It accepts the shareholder nominations of directors and recommends, after study, the compensation of directors, as well as succession issues.

Independent Directors Comprise Majority of the Corporate Governance Committee

The Committee is composed of a majority of Independent Directors (three out of five directors). The Chairman of the Committee is a non-executive director and brings with him his past valuable experience and expertise in the major businesses of the Company, having served as its Chairman of the Board from 1998 to 2008.

The Board Corporate Governance Committee is currently composed of the following:

Chairman of the Corporate Governance Committee is an Independently Minded Non-Executive Director

Since the Board Corporate Governance Committee is a merger of the Nomination and Compensation Committees and the original Corporate Governance Committee, the Board Corporate Governance Committee formulates policies, guidance in selecting nominees for the Board of Directors, among others, in a coordinated way. In performing its duties, the Committee maintains an effective working relationship with the Board of Directors. The Board Corporate Governance Committee performs the functions of the Nominations and Remuneration Committee. It accepts, receives and recommends directors nominated by shareholders, as well as assesses succession issues of management.

Disclosure of Governance Structure and Charter of the Corporate Governance Committee

The composition, roles and responsibilities of the members of the Corporate Governance Committee are defined in the Company’s Manual on Corporate Governance, which serves as the committee’s charter. The Manual on Corporate Governance is available at www.aboitiz.com under Policies & Protocols in the Corporate Governance page.

Number of Committee Meetings in a Year and Attendance of Members

All members of the Board Corporate Governance Committee attended all its meetings in 2015. Individual directors’ percentage record of attendance at meetings of the Committee was 100% and overall percentage of directors present at said meetings was 100% as shown below:

Nomination of Independent Directors

The nomination and selection of Independent Directors by the Board Corporate Governance Committee, acting in its capacity as a Nominations Committee, are intended to obtain a balanced mix of discipline and expertise among the Independent Directors and to align the Independent Directors’ credentials with that of the Company’s strategic goals, mission and directions. The Committee therefore looks for the disciplines of finance and accounting, legal, engineering, investment banking, economic planning and business development, among many other skills and credentials.

Approval of the Corporate Governance Committee

The resolutions of the Board Corporate Governance Committee can only be approved with the vote of at least one Independent Director.

Annual Performance Assessments

The annual performance assessments of the CEO, the individual members of the Board, and the Board of Directors as a body are conducted by the Board Corporate Governance Committee. The attendance of directors at Board meetings is reported to the Board Corporate Governance Committee through the Board Performance Report and the Certificate of Attendance. Pursuant to SEC Memorandum Circular 1-2014, the Company updated its Annual Corporate Governance Report in its corporate governance website to reflect the attendance of the members of the Board of Directors in meetings conducted for the year 2015.

The Office of the Corporate Secretary and Chief Compliance Officer, pursuant to the mandate of the Board Corporate Governance Committee, implements the current written policies and procedures designed to ensure compliance with the PSE and SEC disclosure rules, as well as other disclosure requirements under existing laws and regulations. These policies provide procedures and timelines for the disclosure of: material contracts, agreements and events that may impact on the control, ownership, and strategic direction of the Company, director and executive compensation policy, disclosures of groups or individuals who hold five percent or more ownership interest in the Company, significant cross-shareholding relationship and cross guarantees, as well as the nature and scope of the Company’s ownership in other entities, annual and quarterly consolidated reports, cash flow statements and special audit revisions, consolidated financial statements and interim reports, changes to its Manual on Corporate Governance and practices, information necessary for shareholders decision making, trading of Company shares by directors, officers and controlling shareholders, annual reports, and any material event or information.

For the year 2015, the Board Corporate Governance Committee took up the following matters:

The Board Audit Committee

The Board Audit Committee oversees the function of the Group Internal Audit in maintaining a comprehensive enterprise-wide compliance program and a robust institutionalized quality service platform for the Company’s internal audit functions that are annually reviewed. The Board Audit Committee, in conjunction with the Group Internal Audit, performs the following functions: reviews and approves non-audit services conducted by the external auditor and corresponding fees, assesses and recommends the external auditor on behalf of the Board to ensure a selection of credible, competent external auditor with the ability to understand the complexity of the entire range of the transactions of the Company, provides the Board with adequate and relevant information on the external auditors for a fair and transparent selection or tender process, and schedules regular meetings and dialogues with the external audit team (with and without management teams present). The Company’s CFO, when invited by the Board Audit Committee, attends the meetings of the Board Audit Committee (a) to ensure immediate clarification and feedback of audit issues to the Board Audit Committee, and (b) to give prompt instructions to the Company of any policy that the Board Audit Committee proposes to implement.

Existing corporate audit policies require that the financial reports are attested to by the CEO and CFO, and that a sound internal audit, control and compliance system is in place and working effectively in the Company. The Company follows the policy of rotating its lead external audit partner of every five years.

The audited financial statements are released in accordance with the BIR requirement to file every April 15.

Independent Directors Comprise Majority of the Audit Committee

The Board Audit Committee is composed of at least three (3) directors, two (2) of whom shall be independent directors. Currently, three Independent Directors sit in the Committee. The Chairman of the Board Audit Committee is an Independent Director.

For 2015-2016, the Board Audit Committee membership is as follows:

Chairman of the Audit Committee is an Independent Director

During the Company’s Organizational Meeting last May 19, 2015, the Board appointed Retired Justice Jose C. Vitug as Chairman of the Board Audit Committee. Retired Justice Vitug brings with him a wealth of experience in internal controls and audit having worked with companies such as ABS-CBN Holdings Corporation.

Governance Structure and Charter of the Board Audit Committee

The composition, roles and responsibilities of the members of the Corporate Governance Committee are defined in the Company’s Manual on Corporate Governance and Audit Charter. The Manual on Corporate Governance and the Charter of the Board Audit Committee are available at www. aboitiz.com under the Policies and Protocols in the Corporate Governance page and under the Board Committees in the Governance and Management Team page, respectively.

Disclosure of the Qualifications or Profile of the Audit Committee Members

The Company fully discloses the qualifications of the members of the Board, including the members of the Audit Committee. As reported in the Company’s Definitive Information Statement which is distributed to the shareholders prior to the Annual Stockholders’ Meeting, each member of the Audit Committee has vast experience in auditing, finance and accounting. The profiles of the Directors are disclosed to the SEC and PSE prior to the shareholders’ meeting and uploaded in the Company’s website. (Please refer to www.aboitiz.com under the Board Committees in the Governance and Management Team Page.)

Each member of the Board Audit Committee has long accounting and finance working experience in their respective professional careers: each has adequate understanding, familiarity and competence on most of the Company’s financial management systems and environment.


Accounting Experience of the Independent Directors who are Members of the Audit Committee

Each member of the Audit Committee, generally with accounting and finance backgrounds, has adequate understanding, familiarity and competence on most of the Company’s financial management systems and environment.

Justice Jose C. Vitug is a retired Justice of the Philippine Supreme Court, professor of law and a legal luminary. Mr. Raphael P.M. Lotilla was formerly the Secretary of the Department of Energy and head of the National Economic Development Authorities of the Philippines. Mr. Stephen C. CuUnjieng is both a lawyer and a seasoned and multi-awarded international investment banker. His professional background provided him with working knowledge of current accounting and finance best practices, which knowledge he is able to contribute to his Board and Board Committee work. Mr. CuUnjieng has advised global and Philippine companies in mergers, acquisitions, capital and debt markets and other fund raising exercises in the major financial centers in the world.

Number of Committee Meetings in a Year and Attendance of Members

Attendance record in meetings by members of the Board Audit Committee has been good. Individual directors’ record of attendance at meetings of the Committee has been 84% and overall percentage of directors present at said meetings has been 84% as can be seen below:


Disclosure of the Attendance of Members of the Audit Committee Members

The Company fully discloses the attendance of the members of the Board Audit Committee for the year 2015 in its Annual Corporate Governance Report duly filed with the SEC and is readily available in the Company’s website at www.aboitiz.com in the Governance Reports and Scorecards under the Corporate Governance page.

Audit Committee’s Primary Responsibility to Recommend the Appointment and Removal of External Auditor

The Board Audit Committee, in conjunction with the Group Internal Audit, performs the following functions: reviews and approves non-audit services conducted by the external auditor and corresponding fees, assesses and recommends the external auditor on behalf of the Board to ensure a selection of credible, competent external auditor with the ability to understand the complexity of the entire range of the transactions of the Company, provides the Board with adequate and relevant information on the external auditors for a fair and transparent selection or tender process, and schedules regular meetings and dialogues with the external audit team (with and without management teams present).

By policy and practice, the Board Audit Committee makes recommendations to the Board of Directors concerning the selection of the external auditor and preapproves audit plans, scope and frequency before the audit is conducted. In 2015, the shareholders delegated to the Board the authority to qualify and appoint the Company’s external auditor.


Transparency of Audit Process

The Company’s Group Internal Audit Team and the Board Audit Committee conducts and reviews the Company’s internal audit operations to make sure that all information are prepared and disclosed in accordance with high integrity standards of accounting, financial and non-financial disclosure. The Board Audit Committee has oversight over the Group Internal Audit. The Group Internal Audit conducts its own internal audit, providing an independent review of the Company’s internal organizational and operational controls and risk management policies to ensure its effectiveness and appropriateness, and that they are complied with. The Group Internal Audit reports to the Board Audit Committee.

With an independent audit function, the Group Internal Audit Team provides reasonable assurance that the Company’s key organizational and operational controls are effective, appropriate and complied with. The team is also responsible for identifying and evaluating significant risk exposures and accordingly contributes to the improvement of risk management and control systems. The team does this by assessing adequacy and effectiveness of controls covering the organization’s governance, operations and information systems. The Group Internal Audit also utilizes other quality assurance providers within the organization.

The Group Internal Audit adheres to established professional standards and such standards promoted by the Institute of Internal Auditors’ Code of Ethics.

The Board Audit Committee assists the Board of Directors in its oversight responsibility of monitoring the quality and integrity of the accounting, auditing, legal, ethical and regulatory compliance, risk management and reporting practices of the Group and such other duties as directed by the Board. The Committee assists the Board in fulfilling its responsibility of corporate governance. The role and responsibilities of the Board Audit Committee are clearly defined in the Manual on Corporate Governance, specifically the Board Audit Committee Charter. The Independent Director who acts as Chairman of the Board Audit Committee signs off on all Board Audit Committee Reports.

Aside from an internal audit, an annual external audit of the Company is performed by SGV, an independent, competent and qualified auditor. SGV has been the Company’s external auditors for the fiscal years 1998 to 2015. SGV provides an external and objective assurance to the Board as well as provides additional protection to the rights of shareholders and creditors that the financial statements fairly represent the financial position and performance of the Company in all materials aspects.

Ms. Leovina Mae V. Chu is the Company’s audit partner for 2015. She replaced Mr. Ladislao Z. Avila, Jr. who served as the audit partner of the Company in 2011. The external auditors also attend the Company’s Annual Stockholders’ Meeting to respond to any questions on the Company’s audited financial statements. They also have the opportunity to make a statement if necessary. In instances when the external auditor suspects fraud or error during its conduct of audit, they are required to disclose and express their findings on the matter.

There has been no event in the past 16 years where the Company and its external auditors or the handling partner had any serious or material disagreement with regard to any matter relating to accounting principles or practices, financial statement disclosure or auditing scope or procedure.

Audit of Company

The Company has a well-entrenched independent internal audit group, the Group Internal Audit (GIA), which is overseen by the Board through the Board Audit Committee. The independent internal auditors reports directly to the Board Audit Committee, and the Board Audit Committee has the ultimate authority and responsibility to select, evaluate, recommend, and where appropriate, re-appoint or replace the Company’s Independent External Auditors. The Board Audit Committee represents the Board in its oversight responsibility over all audit-related matters of the Company’s group companies. It oversees the optimization of effective financial management, as well as compliance with regulatory reporting requirements for all business units.

ISO 9001:2008

The Group Internal Audit ensures that existing Company mechanisms allow all stakeholders to raise valid audit issues to the Board Audit Committee. The Company’s internal audit team, together with AEV Corporate Center, achieved an ISO 9001:2008 QMS certification further raising the quality and integrity of internal audit services of the Company to itself and to all its business units.

Interface with External Auditor

The Board Audit Committee’s executive decision-making authority is delineated in the Manual on Corporate Governance, in the Audit Charter and under such delegated authority issued by the Board. By defined policy, the Board Audit Committee has the primary responsibility to recommend the appointment and removal of external auditor to the Board of Directors. It pre-approves audit plans and the scope and frequency of audits before an audit is actually conducted. Services of external auditors for the past five years were pre-approved by the Board Audit Committee. The Board Audit Committee also reviews the extent and nature of these services to ensure that the independence of the external auditors, are preserved.

Below are the highlights for the Board Audit Committee work for the year 2015:


Internal Company Controls

In the pursuit of its core businesses and in its dealings with all stakeholders, the Company complies with its external and legal framework involving various general and special laws and their implementing rules and regulations.

The Company’s internal regulatory framework is primarily based on the corporate governance principles and policies laid down in its Articles of Incorporation and By-Laws, the Manual on Corporate Governance , the Code of Ethics and Business Conduct, Board Protocols, Board Committees’ Charters, and work procedures, and policies laid down by the Board Corporate Governance Committee, Board Audit Committee, Board Risk and Reputation Management Committee, the Group Mancom, AEV Corporate Mancom, Human Resources Committee, BIT Committee, Investment Committee, Insurance Management Committee, among others.

Board Audit Committee Self-Assessment

The Board Audit Committee Self-Assessment for showed exemplary compliance to the standards required of a Board Audit Committee under the SEC Revised Code of Corporate Governance. In compliance with SEC Memorandum Circular No. 4: Guidelines for the Assessment of the Performance of Audit Committees of PLCs, the Board Audit Committee and the Board of Directors approved the Amended Board Audit Committee Charter, on August 2, 2012 and September 27, 2012, respectively. The Company also disclosed to the PSE and SEC, the SEC FORM 17-C in compliance with the SEC Memorandum Circular No. 4 last October 4, 2012. No additional self-assessment was required to be conducted in 2015.

The role of the Board Audit Committee is important because it ensures that local investors and global capital markets rely on quality financial statements. The Board Audit Committee approves and submits accurate and transparent financial disclosures and observes adequate risk controls.

The Board Audit Committee Charter contains its purpose, membership, structure, operations, reporting procedures, resources, assessment of the members of the committee and other relevant information.

As reported by the Chairman of the Board Audit Committee in the Annual Report, the Company’s internal controls are adequate and the basic control assertions of reliability and integrity have been satisfactorily complied with. Standardization and alignment of processes across the Group have also been satisfactorily addressed in 2013 and throughout 2015.

Report of the Board Audit Committee

For 2015, the Company did not receive any sanctions from regulators on financial reports nor did it receive any qualified, adverse and disclaimer opinions on its external audit report. The Board Audit Committee also reported to the Board on the adequacy of the Company’s current internal controls. The Board Audit Committee recently passed its 2015 mandatory self-assessment for audit control, procedures and system.

There was no incidence where the Company did not comply with any listing rules and regulations over the past year.

The Company also disclosed to the SEC and the PSE its compliance with SEC Memorandum Circular No. 4-2012, Guidelines for the Assessment of the Performance of Audit Committee of Companies Listed on the Exchange last October 4, 2012 based on SEC’s compliance monitoring schedule.

The Board Risk and Reputation Committee

The Board Risk and Reputation Management Committee primarily assists the Board, and to some extent the Board Audit Committee, in fulfilling the corporate governance responsibilities relating to risk management and brand reputation. The Board Risk and Reputation Management Committee assists in defining the Company’s risk appetite and tolerance levels and oversees the risk profile and performance against the defined risk appetite. It is also responsible for overseeing the identification, measurement, monitoring and controlling of the Company’s principal business risks. With respect to reputation management, the Committee likewise oversees reputational risks and provides guidance to management in corporate branding and communication strategies.

The Board Risk and Reputation Management Committee oversees the Company’s Enterprise Risk Management (ERM) initiatives. The Company’s ERM pillars are Risk Management Governance, Process and Integration, Risk Finance and Capability Building.

The Board Risk & Reputation Management Committee is composed of four directors, one of whom is independent, as well as two non-voting members in the persons of the Chief Financial Officer (CFO) and the Chief Risk and Reputation Management Officer.

The Board Risk and Reputation Management Committee is currently composed of the following:




Attendance record of members of the Board Risk and Reputation Management Committee has been consistently good. Individual directors’ percentage record of attendance was at 89.00% and overall percentage of directors present at said meetings was at 88%.



In its 2015 meetings, the Board Risk and Reputation Management Committee reviewed, discussed, updated and approved the following matters:

Other Company Committees and Group Initiatives

The Company and its Management team work through other committees for the formulation and implementation of management policies.

The Group Management Committee (Group ManCom) reviews and approves group-wide polices and initiatives and conducts Key Talent Reviews. The committee also serves as Risk Management Council that ensures proper implementation of the Risk Management framework and its strategies, policies, and key initiatives. It reviews and monitors the Group’s top risks and emerging risks and ensures implementation of corresponding risk mitigation. The Committee approves all risk transfer programs with insured values beyond P2 billion. It is composed of the President & Chief Executive Officer, who is the Chairman, and the Team Leaders of the Strategic Business Units (SBUs), Chief Human Resources Officer, and Chief Financial Officer, as members.

The AEV Management Committee is in charge for the following functions: (a) Review and approve Corporate Center initiatives that enhances governance, business partnering and being a knowledge center for support services; (b) Review and recommend initiatives to Group ManCom that will require participation from the SBUs and/or will have an impact to the SBUs; and (c) Review and approve Corporate Center policies, organization structure, promotions, benefits, budgets and plans; and Conducts Key Talent Reviews. The Chairman is the Company’s Chief Executive Officer. The members are the Chief Human Resources Officer, Regulatory Team Leader, Chief Financial Officer, Chief Strategy and Investment Officer, Chief Legal Officer/Compliance Officer, the Company’s Treasurer, the Chief Technology Officer, the Company’s FVP – Controller, the Company’s FVP – Human Resource and Quality, and the Chief Strategy and Investment Officer.

The Insurance Management Committee is created to perform the reviews and approval of (a) Business interruption assumptions for the sum insured and indemnity period; (b) Replacement value of the business unit’s physical assets; (c) All insurance lines to be procured by the business units for operations and project requirements; (d) All insurance quotations; and (e) Insurance programs of business units with insurable risk value of up to π2 billion. The Chairman is the Chief Financial Officer. The members are the Chief Reputation and Risk Management Officer, AboitizPower’s Chief Financial Officer, the SBU’s Finance Team Leaders, and the Financial Risk Management Officer.

The Investment Committee has the following functions: (a) Provide a standard way of pulling together information on investment opportunities; (b) Provide early opportunity for information to flow in two ways to help team members and management to understand any deal; and (c) Ensure timely investment and timely evaluation of opportunities available to the Company. The Chairman is the President & Chief Executive Officer. The members are the Chief Financial Officer, Chief Strategy and Investment Officer, Deal Team Leaders, SBU’s Chief Executive Officer, the SBU’s Chief Financial Officer, and the business units’ Chief Operating Officer.

The Risk Management Steering Committee is responsible for the following: (a) Review and recommendation of group-wide Risk Management and Insurance Policies, strategies and initiatives for RM Council’s review and approval; (b) Review, monitoring and reporting of implementation progress of group-wide Risk Management and Insurance projects and initiatives; and (c) Serving as forum for discussing key risk issues, emerging risks and sharing Risk Management knowledge, best practices, experience and research work. Its Chairman is the: Chief Risk and Reputation Management Officer. The members are the Risk Management Team Leaders, and the SBU and business units’ Risk Managers.

The Reputation/Corporate Social Responsibility/Sustainability Council performs the following functions: (a) Develop strategy and group-wide initiatives and related to reputation management, CSR, and sustainability; (b) Set policies and guidelines related to corporate communication, media relations, branding, CSR and sustainability; and (c) Review, monitor, and report implementation progress of group-wide projects related to corporate communication, media relations, branding, CSR, and sustainability. The Chairman is the Chief Risk and Reputation Management Officer and the members are the SBU and business units’ Reputation Managers.

The BIT Committee formulates and manages IT policies, processes, structures, and systems of group- level issues where collective effort, knowledge, capital, or economy create a higher quality outcome. This is chaired by the Chief Technology Officer and the members are the SBU and business units’ IT Managers.

The Human Resource Committee leads in the following matters of the Group: (a) Key HR initiatives in Corporate Center and the SBUs/business units; (b) Group HR policies and practices; (c) HR best practices; and (d) Resolution of HR-related issues. The Chairman is the Chief Human Resources Officer and the members are the First Vice President – Human Resources and Quality, AEV’s HR Team Leaders, and SBU business units’ HR Heads.

The Finance Committee performs the following functions: (a) Review long-term financing requirements including operational companies, greenfield projects, and business development projects which include acquisitions; (b) Review placement limits and investment outlets; (c) Review credit lines (short-term lines and single borrower’s limit); (d) Review cash flows; (e) Review foreign exchange hedging requirements; and (f) Update market directions on interest rates and foreign exchange. The Chief Financial Officer chairs the committee. Its members are AboitizPower’s Chief Financial Officer, the Company’s Treasurer, and the Financial Team Leaders (as Invited Attendees).

The Government Relations Committee (a) Coordinates all government-related activities across the group; (b) Monitors relevant legislation and government policies; (c) Develops good working relationships with government agencies, LGUs and business organizations, in coordination with different business units and the Aboitiz Foundation and WeatherPhilippines Foundation; and (d) Participates and provides inputs to government committee hearings and public consultations. It is chaired by an AEV Executive Officer. The members are the AboitizPower President and Chief Operating Officer, the Government Relations Team Leaders, AboitizPower’s Regulatory Team Leaders, and the Chief Legal Officer.

The Legal Executive Committee (LexCom) is formed to do the following: (a) Report and assess the Company’s corporate governance compliance track records, identifies and mitigates legal risks, reviews litigation management procedures, tax protocols, current litigation issues and other related matters affecting the Aboitiz group, including overall legal expenditure of the business units; (b) Ensure a comprehensive legal compliance program of the company; (c) Initiate the formal adoption of the Company’s Code of Conduct, clarify responsibilities, and inform other stakeholders on the conduct expected from company personnel; and (d) Regularly update management on ongoing projects or activities of the Legal and Corporate Services Team. It is chaired by the Chief Financial Officer. The members are the Chief Legal Officer and Compliance Officer, Human Resources Officer, Chief Reputation and Risk Management Officer, the Legal and Corporate Services Legal Team, and AboitizPower’s Chief Financial Officer.

The LexCom is one of the Company’s institutional venue enabling members of the Legal and Corporate Services Team to meet with the executive management to discuss legal issues and concerns that affect the Group. The members report, discuss and assess corporate governance compliance track records, identification and mitigation of legal risks, review of litigation management procedures, tax protocols, current litigation issues and other related matters affecting the Aboitiz Group, including overall legal expenditure of the Company’s business units.


 

The LexCom meets every two months to regularly update management on ongoing projects or activities of the Legal and Corporate Services Team. The purpose of these meetings is to provide Executive Management with up-to-date and relevant legal developments within the subsidiaries and affiliates of the Company. The LexCom reviews if there are any requests for waivers or exemptions of company governance rules. The LexCom initiates the formal adoption of the Company’s Code and proper conduct that guides individual behavior and decision-making, clarifies responsibilities, and informs other stakeholders on the conduct expected from company personnel. The LexCom sets the policies and procedures for curbing and penalizing company or employee involvement in unethical behavior, such as offering, paying and receiving inappropriate rewards.

The Office of the Chief Legal Officer is responsible for ensuring compliance by the Company, and its subsidiaries and affiliates, with all relevant laws, rules and regulations, as well as all regulatory requirements, including the protection and respect for intellectual property rights. The LexCom is responsible for the comprehensive legal compliance program of the Company. As part of its program, the LexCom and the Office of the Chief Legal Officer oversees the appropriate training and awareness initiatives to facilitate understanding, acceptance and compliance with the said issuances by the employees and the business units.

The LexCom also reviews or recommends the appropriate dispute resolution system for conflicts and differences with counterparties, particularly with shareholders and other key stakeholders to ensure that they are settled in a fair and expeditious manner from the application of a law, rule or regulation especially when it refers to a corporate governance issue. The Office of the Chief Legal Officer explains the rationale for any such action as well present the specific steps being taken to finally comply with the applicable law, rule or regulation.

The LexCom also serves as an additional whistle blowing forum, in addition to the CEO’s, Chairman’s, and the Board Corporate Governance Committee oversight. Any complaint of whistleblowers are encouraged, reviewed, investigated and reported to the Lexcom for discussion and appropriate action.

The LexCom Functional and Strategic Structure below shows the two-way flow of information of legal issues from the BUs to the Board and the forum for addressing legal and corporate governance issues.

Board Processes
Schedule of Board Meetings

During the last board meeting of every year, the members of the Board agree on the schedule of meeting for the next financial year. The final date of meeting for the succeeding year, as well as the time and venue of the meetings are circulated to the Board and uploaded in the Diligent Board Books right after the last meeting of the year.

Pursuant to the Manual on Corporate Governance of the Company, the Board of Directors of the Company meets at least once every two months or at least six (6) times a year. In 2015, the board meetings of the Company were as follows: January 27, 2015, March 26, 2015, May 18, 2015, July 29, 2015, September 24, 2015, and December 4, 2015.


Attendance of Directors to Board Meetings

The attendance of individual directors in board meetings is reported to the Board Corporate Governance Committee by way of the Board Performance Report and to the SEC through the filing of the Annual Corporate Governance Report. The attendance of the directors to the Company’s board meetings in 2015 was good. The attendance of the directors to the Company’s board meetings in 2015 was exemplary with an overall percentage of 96.3% attendance record for the nine (9) regular and special board meetings including strategy meetings for each director and 96.3% presence of directors per meetings.


Quorum Requirement for Board Approvals

In accordance with Section II Article 3 of the Company’s By-laws, a majority of the members of the Board shall constitute a quorum. This same requirement is in accordance with Section 25 of the Corporation Code. As practiced, decisions of the Company’s Board are always made with the consensus or vote of all of the Company’s independent directors and other directors resulting in at least 2/3 or a unanimous vote of all directors of the Board.

Meeting of Non-Executive Directors at Least Once a Year
(Without Executives Present)

As provided in the Company’s Board Protocol, the Company’s Independent Directors meet at least once a year for an Executive Session. The Independent Directors may also meet periodically in an executive session with no other Director or management present except for the Chairman of the Board Corporate Governance Committee who shall call for and preside the meeting. Topics for discussion during these executive sessions shall be determined by the Independent Directors, but actions of the Board generally should be taken separately during Board meetings. The Independent Directors met with the non-executive directors, including the Chairman of the Board Corporate Governance Committee, at Taguig City on July 23 and 29, 2015 for their informal discussion of issues.

Board Materials Circulation Timeline

Based on existing Board Protocols adopted by the Board Secretariat, the board materials for directors are provided to the Board. The Board Secretariat ensures that the Board materials are uploaded to the Aboitiz Boardbooks and available for reading at least five (5) business days prior to a board meeting.

Board meeting agenda items include reports on the generation businesses per sector, the power distribution business, energy trading updates, business developments, power regulatory updates and issues, investment proposals and business transactions, business strategies, financial and management reports, treasury reports, and top risks of the Company, among others.

Role of the Company Secretary

The Company’s Corporate Secretary plays a significant role in supporting the Board in discharging its responsibilities through management of a Board Secretariat, through inputs to the agenda, review of reports and PSE and SEC compliance, through an oversight of investor concerns, oversight of stock and transfer agent, and active participation at Board meetings. The current Corporate Secretary is a member in good standing of the Philippine and New York State Bar and alumni of the Institute of Corporate Directors and Professional Directors’ Program. The professional members of the Board Secretariat are lawyers and accountants who are also alumni of the Corporate Governance and Professional Directors’ Program.

The members of the Board have free access to the Chief Legal Officer of the Company and to the legal team in general. This line of communication supports effectiveness of governance practices. Recent global practices show that the governance effectiveness at any company benefits from the board of directors’ expanded interaction with the general counsel or chief legal officer. This enhanced interaction goes beyond the traditional practice of general counsel attendance at board meetings, responding to questions and presenting reports on specific agenda matters. Although the level of interaction has not reached a formal practice, AEV directors have informal opportunities to share perspectives with the legal team.

Board Appointments and Re-Election
Criteria in Selecting New Directors

For an effective Board, the Company takes serious consideration of the selection of Members of the Board. The selection is based on the following minimum qualifications: (i) ownership of at least one share of stock of AboitizPower in compliance with the Corporation Code of the Philippines; (ii) university education or sufficient experience in managing the business, in lieu of a college education; (iii) at least 21 years old; (iv) proven to possess integrity and probity; (v) no conflict of interest; (vi) able to devote his time in fulfilling his duties and responsibilities as Director; (vii) practical understanding of the businesses of the Company; (viii) membership in good standing in relevant industry, business or professional organizations; and (ix) previous business experience. Each member of the Board is identified and selected for the depth of experience and wisdom he is expected to provide to the Company, considering that the Company’s business is a unique aggrupation of businesses, requiring the capability to understand power industry financials and technical matters.

The annual selection process is intended to appoint a diverse mix of highly competent directors and officers with in-depth knowledge and experience in the core industries of AboitizPower or corporate management, financial expertise, audit and governance experiences. Other factors considered are independent-mindedness, ethical behavior and value contribution of each director. The Company follows a formal and transparent board nomination and election process to ensure the interests of all shareholders. Any shareholder may nominate a director and Independent Director. Nominees for directors are submitted to the Board Corporate Governance Committee, to which the Nominations and Compensation Committee has been merged into. The overall procedure is in compliance with the Amended Implementing Rules and Regulations of the Securities Regulation Code.

As a corporate practice, Directors of the Company sit as directors in no more than five (5) publicly- listed companies.

Process Followed in Appointing New Directors

The Company’s Guidelines for the Constitution of the Nomination Committee and the Nomination and Election of Independent Directors are available in the Company’s website at www.aboitiz.com under the Corporate Governance webpage.

The Company also discloses the process of electing regular and independent directors in the Definitive Information Statement, copies of which are distributed to the shareholders and uploaded in the Company’s website at www.aboitiz.com.

Re-Election of Directors

All directors are elected every year. A Board director holds office for one year until his successor is elected at the next ASM in accordance with the Corporation Code of the Philippines, the Company’s By- Laws and the SEC guidelines. Shareholders may nominate board members individually through the nominations process. At the ASM, and in accordance with the Corporation Code of the Philippines, the Company follows the rule of One-Share, One-Vote. Under this rule, any minority shareholder can influence the board composition by individual nomination and by the power of cumulative voting rights. The right to cumulative voting is a statutory right granted by the Corporation Code of the Philippines.

Directors Selection Database

The Company uses professional search firms, external sources of candidates including director databases, professional organizations (whether Philippines or offshore) when searching for candidates for nomination of independent directors. The Company uses all available professional databases and information resources for the selection of Directors, whether through professional search firms or other external sources of candidates.

Board Remuneration Matters
Remuneration Policy and Practices of Executive Directors and CEO

The Board members’ remuneration is a form of reward and recognition to attract, retain and optimize the directors who continually deliver quality services for the growth of the Company.

The Company rewards the individual directors through a board compensation package and the officers based on their stretched strategic goals and ability to execute their duties and responsibilities. The Company’s performance reward philosophy is based on objective performance. Performance is evaluated and compensation is reviewed on an annual basis.

The Board members’ remuneration policy and practice is disclosed in the Company’s Definitive Information Statement and the Annual Corporate Governance Report.

Disclosure of the Fee Structure for Non-Executive Directors
Shareholders or Board Approval for the Remuneration of Executive Directors and Senior Management

AEV ensures that it pays its directors and officers competitively by comparing rates with other Philippine-based companies through market salary surveys. Changes in Board compensation, if any, are recommended by the Board Corporate Governance Committee, approved by the Board and voted on by the shareholders in a regular shareholders meeting. As approved by the shareholders during the Annual Stockholders Meeting held last May 16, 2011, each director receives a monthly allowance of ₱100,000.00 for each member and ₱150,000.00 for the Chairman. Each director receives a per diem of ₱100,000.00 per board meeting attended, except for the Chairman of the Board, who receives a per diem of ₱150,000.00. For every board committee meeting attended, each director is entitled to a per diem of ₱80,000.00, except for the Chairman of the Committee, who receives ₱100,000.00. There were no changes to the Board compensation recommended for shareholder approval in 2012, 2013 and2014. The 2014 remuneration was considered at par with peers in the industry.

In the last Annual Stockholders Meeting of 2015, the shareholders approved an increase in the compensation of the directors to take effect after May 18, 2015, details are as follows:



All proposed changes in Board remuneration are approved by the shareholders and disclosed to the public in a timely manner through PSE and SEC disclosures and the Company’s Annual Report. The Company reviews Board remuneration by benchmarking against other Philippine publicly listed companies. It also participates in market surveys to benchmark board remuneration.

The non-executive directors do not receive any additional compensation, options, performance shares or bonuses from the Company.

Independent Non-Executive Directors Do Not Receive Options, Bonuses or Performance Shares

The non-executive directors do not receive options, performance shares or bonuses. Company executive officers do not receive stock options or performance shares.

Internal Audit
The Company’s Internal Audit Function

The Company has a fully functional independent internal audit team, the Group Internal Audit. The Group Internal Audit is overseen by the Board through the Board Audit Committee. The independent internal auditors of the Company report directly to the Board Audit Committee and the Board Audit Committee has the ultimate authority and responsibility to select, evaluate, recommend and replace the independent auditors. The Board Audit Committee represents the Board in its oversight responsibility over all audit-related matters of the Company’s group companies. It oversees the optimization of effective financial management, as well as compliance with regulatory reporting requirements for all business units.


The Head of Group Internal Audit

The Company did not hire or engage an external firm to head Group Internal Audit (GIA). Ms. Marie Tanate who heads the GIA holds the position of Assistant Vice President for Internal Audit. The report discloses the position of Ms. Tanate as head of the GIA.

The Board Audit Committee to Appoint and Remove the Internal Auditor

By defined policy, the Board Audit Committee has the primary responsibility to recommend the appointment and removal of external auditors to the Board of Directors and pre-approves audit plans and the scope and frequency of audits before an audit is actually conducted.

Risk Oversight
Company’s Internal Procedure/Risk Management System

The primary purpose of the Board Risk and Reputation Management Committee is to assist the Board, and to some extent the Board Audit Committee, in fulfilling the corporate governance responsibilities relating to risk management and brand reputation. The Board Risk and Reputation Management Committee assists in defining the Company’s risk appetite and tolerance and oversees the risk profile and performance against the defined risk appetite. It is also responsible for overseeing the identification, measurement, monitoring and controlling of the Company’s principal business risks.

In reputation management, the Committee oversees Brand Identity, Brand Image, Brand Integrity and Capability Building of the Company’s Reputation Team. It also handles Reputation Issues Management, Corporate Branding and Communication Strategy, and identifying the governance structure to support its framework.

The Board is cognizant and committed to having a risk aware corporate culture. The Board oversees the Company’s risk and reputation management functions through the Board Risk and Reputation Management Committee. The Board has adopted a formal risk management policy to guide and direct the Company’s risk and reputation management and compliance processes and procedures. In 2011, the Company’s Chief Risk Management Officer implemented the phases of the Company’s Enterprise Risk Management (ERM) platform and conducted a study to benchmark the Company’s practices with internationally recognized standards. The incumbent Chief Reputation and Risk Management Officer has continued the planned outlay of the Company’s ERM program.

The Board Risk and Reputation Management Committee represents the Board in discharging its responsibility relating to all risk management-related matters across the Aboitiz Group of Companies. This Committee does not have decision-making authority, except in the circumstances outlined in the Manual on Corporate Governance or to the extent that the Board expressly delegates certain authority to it.

The Board Risk and Reputation Management Committee is composed of four directors, one of whom is independent, as well as two non-voting members, the Chief Financial Officer (CFO) and the Chief Reputation and Risk Management Officer.

The Company discloses its internal control procedures and risk management systems through the Risk Management Report of its Chief Reputation and Risk Management Officer in the Aboitiz Integrated Annual Report. The report shows a review of the Company’s material controls and risk management systems, key Group risk management developments, and a discussion of the Company’s top risks. The Risk Management Team pursued various initiatives for 2014, such as the development and implementation of a Level 5/Regional Scenario Business Continuity plan, a conduct of risk engineering surveys, developing better insurance programs for the Aboitiz Group, review, assessment and development of groupwide Business Continuity Plan table top test plans, Risk Management Integration with Key Internal Processes, Improved Integration of Risk Subject Matter Experts, 2014 Risk Maturity Index Assessment, Risk Management Information System Phase 1 and 2, Risk Management Policy Review, ERM Process Audit, and development of a sustainability roadmap. (See Risk Management Report in the Aboitiz Integrated Annual Report at www.aboitiz.com)

Review of Company’s Material Controls and Risk Management System

The Aboitiz Integrated Annual Report shows a review of the Company’s material controls and risk management systems, key Group risk management developments, and a discussion of the Company’s top risks. The Risk Management Team continues to pursue various initiatives for 2015, such as the development and implementation of a Level 5/Regional Scenario Business Continuity plan, a conduct of risk engineering surveys, developing better insurance programs for the Aboitiz Group, review, assessment and development of groupwide Business Continuity Plan table top test plans, Risk Management Integration with Key Internal Processes, Improved Integration of Risk Subject Matter Experts, 2014 Risk Maturity Index Assessment, Risk Management Information System Phase 1 and 2, Risk Management Policy Review, ERM Process Audit, and development of a sustainability roadmap. (See Risk Management Report in the Aboitiz Integrated Report at www.aboitiz.com)

Management of Key Risks

The Company discloses how key risks are managed in its Annual Report. The Company’s top challenge in 2015 was and still remains the growing of a sustainable business with a corresponding organizational capability, given the regulatory risks of its businesses. In 2015, AEV focused on execution of its growth pipeline for both existing core businesses; building of its business development team; planning and pursuing plans to grow the scale of its other core industries other than power in order to lessen linkage of AEV performance to AboitizPower performance; promote good governance practices; plan and support execution of shift to CSR 2.0; and ensure that financial and operating risks are managed.

In 2014, AEV’s food group also pursued it strategy to enter the ASEAN market with the purchase of its first feed mill operations in Vietnam and the opening of a Representative Office in Indonesia. This overseas expansion carries both opportunities for cross border businesses and partnerships as well as the risks and challenges of navigating new markets, different political regimes and new regulatory framework.

AEV’s land business also forged ahead with the expansion of its economic zones through the acquisition of Lima Land, Inc. in Malvar, Batangas and new partnerships for mixed land use developments in Cebu City. The substantial expansion of AEV’s land development sector requires investment in financial and human capital.

In all these developments and execution for growth plans of the Company, the Board continues to review and monitor the evolving risks and threats to the Company’s businesses. Such risks include: reputational risk, competition risk, regulatory risk, financial risk and commodity price risk. (See Risk Management Report in the Aboitiz Integrated Annual Report at www.aboitiz.com)

In order to support the growth and expansion of its businesses, the Company’s strategy is to provide corporate support to the Company’s business units. The AEV Corporate Center’s mission is to provide management services and business solutions to all its business units. AEV Corporate Center is committed to create and maintain long term value for all stakeholders by being the Knowledge Center, a Business Partner and a Governance Center of the Aboitiz group of companies. Each functional unit of the Company, such as the Corporate Center’s Human Resources, Treasury, Accounting, Risk and Reputation Management, Legal and Corporate Services, and IT Teams support the business units in these three corporate center key areas.

Adequacy of the Company’s Risk Management System

The Company’s Annual Report contains an assessment from the Board of Directors of the Company’s internal controls. The overall assessment of the statement of the effectiveness of the system of internal controls of the company is also presented and discussed during the first Board Audit Committee meeting.

People on the Board
The Chairman of the Board

The Board is led by a Chairman who is very knowledgeable about the Company’s core businesses is seasoned in corporate finance, and has a deep commitment to corporate social responsibility. The Chairman, who is a non- executive director, ensures that the Board functions in an effective, robust and collegial manner. The Company’s CEO is related to the Chairman of the Board by six civil degrees of separation. All decisions and dealings with each other are done in a professional manner, in keeping with an Aboitiz Family Constitution that sets strict standards for each member’s work involvement in the Aboitiz Group of Companies. (See Section on Information on Directors and Officers at www.aboitiz.com)

The Chairman of the Board is a Different Person from the CEO

To ensure a clear distinction of the responsibilities in the management of the Company’s business, the positions of the Company’s Chairman and CEO are held separately by different individuals.

The Chairman of the Board, Mr. Enrique M. Aboitiz and the Company’s CEO, Mr. Erramon I. Aboitiz were elected to their respective positions during the Organizational Meeting of the Board last May 18, 2015.

Former CEO does not Serve as Director of the Board

The Company’s current regular and independent non-executive directors have not served as CEO of the Company in the past two years.

The Chairman is not a former CEO of the Company

The Company’s Chairman of the Board, Mr. Jon Ramon Aboitiz has not served as CEO of the Company in the last two years. The profile and qualifications of Mr. Aboitiz can be viewed in www.aboitiz.com.

Roles and Responsibilities of the Chairman

The roles and responsibilities of a member of the Board of Directors and Chairman of the Board are clearly defined in the Company’s Amended By-Laws and in the Manual on Corporate Governance which are available at www.aboitiz.com.

Skills and Competencies of Directors

The Company’s Independent Directors are chosen from a diverse pool of experts. The selection process aims to align the Company’s strategy with the right balance of different expertise and working experience in different businesses such as power, land, banking, infrastructure, foods, and disciplines such as legal, finance, accounting, economics and engineering. The Board Corporate Governance Committee undertakes a careful selection process by accessing professional databases, professional search companies and other alternative or informal databases.

The Company’s selection process ensures that at least one non-executive director has experience in the industries the Company operates in. For example, Mr. Antonio R. Moraza, who has been a non- executive director of the Company since 2009, is concurrently the President and Chief Operating Officer of AboitizPower, one of the Company’s subsidiaries engaged in its main business of power generation and distribution. Moreover, Messrs. Justo A. Ortiz and Stephen T. CuUnjieng, who are likewise non-executive directors of the Company, have extensive banking experience relevant to the Company’s banking unit.

Policy on the Diversity of the Members of the Board

The annual selection process is intended to appoint a diverse mix of highly-competent directors and officers with in-depth knowledge and experience in the core industries of the Company and/or corporate management and financial expertise. Other factors that are considered are independent- mindedness, ethical behavior and value contribution. The Company follows a formal and transparent board nomination and election process to ensure the protection of the interests of all shareholders. Any shareholder may nominate a director and Independent Director. Nominees for directors are submitted to the Board Corporate Governance Committee (to which the Nominations and Compensation Committee has been merged into). The overall procedure is in compliance with the Amended Implementing Rules and Regulations of the Securities Regulation Code.

Board Performance
Orientation Program for New Directors

All newly-elected directors undergo a director’s orientation program provided by independent service providers and other training programs that will enhance their understanding of roles and develop their technical knowledge to discharge their functions effectively. In addition, each new director undergoes an on-boarding process where each is given an on-boarding kit that contains relevant information on the Company and their duties and responsibilities as incoming directors. The on- boarding kit includes the Company’s Annual Report, Code of Ethics and Business Conduct, Manual on Corporate Governance, and Board Protocol, among others. Briefings on relevant industry specific issues are also given to new directors. The onboarding process also includes one-on-one briefing by management.

Policy on Continuing Professional Education Programmes

The Company has a policy that directors shall attend the necessary training programs to enhance their understanding of their roles and to develop and maintain the required technical knowledge to discharge their functions effectively.

Throughout the year, the Board participated and attended forums, seminars, and briefings on various issues and topics affecting the Company, with the end in view of gaining depth and understanding of the issues and concerns of the Company. These seminars and trainings included the annual joint risk and audit forum, discussions on current developments on the ASEAN Integration, the ASEAN Corporate Governance Scorecard, Financial Reporting Standards, the role of the Board in the Audit Committee and audit procedures, Philippine and Asia economic briefings by the Credit Suisse Economic Briefing and by BDO Unibank, Inc. The Board of Directors also participate in the annual joint risk and audit forum during which are discussed global risks and trends.

The AEV recognizes that, for an effective corporate governance system, senior executives must constantly review and assimilate the principles of corporate governance consistently with the commitment of the Board of Directors. Newly hired or newly transferred team leaders and team members are required to take the in-house corporate governance e-learning seminar mandated by the Board. In addition, all Directors, together with key officers of the Company, are also required to attend annual in corporate governance seminars in compliance with SEC Memorandum Circular No. 20-2013, issued on December 6, 2013. Directors and officers attended the Company’s SEC mandated Corporate Governance Seminar held in March 25, 2015 in partnership with the Institute of Corporate Directors.

Succession Planning for the CEO and Key Management Positions

The Company has in place the Aboitiz Talent Management Program (ATMP). This program addresses the top executive succession planning and group-wide organizational executive and management bench. The 18 program guidelines and developments are presented and reviewed by the Board Corporate Governance Committee.

Strengthening the Organization

In 2015, the Company recently implemented changes to the organization structures of AEV. The Company believes these moves will effectively strengthen the organization and the leadership capabilities to successfully execute our long-term strategic plans. Only a strong team can drive excellent performance – especially at a time of growth amid a challenging business environment. The Company’s aim is to continuously strengthen the leadership team and cultivate a unique performance culture. The Company continues to equip its people with the essential competencies to excel through leadership development and competency building programs. The Company takes pride in its leadership excellence, producing leaders from the ranks. Currently, 72% of its top executives are homegrown talents. To further strengthen the organizational capability and sustain the leadership performance, the Company’s HR is now in the process of taking Group talent management into a new level of governance. It is maximizing synergies across the Company’s Group, developing and implementing more effective and efficient HR solutions for its Strategic Business Units through an enterprise-wide HR management system.

Board Members and Directors Annual Performance Assessment/Appraisal
Disclosure of Process Followed in Conducting the Appraisal
Disclosure of Criteria Used in the Board and Individual Assessment

Members of the Board annually assess the Board’s performance, their own individual performances, and the CEO’s performance through an annual Board Assessment Review overseen by the Board Corporate Governance Committee. The Board Corporate Governance Committee regularly conducts the Board Self-Assessment Review and the CEO assessment. Results of the Board, Self and CEO Assessments for 2015 were presented to the Board Corporate Governance Committee and circulated to the Board for their review and feedback.

The process followed and the criteria used in assessing the annual performance of the board and its committees, individual directors and the CEO/President are disclosed in the Company’s Annual Report assessment and director appraisal.

To date, there have been no instances where non-executive directors resigned and raised issues of governance-related concerns. There have also been no major or minor corporate governance scandals that have affected the Company.

COMPANY AWARDS & RECOGNITION 

Awards Received in 2015

The Company and AboitizPower have built and consistently maintained its core values and conformed to corporate governance principles in the face of evolving stakeholder concernsand demands in their ever-changing business environment. The Aboitiz Group’s dedicated and steadfast adherence to these values and principles is clear proof of the value of the Aboitiz business motto: We can do well by doing good.

The Company has been consistently considered as one of the top well managed and governed Philippine companies by the Institute of Corporate Directors, Corporate Governance Asia, Finance Asia, and the PSE, among others, for its commitment to good corporate governance practices.

In November 2015, the company was recognized as one of the Top 50 Publicly Listed Companies in 2015 ASEAN at the first-ever ASEAN Corporate Governance Awards, an event organized by the ASEAN Capital Markets Forum and the Securities and Exchange Commission held at the Manila Polo Club, Makati City. The Company was likewise recognized as one of theawardees of Top Philippine Publicly- Listed Companies in the 2015 PSE Bell Awards. AEV received the PSE Bell Awards for exemplary corporate governance practices for 2014. AEV has been consistenly recognized by the PSE for the past five years.

The numerous awards received by the Company and AboitizPower, especially in the field ofcorporate governance and stakeholder engagement, reflect the commitment of the Aboitiz Group to adopt and implement good corporate governance best practices. Both companies,along with their subsidiaries and affiliates have been consistently recognized in local andinternational surveys, assessments, and scorecards as among the Philippines’ best-managed companies.

AEV received the following awards in 2015:

Awards Received in 2014

The numerous awards received by the Company and AboitizPower, especially in the field of corporate governance and stakeholder engagement, reflect the commitment of the Aboitiz Group to adopt and implement good corporate governance best practices. Both companies, along with their subsidiaries and affiliates have been consistently recognized in local andinternational surveys, assessments, and scorecards as among the Philippines’ best-managed companies.

Finance Asia Best Companies 2014 Awards also awarded the Company for third BestManaged Companyfourth Best Investor Relations, and eighth Best CSR.

The Company was likewise recognized as one of the finalists of the Top Philippine Publicly-Listed Companies in the 2013 PSE Bell Awards. AboitizPower received the PSE Bell Awards forexemplary corporate governance practices in 2014.

The Company sponsored the coffee-table book “Shades of Majesty,” was awarded theGintong Aklat Awards for Best Book in Natural Sciences. The Company continues to sponsorthe original publication of books highlighting local themes, indigenous culture and medicinalflora as part of the sustainability mindset.

In a 2014 reputation survey conducted by the Company with shareholders, customers,suppliers, communities, and team members as respondents, the most excellent reputationdimension for the Aboitiz Group was notably in CSR. Inspired by the results of thereputation survey, the Company is now working on achieving its CSR 2.0 in its programareas by implementing more sustainable projects that are also aligned to its businesses.The Company will carry on its BetterWorld journey, always being mindful about making the right long term decisions that balance the interests of people, planet, and profits andstaying focused on a sustainability mindset that “we can do well by doing good”. TheCompany is committed to doing everything the Aboitiz Way, driven by Passion for BetterWays, and guided by the total package of core values and beliefs.

Below is the summary of the awards and recognitions received by the Company in 2014: