Shaping Tomorrow

Transcription

Shaping Tomorrow

Equity Ventures
Shaping Tomorrow
Today
2007 ANNUAL REPORT
2007 ANNUAL REPORT
Aboitiz Equity Ventures, Inc. (AEV) is a diversified conglomerate listed in the Philippine
Stock Exchange that has interests in power generation and distribution, banking, transport
and food manufacturing. Its mission is to create long-term value for all its stakeholders.
The company has been recognized in international surveys as among the Philippines’ best
managed companies. In 2007, it placed 9th overall as the Best Managed Company in Finance
Asia’s Annual Best Companies in Asia poll. In the same poll, AEV ranked 8th as the Most
Committed to Corporate Governance, and 7th in Best Investor Relations.
Aboitiz Power Corporation (AP), a majority-owned subsidiary of Aboitiz Equity Ventures, is
one of the leaders in the country’s renewable energy industry and the largest conventional
hydropower operator in the country. It has a reputation of operating the most efficient
electricity distribution utilities in the Philippines. The company provides its customers with
quality service and reasonably-priced electricity. Since its incorporation in 1998, AP has
accumulated interests in both hydroelectric power generation facilities and thermal plants,
and expanded its distribution business. It is committed to expand its renewable energy
capacity, driving innovation to power the Philippines.
UnionBank, a partnership among the Aboitiz Group, Insular Life and Social Security System,
is recognized in the banking industry for its leadership in creating financial value, achieving
operational excellence, building a customer franchise and demonstrating superior innovation.
It has championed ‘Smart Banking’ as the philosophy behind engaging its customers in a
unique UnionBank experience, boosting prospects for sustained long-term growth of the
bank’s profitability. UnionBank is the sixth largest private domestic commercial bank in terms
of assets with a total of 166 branches and 187 operational ATMs nationwide.
Aboitiz Transport System (ATS) is the largest, most progressive and efficient total transport
and logistics solutions company in the Philippines. Its principal business units are engaged in
the movement of people under the brand name ‘SuperFerry’ and the movement of cargo under
the brand name ‘2GO’. ATS embodies a proud legacy of leadership and service, and today its
unique work ethic remains unchanged. With a renewed promise but still holding true to the
vision of its founders, ATS continues to strive for excellence by setting new standards in the
local maritime industry.
Aboitiz Group Foundation, Inc. (AGFI) is a non-stock and non-profit corporate
foundation registered with the Securities and Exchange Commission in 1989. It is the
concrete manifestation of the Aboitiz Group’s strong commitment to corporate social
responsibility. Guided by its mission, “helping people help themselves”, AGFI addresses
the social and economic development needs of less privileged communities in areas where
Aboitiz companies operate. The Foundation has helped improve the quality of life of its
chosen beneficiaries under its major program components, namely education, enterprise
development, primary health and childcare.
Contents
Financial Highlights
Report to Stockholders
from your Chairman and President & CEO
Chief Operating Officer
Chief Financial Officer
Chief Compliance Officer
Features: Shaping Tomorrow Today
ABOITIZ POWER CORPORATION
Powering new frontiers
2
4
12
22
24
36
UNIONBANK OF THE PHILIPPINES
Redefining ‘smart banking’
38
CITY SAVINGS BANK
Branching out
40
PILMICO FOODS CORPORATION
Expanding capabilities
42
ABOITIZ TRANSPORT SYSTEM
Transforming solutions
44
ABOITIZ GROUP FOUNDATION, INC.
Sustaining public education
46
ABOITIZ FUTURE LEADERS BUSINESS SUMMIT
Shaping the next generation of leaders
48
LOCATION OF OPERATIONS
THE BOARD OF DIRECTORS
CORPORATE OFFICERS
FINANCIAL STATEMENTS
50
51
52
54
Shaping Tomorrow
Today
ABOITIZ EQUITY VENTURES ANNUAL REPORT 2007
Financial highlights
Revenues
(In Million Pesos)
Cash and Cash Equivalents
07
07
31,205
06
05
18,568
06
26,711
26,923
05
EBITDA
Total Assets
9,318
6,602
06
05
6,527
05
05
34,665
23,792
Stockholders’ Equity
07
1.02
38,127
06
0.76
05
3,159
39,293
05
597
06
3,754
07
06
736
07
5,797
06
1,139
(IN PESOS)
07
38,276
Market Capitalization
Earnings per share
Net Income to Common
40,844
05
4,623
07
06
65,504
06
8,010
Cash Dividend to Common
07
07
23,078
05
0.65
20,161
AEV Stock Price vs PSE Index
From January 3, 2005 to March 26, 2008
10.00
9.00
AEV Stock Price
High
Low
2005
5.30
3.20
5.00
2006
7.00
4.75
4.00
2007
9.60
5.80
8.00
7.00
6.00
3.00
Outstanding Shares as of March 31, 2008
Source: Technistock
JAN 2005
APR 2005
JUL 2005
OCT 2005
JAN 2006
APR 2006
JUL 2006
AEV
OCT 2006
JAN 2007
PSE
APR 2007
JUL 2007
OCT 2007
JAN 2008
MAR 2008
5,688,903,621
FINANCIAL SUMMARY
For the Year (In Million Pesos)
Percentage Contribution
2005
2006
2007
% change
(‘07 vs ’06)
26,923
26,711
31,205
16.8%
Operating profit from ordinary activities
2,142
2,328
2,861
22.9%
Equity in Net Earnings of Associates
2,155
2,115
3,976
88.0%
Other Income (Charges)
(611)
(135)
1,196
(987.8%)
Income before income tax
3,686
4,308
8,033
86.5%
Provision for income tax
(469)
(494)
(1,212)
145.3%
Income before minority interest
3,217
3,814
6,822
78.9%
(58)
(60)
(1,024)
3,159
3,754
5,797
REVENUES
Per Business Segment for 2007
OPERATING PROFIT
Minority interest
Net Income to Common
FOOD
10%
530
TRANSPORT
6%
318
BANKING
23%
1,243
POWER
61%
3,338
(Figures in million pesos)
Income Breakdown
Per Business Segment
(In Million Pesos)
3,338
54.4%
1,048
At Year End (in million pesos)
Total Assets
38,276
40,844
65,504
60.4%
Total Liabilities
16,936
16,561
18,516
11.8%
1,178
1,205
8,861
635.3%
20,161
23,078
38,127
65.2%
6,527
6,602
9,318
41.1%
Minority Interest
Equity Attributable to Equity Holders of the Parent
EBITDA
2,264
2,024
05
Book Value
Cash Dividends (Common)
06
07
05
POWER
Per Share (in pesos)
Earnings
1,243
0.65
0.76
1.02
33.7%
4.11
4.66
6.70
43.7%
0.20
33.3%
0.12
0.15
1,118
510
07
BANKING
06
530
318
382
142
Financial Ratios
Current Ratio
1.29
2.06
2.48
20.5%
Debt-to-Equity Ratio
0.79
0.68
0.39
-42.2%
Net Debt-to-Equity Ratio
0.30
0.11
(0.15)
-238.2%
34
05
06
FOOD
07
07
TRANSPORT
05
06
FROM YOUR CHAIRMAN AND PRESIDENT & CEO
Dear Shareholders and Friends,
Roberto E. Aboitiz
CHAIRMAN
We are very
pleased to report
that 2007 was a
banner year for
AEV as it posted a
record profit of
5.8 billion, an
increase of 54%
over its 2006
earnings. Return
on equity was
20% as all
companies
turned in strong
performances.
We are very pleased to report to you that 2007 was again another
record year for Aboitiz Equity Ventures, Inc. (AEV), as it posted a
profit of 5.8 billion, a 54% increase over 2006 earnings of
3.8 billion. Return on equity was 20% as all companies turned in
strong performances.
We continued to enhance and maximize the value of all our existing
businesses, entering into strategic business partnerships and acquiring
new major investments. We likewise continued to provide shareholders
with attractive dividend yields.
We had begun the year 2007 with the successful placement of our
entire treasury shareholdings representing 742,511,938 shares at a price
of 8.20. The transaction raised approximately 6 billion, equivalent to
US$121 million.
International investors in the United States, Europe and Asia took up
89% of the offering with domestic investors taking 11%. This increased
by 15% the company’s free float and further strengthened AEV’s
shareholder base.
POWER
The company’s main event of the year, the listing of Aboitiz Power
Corporation (AP) at the Philippine Stock Exchange in July, raised
US$230 million to fund future capital investments in the power sector.
We have begun to deploy the funds raised in our initial public offering
(IPO) wisely and profitably. The company is now well positioned to
expand as the Philippine power sector is deregulated and government
continues to sell off power assets. The demand for new power
investments is also increasing due to economic growth and supply
limitations.
AP, which is 73% owned by AEV, continues to be the major contributor
to AEV’s profits accounting for 61% of its earnings.
Generation
A series of exciting developments happened in our generation
business in 2007.
In February, we entered into a partnership with Taiwan
Cogeneration International Corporation to build and operate an
independent coal-fired 300-MW plant in the Subic Bay Freeport
Zone. We expect to finalize the plans for this investment in 2008.
Together with our partners SN Power of Norway, we began
operating the 360-MW Magat plant in Isabela in April. In
October, SN Aboitiz Power-Magat, Inc. (SNAP-Magat) achieved
full ownership of the facility after a successful refinancing,
which involved a club of banks with the International Finance
Corporation acting as anchor lender. The project financing,
which won four international awards, has been referred to as the
landmark power deal of the year.
The Magat plant’s operations results for eight months in 2007
were exceptional. The team not only excelled in maximizing plant
efficiencies but also set up a formidable power trading operation
that maximized electricity trading in the Wholesale Electricity Spot
Market (WESM).
In April, we also acquired major stakes in East Asia Utilities
Corporation (EAUC) and Cebu Private Power Corporation
(CPPC), two diesel plants in Cebu with a combined capacity of 120
MW. These plants sell power to Visayan Electric Company, Inc.
(VECO), and the Mactan Economic Zone 1.
In November, we won the bid for a 34% stake in STEAG State
Power Inc., a company that owns and operates a 232-MW coal
plant in Mindanao. The company has a 25-year build-operatetransfer contract with the National Power Corporation.
REPORT TO OUR STOCKHOLDERS
In 2007, generating capacity attributable to AP grew by 200%, from 164
MW to 490 MW. The increase was due to our acquisition of the Magat,
EAUC, CPPC and STEAG facilities.
shipyards as main customers. We also increased our ownership in
Subic EnerZone Corporation (SEZ) to 100%, after buying out our
different partners.
The consortium of SN Power and Aboitiz Power successfully won the
bid in November 2007 for the 175-MW Ambuklao Binga hydro facilities
in Benguet privatized by the Power Sector Assets and Liabilities
Management Corp. (PSALM). With the acquisition of these facilities,
Aboitiz Power is now the largest conventional hydro power plant
operator in the Philippines. Turnover of the plant will be in 2008.
VECO and Davao Light continue to upgrade their distribution
systems to cope with the growing power requirements of their
franchise area.
Hedcor, Inc. is in the process of building two hydropower plants in
Davao province with a combined total capacity of 76 MW. These plants
will supply power to Davao Light starting in 2009 and in 2010.
We are also participating in a joint venture for a 246-MW coal plant
project in Cebu, which we expect to be operational by the first quarter
of 2010. The plant will address the looming power shortage in Cebu and
supply part of the needs of VECO.
Distribution
Our distribution business recorded strong sales growth in 2007 with the
increased economic activity in all our utilities’ franchise areas. Growth
was strong in all sectors - residential, commercial and industrial - that is
in sharp contrast to the previous year’s low growth.
Jon Ramon Aboitiz
VECO experienced particularly high growth in 2007 due to the rapid
growth in tourism, call centers, hotels and residential subdivisions
in Cebu City.
Operating margins and service delivery improved in all our
distribution utilities. Systems losses have improved and are well
within the 9.5% mandated cap set by law, with the exception of
Cotabato Light.
Expanding its services, SEZ signed a Memorandum of Agreement
to provide electric power to Hanjin Heavy Industries Corporation,
a large Korean shipbuilding company located at the Redondo
Peninsula in Subic. The energization of the Redondo Peninsula will
attract more investors to the area.
BEZ also expects solid growth as the Tsuneishi shipyard expands its
shipbuilding operations to construct ships up to 200,000 DWT.
BANKING
Based on the new service requirements of these three customer types,
we can expect this solid growth to continue.
In June, we acquired the Mactan EnerZone Corporation (MEZ) and
Balamban EnerZone Corporation (BEZ). These two distribution utilities
serve the needs of MEPZ II, a PEZA zone in Mactan, Cebu and the
250-hectare Balamban Economic Zone, also in Cebu, which has two
UnionBank
AEV’s banking group ended the year 2007 with solid financial
results. In May, UnionBank concluded its offering of 90 million
new shares to domestic and international investors raising over
5.1 billion of new capital. The offering was oversubscribed and
strengthened the bank’s capital base as well as increased the free
float of its shares.
PRESIDENT
& CHIEF EXECUTIVE OFFICER
Our distribution
business recorded
strong sales
growth in 2007
with the increased
economic activity
in all our utilities’
franchise areas.
UnionBank continued with the integration of iBank, which was
acquired in 2006, and this has resulted in cost savings and better
operational efficiencies. It pursued its branch rationalization
program and completed the IT systems integration of both banks.
The bank also sold 2 billlion worth of assets to a special purpose
asset vehicle (SPAV) and non-performing loans (NPL) ratio was
down to 3.6%. Net interest income grew by 16% and total loans by
12%.
In 2007, Aboitiz
Transport
celebrated its
100th year
anniversary. The
group moved
forward in its
transformation
to provide better
and diverse
solutions to
customers’
changing logistics
needs.
City Savings Bank
company, MCC Transport Philippines, Inc. (MCCP), is currently
operating a 600-TEU capacity freight service.
Faced with increasing fuel prices and fierce competition from the
airline business, ATS transformed its passage vessels into the lowest
cost carriers with price, safety, schedule and cleanliness as major
drivers of the business.
The ATS group maintained its focus on expanding its supply
chain management services. It also successfully expanded its
ship management and crewing businesses both domestically and
internationally.
It was a standout year for City Savings Bank (CSB) in 2007, with
total resources growing by 65% and deposits jumping by 61%.
Return on equity was 47.4%.
FOOD
CSB currently has 17 branches and extension offices in the Visayas
and Mindanao. The bank continues to experience strong growth in
its consumer lending activities for its identified market niche.
2007 was another solid year for Pilmico Foods Corporation
(Pilmico) despite the rising cost of wheat that reached record levels.
Sales in flour products continued to show growth. We focused on
market penetration in Luzon while maintaining our strong presence
in the VisMin area.
TRANSPORT
In 2007, Aboitiz Transport System Corp. (ATS) celebrated its 100th
year anniversary. The group moved forward in its transformation
to provide better and diverse solutions to customers’ changing
logistics needs.
ATS right-sized its fleet selling three SuperFerries as well as other
excess assets such as containers, chassis and land.
Excess passage capacity onboard ATS vessels were converted to
cargo and RoRo spaces to accommodate increasing volumes. 2GO’s
RoRo business grew by over 60% in both revenue and volume in
2007 compared to its 2006 performance.
Reduced cargo capacity due to ship sales was replaced with
modern, efficient, state-of-the-art container services through our
partnership with the AP Moller Maersk Group. The joint-venture
We showed solid growth numbers in both our feed and swine
business. Managing the high cost of ingredients was a challenge
throughout the year. Construction began midyear of the new feed
milling complex in Iligan to efficiently and cost effectively service
growing VisMin markets. We also have begun constructing breeder
farms in Tarlac.
OUTLOOK 2008
We look forward to 2008 as another challenging and exciting year
of sustained growth and expansion.
Power
AP will pursue expansion through acquisitions participating in the
government’s power assets privatization program and in greenfield
projects. We foresee that in the near future our largest growth will
come from power generation.
We expect the turnover of the 175-MW Ambuklao and Binga hydro
complex in mid-year 2008. We will immediately begin operating
and rehabilitating these facilities to improve its capabilities and
efficiencies.
We intend to finalize with our partners Taiwan Cogeneration
International Corporation the plans for our 300-MW coal project
in Subic. We are also studying the further expansion of our 232MW STEAG State Power facility in Mindanao as the power supply
situation tightens in this grid.
In distribution, we again expect a strong year of energy sales as
the economy expands. Our utilities continue to focus on improving
service delivery and operational excellence.
The Energy Regulatory Commission is moving towards a
Performance-based ratemaking approach (PBR) with Cotabato Light
currently going through the rate reset procedure to prepare for its
entry into a four-year regulatory period under PBR by April 2009.
The reset procedure for Davao Light and VECO will start at the end
of 2008, for new rates to take effect by July 2010.
We are preparing ahead to maximize the potential benefits over the
long term for our distribution companies, whose efficiency should
be rewarded under this regulatory approach. It also provides an
opportunity for immediate gains upon entry as rates are re-based
from the 2000 test years in our current unbundled rates to updated
pricing parameters.
Banking
For UnionBank, 2008 will be an exciting year as it recently launched
and brought to life its new brand and brand essence. “Smart
banking” is the bank’s new brand positioning statement, promising
to serve customers in a more innovative and responsive way by
developing smarter solutions for their diverse needs.
The bank will pursue expanding its loan portfolio and fee-based
income. It will further maximize deployment of its branch network
strategically.
Aboitiz Power
will pursue
expansion through
acquisitions
participating in
the government’s
power assets
privatization
program and in
greenfield projects.
UnionBank will also search for means to increase revenue by
expanding resources and undertaking cost management initiatives.
It will also increasingly capitalize on its clear leadership in
technology-based banking solutions.
City Savings Bank will continue to focus on its expanding customer
base and service reach. The bank is moving ahead in its branch
expansion and will open its first branch in Luzon in 2008.
Food
City Savings Bank
is moving ahead
in its branch
expansion and will
open its first branch
in Luzon in 2008.
The food group faces another engaging year as we see the
continued sharp price increases of all commodities primarily caused
by higher worldwide demand and diversion to ethanol. We are,
however, optimistic of its sustainable growth and profitability.
We expect to complete the feed mill in Iligan by mid 2008 and the
commercial operation of our finisher swine and nucleus breeder
farms in Tarlac by 2009 and 2010, respectively.
Transport
2008 will continue to be a challenging year for ATS with increasing
fuel prices. It is, however, in a strong financial position to weather
the storm. With a sound balance sheet consisting of almost no debt
and with substantial cash reserves, it can afford to be flexible and
focus on its new business model of being a low-cost producer.
Plans for 2008 are focused mostly on its freight business.
Containerization services, through its joint venture with the AP
Moller Maersk Group, are expected to expand with the addition of a
new 600-TEU container ship to serve Southern Philippines.
ATS’ integrated logistics will continue to support value-added
services like supply chain management. Internationally, the
company will continue to grow its presence by continuing to offer
crewing and ship management services globally.
UNIONBANK IMAGE
Dividends Per Share
(In Pesos)
implementing carefully planned programs and projects to help
people help themselves. With the coordination and leadership of
the group’s corporate foundation, the Aboitiz Group Foundation,
Inc. (AGFI), member-companies implement projects in the
area of education through building schools, scholarships and
computerization programs. They also initiate projects under
enterprise development, and primary health and childcare.
0.61
In 2007, the AGFI allocated 49 million for projects conceptualized
by its member-companies. These companies also undertook various
projects worth 81 million that they themselves directly funded.
Together with personal and restricted donations of 23 million, the
Aboitiz Group’s total funding for CSR projects amounted to
153 million.
AEV companies are consistent and active members of the Philippine
Business for Social Progress (PBSP).
Brand
Cash dividends
Following its dividend policy of paying out approximately onethird of its consolidated net income from the preceding year, AEV
declared a 0.31 regular cash dividend on February 7, 2008 and also
a 0.30 special cash dividend that was declared on the same date.
These dividends were paid on March 3, 2008 to all stockholders
of record as of February 21, 2008. A total of 3.47 billion in cash
dividends were paid out, representing a 205% increase over last
year.
It has been three years since AEV embarked on a re-branding
journey. In 2005, it took the bold step of refreshing the Aboitiz
brand. Its objectives were clear, and it went on a campaign to make
everyone in the company understand that to be a strong brand,
delivery of excellent products and services are of utmost importance.
Our ultimate goal is to achieve brand excellence, as we are fully
aware that this has a significant impact on the financial value of
a company. To prepare ourselves for this, we have taken steps
to define, align and integrate our brand strategies with all our
subsidiaries in order to ensure a powerful and sustainable impact in
all our undertakings, and to have a common sense of purpose across
the group.
Corporate Social Responsibility
The Aboitiz Group of Companies remains steadfast in its
commitment to assist communities where they operate by
We have inspired everyone in the group to live out our brand promise
of “passion for better ways” by engaging them in meaningful brandbuilding activities.
0.20
0.12
05
0.15
06
07
08
AEV declared a
0.31 regular
cash dividend and
a 0.30 special
cash dividend on
February 7, 2008.
We have all taken to heart our being driven, driven to lead, driven
to excel, and driven to serve.
Focused strategy
As always, we confront our future with much optimism, fully
committed to help shape the industries we are involved in, to
ensure a better future for all our stakeholders.
We will remain committed to our proven strategy to focus on our
core investments, our people, our customers and our systems.
We will continue to be low-cost producers, maintain a balanced
investment portfolio, and aim to become world-class, thereby
enhancing shareholder value.
We thank you, our shareholders, for your continued support and
confidence over the years. We too are grateful to our customers,
business partners, and other stakeholders for their trust. And to
all AEV teams, we thank you for your untiring efforts and for your
valuable contributions to the company. Let us continue to work
together to pursue shaping tomorrow today.
Thank you.
We will remain
committed
to our proven
strategy to focus
on our core
investments,
our people, our
customers and
our systems.
Roberto E. Aboitiz
CHAIRMAN
10
Jon Ramon Aboitiz
PRESIDENT & CHIEF EXECUTIVE OFFICER
RESULTS OF
OPERATIONS
11
FROM YOUR CHIEF OPERATING OFFICER
enerzone images
Dear Shareholders,
Erramon I. Aboitiz
EXECUTIVE VICE PRESIDENT
& CHIEF OPERATING OFFICER
Aboitiz Power
ended the year
with investments
in generation
assets that have a
total capacity of
more than 1,000
MW. This resulted
to an increase in
its attributable
capacity by
200%, from 164
MW in 2006 to
490 MW in 2007.
We are very pleased to report that Aboitiz Equity Ventures, Inc.
(AEV) experienced very healthy growth in the year 2007.
Your company ended 2007 with record earnings of 5.8 billion, a
54% increase from 2006. This translates to an earnings per share
(EPS) of 1.02. Earnings before interest, taxes, depreciation and
amortization (EBITDA) increased by 41% reaching 9.3 billion.
Strong operating results of the power and banking groups drove
AEV’s robust performance, accounting for 61% and 23% of total
income contribution from our business groups, respectively. The
food group continued to be a stable source of earnings contributing
10%; while the transport group accounted for 6% of AEV’s income
in 2007.
With its participation in the government’s privatization program
and its acquisition of other projects in 2007, AP ended the year
with investments in generation assets that have a total capacity of
more than 1,000 MW. This resulted to an increase in its attributable
capacity by 200%, from 164 MW in 2006 to 490 MW in 2007.
Consequently, the power sales of the generation group grew by
176% year-on-year, from 369 GwH to 1,018 GwH.
We are also pleased to report that the debut year for the Magat
hydro plant and our involvement in the Wholesale Electricity Spot
Market (WESM) resulted in very encouraging results. Following our
strategy of concentrating the generation of power during peak hours
resulted in our attaining premium prices for our power resulting to an
average price of 5.28 per kilowatt-hour (kwh) for sales to the WESM
for the eight months of operations in 2007.
POWER
The power group continued to account for the lion’s share of AEV’s
earnings contributions despite the company’s ownership dilution
following the listing of Aboitiz Power Corporation (AP) in July 2007.
Favorable economic conditions led to strong electricity sales for AP’s
distribution group; while the increase in generating capacity of the
generation group led to a higher contribution from power revenues.
The power group contributed a total of 3.3 billion, up 47% from the
previous year.
Generation Business
In 2007, the earnings performance of the power generation group
showed significant improvement as it shored in 2 billion, up by 88%
from the previous year. This represented 61% of the power group’s
total income contribution in 2007 and for the first time accounting
for a larger share of the power groups earnings versus 48% in 2006.
12
In December 2006, SN Aboitiz Power-Magat, Inc. (SNAP-Magat),
the 50:50 joint venture between AP and Norway’s SN Power, won the
bid for the 360-MW Magat hydroelectric plant after submitting the
highest bid of US$530 million. The plant was turned over to SNAP on
April 26, 2007.
On April 20, 2007, AP acquired for 131 million a 50% stake in East
Asia Utilities Corporation (EAUC), the owner and operator of a
50-MW bunker-fired power plant in Mactan, Cebu. EAUC is the sole
provider of electricity at the Mactan Export Processing Zone I
(MEPZ I).
Also on April 20, 2007, AP acquired for 178 million from EAUC a
60% stake in Cebu Private Power Corporation (CPPC), the owner of
a 70-MW bunker-fired plant embedded in VECO’s franchise area.
RESULTS OF OPERATIONS
POWER
GENERATION
In 2007, the
earnings
performance
of the power
generation
group showed
significant
improvement
as it shored in
2 billion, up by
88% from the
previous year.
On August 10, 2007, AP won the competitive bid for a 34% stake in
STEAG State Power Inc. (SPI), the owner and operator of a 232-MW
coal-fired power plant located in the PHIVIDEC Industrial Estate in
Misamis Oriental, Northern Mindanao. AP’s bid was US$92 million
and the sale and purchase transaction was closed on November 15,
2007.
and the 100-MW Binga plant in Itogon, Benguet. The price offer
amounted to US$325 million. Upon turnover by the Power Sector
Assets and Liabilities Management Corporation (PSALM), the hydro
complex would further increase the group’s attributable capacity by
18% to 578 MW.
Greenfield projects
On November 28, 2007, SN Aboitiz Power-Benguet (SNAPBenguet), a joint venture between AP and Norway’s SN Power, won
the bid for the Ambuklao-Binga hydroelectric power complex. The
facility consists of the 75-MW Ambuklao plant in Bokod, Benguet
With demand for electricity accelerating with the country’s
economic growth, we see reserve margins in the power industry
tightening and a need for additional power supply.
13
To fill this need, AP has lined up several greenfield projects
that are expected to come on stream within the next three
years.
Hedcor began
construction work
on the 42-MW
Sibulan
run-of-river
hydro plant in
Davao estimated
to cost 5 billion.
It is currently
in the detailed
design stage for a
34-MW Tamugan
plant that is
expected to be
operational by
August 2010.
On February 17, 2007, AP entered into a Memorandum
of Agreement with Taiwan Cogeneration International
Corporation, a Taipei-based generation company, to
collaborate in the building and operation of a coal-fired
power plant in the Subic Bay Freeport Zone. We are
expecting to break ground for the construction of the
power plant by the third quarter of 2008 and expect
completion 36 months after.
On June 26, 2007, AP’s 100%-owned subsidiary Hedcor,
Inc. began construction work on the 42-MW Sibulan
hydropower plant in Davao. This is a run-of-river facility
estimated to cost 5 billion.
Hedcor is also currently in the detailed design stage for
another 34-MW run-of-river hydro plant that is expected
to start construction in August 2008 and be operational
by August 2010. Both plants will supply Davao Light with
approximately 400 million kWh of energy annually.
On December 19, 2007, AP’s 60%-owned subsidiary,
Abovant Holdings, Inc., entered into a joint venture
agreement with the Global Business Power Corporation,
a member of the Metrobank Group of Companies, and
Formosa Plastic of Taiwan for the construction and
operation of a 246-MW coal-fired power plant in Toledo,
Cebu. The consortium’s total investment in this project is
expected to reach US$450 million. The plant is targeted
to be completed by early 2010 and will provide part of its
power output to VECO and BEZ. AP’s beneficial ownership
of the project is 26%.
14
When the above projects are completed, we expect
AP’s attributable capacity to increase further by
another 50% to 868 MW.
Distribution Business
Income generated by the power distribution group
grew by 11.3%, from 1.2 billion to 1.3 billion,
accounting for 39% of the power group’s total income
contribution to AEV.
Riding on strong economic growth in 2007, the
distribution business recorded strong kilowatt hour
(kwh) sales growth in its franchise areas. On an
organic basis, the group’s electricity sales improved
POWER
DISTRIBUTION
MEZ, the owner and operator of the power distribution
system at the Mactan Export Processing Zone II in Mactan,
Cebu, delivers power to semiconductor firms, electronics
manufacturers and other exporters operating within the
zone. BEZ owns and operates the power distribution system
at the West Cebu Industrial Park (WCIP), a special economic
zone for light and heavy industry. It is home to shipbuilding
and ship repair facilities, steel fabrication yards and
supporting suppliers such as industrial gas plants and other
subcontractors.
Also through a share swap, AP acquired an additional 25%
stake in Subic EnerZone Corporation (SEZ) from AEV, San
Fernando Electric, Okeelanta and Pasudeco for 115 million.
This increased its ownership in the company to 80%. On
December 17, 2007, AP acquired the remaining 20% stake in
the company for 92 million in cash from Team Philippines
Industrial Power II Corporation, thereby bringing its
ownership in SEZ to 100%.
by 7%, from 2,507 gigawatt hours (GwH) to 2,673 GwH. Growth
further improved to 11% from the sales contribution of newly
acquired Mactan EnerZone Corporation and Balamban EnerZone
Corporation, as well as the increased ownership in Subic
EnerZone Corporation. Higher group wide margins per kwh
increased by 6% to 1.32 per kwh. This was a result of improved
efficiencies, reduced system losses and controlled costs.
As disclosed during its Initial Public Offering, AP acquired
stakes in three utilities via a share swap on June 8, 2007. The
company acquired 100% of Mactan EnerZone Corporation
(MEZ) and 60% of Balamban EnerZone Corporation (BEZ) from
AboitizLand, Inc. for 610 million and 267 million, respectively.
On March 7, 2008, AP acquired the 40% balance of BEZ from
Tsuneishi Holdings (Cebu), Inc. for approximately 178 million.
As of year-end 2007, the group provided electricity to
637,000 customers across the country, 3% more than in
2006. With the increased economic activity in the group’s
franchise areas, peak demand grew by 15%, from 678
megawatts (MW) in 2006 to 780 MW in 2007.
Operating efficiencies improved across the board. Systems
losses of AP’s distribution companies remained well within
the 9.5% mandated cap set by law, except for Cotabato
Light, which is experiencing pilferage problems. Efforts are
being exerted to bring the losses down to the mandated cap.
15
As of yearend 2007, the
group provided
electricity
to 637,000
customers across
the country. Peak
demand grew by
15%, from
678 MW in 2006
to 780 MW
in 2007.
AEV’s banking
group ended
the year 2007
with solid
financial results,
contributing
1.24 billion, 11%
higher than
in 2006.
Despite soft conditions prevailing in the financial
markets, AEV’s banking group ended the year 2007
with solid financial results. The group contributed 1.24
billion, 11 % higher than in 2006, and accounts for 23%
of AEV’s total income.
UnionBank of the Philippines (UnionBank) contributed
1.18 billion in 2007, 10% higher than last year’s
contribution, notwithstanding lower interest rates
prevailing in the market squeezing interest spreads.
Net revenues surged by 17% to 8.7 billion driven
primarily by the 16% growth in net interest income,
as average earning assets increased by 31% with the
increase in total loans (net of bills purchased) to 40.3
billion and the reduction of non-performing loans to
4.2 billion. Non-interest income jumped 18% with the
16% growth in service charges, fees and commissions
and higher gains on asset foreclosures and sale of
selected non-performing loans in March 2007.
UnionBank’s return on average equity of 12.2% and
return on average assets of 1.6% in 2007 compared
favorably with the industry average of 11.6% and 1.4%,
respectively. Non-performing loans (NPL) ratio declined
to 3.6% in 2007 from 4.9% in 2006.
Total assets expanded to 188 billion in 2007 from
183 billion in 2006, making UnionBank the sixth
largest private domestic universal bank in the country.
Deposit growth slowed down to 107 billion at the end
of 2007 as the peso appreciated and trust entities’ were
able to access BSP’s special deposit account. Capital
base increased 37% to 27 billion with the Bank’s
follow-on equity offering in May 2007.
16
BANKING
offering superior, relevant and technology-advanced
products and delightful services. On March 28, 2008,
the bank launched its new brand as it positions itself
to challenge conventions for smarter solution for its
customers.
change photo csb
UnionBank received awards for its achievements
in 2007, including a recognition from Visa as the
bank with the “highest retail transaction growth in
2006” for Visa Debit Cards. In February 2008, the
bank received the “Financial Insights Innovation
Award” from Financial Insights for its Business-toGovernment (B2G) Payments.
City Savings Bank’s (CSB) strong performance
continued in 2007 contributing 63 million to AEV’s
income in 2007, up by 32%. The bank recorded a 44%
year-on-year growth in loans totaling 2.5 billion,
while total deposits grew by 61% hitting 3.2 billion.
City Savings Bank promotes
the value of savings to
young children.
On July 23, 2007, the Bank completed its full system
integration allowing UnionBank and iBank customers
to access a broader range of products and services,
a total network of 166 branches and 187 ATMs, more
distribution channels, and more technology-based
solutions. The bank also completed its branch
rationalization program in 2007 and will expand its
branch network coverage in 2008 as it opens more
branches in the coming months.
City Savings Bank
recorded a 44%
year-on-year
growth in loans
totaling 2.5 billion,
while total deposits
grew by 61%
hitting 3.2 billion.
At year-end, the bank’s total resources grew by 65%
to 4 billion. Non-performing loans ratio remained flat
at 2.45%, well below industry standards. CSB’s return
on equity was 47% while return on assets was at 6%.
CSB continued to experience strong growth in its
lending activities for public school teachers, its
identified market niche. The bank currently has 17
branches and extension offices in the Visayas and
Mindanao and has over 70,000 depositors and 60,000
borrowers. One new branch was opened in 2007 and 9
new branches and extension offices are being planned,
with target completion in 2008.
The year 2007 saw UnionBank embarking on a branding
exercise in an effort to bring it closer to its customers by
17
The Aboitiz Transport System Corporation
(ATS) led the strong performance by the
transport group in 2007. The group ended the
year with a net income contribution of
318 million, a 124% increase over its 2006
contribution. Improvement of its profit
performance was primarily due to ATS’ gains
from the sale of assets that resulted in lower
financing costs, and the reconfiguration to
higher freight capacity that led to higher asset
utilization and earnings.
The company continued to rationalize its assets
to improve fleet productivity and enhance
earnings performance. ATS purchased one
kumano vessel to add to the Cebu Ferries fleet
and three fast crafts to add to the SuperCat fleet.
The company sold three ships, SuperFerries 15,
16 and 17, which generated 2.4 billion. This was
used to pay down 1.8 billion of debt. It also
converted three vessels, giving up some spare
passenger capacity to generate an additional 191
TEUs of freight capacity.
The direction
of ATS is to
recreate the
freight business
model that
would focus on
increasing freight
capacity and RoRo
movement.
In 2007, ATS declared a cash dividend of
0.30 per share for all common and preferred
shareholders, paying out a total of 735 million.
Over the past five years, the company has
returned 3 billion to its shareholders.
In a strategic move to lower its cost structure and
make up for lost freight capacity, ATS entered
into a joint venture with the A.P. Moller-Maersk
Group to form MCC Transport Philippines Inc.
18
It currently operates a 600-TEU container ship that offers
regular weekly sailings, servicing the ports of Manila, Cebu,
Cagayan de Oro and Bacolod.
In 2007, the transport group began operating with a
new business model that would enable them to be more
competitive, flexible and profitable. The direction is to
re-create the freight business model that would focus on
increasing freight capacity and RoRo movement.
TRANSPORT
as a distributor and warehouse provider for fast-moving
consumer goods leveraging on the synergies brought on by
an integrated transport group.
The company acquired Reefer Van Specialist, Inc. and
Refrigerated Transport Services, Inc. marking its entry in
the cold chain service for the movement of perishable
commodities.
Aside from its infrastructure, 2GO’s biggest competitive
advantage is having total control of its network. ATS
believes much of its future will be focused on growing its
supply chain business.
ATS’ ship management services, through its long-time
partnership with the Jebsens Group of Norway, achieved
a milestone after securing full contracts of third party
international vessels for the first time.
In 2007, Aboitiz Jebsens (Abojeb) took over the technical
management of container and dry cargo vessels from its
Japanese owners. By year-end, Abojeb’s managed fleet
was composed of passenger, Ro-Ro, container and dry
cargo vessels.
2GO’s RoRo service is a simple, self-driven cargo system that is
given priority loading and unloading to ensure faster delivery leadtime. It also allows better control over the movement of goods. The
RoRo service posted 859 million in revenues in 2007, up by 68%.
This represents 25% of total freight revenue for the year.
In crewing operations, Jebsens Maritime continued to
expand its market share by acquiring new principals. The
company currently has 46 principals and 312 ships under its
crew management. As of year-end 2007, the company had
4,862 Filipino crew onboard and 7,293 in its pool.
ATS also launched its 2GO Supply Chain Management service to
reduce overall cost by streamlining processes and eliminating the
need for middlemen. It offers integrated supply chain solutions
19
ATS launched its
2GO Supply Chain
Management
service, which offers
integrated supply
chain solutions as
a distributor and
warehouse provider
for fast-moving
consumer goods.
The food group has
been a consistent
profit and dividend
contributor with
favorable prospects
on the back of
national economic
and population
growth.
The food group has been a consistent profit and dividend
contributor with favorable prospects on the back of national
economic and population growth.
The profit contribution of Pilmico Foods Corporation
(Pilmico) to AEV’s income grew by 4% to 530 million,
despite an increase in inputs costs. Higher selling prices
for flour and its efficient milling operations afforded the
company a 15% year-on-year expansion in operating income.
The company’s feeds business and swine operations recorded
a 19% year-on-year growth in combined revenues, from
2.8 billion to 3.3 billion.
In June 2007, Pilmico began the construction of a new
feedmill at its Iligan Milling Complex. Utilizing the latest in
Dutch manufacturing technology, this new state-of-the-art
feedmill will be operated by subsidiary Fil-Am Foods, Inc. and
will serve the animal nutrition needs of the Visayas-Mindanao
market. The feedmill is scheduled to be operational in 2008.
The construction of additional grain silos is also planned for
this year. This will give Pilmico the largest flourmill storage
capacity in the Philippines.
The construction of additional grain silos will give Pilmico the largest flourmill storage
capacity in the Philippines.
20
FOOD
The expansions of Fil-Am Foods’ swine finishing and
breeding capacities are ongoing and are expected to
become commercially operational by 2009 and 2010,
respectively.
We are very pleased with the overall performance of
our various investments and look with optimism at the
company’s future prospects and continued growth. We
believe the company and its businesses are well positioned
with both financial and managerial resources to capitalize on
opportunities available to us allowing us to shape tomorrow
today. We remain committed to always seek ways to
enhance shareholder value whenever and wherever possible.
We would like to thank the team members who make up
AEV for their contributions and unwavering commitment to
the group’s goals. To our shareholders, partners and other
stakeholders, thank you too for your continued trust and
confidence.
Erramon I. Aboitiz
EXECUTIVE VICE PRESIDENT &
Chief Operating Officer
21
We are very
pleased with
the overall
performance
of our various
investments and
look with optimism
at your company’s
prospects.
FROM YOUR CHIEF FINANCIAL OFFICER
Dear Shareholders,
Stephen G. Paradies
SENIOR VICE PRESIDENT
CHIEF FINANCIAL OFFICER
With the favorable
conditions in both
the domestic
and foreign
equity markets,
particularly in the
first semester of
the year, AEV
tapped the markets
for additional
capital to fund its
growth.
The year 2007 was an eventful one for Aboitiz Equity Ventures,
Inc. (AEV). With the favorable conditions in both the domestic
and foreign equity markets, particularly in the first semester of
the year, AEV tapped the markets for additional capital to fund its
growth.
In January, the parent company raised approximately 6 billion,
selling its entire treasury shareholdings primarily to foreign
institutional investors. The bulk of the proceeds were used to
increase the capitalization of its wholly owned subsidiary Aboitiz
Power Corp. (AP). This was in preparation for AP’s acquisition of the
360-megawatt (MW) Magat hydroelectric complex, together with
joint venture partner SN Power of Norway.
In May, UnionBank of the Philippines (UnionBank), of which
AEV is the largest stockholder, went to the equity markets and
successfully launched a follow-on offering that raised over
5.1 billion. UnionBank had acquired the International Exchange
Bank (iBank) in 2006, and this, together with the implementation
of the Basel 2 standards, impacted on UnionBank’s capital
adequacy ratio (CAR). Although the bank’s CAR was still above
the minimum set by the Basel 2 convention, its shareholders
felt it prudent to raise capital to bring this ratio to a higher level
that would allow it more flexibility for growth. As a result of the
offering, AEV’s ownership in the bank was diluted from 42% to
36%.
In July, AEV listed AP in an initial public offering that raised over
10 billion in proceeds. This new capital has been partially deployed
as of year-end 2007, to finance AP’s purchase of a stake in STEAG
State Power Inc., and to partially fund the construction of its
wholly-owned Hedcor Sibulan hydro project.
22
Equity was also infused into a new coal-fired power plant project
in Cebu. Funds have been earmarked for the downpayment on the
Ambuklao-Binga hydroelectric complex in Luzon, which we expect
to be turned over in the middle of 2008, and for the purchase of the
remaining 40% stake in Balamban EnerZone and 20% stake in Subic
EnerZone. After the offering, AEV’s ownership in AP was diluted
from 100% to 73%.
The credit markets in 2007 were favorable as well, and the group
was able to tap these markets to help finance several acquisitions
and expansion projects. Our food group availed of 750 million in
fixed-rate term financing for its new feed mill and swine farms, with
tenors of up to 7 years, and at attractive interest rates.
Our associate company, SN Aboitiz Power-Magat, Inc., closed a
landmark project finance transaction worth US$380 million with a
consortium of foreign and local banks, including the International
Finance Corporation and Nordic Investment Bank together with
seven domestic banks. This was the first limited recourse project
finance granted to a merchant power plant in the Philippines, with
loan repayment over 15 years and 10 years for the dollar and peso
tranches, respectively. We expect to finance the Ambuklao-Binga
acquisition in 2008 under a similar arrangement.
In the latter part of the year, we initiated discussions with a group
of domestic banks for long-term project financing for our Hedcor
Sibulan hydropower project in Davao province amounting to
3.5 billion. Financial closing for Sibulan is expected in the first half
of 2008, with project completion scheduled for middle of 2009. We
are encouraged by the keen interest shown by domestic lenders in
our various power project initiatives.
Aboitiz Transport System Corp. (ATS) also had its share of activity
in 2007, with the sale of three of its newer generation Superferries.
We seized on the opportunity to sell these vessels at prices
significantly above their book values. It was also in line with our
direction to rightsize the fleet, as we see more of the passage market
moving toward air travel. The sale of these vessels generated an
extraordinary gain of 623 million, and allowed ATS to pay down
1.8 billion in debt. ATS ended the year with 570 million in interestbearing debt, while its cash reserves stood at a healthy 821 million.
AEV’s financial performance in 2007 was well above that of the
previous year, as all its four core businesses posted better operating
results. Revenues grew by 17% to 31 billion, generating Earnings
before Interest Taxes Depreciation and Amortization (EBITDA) of
9.3 billion, a 41% improvement over 2006. Likewise, Net Income
Attributable to Common Shareholders increased by 54% to 5.8
billion. This translated to earnings per common share of 1.02,
compared to 0.76 in 2006. The company posted a Return on Equity
of 20% for the year.
into equity, there were also the treasury share sale at the parent
company level that raised 6 billion, as well as a Gain on Dilution
of 5 billion from AP’s public offering and the UnionBank followon offering. Both these items added to the value of Stockholders’
Equity.
On a consolidated basis, Cash and Cash Equivalents increased from
8 billion at year-end 2006 to 18.6 billion at year-end 2007. Your
company registered a current ratio of 2.5x and a debt-to-equity
ratio of 0.39x at year-end 2007, compared to 2.1x and 0.68x,
respectively, at the end of 2006.
Ratios
3.00
2.50
2.00
1.50
1.00
0.50
(0.50)
Net Income
(in millions)
1,132
2000
2000
2002
2003
2,452
2004
2005
2006
2003
2004
Debt-to-Equity
2005
2006
2007
Net Debt-to-Equity
In summary, your company has taken various steps to position
its businesses for further growth in 2008 and onwards. With the
total commitment of the Aboitiz team, your board of directors and
management are optimistic about AEV’s future.
3,754
1,973
2002
5,797
3,159
2,155
2001
Current Ratio
CAGR 24.15%
(from 2001-2007)
1,582
2000
2007
Your company’s balance sheet strengthened considerably, with total
assets increasing by 60% to 65.5 billion, while Equity Attributable
to Equity Holders of the Parent grew by 65% to 38.1 billion. Aside
from the significant Net Income earned during the year that went
Stephen G. Paradies
SENIOR VICE PRESIDENT /
23
Your company
has taken various
steps to position
its businesses for
further growth
in 2008 and
onwards.
FROM YOUR CHIEF COMPLIANCE OFFICER
M. Jasmine S. Oporto
FIRST VICE PRESIDENT - LEGAL
CORPORATE SECRETARY
CHIEF COMPLIANCE OFFICER
Dear Shareholders,
Aboitiz Equity Ventures, Inc. (AEV) believes that corporate
governance is a necessary component of what constitutes
sound strategic business management. Thus, it is fully
committed to upholding a governance regime that ensures that
the Aboitiz time-honored values of fairness, integrity, trust and
social responsibility permeate every level of the organization,
from the Board of Directors down to the employees.
AEV is fully
committed to
upholding a
governance regime
that ensures that
the Aboitiz
time-honored
values of fairness,
integrity, trust
and social
responsibility
permeate every
level of the
organization.
This section describes the governance structure of AEV as
it continuously strives to achieve its mission of maximizing
shareholder value.
In the Board are seven directors carefully chosen for their ability
to bring about practical but strategic and progressive changes to
AEV through a dynamic mix of their business, legal and finance
competencies as well as for their ability to render independent
judgment, particularly in the formulation of corporate policies.
All the directors have attended corporate governance seminars.
BOARD OF DIRECTORS
Composition
The Board of Directors is responsible for ensuring that AEV’s
corporate strategies are always aligned with the creation and
maximization of shareholder value. Towards this end, the
Board provides strategic guidance to the whole organization,
with particular focus on developing AEV’s core competencies,
people, financial strength and systems. It also monitors and
evaluates management performance; identifies, assesses
and manages risks inherent to AEV’s businesses; and ensures
compliance with existing laws and regulations.
The Board of Directors is chaired by Roberto E. Aboitiz. The other
directors are Jon Ramon Aboitiz, President and Chief Executive
Officer; Erramon I. Aboitiz, Executive Vice President and Chief
Operating Officer; Enrique M. Aboitiz Jr., Justo A. Ortiz, and
Independent Directors Roberto R. Romulo and Justice Jose C. Vitug
(ret.).
As the corporate body primarily responsible for setting the
tone of governance in the whole organization, the Board
regularly reviews AEV’s governance policies to ensure that such
policies remain relevant and appropriate to AEV’s governance
conditions. In 2007, the Board approved the amendment of
24
AEV’s Manual on Corporate Governance to include information
security management as an important component of corporate
governance.
Except for the independent directors, all the aforementioned
directors have been with AEV since it went public in 1994. The
directors have extensive experience in and intimate knowledge
of the different industries that AEV is engaged in. Their collective
experience and expertise make them very qualified to steer AEV
through the many growth opportunities and risks brought about by
the ongoing deregulation and privatization of the Philippine electric
power industry and consolidation of the banking and transport
industries.
CORPORATE
GOVERNANCE
The independent directors represent 20% of the total number of
directors in compliance with the requirements of the Securities
Regulation Code for public companies. As independent directors,
they are independent of management and free of any business or
other relationship with AEV that could materially interfere with their
exercise of unfettered judgment as members of the Board.
Each member of the Board holds office for one year until his
successor is elected at the next annual stockholders’ meeting.
Board Performance
To emphasize the oversight function of the Board over
management, the respective roles and responsibilities of the Board
and of management are clearly delineated. In particular, the role
of the Chairman is separated from that of the President and Chief
Executive Officer. This separation of responsibilities serves to
underscore the accountability of management to the Board and
ultimately to AEV’s shareholders that the Board represents.
Directors
To emphasize
the oversight
function of
the Board over
management,
the role of the
Chairman is
separate from
that of the
President and
Chief Executive
Officer.
A total of seven regular and special meetings were held in 2007.
Among the significant transactions approved by the Board in 2007
were the sale of AEV’s treasury shares, the reorganization and
consolidation of AEV’s power assets into its subsidiary Aboitiz
Power Corporation (AP) and the initial public offering of the
common shares of AP in the Philippine Stock Exchange (PSE).
Regular and Special Board Meetings for 2007
Jan. 11
Jan. 16
Feb. 8
Apr. 12
May 21
Aug. 29
Nov. 13
Roberto E. Aboitiz
P
P
P
P
P
A
P
Jon Ramon Aboitiz
P
P
P
P
P
P
P
Enrique M. Aboitiz, Jr.
P
P
P
P
P
P
A
Erramon I. Aboitiz
P
P
P
P
P
P
P
Justo A. Ortiz
P
P
P
P
A
P
P
Roberto R. Romulo
(Independent Director)
A
P
P
P
P
Jose C. Vitug
(Independent Director)
P
P
P
P
P
P
P
Total No. of Directors Present
6
7
7
7
6
5
5
A
A
Legend:
P- Present
A- Absent
25
Board Committees
To ensure that
the Board is
independently
and fully informed
of the strategic
issues and major
risks facing AEV,
four committees
- Nomination,
Compensation and
Remuneration,
Audit and Investor
Relations - support
the Board to ensure
good governance.
To ensure that the Board is independently and fully informed
of the strategic issues and major risks facing AEV, four
committees - Nomination, Compensation and Remuneration,
Audit and Investor Relations - support the Board to ensure good
governance.
The Nomination Committee held two meetings in 2007: the first
one was to approve the nomination of Roberto R. Romulo and
Justice Jose C. Vitug as Independent Directors, and the second
meeting was to approve the nomination of Jon Ramon Aboitiz,
Roberto E. Aboitiz, Enrique M. Aboitiz Jr., Erramon I. Aboitiz and
Justo A. Ortiz.
Compensation and Remuneration Committee
Nominations Committee.
The Nomination Committee pre-screens and shortlists all
nominees for Board membership in accordance with the
provisions of AEV’s Manual on Corporate Governance and
Bylaws as well as the statutory requirements under the
Corporation Code of the Philippines and the Securities
Regulations Code. In consultation with AEV’s Executive
Committee, the Nomination Committee is also tasked to redefine the role, duties and responsibilities of the Chief Executive
Officer, primarily by integrating the dynamic requirements of
the business as a going concern, and the future expansionary
prospects within the tenets of good corporate governance.
The Nomination Committee is composed of at least three voting
members, one of whom is an independent director, and one
non-voting member in the person of the Senior Vice President
for Human Resources. To date, the voting members of the
Nomination Committee are Jon Ramon Aboitiz as Chairman,
Erramon I. Aboitiz and Independent Director Roberto R. Romulo.
26
The Compensation and Remuneration Committee reinforces
AEV’s pay-for-performance philosophy. It is tasked to establish
a formal and transparent policy on directors and executive
remuneration to ensure that compensation is consistent with
AEV’s culture, strategy and control environment and in a level
sufficient to attract and retain directors and officers who
are needed to run AEV successfully. It is also responsible for
reviewing existing personnel policies on conflicts of interest,
salaries and benefits, promotion and career advancement
directives.
The Committee has at least three members, one of whom is
an Independent Director. Its current members are Jon Ramon
Aboitiz as Chairman, Roberto E. Aboitiz and Independent
Director Justice Jose C. Vitug.
The Committee held three meetings during which it reviewed
and approved the enhancements to the benefits packages of
AEV’s employees, the 2006 Human Resources (HR) year-end
report, the 2007 HR agenda, the salary adjustment rates and
salary rates for entry-level positions for 2007 and the winners of
the 2007 Passion for Better Ways Team Awards.
CORPORATE
It also reviewed the nominees for the 2007 Don Ramon Aboitiz
Awards of Excellence and agreed that none of the nominees
qualified for the award. The results of the 360° survey as well
as the Aboitiz Talent Management Program (ATMP) Dashboards
for all identified key players in AEV’s middle management were
also presented and discussed. The Committee also approved a
new formula for computing retirement transfers for employee
movements within the AEV group.
Audit Committee
One of the key roles of the Audit Committee is to advise and assist
the Board in safeguarding the integrity of financial reporting in
AEV. This responsibility embraces adopting, maintaining and
applying appropriate accounting and reporting processes and
procedures. It also involves ensuring that financial reports are
compliant with internal processes and procedures as well as with
pertinent accounting standards and regulatory requirements.
The Committee has oversight over the Corporate Audit Team,
which performs the internal audit function within AEV. It likewise
performs direct interface functions with the internal and external
auditors, facilitates the independence of the external audit process
and addresses issues arising from this process.
The Audit Committee also performs oversight financial
management functions and crisis management.
GOVERNANCE
The Audit Committee held two meetings in 2007. Among the
items discussed were the results of the audit performed by
Sycip, Gorres, Velayo & Company (SGV) on the 2006 financial
statements of AEV, the audit and accounting issues and the
resolutions of each issue, endorsement to the Board of Directors
of the reappointment of SGV as the external auditor for taxable
year 2007, the 2007 audit plan
and scope, including outstanding
accounting and auditing issues,
and the audit fees of SGV. The
Committee also reviewed the
internal audit activities of AEV as
well as its amended internal audit
charter.
Investor Relations Committee
The Investor Relations
Committee ensures that
shareholders and investors
receive timely, high quality,
relevant, balanced and
understandable information
about AEV. It is also responsible
for ensuring that shareholders and investors have easy and
direct access to officially designated spokespersons for
clarifying information, issues and for conveying concerns.
The Audit Committee is chaired by Independent Director Roberto
R. Romulo, with Roberto E. Aboitiz and Justo A. Ortiz as members.
27
The Committee also performs oversight functions over the
Investor Relations and Corporate Communications teams of
AEV, regularly monitoring and evaluating the programs and
activities of the teams against expectations of disseminating
accurate and timely information to shareholders, investors
and other stakeholders.
Composed of Jon Ramon Aboitiz as Chairman, with Erramon
I. Aboitiz, CFO and Chief Information Officer Stephen G.
Paradies and AVP for Corporate Communications Caroline G.
Ballesteros as members, the Committee held three meetings
in 2007. Matters discussed during the meetings were the
results of meetings and briefings with institutional investors
and financial analysts, updates on the current features in
the corporate website, stockholders concerns, preparations
for the AEV annual stockholders’ meeting and annual report
and results of the customer satisfaction survey on the daily
newswire service of the Corporate Communications Group.
AEV’s risk
management
framework provides
the manner and
approach by which
risks are defined,
managed, assessed
and monitored.
Director and Senior Executive Compensation
AEV rewards its individual directors and officers based
on ability to execute his duties and responsibilities. It is
the company’s philosophy to reward based on individual
performance. Performance is evaluated and compensation
is reviewed on an annual basis. AEV ensures that it pays its
directors and officers competitively by comparing rates with
other Philippine-based companies through a market salary
survey. Changes in Board compensation, if any, comes at the
28
suggestion of the Compensation and Remuneration Committee
but with full discussion and concurrence by the Board.
In 2007, all of AEV’s directors received a monthly allowance of
50,000 per month. In addition, each director received a
per diem for every Board or Committee meeting attended as
follows:
Type of Meeting
Board Meeting
Independent Directors and
Mr. Justo Ortiz
Other Directors
Committee Meeting
Per Diem
25,000
15,000
20,000
To date, AEV has not granted any stock option to its directors or
officers.
RISK MANAGEMENT
Risk Management Framework
AEV’s risk management framework provides the manner and
approach by which risks (including compliance risks) are defined,
managed, assessed and monitored. Risk management is a
continuous improvement process whereby everyone in the AEV
organization, from the Board of Directors to the employees,
is actively integrating and embedding risk management in all
business activities.
CORPORATE
The framework provides the infrastructure for risk management
and is comprised of AEV’s Board of Directors, the Audit Committee
and other Board committees, executive and divisional committees,
management and other relevant parties in the AEV organization.
Together, the different components of the risk management
framework set the risk culture in AEV and develop appropriate
policies, procedures and methodologies.
Policies and Procedures and Reporting Responsibilities
There are existing policies and procedures articulating AEV’s
position and expectations on identifying risks and the manner of
communicating these to the Board and staff. There are established
issue identification, escalation and reporting mechanisms across
AEV. Risks issues are reported independently to the Board, Executive
Committee, Audit Committee and other relevant Board committees
at designated periods.
AUDIT AND ACCOUNTABILITY
External Audit
An external auditor enables an environment of good corporate
governance as reflected in the financial records and reports of AEV.
An external auditor is selected and appointed by the shareholders
upon recommendation of the Audit Committee.
GOVERNANCE
As a policy, the Audit Committee pre–approves audit plans,
scope and frequency before an audit is conducted. Audit services
of external auditors for 2007 were pre–approved by the Audit
Committee. The Audit Committee also reviewed the extent and
nature of these services to ensure that the independence of the
external auditors is preserved.
The auditing firm of Sycip, Gorres, Velayo & Company (SGV) is AEV’s
external auditor. The current audit partner is Mr. Ladislao Z. Avila,
Jr. SGV is being nominated for re-election at the scheduled annual
meeting of shareholders.
The external audit and consultancy fees for the years 2007 and 2006
were as follows:
Audit Fees (Incurred by
Registrant)
Audit-Related Fees
Tax Fees
Consultancy Fees (Incurred
by Group)
Total
Year ended
December 31,
2007
336,000
Year ended
December 31,
2006
286,000
-
-
336,000
286,000
29
An external
auditor enables
an environment
of good corporate
governance as
reflected in the
financial records
and reports
of AEV.
Internal Audit
The Corporate
Audit Team has
full, free and
unrestricted access
to all operating and
financial records,
information,
systems and
applications,
physical properties,
activities and
personnel under
review.
It is the policy of AEV to maintain an internal audit function as
a primary resource of the Board of Directors, Audit Committee
and management in the effective discharge of their respective
duties and responsibilities of reviewing, evaluating, managing
and controlling AEV’s operations, including that of its
subsidiaries and affiliates.
Internal audit is an independent and objective assurance
and consulting function designed to add value and improve
AEV’s operations through a systematic, disciplined approach
in evaluating and improving the effectiveness of AEV’s
risk management, control and governance processes. It is
undertaken by the Corporate Audit Team, a staff organization
that functions in an advisory capacity. To maintain its
objectivity, it exercises no direct responsibility or authority on
operating activities or functions it reviews.
The Corporate Audit Team reports to the Audit Committee and
has direct access to the Chairman of the Board. The Board of
Directors and senior management support the Corporate Audit
Team to ensure that audits are performed without interference.
The Corporate Audit Team has full, free and unrestricted access
to all operating and financial records, information, systems and
applications, physical properties, activities and personnel under
review.
30
Its scope of work encompasses evaluating and improving the
adequacy and effectiveness of AEV’s risk management, control
and governance processes through risk profiling and evaluation
of risk exposures, evaluation of existing internal control structure,
participation in the planning, design and implementation of major
information systems as a consultant to ensure that systems
are properly tested, secured, documented and implemented,
and undertaking of special reviews as determined by the Audit
Committee.
The Corporate Audit Team adheres to established professional
standards and abides by the Institute of Internal Auditors’ Code of
Ethics.
CORPORATE
Compliance Officer
To safeguard adherence to corporate principles and best practices,
a Chief Compliance Officer is designated who reports directly to the
Chairman of the Board. Principal responsibilities include monitoring
compliance with the Manual on Corporate Governance, and
identifying, monitoring and controlling compliance risks. Presently,
the Corporate Secretary holds the position in concurrent capacity.
The Office of the Chief Compliance Officer monitors compliance
with all reportorial requirements of the Securities and Exchange
Commission and the Philippine Stock Exchange and reports to
management every two months the status of such compliance as
well as other material legal issues confronting AEV.
DISCLOSURE AND TRANSPARENCY
GOVERNANCE
As of December 31, 2007, Aboitiz & Company, Inc. owns 2.48 billion
common shares of AEV, representing 43% of the outstanding
capital stock of AEV. Other record holders holding more than 5%
of AEV’s outstanding capital stock are PCD Nominee Corporation
(Foreign) which holds a total of 860.49 million common shares, and
Ramon Aboitiz Foundation, Inc. which holds a total of 417.90 million
common shares, representing 15% and 7%, respectively of the total
outstanding capital stock of AEV.
Disclosures
AEV discloses to the public its financial and operating results every
quarter through its filings with the SEC and the PSE. It also discloses
its full year financial and operating results in SEC Form 17-A filed
with the SEC and the PSE. Its shareholders are furnished a report of
its full year financial and operating results through the Definitive
Information Statement sent out to the shareholders every year.
Ownership Structure
AEV discloses its ownership structure in the reports it files with
the Securities and Exchange Commission (SEC) and the Philippine
Stock Exchange (PSE). It submits to the PSE a list of its top 100
shareholders every quarter. It likewise submits periodically to the PSE
a public ownership report which details the ownership of controlling
shareholders, including the shareholdings of their subsidiaries and
affiliates, and of directors and management. It also discloses its top
20 shareholders, including the record and beneficial owners owning
more than 5% of AEV’s outstanding capital stock, as well as the
shareholdings of directors and officers in the Definitive Information
Statement sent out to shareholders annually.
In addition to the periodic reports submitted to the SEC and the PSE,
AEV immediately updates the investing public with any material fact
or event related to AEV and its business operations which may affect
investors’ decision in relation to the trading of AEV’s securities.
In 2007, unstructured disclosures filed with the SEC and the PSE
contained information related to the initial public offering of its
subsidiary Aboitiz Power Corporation, significant asset acquisitions
such as the STEAG and the Ambuklao-Binga power plants, the Magat
refinancing, joint venture projects and status of ongoing projects.
These unstructured disclosures are also uploaded to AEV’s website.
31
AEV updates
the investing
public with
any material
fact or event
related to AEV
and its business
operations
which may
affect investors’
decision in
relation to the
trading of AEV’s
securities.
An Investor
Relations Unit
was created to
ensure the effective
and transparent
communication
of relevant
information about
AEV to its investing
public, particularly
minority
stockholders.
Dealings in Securities
Shareholder and Investor Relations
In compliance with disclosure rules of the SEC and the PSE, the
members of the Board of Directors and management disclose
within five trading days any acquisition, disposal or change in their
beneficial shareholdings in AEV.
AEV continues to strive to work on improving its relationship with its
shareholders and investors. An Investor Relations Unit was created
to ensure the effective and transparent communication of relevant
information about AEV to its investing public, particularly minority
stakeholders. This is to foster better understanding of AEV and
its plans and strategies, which open communications redound to
enhancing shareholder value.
STAKEHOLDER RELATIONS
Shareholder Meeting and Voting Procedures
Annual and special meetings of shareholders are held in Cebu
City where the principal office of AEV is located. Annual meetings
of the shareholders are held every third Monday of May of each
year. In addition, a separate shareholders’ briefing is conducted in
Makati City for shareholders who are unable to attend the annual
shareholders’ meeting in Cebu City.
Notices and agenda of any shareholders’ meeting are sent to
shareholders of record at least 15 business days from the date of the
meeting.
Each common share of stock entitles the holder under whose name
it is registered to one vote in all matters that may be submitted
for the consideration of the shareholders during the meeting.
Shareholders may vote either in person or by proxy duly given in
writing and presented to the Corporate Secretary for inspection,
validation and record at least seven (7) days prior to the opening of
the meeting.
32
The Investor Relations Unit is responsible for addressing the various
information requirements of the investing public, particularly the
minority shareholders. Timely disclosures to the PSE and the SEC,
regular quarterly briefings, one-on-one meetings, conference calls,
roadshows and investor conferences, website updates, emails and
telephone calls are the means by which AEV, through its Investor
Relations Unit, conveyed its messages to the investing public.
In 2007, AEV held three briefings on its financial and operating
results. The first was on the full year 2006 and first quarter of 2007
results; the second was on the results for the first half of 2007; and
the third was on the results for the first nine months of 2007. Mostly
in attendance were institutional investors and sell side analysts.
Apart from venues like these, access to senior management was
provided via one-on-one meetings upon request.
AEV had a roadshow in January 2007, which was in relation to the
placement of its treasury shares. Senior management met with
financial analysts and fund managers, both local and international.
CORPORATE
AEV regularly updates the Investor Relations section of its
website. Filings with and disclosures to regulatory agencies, press
releases and presentations made during briefings are immediately
made available on this section. The regular release of the Online
Newsletter is also another way of updating the investing public of
the current developments in AEV.
GOVERNANCE
rewards, and continually measures its employees’ satisfaction and
morale level through annual surveys. A healthy work-life balance is
promoted throughout the organization. It is likewise committed to
providing a safe and healthy work environment for its employees.
AEV places a high regard for its employees’ professional and personal
growth, and finds opportunities to develop each team member. It
cultivates life-long learning through high impact, quality training
programs designed to support employee career development path
and personal growth. Exemplary performers are developed through
a talent management program, which is designed for the next
generation of corporate leaders.
AEV encourages an open-door policy, which allows employees to
talk and interact with top executives in the organization who serve
as leaders and mentors. This allows a free exchange of ideas and
experiences, promoting teamwork, collaboration, cooperation and
diversity within the organization.
CODE OF ETHICS AND BUSINESS CONDUCT
Employee Relations
In AEV, people are treated not just as employees but as business
partners as well.
AEV offers fair and competitive compensation commensurate
to employee qualification and performance on the job. It aims
to provide healthy balance between financial and non-financial
AEV’s Code of Ethics and Business Conduct sets forth the basic
principles that guide the day-to-day activities of its employees,
officers and directors. It is to be read together with other existing
policies and procedures of AEV.
Under the Code, everyone within the AEV organization is expected
to comply with the spirit and letter of applicable laws and
regulations to promote the avoidance not only of actual misconduct
but even the appearance of impropriety.
33
AEV encourages
an open-door
policy, which
allows employees
to talk and
interact with top
executives in the
organization who
serve as leaders
and mentors.
AEV seeks to outperform its
competition fairly and honestly
through superior performance
and every employee, officer and
director is expected to keep
the best interests of customers
paramount and to deal fairly
with suppliers, competitors
and the public. Moreover, every
employee, officer and director
is exhorted to act in the best
interest of AEV and avoid any
situation in which a conflict of
interest may arise.
All directors are
required to recuse
themselves
from any Board
discussion or
decision affecting
their personal,
business or
professional
interests.
Employees and officers are required to promptly report to the
Human Resources Department any potential relationship, action
or transaction that may give rise to a conflict of interest. Directors
are under obligation to disclose any actual or potential conflicts of
interest to the Chairman of the Board and the Compliance Officer.
All directors are also required to recuse themselves from any
Board discussion or decision affecting their personal, business or
professional interests.
The Code further prohibits the use of one’s position in AEV or of
corporate property or information for personal gain. 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. Conversely, everyone is also
expected to respect the property rights of other companies.
Insider trading is strictly prohibited under the Code and every
member of the AEV organization is obligated to prevent the misuse
of inside information.
34
The Code affirms AEV’s commitment to provide fair and truthful
disclosures to the public. In particular, AEV’s senior financial officers,
executive officers and directors are tasked to promote full, fair,
accurate, timely and understandable disclosure in AEV’s public
communications and in all disclosures filed with the SEC and other
regulators. Furthermore, it is considered the obligation of every
member of the AEV organization to report to the proper officer or
committee any materially inaccurate or misleading statement in a
public communication.
The Code further affirms AEV’s obligation to maintain accurate and
complete books and records. In particular, senior financial officers
are tasked to ensure that financial information included in AEV’s
books and records is correct and complete in all material respects.
The Code also promotes a safe and healthy working environment,
an environment that provides equal employment opportunities
and prohibits discriminatory practices and where all individuals are
treated with dignity and respect.
WEBSITE
Additional information on corporate governance principles and
practices of the AEV is available at www.aboitizequityventures.com
CORPORATE SECRETARY
Shaping Tomorrow
Today
FEATURES
35
ABOITIZ POWER CORPORATION
Powering an industry
Aboitiz Power
was incorporated
in 1998 and is the
fourth publicly
listed company in
the Aboitiz Group
after Aboitiz
Equity Ventures,
Aboitiz Transport
System and
UnionBank.
President Gloria Macapagal-Arroyo rings the bell at the Philippine Stock Exchange to signal the start of trading of AP stocks.
36
Proceeds amounted to over 10 billion which will
be used to further expand and develop the Aboitiz
power business.
The company’s strategy moving forward is to
continue to grow its distribution business organically
and through acquisitions, powering new frontiers in
the Philippine power industry.
“We will also continue to bid for plants being
privatized by the government through PSALM,
develop greenfield projects and grow our renewable
energy business. Being in both generation and
distribution allows us to build synergies between the
supply and demand needs of the power business,”
said AP Chairman Jon Ramon Aboitiz in his opening
remarks.
“We are confident that we will be able to deploy
the funds raised in our IPO wisely and profitably. We
believe Aboitiz Power is well positioned to succeed
as the Philippine power sector is deregulated and
subjected to more competitive forces,” he said.
July 16, 2007 marked a significant milestone for
the Aboitiz Group with the listing of Aboitiz Power
Corporation (AP) at the Philippine Stock Exchange
(PSE).
President Gloria Macapagal-Arroyo rang the
ceremonial bell to officially signal the start of trading
of AP shares at the stock exchange in a ceremony held
at PSE Ayala.
A total of 1,787,664,000 shares were issued and sold at
an initial public offering (IPO) price of 5.80 per share.
UBS Investment Bank was sole global coordinator
and bookrunner for the IPO. BDO Capital and
Investment Corporation and PCI Capital Corporation
were the domestic lead underwriters with ATR King
Eng Capital Partners, BPI Capital Corporation and
First Metro Investment Corporation as
domestic co-lead underwriters.
Aboitiz Power Corporation was incorporated in 1998
and is the fourth publicly listed company in the
Aboitiz Group after Aboitiz Equity Ventures, Aboitiz
Transport System and UnionBank.
37
We believe
Aboitiz Power
is well positioned
to succeed as
the Philippine
power sector is
deregulated and
subjected to
more competitive
forces.
UNIONBANK OF THE PHILIPPINES
Redefining ‘smart banking’
UnionBank knows that its customers expect and
deserve nothing less, so it continuously strives to seek
leadership in service, innovation and value for money.
It recently unveiled its new brand positioning: smart
banking, its action plan to challenge conventions for
smarter solutions for customers.
The bank is now identifiable with its new colors
of tangerine orange complemented by royal blue.
Tangerine orange reflects a bright warm attitude that
is not afraid to be different, to challenge convention.
Royal blue signifies stability and intelligence that are
vital to become innovators in behalf of its customers.
UnionBank has
unveiled its new
brand positioning:
smart banking,
its action plan
to challenge
conventions for
smarter solutions
for customers.
The year 2007 was largely spent on developing
and implementing initiatives that would bring the
brand to life. The pilot project in the area of brandaligned customer service quality was successfully
conducted, resulting in an enhanced quality of service
to customers. UnionBank has began the rollout of its
branding throughout the bank’s entire system.
38
In 2008, UnionBank’s new visual identity is
being applied on its signages, branch interiors,
corporate and product posters, brochures and
collaterals, office stationeries and employee
uniforms.
1
UnionBank continues to make improvements
in its processes that would result in faster
turnaround time, making banking more
convenient for customers. Its frontliners have
started to equip themselves with customer
relationship management competencies.
2
relevant
really
know our
customers!
expert
really know
what we’re
talking about!
These efforts will enable the bank to gain a
deeper understanding of its customers’ needs
and wants, thus giving them the opportunity
to nurture deeper connections and to respond
with relevant products and services.
3
challenging
don’t think
like a
traditional
bank!
As Chairman & CEO Justo A. Ortiz said, “We
have been known for our use of technology and
superior innovation. In fact, we have the slogan
‘high-tech, high-touch’. These are the O and
S in the bank’s FOCUS 2010. And it’s still the
same vision. But we now recognize the need to
put emphasis on the U, which is the UnionBank
customer brand experience.”
39
City Savings Bank
Branching out
When it was established over 42 years ago, City Savings
Bank (CSB) was envisioned to provide financial services
to people of moderate means. Today, it continues
with this vision with a dedicated focus to provide more
convenience and better service to its customers amid the
advancement of technologies and changing customer
expectations.
Branching is CSB’s key business strategy moving
forward. This entails establishing more branches and
service centers in provincial locations, redesigning its
branch look and enhance customer experience to make
them more convenient, attractive and pleasant.
The newly-renovated CSB Colon branch, one of the landmarks in Cebu CIty’s oldest street.
40
The bank currently has 17 branches and extension offices
in the Visayas and Mindanao, and will soon open its first
branch in Luzon.
In 2007, CSB Colon, one of the bank’s pioneer
branches, underwent a total overhaul and reopened
with a new look guided by branding guidelines. CSB’s
corporate colors of sunflower yellow, gray and red are
liberally used in the new offices. The Colon branch is
one of the landmarks in Cebu CIty’s oldest street.
While it will offer the option of ATM banking, CSB
believes that customers prefer to bank in person.
Through person-to-person visits, meaningful longterm relationships can be built.
Branching
is CSB’s key
business strategy
moving forward,
establishing more
branches and
service centers
in provincial
locations.
With its client base changing, business process
reengineering, technological initiatives, and marketing
focus continue to be the bank’s major ongoing
initiatives.
As its future undergoes significant changes, trusted
customer relationships will offer the biggest source of
competitive advantage. In addition to enhancing its
physical environment, nurturing the culture of superior
service is everyone’s job.
CSB offers a special savings
account for children, making
them learn the value of saving
at a young age.
While more and more banks are realizing that the
personal touch with the customer is of primary
importance, the passion to serve has been CSB’s main
preoccupation for the past four decades and continues
to be so.
41
PILMICO FOODS CORPORATION
Expanding capabilities
In 2007, the Food Group focused its energies on
implementing the growth plans formulated in the
previous year. The Iligan Milling Complex at Kiwalan
Cove has grown considerably larger and now covers 9.4
hectares of industrial space. It has added new facilities
and expanded its capabilities.
The Iligan Milling
Complex at Kiwalan
Cove has grown
considerably
larger. It now has
the largest grain
storage area of any
milling operation in
the country.
Eight stainless steel silos are currently being added
to Pilmico Foods’ existing silo farm, making its
42
Iligan facility the largest grain storage area of any
milling operation in the country. This storage
capacity allows the company to bring larger vessels
into its private deep-water port as well as take
advantage of opportunities in purchasing wheat from
different sources in a very volatile commodity price
environment. When completed, the new silos will add
27,000 metric tons of new capacity.
In June 2007, Pilmico began the
construction of a feed mill in its
Iligan plant that is targeted to be
operational by July 2008.
Pilmico’s flour blending facility has been installed and
will be operational by the second quarter of 2008. This
new facility creates savings from blending flours of
different grades to produce flour that is of a particular
quality and efficiently serve up small-batch runs of
specialty flours according to the specifications of
industrial customers.
In June 2007, Pilmico began the construction of a feed
mill in its Iligan plant that is targeted to be operational
by July 2008. The mill will produce high-quality animal
rations to serve the needs of animal raisers throughout
the Visayas and Mindanao regions, thereby lowering
operating freight and input costs.
Fil-Am Foods, Inc. (FFI) will provide the technical
expertise to run the new facility and market the feeds.
Registered with the Board of Investments (BOI), the
project will enjoy a six-year tax holiday on the income
derived from its operations. The feed mill is capable of
producing 108,000 metric tons per year.
pig photo
FFI is expanding its swine business, with a growerfinisher farm currently under construction in Tarlac.
When it begins operations in 2009, the farm will be
able to increase production by 4,800 heads. Also
under construction is a nucleus breeder farm that is
expected to increase piglet production by over 35,000
heads when it becomes operational in 2010. These
projects are also BOI-registered.
Fil-Am Foods
swine production
operation has
expanded its
capabilities and is
prepared for
the future.
43
Aboitiz Transport System CORPORATION
Transforming solutions
The year 2007
marked a
significant milestone
in the history of the
Aboitiz Group as
it commemorated
100 years in the
transport business.
The year 2007 marked a significant milestone in the
history of the Aboitiz Group as it commemorated 100
years in the transport business.
Since the purchase of its first vessel, the MV Picket,
in 1907, the Aboitiz transport business has built
a track record of being an innovator and always
seeking groundbreaking solutions. Aboitiz Transport
System Corporation (ATS) was the first in domestic
containerization, door-to-door service and the
SuperFerry model of passenger transport, among
others. These innovative activities have set the
standards of the local shipping industry.
44
Since the
purchase of its
first vessel, the
MV Picket in
1907, Aboitiz
Transport has
built a track
record of being
an innovator and
always seeking
groundbreaking
solutions.
Much like its beginnings, the company’s strong pioneering spirit
continues to live on with the development of its RoRo service in
support of the government’s Strong Republic Nautical Highway
program. ATS was the first to launch a time-defined and time-priced
cargo service known as 136. In 2007, supply chain management,
including the development of cold chain for the movement of
perishable commodities, was comprehensively offered to help
customers thrive in today’s globally competitive world.
The time-honored tradition of trust, honor, respect, and social
responsibility inherited from its founders and forefathers are
values and principles that propel ATS to strive for better ways as it
transforms beyond being a shipping company to a total transport
solutions enterprise.
Today, ATS offers passenger transport through its conventional
ferry and fast craft vessels under the brand names SuperFerry, Cebu
Ferries and SuperCat. Together with the Jebsen Group of Norway,
ATS provides sea-based and land-based manpower solutions as well
as ship management and ship chartering services. In addition, ATS
offers complete supply chain management services under the brand
name 2GO. Technologically driven and with an extensive network,
ATS believes it is more able to satisfy customers in the nascent
supply chain industry.
In 1907, MV Picket I, the first vessel that started the Aboitiz transport business.
As it moves to the next chapter of its corporate history, ATS is
focused on building a value-added service organization, capitalizing
on the synergies brought by an integrated transport group. It is
likewise steadfast in growing its presence internationally, profiting
from global opportunities with its manpower and ship management
solutions.
ATS looks forward to serving the young of today until they get to be
100 like it served the young of 100 years ago.
45
Aboitiz Group Foundation, Inc.
Sustaining public education
The Foundation
and its membercompanies further
strengthened
their partnership
with Department
of Education by
formally enrolling
15 million worth
of projects
under DepEd’s
Adopt-a-School
Program.
A handshake between AGFI Chairman Jon Ramon Aboitiz and DepEd Secretary Jesli Lapus seals the partnership for the Foundation’s support of the department’s Adopt-a-School Program.
46
CORPORATE
SOCIAL RESPONSIBILITY
The Foundation’s programs and projects focused on
education, enterprise development, and primary health and
childcare. Education continued to be the priority thrust,
with AGFI allocating 34 million or 47% of its budget for
education-related initiatives
The Foundation and its member-companies further
strengthened their partnership with the Department of
Education by formally enrolling 15 million worth of projects
under the department’s Adopt-a-School Program.
The Group’s scholarship program has now also gone full
cycle. The support for scholars continues even after their
college graduation as they are given the opportunity to work
for Aboitiz companies.
The commitment of the Aboitiz Group of companies for its
corporate social responsibility was never more evident than in
2007. The group allocated a total of 153 million for various social
development programs and projects for its host communities.
Of the total amount allocated, 72 million was for social initiatives
coursed through its corporate foundation, the Aboitiz Group
Foundation, Inc. (AGFI), while 81 million was for projects initiated
by the companies themselves. Projects were conceptualized and
implemented based on the specific needs of communities within
their areas of operations.
47
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AGFI’s
support
for
diam
nonummy
scholars
nibhextends
euismod
even
after
college
tincidunt ut laoreet
graduation, dolore.
when
they are given
the opportunity
to work for
Aboitiz companies.
Aboitiz Future Leaders business Summit
Shaping the next generation of leaders
The AFLBS aims to
instill in delegates
the appreciation
for both their
Filipino identity
and their role in
helping build the
Filipino nation.
Inspired by the success of the 1st Aboitiz Future
Leaders Business Summit (AFLBS) in 2006, the Aboitiz
Group once again rose to the challenge of gathering,
recognizing and inspiring top students in the Visayas
and Mindanao regions to become the next generation
of our country’s leaders.
48
Eighty-four students from 12 colleges and universities
taking up different courses participated in the 2nd
AFLBS, which was held at the Waterfront Cebu City
Hotel on August 10 and 11, 2007. Participating schools
in the Visayas were Cebu Institute of Technology, St.
Theresa’s College, University of Cebu, University of
San Jose-Recoletos, University of the Philippines, and
University of the Visayas. The Mindanao-based schools were Ateneo
de Cagayan-Xavier University, Liceo de Cagayan, Ateneo de Davao,
Mindanao State University and Notre Dame University.
of the delegates while keeping them in a fun-filled environment.
Winners of the Best Essay, Best Interview, and Best in Case Study
Presentation were also awarded.
A manifestation of the Aboitiz Group’s passion for better ways,
the two-day AFLBS is designed to prepare young students for the
challenges in the corporate world. More importantly, the summit
aims to instill in delegates the appreciation of both their Filipino
identity and their role in helping build the Filipino nation.
This annual event is a product of the concerted efforts of Aboitiz
Group team members, managers, top-level officers, and executives.
For the 2nd AFLBS, delegates of the first summit in 2006 signed up
as volunteers.
Through the Summit, the Aboitiz Group hopes to ignite among the
participants faith, hope and trust in their fellow Filipinos and their
country. It also aims to strengthen their conviction to strive for
excellence in any career they wish to pursue.
Delegates unanimously described the summit as a great learning
experience for it had inspired them to take on the challenge to prove
that the country’s future is in their good hands, the next generation
of leaders.
Centered on the theme, “Developing the Entrepreneurial Spirit
Among the Youth”, the 2nd AFLBS had Aboitiz Group executives
led by AEV President and CEO Jon Ramon Aboitiz discuss and share
experiences in business financing, branding, becoming a world-class
and a customer-centered company, and technology. More than
being a miniature graduate business course, the summit also tackled
integrity and leadership, service to the community, vision and
values, and building, earning, and maintaining trust and reputation.
One of the summit highlights was the dinner with the Aboitiz
executives, who exchanged ideas, experiences, and questions
with the young delegates. A group case study presentation, which
introduced a more realistic picture of the corporate world, was the
summit’s culminating activity.
Team activities conducted by Ramon Aboitiz Foundation, Inc. (RAFI)
facilitators tested the critical thinking, initiative and teamwork
49
The summit
strengthens
the delegates’
conviction to
strive for
excellence in
any career
they wish to
pursue.
ABOITIZ EQUITY VENTURES
LOCATION OF OPERATIONS
CORPORATE STRUCTURE
POWER SN Aboitiz Power-Magat, Inc.
Luzon Hydro Corporation
Subic EnerZone Corporation
SN Aboitiz Power-Benguet, Inc.
Hedcor, Inc.
Fil-Am Foods, Inc.
San Fernando Electric & Power Company, Inc.
LUZON
Aboitiz Transport System Corporation
UnionBank of the Philippines
MANILA
Balamban EnerZone Corporation
Aboitiz Equity Ventures, Inc.
Aboitiz Power Corporation
Visayan Electric Company, Inc.
Cebu Private Power Corporation
City Savings Bank
Supercat Fast Ferry Corporation
Aboitiz Energy Solutions, Inc.
VISAYAS
CEBU
Mactan EnerZone Corporation
East Asia Utilities Corporation
STEAG State Power Inc.
MINDANAO
DAVAO
Pilmico Foods Corporation
Cotabato Light & Power Company
Davao Light & Power Company, Inc.
Hedcor Tamugan, Inc.
Hedcor Sibulan, Inc.
Southern Philippines Power Corporation
Western Mindanao Power Corporation
Distribution Companies:
Davao Light & Power Company, Inc.
Visayan Electric Company, Inc.
Subic EnerZone Corporation
Cotabato Light & Power Company
Mactan EnerZone Corporation
Balamban EnerZone Corporation
San Fernando Electric Light &
Power Company, Inc.
Services:
Aboitiz Energy Solutions, Inc.
BANKING
UnionBank of the Philppines
City Savings Bank
TRANSPORT
Aboitiz Transport System Corporation
Aboitiz One, Inc. & Subsidiaries
Aboitiz Jebsen Bulk Transport Corporation
& Subsidiaries
Aboitiz Jebsen Manpower Solutions, Inc.
Jebsen Maritime, Inc.
JEMA BVI Ltd.
Supercat Fast Ferry Corporation
Zoom In Packages, Inc.
MCC Transport Philippines, Inc.
FOOD
Pilmico Foods Corporation
Fil-Am Foods, Inc.
PORTFOLIO INVESTMENTS
Cebu Praedia Dev. Corporation
AEV Aviation, inc.
50
%
Aboitiz Power Corporation
73
Generation Companies:
SN Aboitiz Power-Magat, Inc.
50
SN Aboitiz Power-Benguet, Inc. 50
Hedcor, Inc.
100
Hedcor Sibulan, Inc.
100
Hedcor Tamugan, Inc.
100
Luzon Hydro Corporation
50
Cebu Private Power Corporation
60
East Asia Utilities Corporation
50
STEAG State Power Inc.
34
Southern Philippines Power Corporation
20
Western Mindanao Power Corpration
20
100
55
100
100
100
60
44
100
36
34
77
100
62
62
62
50
100
100
33
100
100
100
100
Roberto E. Aboitiz
CHAIRMAN
Justo A. Ortiz
DIRECTOR
Jon Ramon M. Aboitiz
Enrique M. Aboitiz , Jr.
Roberto R. Romulo
Jose C. Vitug
DIRECTOR
INDEPENDENT DIRECTOR
AUDIT COMMITTEE CHAIRMAN
NOMINATION COMMITTEE MEMBER
DIRECTOR
BOARD OF
Directors
Erramon I. Aboitiz
DIRECTOR
INDEPENDENT DIRECTOR
COMPENSATION COMMITTEE MEMBER
51
Corporate Officers
Jon Ramon M. Aboitiz
PRESIDENT
& CHIEF EXECUTIVE OFFICER
Xavier J. Aboitiz
HUMAN RESOURCES
52
Erramon I. Aboitiz
Stephen G. Paradies
Juan Antonio E. Bernad
Mikel A. Aboitiz
Luis Miguel O. Aboitiz
Gabriel T. Mañalac
EXECUTIVE VICE PRESIDENT
& CHIEF OPERATING OFFICER
CHIEF INFORMATION OFFICER
CORPORATE INFORMATION OFFICER
FIRST VICE PRESIDENT
FIRST VICE PRESIDENT
TREASURY SERVICES
Corporate Officers
Melinda Rivera-Bathan
Caroline G. Ballesteros
Narcisa S. Lim
Delia Y. Maderazo
Carmela I. Naranjilla
Stella Olive Sucalit
Leah Geraldez
CORPORATE SECRETARY
ASSISTANT VICE PRESIDENT
iCSD
VICE PRESIDENT
COMPTROLLER
INVESTOR RELATIONS
BRANDING & CORPORATE COMMUNICATIONS
CORPORATE FINANCE
HUMAN RESOURCES
ASSISTANT CORPORATE SECRETARY
53

Shaping Tomorrow

Transcription

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