POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Introduction This company has a rich background that stretches all the way from Spanish era. The company has a history that can be said in times with the Philippine History from the Spanish Occupation all the way to the 21st century. It is amazing that the company has evolved and has kept up with the current times and is one of the magnates. Unlike its peers in the early century; where a lot has already faded in the background or has already been dissolve. This family corporation owned a group of diversified companies comprising from the most basic necessity such as power generation, to the luxury industries such as resorts and hotel chains.

It is interesting to have an understanding and knowledge how this company has adapted to the recent times and is reached one of the top 10 most riches company in the country. The challenges faced, solutions provided, adaptations, methods provided, opportunities that came their way for such success. This are the times that would come into mind What did these people do to reach such heights and how is the continuity of such companies be possible where everybody else fails after a more than a century of business. The decisions made to be able to stay ahead of the pack and maintain leadership. What would be the next phase of their empire.

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Currently the family patriarch is having the value of $3 billion net worth. Surprisingly, they have such large organization that they also have some outreach program or foundation to provide assiatnce to the less fortunate countrymen.

As a student who is deeply interested in history and its effects on modern times, this company is truly worth looking into. Also It is a wonder that what we thought as a budding company is already part of our nations history in its silent ways and pivotal for the nations economical stability and necessary for the common mans mundane lives. This company is silent yet is widely respected in business world. Considering the vast influence of this familys company in our daily lives, It is quite astounding that we ordinary citizens are clueless on their contributions and work. Why Aboitiz a person might ask for the topic of my research. Its because of the following:

History : Aboitiz & Company, Inc. is the private holding company in the Philippines of the Aboitiz Family. It traces its roots to the late 1800s starting out as a hemp trading and general merchandise company in Ormoc, Leyte, central Philippines. The family corporation traces its roots to a Spaniard mariner from Basque, Spain named Paulino Aboitiz. Soon after Paulino Aboitiz married Emilia Yrastoza y Torres, daughter of a Basque shipping merchant from Guipzcoa, Spain and a

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Spanish mestiza from Ormoc, Leyte, he traded in abaca fiber or hemp. Paulino Aboitiz also operated a general merchandise business with Angel Moraza, his brother-in-law and husband to his wifes sister, Guadalupe Yrastoza, who was based in Baybay. When the Spanish Government in Manila fell in 1900, Paulino Aboitiz moved his family, wife and his ten children, to Cebu. There, Paulino Aboitiz created a business partnership with Jose Muertegui, an Abaca dealer based in Palompon, and named their business Muertegui y Aboitiz. Their business thrived and soon after, they had the need to buy the ship, Picket in 1907 to transport their aba ca products. Businesses combining shipping and abaca were common at that time.

The companys success and growth in hemp trading opened opportunities to enter the transport business. It made good business sense to buy a ship to transport their own goods across the islands. In 1907, the company bought its first vessel, the Picket. Thus began the Aboitiz transport business. Ramon, Paulinos second son assumed his position at the firm at the age of 22 and the business prospered further. Together with his elder brother, Guillermo, Ramon established another merchandising business named G. y R. Aboitiz to cover areas unreached by Muertegui y Aboitiz. In 1916, the Aboitizes bought Muerteguis share for PhP95,000 and the Muertegui y Aboitiz partnership ended.

In 1918, Ramon bought passenger ship Tubig from Smith, Bell and Co. The family then formed a new partnership called Viude e Hijos de P. Aboitiz that operated on passenger shipping. Ramon petitioned to the Commission on Public Utilities for their passenger ship to operate the route between the Cebu and Leyte ports of Baybay, Inopacan, Hilongos, Bato and Hindang. In 1919, Ramon, his wife Dolores and son Eduardo left for Spain and sold his share to his brothers Guillermo and Vidal. He believed that he has left the business in good condition for his mother and siblings to live by. On February 4, 1920, the Bureau of Commerce approved the corporation founded by Guillermo Aboitiz and a Portuguese businessman named Arnaldo F. Silva called Aboitiz y Compania Incorporada that capitalized at 1.25 million and PhP500,000 paid-up capital. Cousins Manuel Moraza and Joaquin Yrastoza bought 300 and 50 shares from the corporation, respectively, thereby joining the corporation while Paulino and Luis bought 100 shares each. A few months after, the business was in peril. Ramon Aboitiz had to come back to the Philippines in September 1920 after his 14-month stay in Spain. He had found out that corporation owed PhP2 million to the bank and others. Ramon had an iron grip on the corporations reputation by refusing to declare bankruptcy. Instead, he had arranged an PhP800,000 loan from Philippine National Bank (PNB) manager Jose Martinez and borrowed money from businessmen, Gotiaco Hermanos and Joaquin Castro. He had also convinced Macleod and Smith Bell to

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

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advance funds to the company in exchange for a first choice of any abaca shipment. While having financial difficulties, Ramon nevertheless continued to venture into profit-making businesses by acquiring Cebu Ice and Cold Stores Corp. The hemp trade continued to flourish and in 1920, Aboitiz & Company was formally incorporated. By then, it had become one of the leading Cebu-based ship owners with 11 vessels. It also had a thriving commercial and trading business offering services of cold storage, sold ice, fruits, meat and other refrigerated and frozen goods. Ramon was able to pay off the loan 20 years later and their business caught up afterwards as demand for abaca hemp and copra grew.

In 1930, the company ventured into power generation and distribution, and invention the company expand its power generation and distribution business and enter other business ventures, among them, industrial gases, banking and finance, insurance brokerage, food, coconut oil milling, construction, real estate

development, oleo chemicals, overseas shipping, crewing and shipbuilding. WWII When the Japanese invaded Cebu on April 10, 1942, they did not falter in conducting their business. However, a huge blow struck them when the bombings hit their knitting factory in Manila, their power plants in Mindanao, a portion of their shipyard in Mactan Island, hardware store and ice plant in mainland Cebu.

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Through diversifying their businesses, the family corporation survived the devastations brought by the war. The Aboitizess knitting factory and liquor factory continued to bring in profit throughout the years. At the same time, Ramon and his brothers rebuilt their enterprises with what was left of their company assets.

Post World War II With the onset of the American occupation in the Philippines, the US Navy sealed a contract with the Aboitizes through their companys Cebu Shipyard and Engineering Works. It allowed the US Navy exclusive use of the shipyard for two years. From this point, the family corporation is venturing into another shipping company, started manufacturing oxygen and started reviving their power plants in Cotabato, Mindanao named Cotabato Light and Power Co. and bought a franchise of Davao Light and Power Co. Today, together with joint ventures and alliances with domestic and foreign partners, Aboitiz focuses on six major areas, namely: power, banking, food, land development, construction and shipbuilding. Over 60 operating companies with 27,000 team members now make up the Aboitiz Group of Companies.

The publicly-listed holding company of the Aboitiz family is Aboitiz Equity

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Ventures, which in turn has shareholdings in a number of other listed and privately held companies (see Aboitiz Equity Ventures portion in About Us). After Ramons management of the corporation, Ramons son, Eduardo, took over before handing it to Ramons brother, Luis, and finally to, Eduardos son, Jon Ramon, who is currently the Chief Executive Officer and President of the Aboitiz & Co. 1990s

After 74 years as a private, family-owned business, Aboitiz formed AEV and subsequently listed it on the Philippine Stock Exchange in 1994. Aboitiz & Co. put into the Company's basket, the best and most profitable businesses it had with the view to expanding and growing the Aboitiz' businesses. This included the power generation and distribution businesses of Aboitiz & Co. Under Jon Ramons leadership of the Aboitiz & Co., the company has went public in 1994 through Aboitiz Equity Ventures (AEV), a holding management company or business in power distribution, financial and insurance services, food and industrial production. AEV became the publicly listed holding and investment management company. The thrust of the company is to work towards its business development in banking and power.

Converting AEV into a Publicly Listed Company (PLC) was a transformation since, for the first time, the Aboitiz Group not only gained non-family shareholders, but also local and foreign shareholders. This big step required further

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professionalization of the Aboitiz Group as new disciplines and demands for transparency, corporate governance and accountability and a more focused business strategy also evolved. Today, we continue to follow the focused business strategy and course we have set. And we continue to adapt to the changing requirements for corporate governance practices and principles expected of a PLC. The new management also understood the benefits of technology that it has partnered with Bayantrade, a procurement exchange company and is partnered with Ayala Corporation, Benpres Corporation, JG Summit, Philippine Long Distance Telephone Company and United Laboratories. Through this, Aboitiz Equity Ventures has used information technology to expand its business opportunities and increase productivity of its employees. Aboitiz & Co. has expanded into industrial and commercial real estate development, banking, power distribution and generation, freight forwarding and food-related business.

AEV's market capitalization of Php 15 billion in 1996 increased to a market capitalization of Php 292.4 billion in 2012.

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Nature of Business:
Aboitiz Equity Ventures, Inc. is a Philippines-based company primarily engaged in power distribution and generation. The Company through its various subsidiaries and Affiliates can be grouped into five main categories: power distribution, power generation and retail electricity supply, financial services, food manufacturing, real estate and portfolio investments. The Company operates in five segments: power segment, which is engaged in power generation and sale of electricity; food manufacturing segment, which is engaged in the production of flour and feeds and swine breeding; the financial services segment, which is engaged in banking operations; and the parent company and others, which include the operations of the Company, air transport services, ship and crew management services, and real property business of the Company. Aboitiz Equity Ventures (AEV) listed in the Philippine Stock Exchange (PSE) in 1994 as the public-held holding company of the Aboitiz Family. Since its IPO, AEV has been recognized by various local and international surveys and publications as among the Philippines best managed companies. AEV has l ikewise received numerous awards for its corporate governance practices.

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Company profile Aboitiz Equity Ventures, Inc. was incorporated in September 11, 1989 as Cebu Pan Asian Holdings, Inc. AEV is the holding company of the Aboitiz Group. To further increase funding, the Aboitiz Company listed AEV in 1994. To date, the companys shares are traded under the stock symbol AEV. AEV has business interests in the following: power distribution and generation Aboitiz Power Corporation financial services Union Bank and Cebu City Savings Bank food manufacturing Pilmico Foods Corporation transportation Aboitiz Transport System, Accuria, Inc. portfolio investments - Cebu Praedia Development Corporation, AEV Aviation, Inc. Subsidiaries Power Distribution

Aboitiz Power Corporation is the power distribution and generation arm of AEV. It owns 76.40% of the outstanding capital stock of AboitizPowe. Since its incorporation in 1998, it has become of the leaders in the Philippine power industry. Including the second and third largest in the country in terms of power sales. These utilities are recognized for setting the standards in innovation, efficiency and

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customer service. AboitizPower, which debuted as a public company in 2007. The power generation holdings include renewable, such as geothermal and

hydroelectric, and non-renewable plants. AboitizPower's portfolio of plants are diversified in fuel source and located throughout the country, enabling it to cater to the diverse needs of every power consumer. It is pioneer in offering Cleanergy, its brand of clean and renewable power.

Financial services

AEVs financial services group is composed of Union Bank of the Philippines (Unionbank) and City Savings Bank. Aboitiz Equity Ventures is the largest shareholder of UnionBank, a publicly-listed universal bank also recognized as among Asias best companies in banking and finance. UnionBank consistently ranks as among the top banks in key performance ratios in profitability, liquidity, solvency and efficiency. It is a pioneer in the application of information technology in banking services. Aboitiz Equity Ventures also owns City Savings Bank, a leading thrift bank based in central Philippines and currently expanding into Luzon

Unionbank was incorporated in 1968 as a savings bank. By 1982, the bank has been granted a commercial banking license, and in 1992, became a universal bank. Since incorporated, Unionbank has acquired International Corporate Bank in 1994,

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and the International Exchange Bank in 2006. As of December 2010, AEV beneficially owns 40.91 percent of UnionBank.

City Savings Bank was incorporated in 1965 originally known as Cebu Savings and Loan Association. It was the first of its kind to be organized under the Savings and Loan Association Act, otherwise known as Republic Act 3779. AEV currently holds 60 percent equity in City Savings Bank.

Food Manufacturing

Pilmico is one of the countrys largest manufacturers of flour and is ranked among the top three domestic flour producers in terms of sales. It was incorporated in 1958 and started out as a JV between the Aboitiz Group Lu Do Group, the Soriano Group and the Pillsbury Group of the United States. The three groups eventually sold off their holdings to AEV.

In Food, Pilmico Foods Corporation is one of the largest flour mill companies in the Philippines. It is a top-3 player in the flour market and a leader in operating efficiency. Pilmico also manufactures yeast and other bakery products, and through its wholly-owned subsidiary, Pilmico Animal Nutrition Corporation, operates a feed milling and swine growing operation

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Other portfolio investments The Aboitiz Jebsen Group is a joint venture with the Jebsen Group of Norway, primarily engaged in ship management, manning and crew management, and bulk transport businesses.

AEV Aviation Inc. holds AEVs aviation assets, including the corporate aircraft and accompanying support facilities. Incorporated on October 9, 1990, it was originally known as Spin Realty Corporation, and was reorganized in late 1998 when the newly acquired AEV corporate aircraft was placed under its holdings. Cebu Praedia Development Corporation was incorporated in 1997 as a holding company for AEVs real estate assets. It is engaged in leasing of properties located in the cities of Makati and Cebu.

Awards and citations AEV has received numerous awards and citations. Among them: Asian CSR Award in 2010 Asian Institute of Management Best Management Company, 2010 Asia Money Asias Best Company, 2009 Finance Asia Best Project Finance for Magat Hydro Power, 2007 The Asset Asian Awards

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Recent business development On December 1, 2010, AEV together and Aboitiz & Company, Inc. (ACO) entered into a Securities Purchase Agreement with Negros Navigation Company, Inc. (NENACO) for the purchase by NENACO of the entire equity stake of AEV and ACO in AEVs transport subsidiary Aboitiz Transport System (ATSC) Corporation (ATS). The sale included all the logistics and shipping businesses of ATS except the ship management, manning and crew management, and bulk transport businesses of ATSs joint venture companies with the Jebsen Group of Norway.

Current Company Holdings:

ShipBuildings

The Shipbuilding has been one of the core businesses of the Ablitiz Group. By 1920, it had become one of the leading Cebu-based ship owners with 11 vessels. To date, its partner includes Tsuneishi Heavy Industries (Cebu), Inc., a world-class shipbuilder located inside the companys industrial park in Cebu, central Philippines.

Tsuneishi Heavy Industries (Cebu) Inc. is a joint venture between Aboitiz & Company and Japanese shipbuilder the Tsuneishi Group. Tsuneishi (Cebu) builds bulk carriers of up to 100,000 dead weight tons, car and truck carriers and soon,

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container

ships.

In Construction, the Aboitiz Construction Group is a major player in the country that specializes in civil, industrial facilities installation and steel fabrication works. It is also a leading contractor for roads and bridges. Under Metaphil, It is a major player in the country that specializes in civil, industrial facilities installation and steel fabrication works. It is also a leading contractor for roads and bridges. Metaphil is currently an ISO 9001:2000 company. Real Estate

Aboitiz Land is the real estate arm of the Aboitiz Group. Aboitiz Land focuses on the development of residential subdivisions, housing and the management of industrial parks including Mactan Economic Zone 2, and West Cebu Industrial Park. It has developed the trust and confidence in the market for quality and reliability. Other projects include:

Residential Ajoya Kishanta Molave Highlands The Persimmon

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Pristina North Office and Retail iMez The Persimmon Plus Pueblo Verde Leisure Aboitiz Foodball Cup Aboitiz Sports Field

Leisure Resorts

Aboitiz & Company is also part owner of the A. Soriano Corporation subsidiary, Seven Seas Resort and Leisure, which in turn operates and promotes the the world-famous Amanpulo luxury beach resort in Pamilican Island, Palawan

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Corporate Structure As of End - 2012 Ownership POWER Aboitiz Power Corporation Power Generation Aboitiz Renewables, Inc. AP Renewables, Inc. Cleanergy, Inc. Hydro Electric Development 99 Corporation Cordillera Hydro Corporation Hedcor Benguet, Inc. Hedcor Bokod, Inc. Hedcor Bukidnon, Inc. Hedcor Sabangan, Inc. Hedcor Sibulan, Inc. Hedcor Tamugan, Inc. Hedcor Tudaya, Inc. Hedcor, Inc. Luzon Hydro Corporation 100 100 100 100 100 100 100 100 100 100 100 100 100 % 76

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Manila-Oslo Enterprise, Inc.

Renewable 83

SN Aboitiz Power60 Magat, Inc. SN Aboitiz Power60 Benguet, Inc. Neptune Corporation (Formerly: SN 60 Hydro

Aboitiz Pangasinan, Inc.) Therma Power, Inc. Therma Central Visayas, Inc. Therma Luzon, Inc. Therma Marine, Inc. Therma Mobile, Inc. Therma Power Visayas, Inc. Therma South, Inc. Therma Inc. Therma Subic, Inc. 100 Southern Mindanao, 100 100 100 100 100 100 100 100

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Therma

Visayas,

Inc.

(Formerly: Vesper Industrial and 100 Development Corporation) Teraqua, Inc. Redondo Inc. Abovant Holdings, Inc. Cebu Development Corporation STEAG State Power, Inc. Cebu Private Power Corporation East Asia Utilities Corporation Southern Corporation Western Corporation Power Distribution Visayan Electric Company, Inc. Davao Light & Power Company, Inc. Cotabato Light & Power Company 55 99 99 Mindanao Power 20 Philippines Power 20 34 60 50 Energy 44 60 Peninsula Energy, 25 60

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Cotabato Ice Plant, Inc. Subic EnerZone Corporation Mactan Enerzone Corporation Balamban Enerzone Corporation San Fernando Electric Light & Power

100 99 100 100

44 Company, Inc. Retail Electricity Services Aboitiz Energy Solutions, Inc. Adventenergy, Inc. Prism Energy, Inc. Banking Union Bank of the Philippines Food Pilmico Foods Corporation Pilmico Corporation Filagri Inc Land Aboitiz Land, Inc. Propriedad Del Norte, Inc Cebu Industrial 100 100 Park 100 100 Animal Nutrition 100 100 45 100 100 60

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Development Corp. Cebu Praedia Devt. Corp. Integrated Maritime Services Aboitiz Jebsen Aboitiz Company, Jebsen Inc. Bulk 62 100

(Formerly:

Transport Corporation) Aboitiz Jebsen Manpower Solutions, 62 Inc. Jebsens Maritime, Inc. Others AEV Aviation, Inc. ASEAGAS Corporation . POWER AboitizPower Corporation 51 100 62

Generation Assets:

Renewable: Hydro, Geothermal Non-Renewable: Coal-fired, Thermal

Distribution Assets: Davao Light and Power Company , Cotabato Light and Power Company , Visayan Electric

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Company , San Fernando Electric Light and Power Company , Subic Enerzone Corporation , Mactan Enerzone Corporation , Balamban Enerzone Corporation

Services: Aboitiz Energy Solutions, Inc. , AdventEnergy, Inc. ,Prism Energy, Inc.

BANKING

UnionBank of the Philippines , City Savings Bank

FOOD

Pilmico Foods Corporation , Pilmico Animal Nutrition

AboitizLand , Cebu Industrial Park Developers, Inc. , REAL ESTATE Mactan Export Zone 2

CONSTRUCTIO Aboitiz Construction Group, Inc. , Metaphil Division N

Aboitiz Jebsen Bulk Transport Corporation, Tsuneishi OTHER Heavy Industries (Cebu), Inc. , Seven Seas Resorts & INVESTMENTS Leisure, Inc.

SOCIAL

Aboitiz Foundation, Inc. , Ramon Aboitiz Foundation, Inc.

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Business Organizational Structure

DIRECTORS

Jon Ramon Aboitiz

Erramon I. Aboitiz

Roberto E. Aboitiz

Enrique M. Aboitiz, Jr.

Justo A. Ortiz

Antonio R. Moraza

Raphael P.M. Lotilla Independent Director

Jose C. Vitug Independent Director

Stephen CuUnjieng Independent Director

OFFICERS

Jon Ramon Aboitiz Chairman of the Board

Erramon I. Aboitiz President & Chief Executive Officer

Stephen G. Paradies Senior Vice President/Chief Financial Officer/Corporate Information Officer

Mikel A. Aboitiz Senior Vice President/Chief Information Officer

Enrique M.Aboitiz, Jr. Senior Vice President

Juan Antonio E. Bernad Senior Vice President

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Xavier Jose Aboitiz Senior Vice President Chief Human Resources Officer

Gabriel T. Maalac Senior Vice-President - Group Treasurer

M. Jasmine S. Oporto First Vice-President Chief Legal Officer/Corporate Secretary/Compliance Officer

Susan V. Valdez First Vice President Chief Reputation Officer/Chief Risk Management Officer

Luis Miguel O. Aboitiz First Vice President

Horacio C. Elicano First Vice President Chief Technology Officer

Patrick B. Reyes First Vice President -Chief Strategy Officer

Romn V. Azanza III First Vice President Business Development

Melinda R. Bathan First Vice President Controller

Narcisa S. Lim First Vice President Human Resources and Quality

Joseph Trillana T. Gonzales Vice President - Legal and Corporate Services

Susan S. Policarpio Vice President Government Relations

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Robin Patrick R. Sarmiento Assistant Vice President Strategy and Corporate Finance

Vivien Vicente-Limjoco

Assistant Vice President Strategy and Corporate Finance

Ronaldo S. Ramos Assistant Vice President Business Risk Management

Annacel A. Natividad Assistant Vice President Financial Risk Management

Dave Michael V. Valeriano Assistant Vice President Investor Relations

Julie Ann T. Diongzon

Aylmerita C. Pealoza

Assistant Vice President Treasury

Assistant Vice President Treasury

Geraldine Polanco Onganon Assistant Vice President Human Resources and Quality (seconded to the

Ma. Kristina V. Rivera

Noemi Sebastian

Assistant Vice President Human Resources and Quality (seconded to Aboitiz

Assistant Vice President Human Resources and Quality

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Food Group)

Power Corporation Generation Group)

Benedict James B. Duran Assistant Vice President Human Resources and Quality (Seconded to City Savings Bank, Inc.)

Marilou P. Plando

Maria Lourdes Y. Tanate

Assistant Vice President Business Administrator for Legal and Corporate Services

Assistant Vice President Audit

Andy G. Torrato Assistant Vice President Plant Security

Joseph Y. Tugonon Assistant Vice President - Tax Management Services for Legal and Corporate Services

Catherine R. Atay Assistant Vice President Corporate Secretarial and Compliance Services for Legal and Corporate Services/Assistant Corporate Secretary

DIRECTORS

Jon Ramon Aboitiz

Roberto E. Aboitiz

Luis M. Aboitiz,

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Jr. Chairman Vice Chairman Director

Antonio R. Moraza Director

Enrique M. Aboitiz, Jr. Director

Mikel A. Aboitiz Director

Erramon I. Aboitiz Director

OFFICERS

Jon Ramon Aboitiz

Roberto E. Aboitiz

Erramon I. Aboitiz

Chairman of the Board

Vice Chairman

President and Chief Executive Officer

Stephen G. Paradies Senior Vice President - Finance/ Treasurer

Mikel A. Aboitiz Senior Vice President Strategy

Xavier J. Aboitiz Senior Vice President - Human Resources

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Enrique M. Aboitiz, Jr.

Antonio R. Moraza

Luis Miguel O. Aboitiz

Senior Vice President

Senior Vice President

First VicePresident

Catherine R. Atay Corporate Secretary

Mailene M. De la Torre Assistant Corporate Secretary

BOARD of ADVISERS

Enrique M. Aboitiz, Jr. Chairman Emeritus

Jaime Jose Y. Aboitiz Member

Sabin M. Aboitiz Member

Andoni F. Aboitiz Member

Luis Miguel O. Aboitiz Member

Xavier J. Aboitiz Member

Stephen G. Paradies Member

Iker M. Aboitiz Member

STRATEGY COMMITTEE

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Jon R. Aboitiz

Erramon I. Aboitiz

Roberto E. Aboitiz

Chairman

Member

Member

Enrique M. Aboitiz, Jr. Member

Mikel A. Aboitiz Ex-Officio Member

SUCCESSION and COMPENSATION COMMITTEE

Jon. R.Aboitiz

Erramon I. Aboitiz

Enrique M. Aboitiz

Chairman

Member

Member

Roberto E. Aboitiz Member

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Findings:
Honor, Reputation, Trust and Integrity

The Legacy of Core Values

Aboitiz, hold Trust very dearly. They realize the importance of Trust from our customers and that they value our products and services; that they are not cheated, nor are they short changed in any way. We value Trust from our management and employees, that they are respected and treated fairly and appreciated in their contributions to the growth of the Company. We acknowledge the importance of Trust that is reposed in us by our shareholders and investors, that their investments are being handled with integrity, for their benefit, and not for those who run the institution. Lastly, we value Trust from the community at large, that we are an asset to the community by being a responsible member that shares and adds value to all.

We believe that Reputation is the Company's most important asset. It is the sum of values that our stakeholders attribute to us, based on their perception and interpretation of the image the Company communicates over time. We believe that corporate reputation has to be earned; and once earned protected and managed, and integrated into the Company's business strategy. Trust, Transparency, Expertise, Commitment and Empathy are four factors that uphold our Reputation.

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Even at a young corporate age, Trust, Reputation, Governance and Corporate Social Responsibility have since been important to the Aboitiz organization. Aboitiz is what it is today because the family, shareholders, our professional team leaders and team members in our various organizations and business units (BUs) have always upheld strong values that we all believe in and practice, such as Honor, Trust, Loyalty, Fairness and helping those who are less fortunate. From these strong core values, we have also adopted the complimentary values of adherence to quality, innovation, and service excellence.

A culture of Hard work, Sacrifice, Trustworthiness, Constant Improvement, Customer focus, Quality and Social Commitment - this set of characteristics makes us different and unique. This is what our Reputation is all about since the times when Don Ramon Aboitiz laid the foundational legacy of core values and characteristics for family and non-family team members to hold on to.

Corporate Social Responsibility

Corporate Social Responsibility is being practiced by the company long before it became a corporate buzzword. We believe that CSR is a very integral part of how we operate our businesses and an integral part of our overall governance and philosophy of being responsible members of our society by sharing and being a neighbour of choice wherever our companies operate.

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An integral part of the Aboitiz Corporate Philosophy is its Corporate Social Responsibility institutionalized through the Aboitiz Foundation. Aboitiz

companies contribute yearly a percentage of their profits to the Foundation. The Foundations areas of focus are on education, enterprise development, primary healthand child-care, and environmental conservation & protection.

In its over a century of doing business, the Aboitiz name has built a reputation that stands for quality products and services. Today, more than ever, all Aboitiz companies move as one in pursuing a strategic direction of focusing on their core competencies, people, customers and systems. We see Corporate Social Responsibility (CSR) as a way for businesses enterprises like the Company, to manage their business processes to produce an overall impact to society. As a corporate citizen, it is a our Company's continuing commitment to behave eithically and contribute to the economic development of the country, while improving the quality of life of its workforce, their families, our customers, our local communities, our government and society at large. Bottom line being, that Corporate Social Responsibility is about business giving back to society and acting in an ethical and transparent manner in all its dealings with all stakeholders in society.

In 1965 or 47 years ago, Don Ramon Aboitiz gave a big part of his personal wealth to establish the Ramon Aboitiz Foundation, Inc. It is one of the largest shareholders of the Company. Our Company was one of the founding members of

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the Philippines Business for Social Progress when it was established in 1979 and today is still active in both the Board of Trustees and Regional Executive Committees. As the Aboitiz Group grew, CSR began to take on a much broader and more meaningful perspective; it was no longer merely about doing philanthropic acts but also reaching out to partners within our different communities. It has since evolved into a more organized, structured, and professionalised commitment from a dedicated team and from the Aboitiz workforce.

Thus, in 1988, the Aboitiz Group established the Aboitiz Foundation as the social development arm of the Aboitiz corporate group. CSR teams from business units nationwide were formed and now work together with the Aboitiz Foundation in areas where our companies are located. These BUs are mandated to allocate a percentage of their profits every year to fund the Foundation's projects in their respective areas of operations and be the neighbour or choice to their host communities.

The focus areas of our group CSR are primarily education, enterprise development, health and environment. Over the last five (5) years, we have allocated 1.5 billion for our various CSR projects. For 2012 alone, 390 million was earmarked for projects. In addition, Aboitiz Foundation has collaborated and partnered with other organizations and foundations when there was alignment of goals or when a greater need of society required more interdependent CSR strategies were required to assist society

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To fund growth opportunities, Aboitiz & Company listed Aboitiz Equity Ventures in 1994 on the Philippine Stock Exchange as the holding company for its power, banking, food and transport businesses. Aboitiz Equity Ventures mission is To create long-term value for all its stakeholders. Since it went public in 1994, it has been recognized in different international surveys as among the Philippines best companies.

Aboitiz Equity Ventures investments in Power are coursed through publiclylisted. . An integral part of the Aboitiz Corporate Philosophy is its Corporate Social Responsibility institutionalized through the Aboitiz Foundation. Aboitiz

companies contribute yearly a percentage of their profits to the Foundation. The Foundations areas of focus are on education, enterprise development, primary healthand child-care, and environmental conservation & protection.

Companies are challenged throughout the world to incorporate more Sustainability practices into the business model. The Aboitiz Group is committed to this effort and believes that in order to thrive, it must consider the triple bottom line of people-planet-profit into everything it does.

In its over a century of doing business, the Aboitiz name has built a reputation

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that stands for quality products and services. Today, more than ever, all Aboitiz companies move as one in pursuing a strategic direction of focusing on their core competencies, people, customers and systems.

Aboitiz Foundation also addresses the shortage of adequate infrastructure facilities for basic social services by building water systems and health centers, day-care and cooperative training centers.

Water is a basic necessity not readily available to everyone. Hence, the Foundation has made the building of water systems the flagship project in the area of primary health and childcare. So far, the Foundation has donated 30 water systems that benefit 13,150 households in different marginalized communities in Cebu, Davao and Iligan. Most of these water systems are level 3, which means water is piped directly into individual households, making it easily accessible and convenient.

In order to improve the medical and dental services provided in certain communities, the Foundation donates a starter set with basic medical and dental equipment that poorer communities cannot obtain on their own.

Aboitiz companies, through the Aboitiz Foundation, also conduct medical, dental and optical missions to make health services available to their host communities. Aboitiz Power Renewables, Inc., Luzon Hydro Corporation, Subic Enerzone and Hedcor regularly conduct medical missions in their areas of operations, namely in

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Maco,

Nasipit,

Davao,

Subic,

Ilocos,

and

Benguet.

The Foundation hopes to eventually see more children learning in classrooms than roaming the streets. By holding non-formal education sessions under the Street Education Program, the Foundation and the Children of Cebu Foundation aim for street children to be motivated to go to school. The Foundation's goal is to bring at least 40% of these children to get a formal education the following school year. Two hundred fifty street children in six urban centers in Metro Cebu are supported annually in this program. Aside from these non-formal education, the children were also given bags and education supplies to use in their classes.

Some years ago, the Aboitiz Foundation became more involved in environmental concerns in light of the global urgency to protect Mother Earth. As we see the need to proactively respond to this call, the environment is now a new program component in our CSR.

Through this and with the help of Aboitiz Equity Ventures' in-house sustainability team, we will be able to tackle sustainability issues and take a step further in environment conservation efforts.

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Every year, the Aboitiz Group conducts a simultaneous tree planting all over the country. Over 2,000 Aboitiz employees coming from about 20 Aboitiz companies commit to spare their weekend and lend a hand for mother nature. Last July 21 alone, a total of 2.68 million seedlings were planted together by employees across the group. This is in support of the Aboitiz Passion for Reforest and Agroforest to Keep (APARK) initiative that seeks to plant 3 million trees by 2015.

Aboitiz Foundation has been conceptualizing new projects and started taking small steps to see it come to life. An example of this is a training workshop for organic, natural and biodynamic farming systems, which will be open to its existing partner cooperatives for a start.

With close to three million trees in its inventory, a newly launched Cleanergy Park, and a strengthened sustainability agenda, the Aboitiz Group is gearing up its sustainability program for 2014, as it levels up its sustainability reporting with the Global Reporting Initiative (GRI), one of the worlds generally accepted standards.

It is currently at Level B self-declared, while the target is to accomplish the GRIchecked Level B Sustainability Report. This entails reporting fully on a minimum of 20 performance indicators set by GRI with at least one on each area, namely economic, environment, human rights, labor, society, and product responsibility.

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Last year, the group developed a sustainability policy, charter, and framework as well as focus areas. The intent is to establish measurable objectives, set achievable targets, and track them year on year.

Through its BetterWorld campaign, Aboitizs sustainability program aims to increase awareness among stakeholders about its existing initiatives supporting the triple bottom line of people, planet, and profit.

We will pursue an exciting future with the mindset that we can do well by doing good, said Aboitiz Equity Ventures chief executive officer Erramon Aboitiz.

This complements the companys passion for better ways, as it makes the right long-term decisions that balance the interests of the triple bottom line.

The Aboitiz Group, through its corporate social development arm Aboitiz Foundation, exemplifies the best of people initiative as it focuses on education as its flagship program.

Last year, the foundation also raised over P200 million in relief funds to help the survivors of Super Typhoon Yolanda, the most powerful tropical cyclone that hit the Philippines.

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Some 3,000 team members from across 24 business units also committed personal time in 2013 for the Aboitiz Group-wide tree-planting program, APARK, which aims to plant three million trees by 2015.

To date, a total of 2.9 million trees have been planted, and Aboitiz expects to meet its target ahead of schedule.

Aboitiz said it is also committed to look into new businesses that are linked to its core competencies, are scalable, and with strong recurring profits and cash flow.

These include the expansion of its investment portfolio, as it builds the countrys first liquid bio-methane fuel plant through its joint venture, Aseagas.

TO PREVENT its employees from leaving for better-paying jobs abroad, the Aboitiz Group continues to touch the emotional side of its workers. If we keep telling ourselves that we cant compete with the pay abroad, were lost. We have to make decisions to attract, retain and optimize our people, said Txabi Aboitiz, vice president on quality and people development of Aboitiz and Co. Inc. He said that human resource managers should ask why their people are making decisions to leave for overseas jobs and recommended that the body, heart, mind and spirit of employees should be addressed to help pump up the company.

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Several managers at Aboitiz and Co. sat in a panel during the second day of the Third Aboitiz-organized Future Leaders Summit at the Waterfront Cebu City Hotel and Casino to share how good bosses, work challenges, training and fun made them stay with the company for years. Among them is Judd Salas who has been with Aboitiz for more than 12 years, He is presently corporate communications manager of the Aboitiz Transport System (ATS). Salas said that some of the ATS seafarers and information technology professionals are among those who joined the the movement of labor to other countries that is part of globalization. Aboitizgives you opportunities to think world-class and be the best. If you value learning, there is a place for you here to make a difference in the world, he added. Meanwhile, Aboitiz Equity Ventures executive vice president and chief operating officer Erramon Aboitiz attributed the companys success to a carefully laid out strategic map (that is) skillfully executed by (its) great team of professionals. As proof, he cited the bottom line contribution of the Aboitiz power business, which grew to 61 percent last year from 41 percent in 1995. He also mentioned the 32percent increase of City Savings Banks net income in 2007, among others. Aboitiz has evolved into a group totally focused on its core businesses growing its assets to P61 billion from P21 billion at the start of the decade, he added.

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Conclusion: Business & Family Values A strong sense of business acumen lived through the legacy of the Aboitizes. Ramon Aboitizs refusal to declare bankruptcy of Aboitiz y Compania Incorporada in the 1920s proved that business astuteness and esteem could overcome such difficulties. He wrote to Silva, the Aboitiz y Compania Incorparada president and general manager at that time, "The biggest fortune that I have is my word and my reputation. Money can be lost and can be recovered, but once reputation is lost and ones word is worthless, one is surely finished." Taking calculated risks allowed the Aboitiz group to evolve into a conglomerate rather than to remain as a mere trading company was key through its survival through World War II and maintain its longevity up to the present. When Ramon Aboitiz acquired Cebu Ice & Cold Stores Corp., the company invested on buying new equipment. However, after upgrading the companys equipment, electric refrigerators at that time are coming into fashion. A market study was inevitable and Ramon Aboitiz found out that only 20% of his clientele are able to afford the refrigerators so he pursued investing on Cebu Ice & Cold Stores Corp. This attitude of taking calculated risks combined with a keen sense of timing is also an essential business practice among the Aboitizes. Through the years, the company was able to find opportunities in businesses and selling their goods at the right time. Ramon Aboitizs timing is near perfect that his pa rticular businesses are

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

acquired sell at their peak. He sold goods with potential and sold them successfully and however bleak the business economy is, his goods still sold and brought profit to the company. At the advent of the new century and the pervasiveness of technology, Jon Ramon carries the same attitudes and leads Aboitiz Equity Ventures to invest on the internet and e-commerce. "Every company has to have an Internet strategy because future business is completely intertwined into the Internet and ecommerce," notes Jon Ramon. Jon Ramon is aware that closeness within his Aboitiz family is not enough to succeed in business. "We realized early that its not an easy thing to stay together. We have to work at it," he explains. It was necessary for them to create a family council as a venue for regular meetings and discuss issues. Decisions emanating from their family council are decisions voted by the majority. After a decision is made, everybody abides by it, he says. Even family members are not exempted from company rules. "Rules must be equally applied to all," he adds. At present, 17 family members are working within the company. Many people think were all-family, but were only 17 working family members, Jon Ramon says. Aboitizs family business has been passed on for four generations and they have maintained a smooth transition from one generation to the next. Jon Ramons father, Eduardo, made a ruling that family members employed in the company who

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

are over 60 years of age must step down from position but will still serve as elderly advisers to the younger generations. Aboitiz family members do not become part of the Aboitiz & Co. merely because of genealogy. They have to prove their worth. Starting from childhood, the Aboitiz children should learn about the different aspects of their businesses. Taking school breaks as an avenue to work for the company and learn the Aboitiz way of doing business. It is also important to the Aboitizes to maintain close ties with the Chinese community and Aboitiz scions studied Mandarin in Beijing and Taipei to ensure this relationship continues. Even Jon Ramon was branded useless by his grandfather for not being able to speak in Chinese. Business & Family Values A strong sense of business acumen lived through the legacy of the Aboitizes. Ramon Aboitizs refusal to declare bankruptcy of Aboitiz y Compania Incorporada in the 1920s proved that business astuteness and esteem could overcome such difficulties. He wrote to Silva, the Aboitiz y Compania Incorparada president and general manager at that time, "The biggest fortune that I have is my word and my reputation. Money can be lost and can be recovered, but once reputation is lost and ones word is worthless, one is surely finished." Taking calculated risks allowed the Aboitiz group to evolve into a conglomerate rather than to remain as a mere trading company was key through its

44

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

survival through World War II and maintain its longevity up to the present. When Ramon Aboitiz acquired Cebu Ice & Cold Stores Corp., the company invested on buying new equipment. However, after upgrading the companys equipment, electric refrigerators at that time are coming into fashion. A market study was inevitable and Ramon Aboitiz found out that only 20% of his clientele are able to afford the refrigerators so he pursued investing on Cebu Ice & Cold Stores Corp. This attitude of taking calculated risks combined with a keen sense of timing is also an essential business practice among the Aboitizes. Through the years, the company was able to find opportunities in businesses and selling their goods at the right time. Ramon Aboitizs timing is near perfect that his particular businesses are acquired sell at their peak. He sold goods with potential and sold them successfully and however bleak the business economy is, his goods still sold and brought profit to the company. At the advent of the new century and the pervasiveness of technology, Jon Ramon carries the same attitudes and leads Aboitiz Equity Ventures to invest on the internet and e-commerce. "Every company has to have an Internet strategy because future business is completely intertwined into the Internet and ecommerce," notes Jon Ramon. Jon Ramon is aware that closeness within his Aboitiz family is not enough to succeed in business. "We realized early that its not an easy thing to stay together. We have to work at it," he explains. It was necessary for them to create a family

45

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

council as a venue for regular meetings and discuss issues. Decisions emanating from their family council are decisions voted by the majority. After a decision is made, everybody abides by it, he says. Even family members are not exempted from company rules. "Rules must be equally applied to all," he adds. At present, 17 family members are working within the company. Many people think were all-family, but were only 17 working family members, Jon Ramon says. Aboitizs family business has been passed on for four generations and they have maintained a smooth transition from one generation to the next. Jon Ramons father, Eduardo, made a ruling that family members employed in the company who are over 60 years of age must step down from position but will still serve as elderly advisers to the younger generations. Aboitiz family members do not become part of the Aboitiz & Co. merely because of genealogy. They have to prove their worth. Starting from childhood, the Aboitiz children should learn about the different aspects of their businesses. Taking school breaks as an avenue to work for the company and learn the Aboitiz way of doing business. It is also important to the Aboitizes to maintain close ties with the Chinese community and Aboitiz scions studied Mandarin in Beijing and Taipei to ensure this relationship continues. Even Jon Ramon was branded useless by his grandfather for not being able to speak in Chinese.

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Vision and Mission: AEV is the publicly listed investment vehicle of the Aboitiz Group (or the Group). The Companys Mission and Vision are as follows:

Investments focuses on businesses that provide basic goods and services to meet the demands of a growing economy. We will develop and rely on our core competencies, financial strength, and reputation to achieve our goals. We are committed to continuously maximize shareholder value and seek to become the premier investment company in the Philippines.

Our corporate journey is not complete without telling you the story of our roots, our past, and the core values that we have inherited and aim to preserve. It is a past that is inextricably linked to a gentleman's tale of "Palabra de Honor" or "Word of Honor".

Our corporate journey began in the 1920s with the founding of Aboitiz & Co. It was during this period in history when the Aboitiz families consolidated and expanded their existing businesses into a corporate entity. Whilst full of hope and expectations, that period of corporate inception coincided with the deflation of World War I's economic exuberance. Prices of abaca and other agricultural commodities dropped dramatically. But, during this period of great difficulties was forged a deep commitment to corporate governance.

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Aboitiz & Co. was on the brink of bankruptcy with big losses and a large debt. However, the founder, Don Ramon Aboitiz, his brothers, cousins and employees resisted calls from well meaning friends to walk away from the debts. Instead, guided by the principles of "Palabra de honor", Don Ramon, as he is fondly remembered, borrowed money from banks and friends for the purpose of reviving the business with a commitment to pay back the debts.

In a letter to his sibling, he wrote: "The biggest fortune I have is my word and reputation. Money can be lost and can be recovered but once your name and reputation is lost, one's word is worthless and one is truly finished". Without that determination to survive business hardships, with hard work and a commitment to honor their word and reputation, the Aboitiz Group would not be around today.

One of the greatest lessons thus learned from that singular moment in our corporate past has been woven into AEV's business fabric: That Honor, Reputation, Trust and Integrity, are of paramount importance in running both our businesses and in managing our personal lives. The practice of governance and ethics in our business and our expanding Aboitiz family was crucial in the past and still remains so for the challenges our companies will inevitably face in the future.

Honor,

Reputation,

Trust

and

Integrity

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

The Legacy of Core Values

Aboitiz, hold Trust very dearly. They realize the importance of Trust from our customers and that they value our products and services; that they are not cheated, nor are they short changed in any way. We value Trust from our management and employees, that they are respected and treated fairly and appreciated in their contributions to the growth of the Company. We acknowledge the importance of Trust that is reposed in us by our shareholders and investors, that their investments are being handled with integrity, for their benefit, and not for those who run the institution. Lastly, we value Trust from the community at large, that we are an asset to the community by being a responsible member that shares and adds value to all.

We believe that Reputation is the Company's most important asset. It is the sum of values that our stakeholders attribute to us, based on their perception and interpretation of the image the Company communicates over time. We believe that corporate reputation has to be earned; and once earned protected and managed, and integrated into the Company's business strategy. Trust, Transparency, Expertise, Commitment and Empathy are four factors that uphold our Reputation.

Even at a young corporate age, Trust, Reputation, Governance and Corporate Social Responsibility have since been important to the Aboitiz organization. Aboitiz is what it is today because the family, shareholders, our professional team leaders and team members in our various organizations and business units (BUs) have

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

always upheld strong values that we all believe in and practice, such as Honor, Trust, Loyalty, Fairness and helping those who are less fortunate. From these strong core values, we have also adopted the complimentary values of adherence to quality, innovation, and service excellence.

A culture of Hard work, Sacrifice, Trustworthiness, Constant Improvement, Customer focus, Quality and Social Commitment - this set of characteristics makes us different and unique. This is what our Reputation is all about since the times when Don Ramon Aboitiz laid the foundational legacy of core values and characteristics for family and non-family team members to hold on to.

Innovation & Growth.

The company is committed to deliver bestinclass products and services to all clients, developing deep client insight, selecting the right people and employing the most innovative yet appropriate technology. The focus on quality and the customer is the root and result of our passion for better ways.

Looking for APeople.

Aboitiz are strongly motivated individuals who like to get things done and who live out our culture to deliver the brand promise every time, anytime. A people, the most

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qualified and driven to excel in everything with the company. Bold and Dynamic, They have good training ground and developing individuals to able to work cohesively as a unit and yet drive these same individuals to lead. Service oriented company that instills service to meet client needs. Apeople take responsible action and display personal discipline, integrity and pride in being part of a conglomerate with a trusted name in business.

In pursuit of a more focused strategy, the company agreed to share a common set of core values that represent us as a Group. The collective output of all the different values we have espoused across the Group throughout the years, fused together to become the Aboitiz Group Core Values, recognized and embrace by all as their own.

Issues and Concern:

Lower selling prices of electricity and revaluation of dollar liabilities dampened Aboitiz Equity Ventures Inc.s profit results in the second quarter.

In a regulatory filing, AEV said its consolidated net income declined 15 percent to P5.1 billion in the April to June period compared with a year ago.

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For the three-month period, the revaluation of consolidated dollar-denominated liabilities and placements resulted to a non-recurring loss of P1.1 billion versus last years non-recurring gain of P294 million, the Aboitiz holding firm said.

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

However, core income, which excludes non-recurring items, rose six percent to P6.2 billion in the second quarter.

The power business accounted for 74 percent of total earnings, followed by banking, food and property at 19 percent, six percent and one percent, respectively.

Even with the drop in second quarter earnings AEV managed to post P11.9 billion in consolidated net income in the first half, up one percent from P11.8 billion a year ago.

First semester core net income grew 3.5 percent to P11.7 billion. The core earnings stripped off the non-recurring gain of P217 million from the revaluation of dollardenominated liabilities and placements and P1.27-billion earnings from the sale of City Savings Bank Inc. to AEV subsidiary Union Bank of the Philippines in January. Our first semester performance figures are within our expectations. As a conglomerate, our earnings are diversified, which gives it more stability, said AEV president and CEO Erramon I. Aboitiz. In terms of specific units, Aboitiz Power Corp.s income contribution sank 22 percent to P7.3 billion from P9.4 billion in the first half last year.

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When adjusted for non-recurring items, the power strategic business unit recorded a six-percent year-on-year decrease in its earnings share to P8.4 billion from P8.9 billion, AEV said.

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

This as average price for its power output dropped 11 percent in the first half due to weaker selling price in the Wholesale Electricity Spot Market and in bilateral contracts. AboitizPowers net generation rose five percent to 5,360 gigawatt -hours (gwh) in the first half from 5,096 gwh a year ago due to the increase in demand brought about by the hotter weather during the summer months, AEV said. The power distribution groups earnings contribution jumped 15 percent to P1.6 billion from P1.4 billion as total attributable electricity sales increased two percent to 1,997 gwh from 1,949 gwh, AEV said.

The banking and food units, for their part, posted higher earnings in the first six months of the year. The drop in earnings of the power business was made up by the stellar performances of the banking and food businesses, Aboitiz said. The banking strategic business units income contribution surged 42 percent to P2.8 billion from P2 billion last year, driven by increases in both net interest income and other income, AEV said.

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Net interest income climbed 11 percent to P4.1 billion primarily due to the expansion in the average level of earning assets. UnionBanks resources climbed 22 percent to P340.8 billion as of end-June on the by back of the 37-percent growth in total deposits to P259.5 billion.

Pilmico Foods Corp. enjoyed a 22-percent uptick in its first semester income contribution to P630.7 million from P522.2 million. The movement was primarily due to the strong performance of the farms division, which registered a net income of P114.6 million versus last years net loss of close to P7 million as a result of the improved average selling price of market hogs for the period in review, AEV said. But the flour divisions income contribution eased six percent to P229.9 million as a result of softer prices. The feeds divisions earnings inched up one percent to P285.9 million, weighed down by higher input costs.

For the real estate business, Aboitiz Land Inc. posted a consolidated net income contribution of P111.1 million during the first half of 2013 as revenues hit P612.5 million. Our investment in AboitizLand has already begun to contribute to our earnings and will further diversify our earnings base, Aboitiz said. In November, AEV folded AboitizLand into the group.

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Moving forward, the company is gearing up for further expansion, particularly in the infrastructure sector. We remain excited about the opportunities that the Public-Private-Partnership (PPP) projects of the government will bring to us, Aboitiz said. Our cash flows and balance sheet continue to be strong, which will give us the capability of funding our expansion plans, he added.

Shares in the Philippines' Aboitiz Equity Ventures (AEV) jumped as much as 5.6% to a record high on Tuesday, with investors expecting it to benefit as power shortages push up electricity prices.

AEV, a large shareholder of energy developer Aboitiz Power, was the most actively traded stock by mid-morning as it rose to a peak of P14.25.

At 0250 GMT, the stock was at P13.75, up 1.9% and outperforming a 0.4% fall in the broader market and other stocks in the sector.

AEV, which has risen 52.8% so far in 2010 in a market that is up just 0.4%, accounted for 26% of market turnover by the mid-session on Tuesday.

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

"It stands to be a major beneficiary of the spike in demand for power and with the recent surge in the wholesale retail prices of energy," said Jojo Gonzales, research head at Philippine Equity Partners.

"Its energy rivals either do not have as much merchant capacity or have all of their output contracted out already. Investors see that the Aboitiz group could benefit from this the most."

Dry weather due to the El Nino weather pattern has hit hydro-electricity production in the Southeast Asian nation, leading to power outages even in the capital Manila.

Manila Electric Co. (Meralco), the Philippines' largest power distributor, last week warned of a significant hike in charges for March due to higher costs for the power supplied by generation companies.

Shares in Energy Development Corp., which contracts the bulk of its power to Meralco, were steady on Tuesday. First Gen Corp., the country's biggest privately owned power producer, was down 2.4% at mid-trade.

Last week, the government declared a state of calamity in the southern island of Mindanao, where there have been blackouts of up to eight hours per day.

Recommendation:
The Aboitiz Family Governance

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Much is said about family owned companies or companies with controlling shareholders - that these companies may lack the commitment to corporate governance principles, or the discipline to work towards a long term horizon. This is certainly not the case with the Company and the Aboitiz Group. Our track record in the country clearly shows this.

After more than 100 years of doing business, the Aboitiz Group has grown from a closely held family enterprise of less than 10 employees to a professionally run business group focused in seven industries with about a 30,000 strong workforce. This includes thirteen 4th generation Aboitiz family members and about eight 5th generation family members working for the Aboitiz group in a professional capacity. The unity and harmony of the Aboitiz family has been an important factor to the Aboitiz Group's success and continuity. Open Communication, Trust and good Family Governance are the cornerstones of the relationships of the Aboitiz Family. The Aboitiz family has its own Family Constitution to guide family members in their actions and to set rules family members must follow. This Family Constitution, together with the legacy core values and philosophies, are especially relevant to the handling of their corporate interests vis a vis the stakeholders of the Company. In addition, the Aboitiz family also has a Family Council that is separate from the business corporation and is intended to promote family unity and involvement in different activities whether social or otherwise. Staying together and building a legacy for the Aboitiz name and reputation is important.

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Aboitiz & Co. Inc. owns about 49.54% of Aboitiz Equity Ventures, Inc. (AEV) as of March 31, 2013. AEV in turn currently owns about 76.83% of AboitizPower. As of fiscal year 2012, AboitizPower accounted for 78% of the total net earnings contributions of AEV's business segments.

Total Quality Management

In 1992, AEV launched its internal cultural evolution through the adoption of the Total Quality Management (TQM) movement within the organization. To keep up with the fast changing times, the Aboitiz Group needed to experience a re-birth, a change in mindset to make the big transitional step to professionalize the organization. Believing that only organizations that value and practice the quality process, professionalism and good governance would grow and survive in the long run, Management embraced TQM as the key ingredient and driving force behind its business strategy. At that time, globalization and competition in the market place required companies to step up and adopt a culture of constant improvement, innovation, and customer focus. Quality in everything we did was crucial to our continued growth and success. Customer focus and customer satisfaction became our battle cry.

The Aboitiz Group recently launched the new core corporate values last July 2013 to realigned main components of the Aboitiz Way. The company adopted its new group-wide corporate values Integrity, Innovation, Teamwork, and Responsibility.

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