MACAY HOLDINGS, INC. ANNUAL CORPORATE GOVERNANCE...

Macay Holdings, Inc. 2014 Annual Corporate Governance Report 1

MACAY HOLDINGS, INC. ANNUAL CORPORATE GOVERNANCE REPORT


SECURITIES AND EXCHANGE COMMISSION

SEC FORM – ACGR

ANNUAL CORPORATE GOVERNANCE REPORT

1. Report is Filed for the Year : 2014

2. Exact Name of Registrant as Specified in its Charter: MACAY HOLDINGS, INC.

3. 137 Yakal Street, San Antonio Village, Makati City 1203

Address of Principal Office Postal Code

4. SEC Identification Number: PW998 5. (SEC Use Only)

Industry Classification Code

6. BIR Tax Identification Number: 000-410-269

7. (02) 812-8050

Issuer’s Telephone number, including area code

8. Maybank ATR Kim Eng Financial Corporation

Former name or former address, if changed from the last report


TABLE OF CONTENTS

A. BOARD MATTERS ................................................................................................................... 5 1) Board of Directors ...................................................................................................................... 5 2) Chairman and CEO ................................................................................................................... 14 3) Succession Plan for Board of Directors and Senior Management ........................................... 16 4) Other Executive, Non-Executive and Independent Directors .................................................. 17 5) Changes in the Board of Directors ........................................................................................... 20 6) Orientation and Education Program ........................................................................................ 26

B. CODE OF BUSINESS CONDUCT & ETHICS ............................................................................... 26

1) Policies ..................................................................................................................................... 26 2) Dissemination of Code of Ethics or Conduct ........................................................................... 27 3) Implementation of and Compliance with Code ....................................................................... 27 4) Related Party Transactions ...................................................................................................... 27 5) Family, Commercial and Contractual Relations ....................................................................... 29 6) Alternative Dispute Resolution ................................................................................................ 30

C. BOARD MEETINGS & ATTENDANCE .................................................................................. 30

1) Schedule of Meetings ........................................................................................................... 30 2) Attendance of Directors ........................................................................................................ 30 3) Separate Meetings of Non-Executive Directors .................................................................... 31 4) Quorum Requirement .......................................................................................................... 31 5) Access to Information ........................................................................................................... 32 6) External Advice ..................................................................................................................... 33 7) Change/s in existing policies ................................................................................................. 34

D. REMUNERATION MATTERS .............................................................................................. 34

1) Remuneration Process .......................................................................................................... 34 2) Remuneration Policy and Structure for Executive and Non-Executive Directors ................. 34 3) Aggregate Remuneration ...................................................................................................... 35 4) Stock Rights, Options and Warrants .................................................................................... 36 5) Remuneration of Management ............................................................................................ 36

E. BOARD COMMITTEES ...................................................................................................... 36

1) Number of Members, Functions and Responsibilities .......................................................... 36 2) Committee Members ............................................................................................................ 43 3) Changes in Committee Members ......................................................................................... 44 4) Work Done and Issues Addressed ........................................................................................ 44 5) Committee Program ............................................................................................................. 45

F. RISK MANAGEMENT SYSTEM ........................................................................................... 45

1) Statement on Effectiveness of Risk Management System ...................................................... 45 2) Risk Policy ................................................................................................................................. 46 3) Control System Set Up ............................................................................................................. 46

G. INTERNAL AUDIT AND CONTROL ...................................................................................... 47

1) Internal Control System ........................................................................................................... 48 2) Internal Audit ........................................................................................................................... 49


H. ROLE OF STAKEHOLDERS ................................................................................................. 51 1) Policies and Activities ............................................................................................................... 51 2) Corporate Responsibility .......................................................................................................... 51 3) Performance-Enhancing Mechanisms for Employee Participation. ........................................ 51 4) Procedures for Handling Employee Complaint ....................................................................... 52

I. DISCLOSURE AND TRANSPARENCY ................................................................................... 52

1) Ownership Structure ................................................................................................................ 52 2) Does the Annual Report disclose the following: ...................................................................... 52 3) External Auditor’s Fee .............................................................................................................. 53 4) Medium of Communication ..................................................................................................... 53 5) Date of Release of Audited Financial ....................................................................................... 53 6) Company Website .................................................................................................................... 53 7) Disclosure of RPT ..................................................................................................................... 54

J. RIGHTS OF STOCKHOLDERS .............................................................................................. 54

1) Right to Participate Effectively in Stockholders’ Meetings ...................................................... 54 2) Treatment of Minority Stockholders ....................................................................................... 64

K. INVESTOR RELATIONS PROGRAM .................................................................................... 64 L. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES ............................................................ 65 M. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL ..................................................... 66 N. INTERNAL BREACHES AND SANCTIONS ............................................................................. 67 Signatures.................................................................................................................................. 68


A. BOARD MATTERS 1) Board of Directors

1. Number of Directors per Articles of Incorporation 13

2. Actual number of Directors for the year 13

(a) Composition of the Board (As of 31 December 2014)

Director’s Name Type [Executive (ED), Non-Executive (NED) or Independent Director (ID)]

If nominee, identify the principal

Date first elected

Date last elected (if ID, state the number of years served as ID)1

Elected when (Annual/ Special Meeting)

No. of Years served as Director

Alfredo M. Yao NED n.a. 25-Oct-2013 25-Jul-2014 Annual Stockholders Meeting

1 year and 5 months

Armando M. Yao NED n.a. 25-Oct-2013 25-Jul-2014 Annual Stockholders Meeting

1 year and 5 months

Jeffrey S. Yao ED n.a. 25-Oct-2013 25-Jul-2014 Annual Stockholders Meeting

1 year and 5 months

Carolyn S. Yao NED n.a 25-Oct-2013 25-Jul-2014 Annual Stockholders Meeting

1 year and 5 months

Mary Grace S. Yao NED n.a 25-Oct-2013 25-Jul-2014 Annual Stockholders Meeting

1 year and 5 months

Roberto A. Atendido

NED Mazy’s Capital, Inc.

25-Oct-2013 25-Jul-2014 Annual Stockholders Meeting

1 year and 5 months

Fernando R. Balatbat

ED Mazy’s Capital, Inc.


1 year and 5 months

Antonio I. Panajon ED Mazy’s Capital, Inc.


1 year and 5 months

Albert S. Toribio NED Mazy’s Capital, Inc.


1 year and 5 months

Gerardo T. Garcia ED Mazy’s Capital, Inc.

25-Jul-2014 25-Jul-2014 Annual Stockholders Meeting

8 months

Rinaldi C. Aves ED Mazy’s Capital, Inc.

25-Jul-2014 25-Jul-2014 Annual Stockholders Meeting

8 months

1 Reckoned from the election immediately following July 25, 2014.


Jesus G. Gallegos, Jr.

ID n.a. 25-Oct-2013 25-Jul-2014 Annual Stockholders Meeting

1 year and 5 months

Roberto F. Anonas, Jr.

ID n.a. 25-Oct-2013 25-Jul-2014 Annual Stockholders Meeting

1 year and 5 months

(b) Provide a brief summary of the corporate governance policy that the board of directors has adopted. Please emphasize the policy/ies relative to the treatment of all shareholders, respect for the rights of minority shareholders and of other stakeholders, disclosure duties, and board responsibilities.

The corporate governance policies adopted by the board of directors of the Corporation (the “Board”) are found in the Corporation’s Revised Manual on Corporate Governance (the “Manual”), as of 03 September 2014. The Manual contains sections on Shareholders’ Benefits, covering Investor’s Rights and Protection. Under the Manual, it is the duty of the directors to promote, and remove the impediments to, the exercise of shareholder’s rights and allow possibilities to seek redress for violation of their rights. The Board shall encourage the exercise of shareholder’s voting rights and the solution of collective action problems through appropriate mechanisms. The Board shall also be instrumental in removing excessive costs and other administrative or practical impediments to shareholders participating in meetings and/or voting in person. The directors shall pave the way for the electronic filing and distribution of shareholder information necessary to make informed decisions subject to legal constraints. Sec. 7 on Shareholders’ Benefits recognizes and enjoins the Board to respect the following rights of stockholders, to wit -

Voting Right - Shareholders have the right to elect, remove and replace directors

and vote on certain corporate acts in accordance with the Corporation Code.

- Cumulative voting shall be used in the election of directors. - A director shall not be removed without just cause if it will deny

minority shareholders representation in the Board.

Power of Inspection - All shareholders are allowed to inspect corporate books and

records, including minutes of Board meetings and stock registries in accordance with the Corporation Code and shall be furnished with annual reports, including financial statements, without cost or restrictions.

Right to Information - Shareholders shall be provided, upon request, with periodic reports

which disclose personal and professional information about the directors and officers and certain other matters such as their holdings with the Corporation’s shares, dealings with the


Corporation, relationship among directors and key officers, and the aggregate compensation of directors and officers.

- The minority shareholders shall be granted the right to propose the holding of a meeting, and the right to propose items in the agenda of the meeting; provided the items are for legitimate business purposes.

- The minority shareholders shall have access to any and all information relating to matters for which the Management is accountable, except for matters covered by confidentiality agreements.

Right to Dividends - Shareholders shall have the right to receive dividends subject to the

discretion of the Board. - The Corporation shall be compelled to declare dividends when its

retained earnings is in excess of 100% of its paid-in capital stock, except: a) when justified by definite corporate expansion projects or programs approved by the Board or b) when the Corporation is prohibited under any loan agreement with any financial institution or creditor, whether local or foreign, from declaring dividends without its consent, and such consent has not been secured; or c) when it can be clearly shown that such retention is necessary under special circumstances obtaining in the Corporation, such as when there is a need for special reserve for probable contingencies.

Appraisal Right - The shareholders shall have appraisal right or the right to dissent and

demand payment of the fair value of their shares in the manner provided for under Sec. 82 of the Corporation Code of the Philippines, under any of the following circumstances:

a) In case any amendment to the articles of incorporation has the

effect of changing or restricting the rights of any stockholders or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any class, or of extending or shortening the term of corporate existence;

b) In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets as provided in the Corporation Code: and

c) In case of merger or consolidation. Furthermore, Sec. 6 of the Manual on the Reportorial or Disclosure System of the Company’s Corporate Governance Policies provides that the essence of corporate governance is transparency. It is therefore essential that all material information about the Corporation which could adversely affect its viability or interest of its stockholders and other stakeholders, such as earnings results, acquisition or disposition of assets, off balance sheet transactions, related party transactions, and direct and indirect remuneration of members of the Board and management, should be publicly and timely disclosed. All such information should be disclosed through the appropriate Philippine


Stock Exchange (“PSE”) mechanism and submissions to the Securities and Exchange Commission (“SEC”). The Board is committed at all times to full disclosure of material information dealings and shall cause the filing of all required information through the appropriate PSE mechanisms for listed companies and submissions to the SEC for the interest of its stockholders and other stakeholders. The general responsibility of the Board of Directors include the following:

- The Board shall conduct itself with utmost honesty and integrity in the

discharge of its duties, functions, and responsibilities. - It is the Board’s responsibility to foster the long-term success of the

Corporation, and to sustain its competitiveness and profitability in a manner consistent with its corporate objectives and the best interests of its stockholders and other stakeholders.

- The Board should formulate the Corporation’s vision, mission, strategic objectives, policies, and procedures that shall guide its activities, including the means to effectively monitor Management’s performance.

To ensure a high standard of best practice for the Corporation, shareholders, and other stakeholders, the Board shall conduct itself with honestly and integrity in the performance of its specific duties and functions –

a) Implement a process for the selection of directors who can add value

and contribute independent judgment to the formulation of sound corporate strategies and policies. Appoint competent, professional, honest, and highly motivated management officers. Adopt an effective succession planning program for Management.

b) Provide sound strategic policies and guidelines to the Corporation on major investments and capital expenditures. Establish programs that can sustain its long-term viability and strength. Periodically evaluate and monitor the implementation of such policies and strategies, including the business plans, operating budgets and Management’s overall performance.

c) Ensure the Corporation’s faithful compliance with all applicable laws, regulations and best business practices.

d) Establish and maintain an investor relations program that will keep the stockholders informed of important developments in the Corporation. If feasible, the CEO or chief financial officer shall exercise oversight responsibility over this program.

e) Identify the Corporation’s stakeholders in the community in which it operates or are directly affected by its operations, and formulate a clear policy of accurate, timely and effective communication with them.

f) Adopt a system of check and balance within the Board. A regular review of the effectiveness of such system should be conducted to ensure the integrity of the decision-making and reporting processes at all times. There should be a continuing review of the Corporation’s internal control system in order to maintain its adequacy and effectiveness.


g) Identify key risk areas and performance indicators and monitor these factors with due diligence to enable the Corporation to anticipate and prepare for possible threats to its operational and financial viability.

h) Formulate and implement policies and procedures that would ensure the integrity and transparency of related party transactions between and among the Corporation and its parent company, joint ventures, subsidiaries, associates, affiliates, major stockholders, officers and directors, including their spouses, children and dependent siblings and parents and of interlocking director relationships by members of the Board.

i) Constitute an Audit Committee and such other committees it deems necessary to assist the Board in the performance of its duties and responsibilities.

j) Establish and maintain an alternative dispute resolution system in the Corporation that can amicably settle conflicts or differences between the Corporation and its stockholders, and the Corporation and third parties, including regulatory authorities.

k) Meet at such times or frequency as may be needed but no less than four (4) times during one calendar year. The minutes of such meetings should be duly recorded. Independent views during Board meetings should be encouraged and given due consideration.

l) Keep the activities and decisions of the Board within its authority under the articles of incorporation and by-laws, and in accordance with existing laws, rules and regulations.

m) Appoint a Compliance Officer with the rank of at least vice-president. In the absence of such appointment, the Corporate Secretary, preferably a lawyer, shall act as Compliance Officer.

n) Perform such other responsibilities as may be required under relevant rules and regulations.

A director’s office is one of trust and confidence. A director should act in the best interest of the Corporation in a manner characterized by transparency, accountability, and fairness. He or she should also exercise leadership, prudence, and integrity in directing the Corporation towards sustained progress. Accordingly, the Manual provides the duties and responsibilities of individual directors, as follows –

(a) Conduct fair business transactions with the Corporation and ensure that

his personal interest does not conflict with the interests of the Corporation.

The basic principle to be observed is that a director should not use his position to profit or gain some benefit or advantage for himself and/or his related interests. He should avoid situations that may compromise his impartiality. If an actual or potential conflict of interest may arise on the part of a director, he should fully and immediately disclose it and should not participate in the decision-making process. A director who has a continuing material conflict of interest should seriously consider resigning from his position.

A conflict of interest shall be considered material if the director’s

personal or business interest is antagonistic to that of the Corporation,


or stands to acquire or gain financial advantage at the expense of the Corporation.

(b) Devote the time and attention necessary to properly and effectively

perform his duties and responsibilities. A director should devote sufficient time to familiarize himself with the

Corporation’s business. He should be constantly aware and knowledgeable of the Corporation’s operations to enable him to meaningfully contribute to the Board’s work.

Attendance in board meetings is crucial to the effectiveness of the

Board and establishing a quorum at meetings. He should attend and actively participate in Board and committee meetings, review meeting materials and, if called for, ask questions or seek explanation. He should be physically present in at least 50% of the Board meetings.

(c) Act judiciously. Before deciding on any matter brought before the Board, a director

should carefully evaluate the issues and, if necessary, make inquiries and request clarification.

The Board shall have access to complete, adequate, and timely

information from Management about matters to be taken up in their meetings. Reliance on information volunteered by Management may not be sufficient in all circumstances and further inquiries may have to be made by members of the Board to enable them to properly perform their duties and responsibilities. For this purpose, members shall be given independent access to Management and the Corporate Secretary on any issue which requires clarification.

(d) Exercise independent judgment. A director should view each problem or situation objectively. If a

disagreement with other directors arises, he should carefully evaluate and explain his position. He should not be afraid to take an unpopular position. Corollary, he should support plans and ideas that he thinks are beneficial to the Corporation.

(e) A director shall have working knowledge of the statutory and regulatory

requirements that affect the Corporation, including its articles of incorporation and by-laws, the rules and regulations of the Commission, and where applicable, the requirements of relevant regulatory agencies.

A director should keep abreast with industry developments and business

trends in order to promote the Corporation’s competitiveness. (f) Observe confidentiality.


A director should keep secure and confidential all non-public information he may acquire or learn by reason of his position as director. He should not reveal confidential information to unauthorized persons without the authority of the Board.

The Manual also provides for the duties and responsibilities of various Corporate Officers, namely, the Chairman, President, Treasurer, Corporate Secretary, Compliance Officer, External Auditor, and Internal Auditor.

(c) How often does the Board review and approve the vision and mission?

Under the Manual, it is the responsibility of the Board to formulate the Corporation’s vision, mission, strategic objectives, policies, and procedures that shall guide its activities, including the means to effectively monitor Management’s performance. The Board has the authority and discretion to periodically review said vision, mission, strategic objectives, policies, and procedures.

(d) Directorship in Other Companies

(i) Directorship in the Company’s Group2

Identify, as and if applicable, the members of the company’s Board of Directors who hold the office of director in other companies within its Group:

Name Corporate Name of the Group Company

Type of Directorship (Executive, Non-Executive, Independent).

Indicate if the Director is also the Chairman.

Alfredo M. Yao ARC Refreshments Corp. Mega Asia Bottling Corp.

Asiawide Refreshments Corp. Money Mover’s Inc. AMY Holdings, Inc. Zest-O Corporation

Semexco Marketing Corp. Harman Foods

Uni-Ipel Industries, Inc. Solmac Mktg., Inc.

Pharma-Rex Asiawide Kalbe Phil., Inc.

ARC Holdings, Inc. SMI Development Corporation

Amchem Mktg., Inc. Bev-Pack, Inc.

Downtown Realty Investment Corp.

Mazy’s Capital, Inc.

Chairman Chairman Chairman Chairman Chairman Chairman Chairman Chairman Chairman Chairman Chairman

Non-Executive Chairman Chairman Chairman Chairman Chairman

Chairman

2 The Group is composed of the parent, subsidiaries, associates and joint ventures of the company.


Armando M. Yao ARC Refreshments Mega Asia Bottling Corp.

Asiawide Refreshments Corp. AMY Holdings, Inc. Zest-O Corporation

Semexco Marketing Corp. Harman Foods

Uni-Ipel Solmac Mktg., Inc. ARC Holdings, Inc.

SMI Development Corporation Bev-Pack, Inc.

Down Town Realty Investment Corp.


Non-Executive Director Executive Director

Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director

Non-Executive Director

Jeffrey S. Yao ARC Refreshments Corp. Mega Asia Bottling Corp.

Asiawide Refreshments Corp. AMY Holdings, Inc. Zest-O Corporation

Semexco Marketing Corp. ARC Holdings, Inc.

Amchem Mktg., Inc. Bev-Pack, Inc.


Mazy’s Capital, Inc. Philippine Business Bank

Executive Director Executive Director Executive Director

Non-Executive Director Non-Executive Director Non-Executive Director

Executive Director Non-Executive Director

Executive Director Executive Director

Executive Director


Carolyn S. Yao Mega Asia Bottling Corp. AMY Holdings, Inc. Zest-O Corporation

Semexco Marketing Corp. Bev-Pack, Inc.



Non-Executive Director Executive Director Executive Director


Executive Director

Mary Grace S. Yao Semexco Marketing Corp. Down Town Realty Investment

Corp. Mazy’s Capital, Inc.

Non-Executive Director Non-Executive Director


Antonio I. Panajon ARC Refreshments Corp. Asiawide Refreshments Corp.

Asiwide Kalbe Phil., Inc. ARC Holdings, Inc.

Pharmarex

Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director

Albert S. Toribio ARC Refreshments Corp. Asiawide Refreshments Corp.

ARC Holdings, Inc.


Fernando R. Balatbat Pharma-Rex Executive Director

Roberto A. Atendido Pharma-Rex Philippine Business Bank

Non-Executive Director Non-Executive Director


Gerardo T. Garcia ARC Refreshments Corp. Asiawide Refreshments Corp.

ARC Holdings, Inc.


Rinaldi C. Aves ARC Refreshments Corp. Asiawide Refreshments Corp.

ARC Holdings, Inc.


(ii) Directorships in Other Listed Companies

Identify, as and if applicable, the members of the company’s Board of Directors who are also directors of publicly-listed companies outside of its Group:

Director’s Name Name of Listed Company

Type of Directorship (Executive, Non-

Executive, Independent). Indicate if director is also

the Chairman

Roberto A. Atendido Paxys, Inc. PICOP Resources, Inc.

Non-Executive Chairman

(iii) Relationship with the Company and its Group

Provide details, as and if applicable, of any relation among the members of the Board of Directors, which links them to significant shareholders in the company and/or in its group:

Director’s Name Name of the Significant Shareholder

Description of the relationship

Alfredo M. Yao Mazy’s Capital, Inc. These directors are incorporators and directors of Mazy’s Capital, Inc. Mr. Alfredo M. Yao and Mr. Armando M. Yao are brothers. Mr. Jeffrey S. Yao, Ms. Carolyn S. Yao, and Ms. Mary Grace S. Yao are children of Mr. Alfredo Yao. They are all thus relatives up to the third degree of consanguinity.

Armando M. Yao

Jeffrey S. Yao

Carolyn S. Yao

Mary Grace S. Yao

(e) Has the company set a limit on the number of board seats in other companies (publicly listed, ordinary and companies with secondary license) that an individual director or CEO may hold simultaneously? In particular, is the limit of five board seats in other publicly listed companies imposed and observed? If yes, briefly describe other guidelines.


Guidelines Maximum Number of

Directorships in other

companies

Executive Directors

The Chief Executive Officer and other executive directors shall submit themselves to a low indicative limit on membership in other corporate boards. The same low limit shall apply to independent, non-executive directors who serve as full-time executives in other corporations. In any case, the capacity of directors to serve with diligence shall not be compromised. (Section 3.2.1.2, Revised Manual on Corporate Governance)

“low indicative limit”

Non-Executive Directors

CEO

(f) Shareholding in the Company

Complete the following table on the members of the Company’s Board of Directors who directly and indirectly own shares in the Company.

Name of Director Number of

Direct Shares

Estimated Number of Indirect hares/Through (name of record owner)

Total direct & indirect shares

% to Total Outstanding

Shares

Alfredo M. Yao 1 0 1 -nil-

Armando M. Yao 1 0 1 -nil-

Carolyn S. Yao 1 0 1 -nil-

Jeffrey S. Yao 1 0 1 -nil-

Mary Grace S. Yao 1 0 1 -nil-

Antonio I. Panajon 1 0 1 -nil-

Fernando R. Balatbat 1 0 1 -nil-

Roberto A. Atendido 1 0 1 -nil-

Albert S. Toribio 1 0 1 -nil-

Gerardo T. Garcia 1 0 1 -nil-

Rinaldi C. Aves 1 0 1 -nil-

Jesus G. Gallegos, Jr. 1 0 1 -nil-

Roberto F. Anonas, Jr. 1 0 1 -nil-

Total 13 0 13

2) Chairman and CEO

(a) Do different persons assume the role of Chairman of the Board of Directors and CEO? If no, describe the checks and balances laid down to ensure that the Board gets the benefit of independent views.

Yes ☑ No ☐


Identify the Chairman and CEO

Chairman of the Board Alfredo M. Yao

CEO/President Antonio I. Panajon

(b) Roles, Accountabilities and Deliverables

Define and clarify the roles, accountabilities and deliverables of the Chairman and CEO. As provided under the Manual and the Amended By-laws of the Corporation.

Definition Chairman President/Chief Executive Officer

Role, Accountabilities and Deliverables

Under Art. III, Sec. 5 of the Corporation’s Amended By-laws and Sec. 3.3.3 of the Manual, it is the duty of the Chairman to preside at all meetings of the Board of Directors and the stockholders and to exercise such powers and perform such duties as the Board of Directors may assign to him. Furthermore, Sec. 3.3.3 of the Manual also provides the following duties and responsibilities for the Chairman: (a) Ensure that the meetings of

the Board are held in accordance with the Corporation’s By-laws or as he may deem necessary.

(b) Supervise the preparation of the agenda of the meeting in coordination with the Corporate Secretary, taking into consideration the suggestions of the Chief Executive Officer, Management, and the directors.

(c) Maintain qualitative and timely lines of communication and information between the Board and Management.

The President or Chief Executive Officer of the Corporation shall be responsible for the effective management of the Company. Under the Amended By-laws of the Corporation and the Manual, he is tasked with the following:

To be responsible for the general supervision of the business affairs and property of the Corporation;

Have general supervision and management of the business affairs and property of the Corporation.

To initiate and develop corporate objectives and policies and formulate long range projects, plans and programs for the approval of the Board;

To establish general administrative and operating policies and to ensure that they are carried out under his supervision and control;

To assign the exercise or performance of his powers, duties and functions to any other officer or officers, subject always to his supervision and control;

To represent the Corporation at all functions and proceedings or to designate the representative or proxy of the Corporation in all


meetings at which the Corporation must be present;

To execute on behalf of the corporation all contracts, obligations and agreements which require the approval of the board of directors, except as otherwise directed by the board of directors;

To make and present reports to the board of directors and stockholders;

To sign certificates of stock;

To preside at meetings of the board of directors and stockholders in the absence of the Chairman;

Identify, evaluate, and recommend investment opportunities for the Corporation, for the approval of the Board.

Provide the necessary leadership for Management in planning, developing, and implementing business strategies, plans, and budgets as approved by the Board in keeping with the Corporation’s mission, vision, and corporate objectives.

Oversee the preparation of the budgets and the financial statements of the Corporation; sign/execute such reports of the Corporation as may be required by regulatory bodies.

To exercise such other powers and perform such other duties as are incident to his office or are entrusted and assigned to him by the Board of Directors.

3) Succession Plan for Board of Directors and Senior Management

Explain how the board of directors plans for the succession of the CEO/Managing

Director/President and the top key management positions?


It is the duty of the Board to adopt an effective succession planning program for Management under Sec. 3.1.3(a) of the Manual.

4) Other Executive, Non-Executive and Independent Directors Does the company have a policy of ensuring diversity of experience and background of directors in the board?

Sec. 3.1.1 of the Manual mandates that the Board should have a mix of executive and non-executive members, including independent directors. Under Sec. 3.1.3(a) of the Revised Manual on Corporate Governance, the Board is tasked to implement a process for the selection of directors who can add value and contribute independent judgment to the formulation of sound corporate strategies and policies and appoint competent, professional, honest, and highly motivated management officers. Does it ensure that at least one non-executive director has an experience in the sector or industry the company belongs to? Please explain. Yes. The Manual provides that the Nomination Committee shall consider the nature of the business of the corporations of which a candidate is a director among the guidelines in the determination of the number of directorships for the Board (Sec. 3.2.1.2, Revised Manual on Corporate Governance). Sec. 3.2.1.2 of the Manual also requires that a director must be at least a college graduate or possess an equivalent academic degree or have at least five (5) years experience in business to substitute for such formal education. Further, one of the specific duties and responsibilities of a director is to keep abreast with industry developments and business trends in order to promote the Corporation’s competitiveness.

Define and clarify the roles, accountabilities and deliverables of the Executive, Non-Executive and Independent Directors: Sec. 3.1.2 of the Manual provides for the general responsibility of the Board of Directors include the following:

- The Board shall conduct itself with utmost honesty and integrity in the

discharge of its duties, functions, and responsibilities. - It is the Board’s responsibility to foster the long-term success of the

Corporation, and to sustain its competitiveness and profitability in a manner consistent with its corporate objectives and the best interests of its stockholders and other stakeholders.

- The Board should formulate the Corporation’s vision, mission, strategic objectives, policies, and procedures that shall guide its activities, including the means to effectively monitor Management’s performance.

To ensure a high standard of best practice for the Corporation, shareholders, and other stakeholders, Sec. 3.1.3 of the Manual provides that the Board shall conduct itself with honestly and integrity in the performance of its specific duties and functions –

a) Implement a process for the selection of directors who can add value

and contribute independent judgment to the formulation of sound


corporate strategies and policies. Appoint competent, professional, honest, and highly motivated management officers. Adopt an effective succession planning program for Management.

b) Provide sound strategic policies and guidelines to the Corporation on major investments and capital expenditures. Establish programs that can sustain its long-term viability and strength. Periodically evaluate and monitor the implementation of such policies and strategies, including the business plans, operating budgets and Management’s overall performance.

c) Ensure the Corporation’s faithful compliance with all applicable laws, regulations and best business practices.

d) Establish and maintain an investor relations program that will keep the stockholders informed of important developments in the Corporation. If feasible, the CEO or chief financial officer shall exercise oversight responsibility over this program.

e) Identify the Corporation’s stakeholders in the community in which it operates or are directly affected by its operations, and formulate a clear policy of accurate, timely and effective communication with them.

f) Adopt a system of check and balance within the Board. A regular review of the effectiveness of such system should be conducted to ensure the integrity of the decision-making and reporting processes at all times. There should be a continuing review of the Corporation’s internal control system in order to maintain its adequacy and effectiveness.

g) Identify key risk areas and performance indicators and monitor these factors with due diligence to enable the Corporation to anticipate and prepare for possible threats to its operational and financial viability.

h) Formulate and implement policies and procedures that would ensure the integrity and transparency of related party transactions between and among the Corporation and its parent company, joint ventures, subsidiaries, associates, affiliates, major stockholders, officers and directors, including their spouses, children and dependent siblings and parents and of interlocking director relationships by members of the Board.

i) Constitute an Audit Committee and such other committees it deems necessary to assist the Board in the performance of its duties and responsibilities.

j) Establish and maintain an alternative dispute resolution system in the Corporation that can amicably settle conflicts or differences between the Corporation and its stockholders, and the Corporation and third parties, including regulatory authorities.

k) Meet at such times or frequency as may be needed but no less than four (4) times during one calendar year. The minutes of such meetings should be duly recorded. Independent views during Board meetings should be encouraged and given due consideration.

l) Keep the activities and decisions of the Board within its authority under the articles of incorporation and by-laws, and in accordance with existing laws, rules and regulations.

m) Appoint a Compliance Officer with the rank of at least vice-president. In the absence of such appointment, the Corporate Secretary, preferably a lawyer, shall act as Compliance Officer.


n) Perform such other responsibilities as may be required under relevant rules and regulations.

Keeping in mind that a director’s office is one of trust and confidence, individual directors are enjoined to act in the best interest of the Corporation in a manner characterized by transparency, accountability, and fairness. He or she should also exercise leadership, prudence, and integrity in directing the Corporation towards sustained progress. Thus, Sec. 3.1.4 of the Manual provides the duties and responsibilities of individual directors, as follows –

(a) Conduct fair business transactions with the Corporation and ensure that

his personal interest does not conflict with the interests of the Corporation. – A director should not use his position to profit or gain some benefit or advantage for himself and/or his related interests. He should avoid situations that may compromise his impartiality. If an actual or potential conflict of interest may arise on the part of a director, he should fully and immediately disclose it and should not participate in the decision-making process. A director who has a continuing material conflict of interest should seriously consider resigning from his position.

(b) Devote the time and attention necessary to properly and effectively

perform his duties and responsibilities. – A director should devote sufficient time to familiarize himself with the Corporation’s business. He should be constantly aware and knowledgeable of the Corporation’s operations to enable him to meaningfully contribute to the Board’s work. He should attend and actively participate in Board and committee meetings, review meeting materials and, if called for, ask questions or seek explanation. He should be physically present in at least 50% of the Board meetings.

(c) Act judiciously. – Before deciding on any matter brought before the

Board, a director should carefully evaluate the issues and, if necessary, make inquiries and request clarification.

(d) Exercise independent judgment. – A director should view each problem

or situation objectively. If a disagreement with other directors arises, he should carefully evaluate and explain his position. He should not be afraid to take an unpopular position. Corollary, he should support plans and ideas that he thinks are beneficial to the Corporation.

(e) A director shall have working knowledge of the statutory and regulatory

requirements that affect the Corporation, including its articles of incorporation and by-laws, the rules and regulations of the Commission, and where applicable, the requirements of relevant regulatory agencies.

A director should keep abreast with industry developments and business

trends in order to promote the Corporation’s competitiveness. (f) Observe confidentiality. – A director should keep secure and confidential

all non-public information he may acquire or learn by reason of his


position as director. He should not reveal confidential information to unauthorized persons without the authority of the Board.

Independent Directors In order for the Board to exercise objective judgment in fulfilling its duties and functions, the Corporation has at least two (2) independent directors elected to the Board. Independent Directors should always attend Board Meetings. The Board may, to promote transparency, require the presence of at least one Independent Director in all its meetings. An Independent Director shall have the qualifications and none of the disqualifications as set forth in Corporation’s by-laws and the Securities Regulation Code, its Implementing Rules and Regulations, and relevant issuances of the SEC. Provide the company’s definition of “independence” and describe the company’s compliance to the definition. The Corporation abides by the definition of “independent director” as provided in the Securities Regulation Code and its Implementing Rules and Regulations and related regulations (Art. II, Sec. 1, Amended By-laws of the Corporation). Does the company have a term limit of five consecutive years for independent directors? If, after two years, the company wishes to bring back an independent director who has served for five years, does it limit the term for no more than four additional years? Please explain. The Company follows the SEC’s guidelines as provided in Memorandum Circular No. 9, series of 2011, on setting the term limits for Independent Directors.

5) Changes in the Board of Directors (Executive, Non-Executive and Independent Directors) (a) Resignation/Death/Removal

Indicate any changes in the composition of the Board of directors that happened during the period There were no resignations or removal of any of the members of the Board of Directors of the Corporation for 2014. During its Annual Stockholders Meeting, the stockholders approved a proposed amendment to the Corporation’s By-laws increasing the number of directors from eleven (11) to thirteen (13). Accordingly, the stockholders during said meeting elected two (2) additional members of the Board of Directors, namely, Mr. Gerardo T. Garcia and Mr. Rinaldi C. Aves. However, such amendment to the By-laws is subject to the approval of the SEC, which approval was obtained on 12 September 2014.

Name Position Date of Election Reason Gerardo T. Garcia Director 25 July 2014 Additional Director by

virtue of Amended By-laws of the

Corporation

Rinaldi C. Aves Director 25 July 2014 Additional Director by virtue of Amended By-

laws of the Corporation


(b) Selection/Appointment, Re-election, Disqualification, Removal, Reinstatement and Suspension

Describe the procedures for the selection/appointment, re-election, disqualification, removal, reinstatement and suspension of the members of the Board of Directors. Provide details of the processes adopted (including the frequency of election) and the criteria employed in each procedure:

Procedure Process Adopted Criteria

a. Selection/Appointment

Executive Directors The Directors of the Company are elected at the annual stockholders’ meeting to hold office until the next succeeding annual meeting and until their respective successors have been appointed or elected and qualified (Amended By-laws of Macay Holdings, Inc.). The Directors possess all the qualifications and none of the disqualifications provided for in the SRC and its Implementing Rules and Regulations as well as the Company’s By-laws and the Manual.

i. He must be a holder of at least

one (1) share of stock of the Corporation;

ii. He must be at least a college graduate or possess an equivalent academic degree or have at least five (5) years’ experience in business to substitute for such formal education;

iii. He must be at least twenty-

five (25) years old at the time of his election or appointment;

iv. He shall have been proven to possess integrity and probity; and

v. He shall be assiduous and diligent.

(Section 3.2.1.2, Revised Manual on Corporate Governance) The Nomination Committee shall consider the following guidelines in the determination of the number of directorships for the Board:

The nature of the business of the Corporation of which he is a director;

Age of the director;



Number of directorships/active memberships and officerships in other corporations or organizations; and

Possible conflict of interest (Section 3.2.1.2, Revised Manual on Corporate Governance).

Independent Directors

The Corporation follows the requirements of the Securities Regulation Code (SRC) and its Implementing Rules and Regulations as well as the SEC guidelines on the nomination and election of Independent Directors.

Independent Directors In order for the Board to exercise objective judgment in fulfilling its duties and functions, the Corporation has at least two (2) independent directors elected to the Board. Independent Directors should always attend Board Meetings. The Board may, to promote transparency, require the presence of at least one Independent Director in all its meetings. An Independent Director shall have the qualifications and none of the disqualifications as set forth in Corporation’s by-laws and the Securities Regulation Code, its Implementing Rules and Regulations, and relevant issuances of the SEC.

(Section 3.1.3, Revised Manual on Corporate Governance)

3.

b. Re-appointment

Executive Directors Same as above. 4. Same as above.



c. Permanent Disqualification

Executive Directors Directors/ Officers elected or appointed without possessing the qualifications or possessing any of the disqualifications as

Any person convicted by final judgment or order by a competent judicial or administrative body of any crime that (a) involves the




enumerated herein, or in the By-laws of the corporation, shall vacate their respective positions immediately.

purchase or sale of securities, as defined in the SRC; (b) arises out of the person’s conduct as an underwriter, broker, dealer, investment adviser, principal distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; or (c) arises out of his fiduciary relationship with a bank quasi-bank, trust company, investment house or as an affiliated person of any of them;

Any person who, by reason of misconduct, after hearing, is permanently enjoined by a final judgment or order of the Commission or any court or administrative body of competent jurisdiction from: (a) acting as underwriter, broker, dealer, investment adviser, principal distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; (b) acting as director or officer of a bank, quasi-bank, trust company, investment house, or investment company; (c) engaging in or continuing any conduct or practice in any of the capacities mentioned in sub-paragraphs (a) and (b) above, or willfully violating the laws that govern securities and banking activities. The disqualification shall also apply if such person is currently the subject of an order of the Commission or any court or administrative body denying, revoking or suspending any registration, license or permit issued to him under the Corporation Code, Securities Regulation Code or any other


law administered by the Commission or the BSP, or under any rule or regulation issued by the Commission or the BSP, or has otherwise been restrained to engage in any activity involving securities and banking; or such person is currently the subject of an effective order of a self-regulatory organization suspending or expelling him from membership, participation or association with a member or participant of the organization;

Any person convicted by final judgment or order by a court or competent administrative body of an offense involving moral turpitude, fraud, embezzlement, theft, estafa, counterfeiting, misappropriation, forgery, bribery, false affirmation, perjury or other fraudulent acts;

Any person who has been adjudged by final judgment or order of the Commission, court, or competent administrative body to have willfully violated, or willfully aided, abetted, counseled, induced or procured the violation of any provision of the Corporation Code, Securities Regulation Code or any other law administered by the Commission or the BSP, or any of its rule, regulation or order;

Any person earlier elected as independent director who becomes an officer, employee, or consultant of the same corporation;

Any person judicially declared


to be insolvent;

Any person finally found guilty by final judgment or order of a foreign court or equivalent financial regulatory authority of acts, violations or misconduct similar to any of the acts, violations or misconduct enumerated in the foregoing paragraphs; and

Conviction by final judgment of an offense punishable by imprisonment for more than six (6) years, or a violation of the Corporation Code, committed within five (5) years prior to the date of his election or appointment.

Possession of disqualifications under the By-laws.

(Section 3.2.1.2, Revised Manual on Corporate Governance)

d. Temporary Disqualification

Executive Directors The Board shall provide for the temporary disqualification of a director for any of the following reasons:

Refusal to comply with the disclosure requirements of the Securities Regulation Code and its implementing rules and regulations. This disqualification shall be in effect as long as the refusal persists; and

Absence in more than fifty percent (50%) of all regular and special meetings of the Board of Directors during his incumbency, or any twelve (12) month period during said incumbency, unless the absence is due to illness, death in the immediate family or serious accident. This disqualification applies for purposes of the succeeding election.

In addition, the Board may provide for the temporary disqualification of a director for any of the following reasons:

Dismissal or termination for cause as director of any corporation covered by Code. The disqualification shall be in effect until he has cleared himself of any involvement in the cause that gave rise to his dismissal or termination.




If the beneficial equity ownership of an independent director in the corporation or its subsidiaries and affiliates exceeds two percent (2%) of its subscribed capital stock. The disqualification shall be lifted if the limit is later complied with.

If any of the judgments or orders cited in the grounds for permanent disqualification has not yet become final.

A temporary disqualified director shall, within 60 business days from such disqualification, take appropriate action to remedy such disqualification. If, after 60 days, the director refuses to take action, he may be permanently disqualified.

(Section 3.2.1.2, Revised Manual on Corporate Governance)

e. Re-instatement

Executive Directors Same criteria as stated in the selection/appointment of both regular and independent directors.

Same criteria as stated in the selection/appointment of both regular and independent directors.



6) Orientation and Education Program

(a) Disclose details of the company’s orientation program for new directors, if any. A director shall, before assuming as such, be required to attend a seminar on corporate governance which shall be conducted by a duly recognized private or government institution (Sec. 5.2, Revised Manual on Corporate Governance).

(b) State any in-house training and external courses attended by Directors and Senior Management3 for the past three (3) years Seminar on Corporate Governance 2014

(c) Continuing education programs for directors: programs and seminars and roundtables attended during the year.

None

B. CODE OF BUSINESS CONDUCT & ETHICS

1) Policies

Discuss briefly the company’s policies on the following business conduct or ethics affecting

directors, senior management and employees.

3 Senior Management refers to the CEO and other persons having authority and responsibility for planning, directing and

controlling the activities of the company.


The Company began its activities to formalize its policies on ethical conduct and fair dealings

for directors, senior management, and employees, including procedures and principles to be

adopted in the event of conflicts of interest, related party transactions, use of nonpublic

information, use of company funds, assets, and information, and similar matters. The

Whistle-Blower policy was approved by the Board of Directors last September 3, 2014 and is

intended to provide effective protection for whistle-blowers so that officers or employees

and other stakeholders are made aware of how to report any possible violation of a law,

rule, or regulation or unethical or fraudulent conduct. Thus, this Policy shall define who may

qualify as a whistle-blower, provide a procedure for whistle-blowers to raise such concerns

that he or she may reasonably believe in good faith may constitute a possible violation of a

law, rule, or regulation or unethical or fraudulent conduct or other improprieties, and

institute safeguards to protect Whistleblowers from retaliation or retribution.

2) Dissemination of Cost of Ethics or Conduct

Has the code of ethics or conduct been disseminated to all directors, senior management

and employees?

Not applicable at this time.

3) Implementation of and Compliance with Code

Discuss how the company implements and monitors compliance with the code of ethics or

conduct.

Not applicable at this time. The Corporation shall establish procedures for implementing and monitoring compliance with the code of ethics/conduct as part of the overall establishment of written policies and procedures.

4) Related Party Transactions

(a) Policies and Procedures Describe the company’s policies and procedures for the review, approval or ratification, monitoring and recording of related party transactions between and among the company and its parent, joint ventures, subsidiaries, associates, affiliates, substantial stockholders, officers and directors, including their spouses, children and dependent siblings and parents and of interlocking director relationships of members of the Board. The Board is tasked under Sec. 3.1.3 of the Revised Manual on Corporate Governance to formulate and implement policies and procedures that would ensure the integrity and transparency of related party transactions between and among the Company and its subsidiaries, associates, affiliates, join ventures, major shareholders, directors and officers, including their spouses, children and dependent siblings, parents and interlocking director relationships by members of the Board. The Company will formalize its policies and procedures on related party transactions once the corporate structure is finalized.


(b) Conflict of Interest

(i) Directors/Officers and 5% or more Shareholders Identify any actual or probable conflict of interest to which directors/officers/5% of more shareholders may be involved. The Corporation has had no instance of actual conflict of interest because in compliance with the Manual on Corporate Governance, if an actual or potential conflict of interest arises on the part of a director, he fully and immediately discloses it.

Name of Director Details of Probable Conflict of Interest

Alfredo Yao Chairman, ARC Refreshments Corp., Mega Asia Bottling Corp., Asiawide Refreshments Corp.

Armando M. Yao Director, ARC Refreshments Corp., Mega Asia Bottling Corp., Asiawide Refreshments Corp.

Jeffrey S. Yao Director, ARC Refreshments Corp., Mega Asia Bottling Corp., Asiawide Refreshments Corp.

Carolyn S. Yao Director, ARC Refreshments Corp., Mega Asia Bottling Corp., Asiawide Refreshments Corp.

Mary Grace S. Yao Director, ARC Refreshments Corp., Mega Asia Bottling Corp.,

Antonio I. Panajon Director, ARC Refreshments Corp., Asiawide Refreshments Corp.

Albert S. Toribio Director, ARC Refreshments Corp., Asiawide Refreshments Corp.

Gerardo T. Garcia Director, ARC Refreshments Corp., Asiawide Refreshments Corp.

Rinaldi C. Aves Director, ARC Refreshments Corp., Asiawide Refreshments Corp.

(ii) Mechanism

Directors/Officers/Significant Shareholders

Company It is among the duties of a director “[t]o conduct fair business transactions with the Corporation and ensure that his personal interest does not conflict with the interests of the Corporation.” The basic principle to be observed is that a director should not use his position to profit or gain some benefit or advantage for himself and/or his related

Group


interests. He should avoid situations that may compromise his impartiality. If an actual or potential conflict of interest may arise on the part of a director, he should fully and immediately disclose it and should not participate in the decision-making process. A director who has a continuing material conflict of interest should seriously consider resigning from his position.

A conflict of interest shall be considered material if the director’s personal or business interest is antagonistic to that of the Corporation, or stands to acquire or gain financial advantage at the expense of the Corporation.

(Section 3.1.4, Revised Manual on Corporate Governance)

5) Family, Commercial and Contractual Relations

(a) Indicate, if applicable, any relation of a family4, commercial, contractual or business nature that exists between the holders of significant equity (5% or more), to the extent that they are known to the company:

Names of Related Significant Shareholders

Type of Relationship Brief Description of the Relationship

Mazy’s Capital, Inc. Family/Commercial Mazy’s Capital, Inc. is the majority shareholder of the Company, the stockholders of which are majority-owned by the Yao family.

(b) Indicate, if applicable, any relation of a commercial, contractual or business nature

that exists between the holders of significant equity (5% or more) and the company: Aside from the abovementioned relationship, there is no relation of commercial, contractual or business nature that exists between holders of significant equity and the Corporation.

Names of Related Significant Shareholders

Type of Relationship Brief Description

Not applicable Not applicable Not applicable

(c) Indicate any shareholder agreements that may impact on the control, ownership and

strategic direction of the company:

4 Family relationship up to the fourth civil degree either by consanguinity or affinity


There are currently no shareholder agreements that may impact on the control,

ownership and strategic direction of the Company.

6) Alternative Dispute Resolution

Describe the alternative dispute resolution system adopted by the company for the last three (3) years in amicably settling conflicts or differences between the corporation and its stockholders, and the corporation and third parties, including regulatory authorities. The Corporation has not had any disputes with its stockholders, third parties, or regulatory authorities.

C. BOARD MEETINGS & ATTENDANCE

1) Schedule of Meetings

Are Board of Directors’ meetings scheduled before or at the beginning of the year?

The Board of Directors meetings are set at the beginning of the year.

2) Attendance of Directors

Board Name Date of Election No. of Meetings Held During the

Year

No. of Meetings Attended

%

Chairman Alfredo M. Yao 25 October 2013; 25 July 2014

6 5 83.33%

Director Armando M. Yao 25 October 2013; 25 July 2014

6 4 66.66%

Director Jeffrey S. Yao 25 October 2013; 25 July 2014

6 5 83.33%

Director Carolyn S. Yao 25 October 2013; 25 July 2014

6 5 83.33%

Director Mary Grace S. Yao 25 October 2013; 25 July 2014

6 4 66.66%

Director Roberto A. Atendido 25 October 2013; 25 July 2014

6 6 100%

Director Fernando R. Balatbat 25 October 2013; 25 July 2014

6 6 100%

Director Antonio I. Panajon 25 October 2013; 25 July 2014

6 6 100%

Director Albert S. Toribio 25 October 2013; 25 July 2014

6 4 66.66%

Director Gerardo T. Garcia 25 July 2014. n/a Mr. Garcia’s election to the Board was subject to SEC approval of the amendment of the Corporation’s By-

n/a


laws increasing the number of directors from 11 to 13, which took effect on 12 September 2014. All Board meetings were conducted prior to said SEC approval.

Director Rinaldi C. Aves 25 July 2014. n/a Mr. Aves’ election to the

Board was subject to SEC

approval of the amendment of

the Corporation’s By-

laws increasing the number of

directors from 11 to 13, which took

effect on 12 September 2014.

All Board meetings were

conducted prior to said SEC approval.

n/a

Independent Director

Jesus G. Gallegos, Jr. 25 October 2013; 25 July 2014

6 5 83.33%

Independent Director

Roberto F. Anonas, Jr. 25 October 2013; 25 July 2014

6 6 100%

3) Separate Meetings of Non-Executive Directors

Do non-executive directors have a separate meeting during the year without the presence

of any executive? If yes, how many times?

In the event of issues to be discussed in an executive session, the non-executive directors may request the executive directors and senior management present during the meeting to be excused from the board room. This may be done as often as needed. However, the meetings conducted by the present board members did not require such executive session.

4) Quorum Requirement

Is the minimum quorum requirement for Board decisions set at two-thirds of board

members?

Art. II, Sec. 2 of the Amended By-laws of the Corporation provided that “A majority of the board of directors at a meeting duly assembled shall be necessary to constitute a quorum for


the transaction of business, and the act of a majority of a quorum so present shall be valid as a corporate act.”

5) Access to Information

(a) How many days in advance are board papers5 for board of directors meetings provided

to the board? The Corporate Secretary is tasked to “[i]nform all members of the Board, in accordance with the By-Laws, of the agenda of their meetings and ensure that the members have before them accurate information that will enable them to arrive at intelligent decisions on matters that require their approval” (Sec. 3.3.6(g), Revised Manual on Corporate Governance). Notices to meetings shall be delivered to the directors at least two days prior to the date fixed for the meeting (Article II, Sec. 4 of the Corporation’s By-laws).

(b) Do board members have independent access to Management and the Corporate

Secretary? Yes.

(c) State the policy on the role of the company secretary. Does such role include assisting the Chairman in preparing the board agenda, facilitating training of directors, keeping directors updated regarding any relevant statutory regulatory changes, etc.?

The duties and responsibilities of the Corporate Secretary, who should be a Filipino citizen and a resident of the Philippines, are set forth under Sec. 3.3.6 of the Manual, as follows – 3.3.6 Duties and Responsibilities

(a) Be responsible for the safekeeping and preservation of the integrity of the minutes of the Board and its committees, as well as other official records of the Corporation;

(b) Be loyal to the mission, vision, and objectives of the Corporation.

(c) Work fairly and objectively with the Board, Management, stockholders and stakeholders;

(d) Have appropriate administrative and interpersonal skills;

(e) If he is not at the same time the Corporation’s general counsel, be aware of the laws, rules, and regulations necessary in the performance of his duties and responsibilities.

(f) Have a working knowledge of the operations of the Corporation.

5 Board papers consist of complete and adequate information about the matters to be taken in the board meetings.

Information includes the background or explanation on matters brought before the Board, disclosures, budgets, forecasts and internal financial documents.


(g) Inform the members of the Board, in accordance with the Corporation’s By-laws, of the agenda of their meetings and ensure that the members have before them accurate information that will enable them to arrive at intelligent decisions on matters that require their approval.

(h) Attend all Board meetings, except when justifiable causes, such as illness, death in the immediate family, and serious accidents prevent him from doing so;

(i) Ensure that all Board procedures, rules, and regulations are strictly followed by the members;

(j) If he is also the Compliance Officer, perform all the duties and responsibilities of said office as provide in the Code and in this Manual.

(d) Is the company secretary trained in legal, accountancy or company secretarial

practices? Please explain should the answer be in the negative. Yes.

(e) Committee Procedures Disclose whether there is a procedure that Directors can avail of to enable them to get information necessary to be able to prepare in advance for the meetings of different committees:

Yes ☑ No ☐

Committee Details of the procedures

Audit Please see below.

Nomination Please see below.

Compensation and Remuneration Please see below.

Corporate Governance Please see below.

As a matter of practice, materials for the committee meetings are sent to the members of the committee at least two (2) days before the scheduled meeting.

6) External Advice

Indicate whether or not a procedure exists whereby directors can receive external advice and, if so, provide details:

Procedures Details

Please see below. Please see below.


A director may, upon request, obtain external advice as may be justified on a case-to-case basis.

7) Change/s in existing policies

Indicate, if applicable, any change/s introduced by the Board of Directors (during its most recent term) on existing policies that may have an effect on the business of the company and the reason/s for the change:

Existing Policies Changes Reason

n/a n/a n/a

D. REMUNERATION MATTERS

1) Remuneration Process

Disclose the process used for determining the remuneration for the CEO and the four (4) most highly compensated management officers. No formal policy has been established at this time regarding remuneration for the CEO and top 4 highly compensated management officers. The Corporation, through its Compensation Committee is in the process of establishing such policies.

Process CEO Top 4 Highest Paid

Management Officers

Fixed remuneration

Board establishes KPI and Compensation and

Remuneration Committee evaluates performance and

makes recommendation

President establishes KPIs and evaluates performance and

decides on remuneration

Variable remuneration n/a n/a

Per diem allowance n/a n/a

Bonus




President establishes KPIs and evaluates performance and

decides on remuneration

Stock Options and other financial instruments




n/a

2) Remuneration Policy and Structure for Executive and Non-Executive Directors


Disclose the company’s policy on remuneration and the structure of its compensation package. Explain how the compensation of Executives and Non-Executive Directors is calculated.

Each director shall receive a reasonable per diem for attendance in every meeting. Each director receives a per diem allowance of Thirty Thousand Pesos [Php30,000.00] for attending board meetings, which amount shall be inclusive of attendance in committee meetings. There is no distinction for a committee chairman and member. Do stockholders have the opportunity to approve the decision on total remuneration (fees, allowances, benefits-in-kind and other emoluments) of the board of directors? Provide details for the last three (3) years.

Remuneration Scheme Date of

Stockholders’ Approval

Ratification of the acts of the Board of Directors, its Committees, officers and Management on

remuneration 25 July 2014

n/a 2013

n/a 2012

3) Aggregate Remuneration

Complete the following table on the aggregate remuneration accrued during the most recent year:

Remuneration Item Executive

Directors


(other than independent

directors)

Independent

Directors

(a) Fixed Remuneration

(b) Variable Remuneration

(c) Per diem Allowance 630,000.00 540,000.00 330,000.00

(d) Bonuses

(e) Stock Options and/or other financial instruments

(f) Others (Discretionary Allowance/Consultancy Fees)

141,176.47 1,141,176.47 282,352.94

Total 771,176.47 1,681,176.47 612,352.94


4) Stock Rights, Options and Warrants

(a) Board of Directors Complete the following table, on the members of the company’s Board of Directors who own or are entitled to stock rights, options or warrants over the company’s shares:

Director’s Name

Number of Direct Options/Rights/Warrants

Number of Indirect Options/Rights/Warrants

Number of

Equivalent Shares

Total %

from Capital Stock

Please see below.

The Board of Directors is not covered under any Employee Stock Option Program. Other than per diem allowances, the directors do not receive any share options.

(b) Amendments of Incentive Programs

Indicate any amendments and discontinuation of any incentive programs introduces, including the criteria used in the creation of the program. Disclose whether these are subject to approval during the Annual Stockholders’ Meeting:

Incentive Program Amendments Date of

Stockholders’ Approval

None None None

5) Remuneration of Management

Identify the five (5) members of management who are not at the same time executive directors and indicate the total remuneration received during the financial year.

Name of Officer/Position Total Remuneration

n/a

n/a

E. BOARD COMMITTEES

1) Number of Members, Functions and Responsibilities

Provide details on the number of members of each committee, its functions, key responsibilities and the power/authority delegated to it by the Board.

Committee

No. of Members

Committee

Charter Functions

Key

Responsibilities Power

Exec.

Director

(ED)

Non-Exec.

Director

(NED)

Independent

Director

(ID)

Audit n.a. 1 2 Please see Please see

Please see below. Please see


below below. below.

Nomination 1 1 2 Please see

below.

Please see

below. Please see below.

Please see

below.

Compensation

and

Remuneration

1 n.a. 2 Please see

below.

Please see


Please see

below.

Corporate

Governance n.a. 1 2

Please see

below

Please see


Please see

below.

The Board Committees to aid in complying with the principles of good corporate governance under the Manual are as follows –

3.2 Board Committees

3.2.1 Nomination Committee

3.2.1.1. Composition

The Board shall create a Nomination Committee which shall have at

least three (3) members, at least one of whom should be an

independent director.

The Corporate Governance Manual, particularly section 3.2.1 shall

serve as the written charter of the Nomination Committee.

3.2.1.2. Functions

The following shall be the duties and responsibilities of the

Nomination Committee:

a) Review and evaluate the qualifications of all persons nominated to the Board and other appointments that require Board approval and make the appropriate recommendation therefor to the Board, for its approval;

b) Assess the effectiveness of the Board’s processes and procedures in the election or replacement of directors;

c) Pre-screen and shortlist all candidates nominated to become members of the Board of Directors in accordance with the qualifications and disqualifications provided for hereunder.

d) In consultation with the Board, re-define the role, duties

and responsibilities of the Chief Executive Officer by integrating the dynamic requirements of the business as a


going concern and future expansionary prospects within the realm of good corporate governance at all times.

e) Consider the following guidelines in the determination of the number of directorships for the Board:

The nature of the business of the Corporation of which he is a director;

Age of the director;

Number of directorships/active memberships and officerships in other corporations or organizations; and

Possible conflict of interest.

The Chief Executive Officer and other executive directors

shall submit themselves to a low indicative limit on

membership in other corporate boards. The same low limit

shall apply to independent, non-executive directors who

serve as full-time executives in other corporations. In any

case, the capacity of directors to serve with diligence shall

not be compromised.

The optimum number shall be related to the capacity of a

director to perform his duties diligently in general.

3.2.2 Compensation and Remuneration Committee


The Compensation and Remuneration Committee shall be

composed of at least three (3) members from the Board of

Directors, at least one of whom shall be an independent director.


serve as the written charter for the Compensation and

Remuneration Committee.

3.2.2.2. Functions

The duties and responsibilities of the Compensation and

Remuneration Committee are as follows:

a) Establish a formal and transparent procedure for developing a policy on executive remuneration and for fixing the


remuneration packages of corporate officers and directors, and provide oversight over remuneration of senior management and other key personnel ensuring that compensation is consistent with the Corporation’s culture, strategy and control environment.

b) Designate the amount of remuneration, which shall be in a sufficient level to attract and retain directors and officers who are needed to run the Corporation successfully.

c) Develop a form on Full Business Interest Disclosure as part of the pre-employment requirements for all incoming officers, which among others compel all officers to declare under the penalty of perjury all their existing business interests or shareholdings that may directly or indirectly conflict in their performance of duties once hired.

d) Disallow any director to decide his or her own remuneration.

e) Provide in the Corporation’s annual reports, information, and proxy statements a clear, concise, and understandable disclosure of compensation of its executive officers for the previous fiscal year and the ensuing year.

f) Develop or adopt policies to strengthen provisions on conflict of interest, salaries and benefits, promotion and career advancement directives and compliance with statutory requirements and compliance of personnel concerned with all statutory requirements that must be periodically met in their respective posts.

g) Review and assess, at least annually, the adequacy of its charter and recommend changes for the approval of the Board.

3.2.3 Audit Committee


The Audit Committee shall be composed of members of the Board

of Directors, at least two (2) of whom shall be independent

directors, including the Chairman, preferably with Accounting,

Auditing, or related financial management expertise or experience.

Each member shall have adequate understanding at least or

competence at most of the Corporation’s financial management

systems and environment.

3.2.3.2. Functions


The Audit Committee shall have the following duties and

responsibilities:

a) Assist the Board in the performance of its oversight responsibility for the financial reporting process, system of internal control, audit process, and monitoring of compliance with applicable laws, rules, and regulations.

b) Provide oversight over the Management’s activities in managing investments, credit, market, liquidity, operational, legal and other risks of the Corporation. This function includes regular receipt from Management of information on risk exposures and risk management activities.

c) Perform oversight functions over the Corporation’s internal and external auditors. It should ensure that the internal and external auditors act independently from each other, and that both auditors are given unrestricted access to all records, properties, and personnel to enable them to perform their respective audit functions.

d) Review the annual internal audit plan to ensure its conformity with the objectives of the Corporation. The plan shall include audit scope, resources, and budget necessary to implement it.

e) Prior to the commencement of the audit, discuss with the external auditor the nature, scope, and expenses of the audit, and ensure proper coordination if more than one audit firm is involved in the activity to secure proper coverage and minimize duplication of efforts.

f) Organize an internal audit department and consider the appointment of an independent internal auditor and the terms and conditions of its engagement and removal;

g) Monitor and evaluate the adequacy and effectiveness of the Corporation’s internal control system, including financial reporting control and information technology security;

h) Review the reports submitted by the internal and external auditors and regulatory agencies, where applicable, and ensure that Management is taking appropriate measures and corrective actions in a timely manner in addressing control and compliance functions with regulatory agencies.

i) Review the quarterly, half year and annual financial statements before submission to the Board, focusing particularly on:


1. Any changes in accounting policies and practices 2. Major judgmental areas 3. Significant adjustments resulting from the audit 4. Going concern assumption 5. Compliance with accounting standards 6. Compliance with tax, legal and other regulatory

requirements

j) Be responsible for coordinating, monitoring and facilitating compliance with existing laws, rules and regulations.

k) Evaluate and determine non-audit work, if any, of the external auditor and review periodically the non-audit fees paid to the external auditor, if any, both in relation to their significant to the total annual income of the auditor and the Corporation’s overall consultancy expenses. The Committee shall disallow any non-audit work that will conflict with the auditor’s duties or may pose a threat to independence. The non-audit work, if allowed, should be disclosed in the Corporation’s annual report.

l) Establish and identify the reporting line of the internal auditor to enable him to properly fulfill his duties and responsibilities. The internal auditor shall report to the audit committee functionally and to the President/Chief Executive Officer administratively. The Committee shall ensure that the internal auditor/s shall have free and full access to all the Corporation’s records, properties and personnel relevant to the Internal Audit activity and that the Internal Audit activity should be free from interference in determining the scope of internal auditing examinations, performing work, and communicating results.

m) Have explicit authority to investigate any matter within its terms of reference, full access to and cooperation by Management and full discretion to invite directors or executive officers to attend its meetings and adequate resources to enable it to effectively discharge its functions.

n) Review and assess the adequacy of the Committee Charter periodically, requesting Board approval for proposed changes.

o) Address all issues and concerns from the external auditor expeditiously and effectively to avoid the possibility of their having to render a qualified or adverse opinion, including substantive and significant disclaimers.

p) Ensure that the external auditor is credible, competent, and should have the ability to understand complex related party


transactions, its counterparties, and valuations of such transactions.

q) Ensure that the external audit firm is selected on the basis of a fair and transparent tender process.

r) Conduct regular meetings and dialogues with the external audit team without anyone from management present.

s) Ensure that, should the external auditor not be rotated, the lead audit partner is rotated every five years.

3.2.4 Corporate Governance Committee


The Corporate Governance Committee shall be composed of at least

three (3) members, two (2) of whom shall be independent directors.


serve as its charter.

3.2.4.2. Functions

The Committee shall have the following duties and responsibilities:

(a) Be responsible for ensuring the Board’s effectiveness and due observance of corporate governance principles and guidelines.

(b) Oversee the periodic performance evaluation of the Board and its committees and executive management.

(c) Conduct a periodic self-evaluation of its performance.

(d) Decide whether or not a director is able to and has been adequately carrying out his/her duties as director bearing in mind the director’s contribution and performance (e.g., competence, candor, attendance, preparedness and participation).

(e) Make continuing recommendations to the Board regarding the continuing education of directors, assignment to board committees, succession plan for the board members and senior officers and their remuneration commensurate with corporate and individual performance.


(f) Decide the manner by which the Board’s performance may be evaluated and propose an objective performance criteria to be approved by the Board. Such performance indicators shall address how the Board has enhanced long term shareholder’s value.

(g) Conduct an annual review of this Manual and the governance and any related scorecards.

2) Committee Members

(a) Nominations Committee

Office Name Date of

Appointment

No. of

Meetings

Held

No. of

Meetings

Attended

%

Length of

Service in

the

Committee

Chairman (ID) Jesus G. Gallegos, Jr. 25-July-2014 1 1 100% 5 months

Member (ED) Antonio I. Panajon 25-July-2014 1 1 100% 5 months

Member (ED) Fernando R. Balatbat 25-July-2014 1 1 100% 5 months

(b) Audit Committee

Office Name Date of

Appointment

No. of

Meetings

Held

No. of

Meetings

Attended

%

Length of

Service in

the

Committee

Chairman (ID) Roberto F. Anonas, Jr. 25-July-2014 2 2 100% 5 months

Member (ID) Jesus G. Gallegos, Jr. 25-July-2014 2 2 100% 5 months

Member (NED) Albert S. Toribio 25-July-2014 2 2 100% 5 months

(c) Compensation Committee

Office Name Date of

Appointment

No. of

Meetings

Held

No. of

Meetings

Attended

%

Length of

Service in

the

Committee

Chairman (ID) Roberto F. Anonas, Jr. 25-July-2014 1 1 100% 5 months

Member (ID) Jesus G. Gallegos, Jr. 25-July-2014 1 1 100% 5 months

Member (ED) Gerardo T. Garcia 25-July-2014 1 1 100% 5 months


(d) Corporate Governance Committee

Office Name Date of

Appointment

No. of

Meetings

Held

No. of

Meetings

Attended

%

Length of

Service in

the

Committee

Chairman (ID) Jesus G. Gallegos, Jr. 25-July-2014 1 1 100% 5 months

Member (ID) Roberto F. Anonas, Jr. 25-July-2014 1 1 100% 5 months

Member (NED) Roberto A. Atendido 25-July-2014 1 1 100% 5 months

3) Changes in Committee Members Indicate any changes in committee membership that occurred during the year and the reason for the changes. There were no changes in committee membership during the previous year.

4) Work Done and Issues Addressed Describe the work done by each committee and the significant issues addressed during the year 2014.

Name of Committee Work Done Issues Addressed

Audit Approved the annual and quarterly

reports of the Corporation as well as

the appointment of the external

auditor

To ensure compliance with

accounting and reporting standards.

Nomination Evaluated the profiles of the

candidates for membership with the

Corporation’s Board of Directors

prior to the annual stockholders

meeting held on 25 July 2014.

To elect members of the Board for

2014 and to comply with the

required number of independent

directors by the Philippine Stock

Exchange.

Compensation and

Remuneration

Currently reviewing the Company’s

compensation policy.

To comply with the compensation

policy of the Corporation.

Corporate Governance Reviewed and approved the

Corporations’ Revised Manual on

Corporate Governance, the Audit

Committee Charter, and the Whistle-

Blowing Policy.

To regularly check effectiveness of

the Board and determine areas for

improvement. To comply with the

regulations of the SEC.


5) Committee Program

Provide a list of programs that each committee plans to undertake to address relevant issues in the improvement or enforcement of effective governance for the coming year.

Name of Committee Planned Programs Issues to be Addressed

Audit - Create a Risk Management Committee

- Manual for Audit Control Policies and Procedures

- Internal Audit plan for the coming fiscal year

No significant issues that would put the Company at major risk

Nomination Pre-screen qualifications of nominees for independent directors


Compensation and Remuneration

Review the Company’s compensation policy


Corporate Governance Review policies


F. RISK MANAGEMENT SYSTEM

1) Overall risk management philosophy of the company.

The Company aims to identify, measure, analyze, monitor, and control all forms of risks that would affect the company. At present, the Company’s Audit Committee functions as its Risk Management Committee. Under the Audit Committee Charter, The Audit Committee shall assist the Board of Directors in the performance of its oversight function over the Corporation’s financial reporting process, systems of internal control, internal and external audit processes, compliance monitoring procedures, and risk management. The Audit Committee will report its activities to the Board on a regular basis and make recommendations thereon as it may deem appropriate.

(a) A statement that the directors have reviewed the effectiveness of the risk

management system and commenting on the adequacy thereof. There is no statement issued. The Audit Committee will review the effectiveness of risk management systems employed by the Company.

(b) Period covered by the review. The Audit Committee will periodically review the risk

management system of the company through its meetings and review of required reports.

(c) How often is the risk management system reviewed and the directors’ criteria for assessing its effectiveness. The adequacy of the risk management system will be reviewed annually by the Audit Committee. On a quarterly basis, specific risk management processes and findings well be reviewed and evaluated.

(d) Where no review was conducted during the year, an explanation why not. Where no review was conducted during the year, an explanation why not. n/a


2) Risk Policy

The Company’s Risk Management Policy is currently under review. The Audit Committee shall draft the risk management policy and thereafter, the same shall be reviewed and approved by the Board. Its effectiveness shall be reviewed periodically by Internal Audit, once established. (a) Company

Give a general description of the company’s risk management policy, setting out and assessing the risk/s covered by the system (ranked according to priority), along with the objective behind the policy for each kind of risk:

Risk Exposure Risk Management Policy Objective The Corporation is still in process of establishing its policies regarding risk and risk

management.

(b) Group Give a general description of the Group’s risk management policy, setting out and assessing the risk/s covered by the system (ranked according to priority) along with the objective behind the policy for each kind of risk:

Risk Exposure Risk Management Policy Objective The Corporation is currently assessing the risks affecting the group and is in the

process of establishing a risk framework.

(c) Minority Shareholders Indicate the principal risk of the exercise of controlling shareholders’ voting power.

Risk to Minority Shareholders The Company is committed to practice good governance and to respect the rights of the shareholders as provided in the Corporation Code.

3) Control System Set Up

(a) Company

Briefly describe the control systems set up to assess, manage and control the main issue/s faced by the company:

Risk Exposure Risk Assessment (Monitoring and

Measurement Process)

Risk Management and Control (Structures, Procedures, Actions

Taken)

The Audit Committee will work on creating a Risk Management Committee that shall establish the control systems to assess, manage and control the main issue/s faced

by the Company.


(b) Group Briefly describe the control systems set up to assess, manage and control the main issue/s faced by the company:

Risk Exposure Risk Assessment (Monitoring and

Measurement Process)

Risk Management and Control (Structures, Procedures, Actions

Taken)

The Audit Committee will work on creating a Risk Management Committee that shall establish the control systems to assess, manage and control the main issue/s faced

by the Company.

(c) Committee

Identify the committee or any other body of corporate governance in charge of laying down and supervising these control mechanisms, and give details of its functions.

Committee/Unit Control Mechanism Details of its Functions

The Audit Committee is tasked to provide oversight over the Company’s risk management under the Manual. The Audit Committee will work on creating a Risk Management Committee that shall establish the control systems to assess, manage

and control the main issue/s faced by the Company.

G. INTERNAL AUDIT AND CONTROL

Sec. 3.3.8 (a)(b) and (c) of the Manual provides that –

a. The Corporation shall have in place an independent internal audit function which shall be performed by an internal auditor or a group of internal auditors, or a service provider engaged to perform internal audit functions through which its Board, senior management, and stockholders shall be provided with reasonable assurance that its key organizational and procedural controls are effective, appropriate, and complied with. As a holding company, the Corporation’s internal audit function may operate at the level of its operating subsidiary/ies.

b. The internal auditor shall have a direct reporting line to the Audit Committee.

c. The appointment or removal of the head of the internal audit office shall be subject to the approval of the Audit Committee.

d. The minimum internal control mechanisms for management's

operational responsibility shall center on the CEO, being ultimately accountable for the Corporation's organizational and procedural controls.


e. The scope and particulars of a system of effective organizational and

procedural controls shall be based on the following factors: the nature and complexity of business and the business culture; the volume, size and complexity of transactions; the degree of risk; the degree of centralization and delegation of authority; the extent and effectiveness of information technology; and the extent of regulatory compliance.

f. The internal audit function may be outsourced to an external service

provider.

1) Internal Control System

Disclose the following information pertaining to the internal control system of the company:

(a) Explain how the internal control system is defined for the company. Sec. 3.3.8(e) of

the Manual states that the scope and particulars of a system of effective organizational and procedural controls shall be based on the following factors: the nature and complexity of business and the business culture; the volume, size, and complexity of transactions; the degree of risk; the degree of centralization and delegation of authority; the extent and effectiveness of information technology; and the extent of regulatory compliance.

(b) A statement that the directors have reviewed the effectiveness of the internal control system and whether they consider them effective and adequate. Sec. 3.3.8(d) of the Manual provides that “The minimum internal control mechanisms for management's operational responsibility shall center on the CEO, being ultimately accountable for the Corporation's organizational and procedural controls.”

(c) Period covered by the review. The review of the effectiveness of the internal control system shall begin when an Internal Auditor is selected.

(d) How often internal controls are reviewed and the directors’ criteria for assessing the effectiveness of the internal control system. Sec. 3.1.3(f) of the Manual states that it is the duty of the Board to “adopt a system of check and balance within the Board. A regular review of the effectiveness of such system should be conducted to ensure the integrity of the decision-making and reporting processes at all times. There should be a continuing review of the Corporation’s internal control system in order to maintain its adequacy and effectiveness.”

(e) Where no review was conducted during the year, an explanation why not. The Company will need to select an Internal Auditor.


2) Internal Audit

(a) Role, Scope and Internal Audit Function

Give a general description of the role, scope of internal audit work and other details of the internal audit function.

Role Scope Indicate whether In-

house or outsource

Internal Audit Function

Name of Chief

Internal Auditor/ Auditing

Firm

Reporting Process

Provide the Board, senior management, and stockholders reasonable assurance that its key organizational and procedural controls are effective, appropriate, and complied with. (Section 3.3.8 (a), Revised Manual on Corporate Governance)

The scope and particulars of a system of effective organizational and procedural controls shall be based on the following factors: the nature and complexity of business and the business culture; the volume, size, and complexity of transactions; the degree of risk; the degree of centralization and delegation of authority; the extent and effectiveness of information technology; and the extent of regulatory compliance. (Section 3.3.8(e), Revised Manual on Corporate Governance)

The Manual provides that the Internal Audit Function may be performed by an Internal Auditor or a group of Internal Auditors or a service provider engaged to perform internal audit functions (Section 3.3.8(a), Revised Manual on Corporate Governance)

The Company intends to hire an internal auditor for the operating subsidiary, who will report directly to the Audit Committee of the Company.

The Internal Auditor shall have a direct reporting line to the Audit Committee. (Section 3.3.8(b), Revised Manual on Corporate Governance)

(b) Do the appointment and/or removal of the External Auditor or the

accounting/auditing firm or corporation to which the internal audit function is outsources require the approval of the audit committee?


An external auditor shall be selected and appointed by the stockholders upon the recommendation of the Audit Committee. (Section 3.3.9(a), Revised Manual on Corporate Governance).

(c) Discuss the internal auditor’s reporting relationship with the audit committee. Does

the internal auditor have direct and unfettered access to the board of directors and the audit committee and to all records, properties and personnel?

Yes. The Internal Auditor shall report to the Audit Committee (Section 3.3.8(b), Revised Manual on Corporate Governance). The Audit Committee shall ensure that the internal and external auditors are given unrestricted access to all records, properties and personnel to enable them to perform their respective audit functions (Sec. 3.2.3.2(c), Revised Manual on Corporate Governance).

(d) Disclose any resignation/s or re-assignment of the internal audit staff (including those

employed by the third-party auditing firm) and the reason/s for them.

Name of Audit Staff Reason

None. None.

(e) Progress against Plans, Issues, Findings and Examination Trends

State the internal audit’s progress against plans, significant issues, significant findings and examination trends.

Not applicable. There have been no significant findings made by the Corporation’s external auditor, Sycip Gorres Velayo & Co. (“SGV”) in the 2014 Audited Financial Statements (“AFS”). Likewise, the AFS of the Corporation’s component companies do not mention any significant findings.

(f) Audit Control Policies and Procedures

The Audit Committee Charter was approved by the Board of Directors on September 3, 2014. The Manual for Audit Control Policies and Procedures will be prepared by the Audit Committee and will be subject to approval by the Board of Directors.

(g) Mechanism and Safeguards

State the mechanism established by the company to safeguard the independence of the auditors, financial analysts, investment banks and rating agencies (example, restrictions on trading in the company’s shares and imposition of internal approval procedures for these transactions, limitation on the non-audit services that an external auditor may provide to the company):

Auditors (Internal and External)

Financial Analysts

Investment Banks

Rating Agencies

The Audit Committee shall disallow any non-audit work that will conflict

None

None

None


with his duties as an external auditor or may pose a threat to his independence. (Section 3.2.3.2(k), Revised Manual on Corporate Governance)

(h) State the officers (preferably the Chairman and the CEO) who will have to attest to the

company’s full compliance with the SEC Code of Corporate Governance. Such confirmation must state that all directors, officers and employees of the company have been given proper instruction on their respective duties as mandated by the Code and that internal mechanisms are in place to ensure that compliance.

Chairman, President, and two (2) Independent Directors.

H. ROLE OF STAKEHOLDERS

1) Policies and Activities

Disclose the company’s policy and activities relative to the following:

Policy Activities

Customers’ Welfare Not applicable.

Supplier/contractor selection practice None.

Environmentally friendly value chain Not applicable.

Community interaction None.

Anti-corruption programmes and procedures?

The Company instituted a whistle-blowing policy.

Safeguarding creditors’ rights None.

2) Corporate Social Responsibility

Does the company have a separate corporate responsibility (CR) report/section or

sustainability report/section?

None.

3) Performance-enhancing mechanisms for employee participation

(a) What are the company’s policies for its employees’ safety, health and welfare?

The Company abides by safety, health, and welfare standards and policies set by the Department of Labor and Employment. Likewise, the Company’s subsidiary, ARC Refreshments Corporation, has Security and Safety Manuals that are implemented and regularly reviewed to ensure the security, safety, health, and welfare of the employees in the work place.

(b) Show data relating to health, safety and welfare of its employees. The Company has no set policies for the safety, health and welfare of its employees, however, it provides benefits such as: allowances, leave benefits, bonuses, travel allowances, emergency loan, company assigned car and employee medical and dental benefits.


(c) State the company’s training and development programmes for its employees.

Show the data. None.

(d) State the company’s reward/compensation policy that accounts for the performance of the company beyond short-term financial measures The Company’s reward and compensation policy currently accounts for the short-term financial measures only.

4) Procedures for Handling Employee Complaint

What are the company’s procedures for handling complaints by employees concerning

illegal (including corruption) and unethical behavior? Explain how employees are protected

from retaliation.

The Company instituted a whistle-blowing policy which was approved by the Board of

Directors last September 3, 2014

I. DISCLOSURE AND TRANSPARENCY

1) Ownership Structure

(a) Holding 5% shareholding or more (As of December 31, 2014)

Shareholder Number of Shares Percent Beneficial Owner

Mazy’s Capital, Inc. 958,941,660 89.76% Same.

Name of Senior Management Number of Direct Shares

Number of Indirect shares/through name of record

owner)

% of Capital Stock

No member of Senior Management has shareholdings in the Company amounting to 5% or more of its outstanding capital stock.

2) Does the Annual Report disclose the following:

5. Key risks Yes, in the Audited Financial Statements.

6. Corporate Objectives 7. Yes

8. Financial performance indicators 9. Yes, in the Annual Report.

10. Non-financial performance indicators 11. No.

12. Dividend policy 13. Yes, in the Annual Report.

14. Details of whistle-blowing policy The Whistle-Blowing Policy was approved by the Board on 03 September 2015.

15. Biographical details (at least age, qualifications, date of first appointment, relevant experience, and any other directorships of listed companies) of directors/commissioners

16. Yes, in the Annual Report.

17. Training and/or continuing education Yes.


programme attended by each director/commissioner

18. Number of board of directors/commissioners meetings held during the year

19. No.

20. Attendance details of each director/commissioner in respect of meetings held

21. No.

22. Details of remuneration of the CEO and each member of the board of directors/commissioners

23. Yes, in the Annual Report. The Corporation does not provide compensation to its executive officers at the moment.

Should the Annual Report not disclose any of the above, please indicate the reason for the non-disclosure.

3) External Auditor’s Fee

Name of auditor Audit Fee Non-Audit Fee

Sycip, Gorres, Velayo & Company

PHP591,487.80 PHP1,010,000.00

4) Medium of Communication

List down the mode/s of communication that the company is using for disseminating information. Disclosures are made through the PSE, the Company website, and through submissions made with the SEC.

5) Date of Release of Audited Financial: April 15, 2015

6) Company Website

Does the company have a website disclosing up-to-date information about the following?

Website

24. Business operations 25. Yes

26. Financial statements/reports (current and prior years)

27. Yes

28. Materials provided in briefings to analysts and media

29. A section is available on the website but no materials have been provided to analysts and media.

30. Shareholding structure 31. Yes

32. Group corporate structure 33. No.

34. Downloadable Annual Report 35. Yes

36. Notice of AGM and/or EGM 37. Yes

38. Company’s constitution (company’s by-laws; memorandum and articles of association)

39. Yes


7) Disclosure of RPT

RPT Relationship Nature Value

Related Party Transactions were duly disclosed in the Consolidated Financial Statements, in the Corporation’s Annual Report (SEC Form 17-A).

J. RIGHTS OF STOCKHOLDERS

1) Right to participate effectively in and vote in Annual/Special Stockholders’ Meetings

(a) Quorum Give details on the quorum required to convene in the Annual/Special Stockholders’ Meeting as set forth in its By-laws

Quorum Required Under Article I, Sec. 3 of the Amended By-laws, it is stated that “[a]t any meeting of stockholders, the holders as of record date, of a majority of the stock of the company then issued and outstanding, and represented in person or by proxy, shall constitute a quorum for the transaction of business.”

(b) System Used to Approve Corporate Acts

Explain the system used to approve corporate acts.

System Used “At every meeting of the stockholders of the Company, every stockholder shall be entitled to one vote for each share of stock standing in his name on the books of the company; provided, however, that in the case of the election of directors, every stockholders may so vote by proxy, provided that the proxy shall have been appointed in writing by the stockholders himself, or by his duly authorized attorney” (Art. I, Sec. 3 of the Amended By-laws).

Description “The stockholders may, at each annual meeting, appoint two persons (who need not be stockholders), to act as inspectors of election at all meetings of the stockholders until the close of the next annual meeting. If any inspector shall refuse to serve, or neglect to attend, at any meeting of the stockholders, or his


office shall become vacant, the meeting may appoint an inspector in his place” (Art. I, Sec. 5 of the Amended By-laws).

(c) Stockholders’ Rights

List any Stockholders’ Rights concerning Annual/Special Stockholders’ Meeting that differ from those laid down in the Corporation Code

Stockholders’ Rights under The Corporation Code

Stockholders’ Rights not in The Corporation Code

Shareholders shall have the right to elect, remove and replace directors and vote on certain corporate acts in accordance with the Corporation Cod. (Sec. 7.1.1(a) of the Revised Manual on Corporate Governance).

At every meeting of the stockholders of the Company, every stockholder shall be entitled to one vote for each share of stock standing in his name on the books of the company; provided, however, that in the case of the election of directors, every stockholders may so vote by proxy, provided that the proxy shall have been appointed in writing by the stockholders himself, or by his duly authorized attorney (Art. I, Sec. 3 of the Corporation’s Amended By-laws).

Right to attend and participate in the Annual Stockholders’ Meeting and to receive written notice thereof under Section 50 of the Corporation Code (Art. I, Secs. 3 and 4 of the Amended By-laws).

It shall be the duty of the directors to promote, and remove the impediments to, the exercise of shareholder’s rights and allow possibilities to seek redress for violation of their rights. They shall encourage the exercise of shareholders’ voting rights and the solution of collective action problems through appropriate mechanisms. They shall be instrumental in removing excessive costs and other administrative or practical impediments to shareholders participating in meetings and/or voting in person. The directors shall pave the way for the electronic filing and distribution of shareholder information necessary to make informed decisions subject to legal constraints (Sec. 7.1.4 of the Revised Manual on Corporate Governance).

All shareholders shall be allowed to inspect corporate books and records including minutes of Board meetings and

The minority shareholders shall be granted the right to propose the holding of a meeting, and the right to propose items in


stock registries in accordance with the Corporation Code and shall be furnished with annual reports, including financial statements, without cost or restrictions (Sec. 7.1.2 of the Revised Manual on Corporate Governance).

the agenda of the meeting; provided the items are for legitimate business purposes. The minority shareholders shall have access to any and all information relating to matters for which the Management is accountable, except for matters covered by confidentiality agreements (Sec. 7.1.3(b)(c) of the Revised Manual on Corporate Governance).

Right to information - The shareholders shall be provided, upon request, with periodic reports which disclose personal and professional information about the directors and officers and certain other matters such as their holdings with the Corporation’s shares, dealings with the Corporation, relationship among directors and key officers, and the aggregate compensation of directors and officers (Sec. 7.1.3(a) of the Revised Manual on Corporate Governance).

Right to dividends - Shareholders shall have the right to receive dividends subject to the discretion of the Board. The Corporation shall be compelled to declare dividends when its retained earnings is in excess of 100% of its paid-in capital stock, except: a) when justified by definite corporate expansion projects or programs approved by the Board or b) when the Corporation is prohibited under any loan agreement with any financial institution or creditor, whether local or foreign, from declaring dividends without its consent, and such consent has not been secured; or c) when it can be clearly shown that such retention is necessary under special circumstances obtaining in the Corporation, such as when there is a need for special reserve for probable contingencies (Sec. 7.1.4(a)(b) of the Revised Manual on Corporate Governance).

The shareholders shall have appraisal right


or the right to dissent and demand payment of the fair value of their shares in the manner provided for under Sec. 82 of the Corporation Code of the Philippines, (Sec. 7.1.5 of the Revised Manual on Corporate Governance).

Dividends – On 26 June 2014, the Board of Directors of the Corporation approved

the declaration of dividends at Php1.35 per share, applicable to all stockholders on record as of 11 July 2014, with payment to be made on or before 24 July 2014.

Declaration Date Record Date Payment Date

26 June 2014 11 July 2014 24 July 2014

(d) Stockholders’ Participation

1. State, if any, the measures adopted to promote stockholder participation in the

Annual/Special Stockholders’ Meeting, including the procedure on how stockholders and other parties interested may communicate directly with the Chairman of the Board, individual directors or board committees. Include in the discussion the steps the Board has taken to solicit and understand the views of the stockholders as well as procedures for putting forward proposals at stockholders’ meetings

Measures Adopted Communication Procedure

At every meeting of the stockholders of the Company, every stockholder shall be entitled to one vote for each share of stock standing in his name on the books of the company; provided, however, that in the case of the election of directors, every stockholders may so vote by proxy, provided that the proxy shall have been appointed in writing by the stockholders himself, or by his duly authorized attorney (Art. I, Sec. 3 of the Corporation’s Amended By-laws). Stockholders can, if they so choose, communicate directly with the Board or its individual members or board committees during stockholders’ meetings. It shall be the duty of the directors to promote, and remove the impediments to, the exercise of shareholder’s rights and

The Board shall commit at all times to full disclosure of material information dealings. It shall cause the filing of all required information through the appropriate Exchange mechanisms for listed companies and submissions to the Commission for the interest of its stockholders and other stakeholders (Sec. 6, Revised Manual on Corporate Governance). Right to information - The shareholders shall be provided, upon request, with periodic reports which disclose personal and professional information about the directors and officers and certain other matters such as their holdings with the Corporation’s shares, dealings with the Corporation, relationship among directors and key officers, and the aggregate compensation of directors and officers (Sec. 7.1.3(a) of the Revised Manual on Corporate Governance).


allow possibilities to seek redress for violation of their rights. They shall encourage the exercise of shareholders’ voting rights and the solution of collective action problems through appropriate mechanisms. They shall be instrumental in removing excessive costs and other administrative or practical impediments to shareholders participating in meetings and/or voting in person. The directors shall pave the way for the electronic filing and distribution of shareholder information necessary to make informed decisions subject to legal constraints (Sec. 7.1.4 of the Revised Manual on Corporate Governance).

Notice of the time and place of holding any annual meeting, or any special meeting of the stockholders, shall be given to the stockholders at least fifteen (15) business days before the date set for such meeting (Art. I, Sec. 4 of the Amended By-laws). The Chairman, who act as the presiding officer at stockholders’ meetings, can open the floor for any questions and comments of stockholders. The minority shareholders shall be granted the right to propose the holding of a meeting, and the right to propose items in the agenda of the meeting; provided the items are for legitimate business purposes. The minority shareholders shall have access to any and all information relating to matters for which the Management is accountable, except for matters covered by confidentiality agreements (Sec. 7.1.3(b)(c) of the Revised Manual on Corporate Governance).

2. State the company policy of asking shareholders to actively participate in

corporate decisions regarding:

a. Amendment to the company’s constitution The Corporation complies with the procedures under the Corporation Code in cases of amendments to its Articles of Incorporation or By-laws.

b. Authorization of additional shares The Corporation complies with the procedures under the Corporation Code in cases of authorization of additional shares.

c. Transfer of all or substantially all assets, which in effect results in the sale of the company The Corporation complies with the procedure under the Corporation Code in cases of transfer of all or substantially all assets, which in effect results in the sale of the company.


3. Does the company observe a minimum of 21 business days for giving out of notices of the AGM where items to be resolved by shareholders are taken up?

Notice of the time and place of holding any annual meeting, or any special meeting of the stockholders, shall be given either by posting the same enclosed in a postage prepaid envelope, addressed to each stockholder of record, at the address left by such stockholder with the secretary of the company or at his last known post office address or by delivering the same to him in person at least fifteen (15) business days before the date set for such meeting (Art. I, Sec. 4 of the Amended By-laws).

a. Date of sending out notices: 04 July 2014. b. Date of Annual/Special Stockholders’ Meeting: 25 July 2014.

4. State, if any, questions and answers during the Annual/Special Stockholders’ Meeting

None.

5. Results of Annual/Special Stockholders’ Meeting’s Resolutions

Reading and approval of the Minutes of the Annual Stockholders Meeting held on 30 May 2013 - There being a motion duly seconded with no objection raised thereon, the minutes of the annual meeting of the stockholders of the Corporation held on 30 May 2013 was approved.

Action on acts and proceedings of the Board of Directors and Management in 2013 - On motion made and duly seconded, there being no objection thereto, the stockholders ratified the acts and proceedings of the Board of Directors and Management for the year 2013.

Appointment of inspectors of election to serve until the close of the next annual meeting - On motion made, duly seconded, and unanimously carried, the stockholders approved the appointment of Maila Roberta A. Padpad-Banaag and Katherine Y. Pura as election inspectors until the close of the next annual meeting.

Amendment of the Article Sixth of the Corporation’s Articles of Incorporation Increasing the Number of Directors - Upon motion made and duly seconded, and there being no objection thereto, the stockholders approved the amendment of Article Sixth of the Corporation’s Articles of Incorporation to state that “the number of directors of said corporation shall be thirteen (13).”

Election of Directors, including Independent Directors, for 2014-2015 - The following nominees were duly elected by the stockholders, without objection, to serve until their successors are elected:

1. Alfredo M. Yao

2. Antonio I. Panajon

3. Armando M. Yao


4. Jeffrey S. Yao

5. Carolyn S. Yao

6. Mary Grace S. Yao

7. Roberto A. Atendido

8. Albert S. Toribio

9. Fernando R. Balatbat

10. Jesus G. Gallegos, Jr. - Independent Director

11. Roberto F. Anonas, Jr. - Independent Director

Two individuals, namely, Mr. Anonas, Jr. and Mr. Gallegos, were nominated as independent directors in accordance with SEC Memorandum Circular No. 16, Series of 2002, on the Guidelines on the Election of Independent Directors and SEC Memorandum Circular No. 9 Series of 2011, and Article II, Sec. 1 of the Corporation’s by-laws.

The two additional nominees, who were likewise nominated and elected in

light of the proposed amendment to the Corporation’s articles of

incorporation increasing the number of directors from 11 to 13, are as

follows:

1. Gerardo T. Garcia

2. Rinaldi C. Aves

Mr. Garcia and Mr. Aves would assume their seats as members of the

Corporation’s Board of Directors upon approval by the SEC of the proposed

increase in the number of directors.

Appointment of External Auditor - There being a motion made, duly seconded, and unanimously carried, the stockholders resolved to appoint SGV & Co. as the Corporation’s independent external auditors for 2014.

Amendment of Article Third of the Corporation’s Articles of Incorporation Changing the Principal Address of the Corporation - On motion made, duly seconded, and unanimously carried, the stockholders approved the amendment of Article Third of the Articles of Incorporation of the Corporation to state that “the place where the principal office and place of business of the Corporation is to be established or is located at 137 Yakal Street, San Antonio Village, Makati City, Philippines 1203.”

Amendment of Article I, Section 1 of the By-Laws of the Corporation Changing the Venue of the Annual Stockholders Meeting - On motion made and duly seconded, there being no objection thereto, the stockholders approved the amendment of Article I, Sec. 1 of the By-laws of the Corporation to state that the venue of the annual stockholders’ meeting shall be held “at the principal office of the Company or at such other venue designated by the Board of Directors within the city or municipality where the principal office of the Company is located.”


6. Date of publishing of the result of the votes taken during the most recent AGM for all resolutions: The results of the Annual Stockholders Meeting were duly reported to the Securities and Exchange Commission on 28 July 2014 and the Philippine Stock Exchange on the same day of the ASM on 25 July 2014.

(e) Modifications State, if any, the modifications made in the Annual/Special Stockholders’ Meeting regulations during the most recent year and the reason for such modification: None.

(f) Stockholders’ Attendance

(i) Details of Attendance in the Annual/Special Stockholders’ Meeting Held:

Type of Meeting Names of Board members/ Officers present

Date of Meeting

Voting Procedure (by poll, show of

hands, etc.)

% of SH Attending in Person

% of SH in Proxy

Total % of SH

attendance

Annual Stockholders

Meeting

Alfredo M. Yao, Chairman Armando M. Yao Carolyn S. Yao Mary Grace S. Yao Roberto A. Atendido Fernando R. Balatbat, Director/Treasurer Antonio I. Panajon, Director/President Gerardo T. Garcia – Director Elect Rinaldi C. Aves – Director Elect Jesus G. Gallegos, Jr., Independent Director Roberto F. Anonas, Jr., Independent Director Maila A. Padpad-Banaag, Corporate Secretary

25 July 2014

By proxy and show of hands

89.76% 89.76% 89.76%

(ii) Does the company appoint an independent party (inspectors) to count and/or validate the votes at the ASM/SSMs? Yes. The stockholders may, at each annual meeting, appoint two persons (who need not be stockholders), to act as inspectors of election at all meetings of the stockholders until the close of the next annual meeting. If any inspector shall refuse to serve, or neglect to attend, at any meeting of the stockholders, or his office shall become vacant, the meeting may appoint an inspector in his place (Art. I, Sec. 5 of the Amended By-laws).

(iii) Do the company’s common shares carry one vote for one share? If not, disclose and give reasons for any divergence to this standard. Where the company has


more than one class of shares, describe the voting rights attached to each class of shares. The Corporation abides by the basic principle of “one common share, one vote” (Art. I, Sec. 3 of the Amended By-laws).

(g) Proxy Voting Policies

State the policies followed by the company regarding proxy voting in the Annual/Special Stockholders’ Meeting

Company Policies

Execution and acceptance of proxies Every stockholder is entitled to vote by proxy (Art. I, Sec. 3 of the Amended By-laws).

Notary Notarization is not required.

Submission of Proxy The instrument authorizing a proxy to act shall be exhibited to the secretary and to the inspectors of election and shall be lodged with the secretary at least ten (10) days before the scheduled time of the meeting (Art. I, Sec. 3 of the Amended By-laws).

Several Proxies There is no prohibition on the appointment of several proxies.

Validity of Proxy The determination of the validity of proxy is based on the list of stockholders as of record date. Any doubt about the validity of a proxy should be resolved in the shareholders’ proxy (Sec. 6.2 of the Revised Manual on Corporate Governance).

Proxies executed abroad There is no prohibition on the execution of proxies abroad.

Invalidated proxy Invalidated proxies shall not be counted.

Validation of proxy Validation of proxy is done by the inspectors of election.

Violation of proxy None.

(h) Sending of Notices

State the company’s policies and procedure on the sending of notices of Annual/Special Stockholders’ Meeting

Policies Procedure

The Board should be transparent and fair in the conduct of the annual and special stockholders’ meetings of the Company. The shareholders should be encouraged to personally attend such meetings. If they

Notice of the time and place of holding any annual meeting, or any special meeting of the stockholders, shall be given to each stockholder of record at least fifteen (15) business days before the date set for such


cannot attend, they should be apprised ahead of time of their right to appoint a proxy.

meeting. The notice of every meeting shall state briefly the objects of the meeting, and no other business shall be transacted at such meeting except by consent of all the stockholders of the Company. No notice of any meeting need be published in any newspaper. The stockholders of the company may, by unanimous consent, in writing, waive notice of the time, place and purpose of any meeting of stockholders and any action taken at a meeting held pursuant to such waiver shall be valid and building (Art. I, Sec. 4 of the Amended By-laws).

(i) Definitive Information Statements and Management Report

Number of Stockholders entitled to receive the Definitive Information Statements and Management Report and Other Materials

The stockholders as of record date, as provided by the Corporation’s stock and transfer agent, are entitled to receive the Definitive Information Statements and Management Report and other materials.

Date of Actual Distribution of Definitive Information Statement and Management Report and Other Materials held by market participants/certain beneficial owners

The Corporation shall, as far as practicable, issue the call for the ASM to all shareholders within a reasonable time before the date set for the ASM or Special Meeting. The call for the ASM includes the notice, agenda, and the Information Statement.

Date of Actual Distribution of Definitive Information Statement and Management Report and Other Materials held by stockholders

State whether CD format or hard copies were distributed

Hard copies of the Definitive Information Statements were distributed to the stockholders.

If yes, indicate whether requesting stockholders were provided hard copies

All stockholders were provided hard copies of the Definitive Information Statement.

(j) Does the Notice of Annual/Special Stockholders’ Meeting include the following:

Each resolution to be taken up deals with only one item

Yes.


Profiles of directors (at least age, qualification, date of first appointment, experience, and directorships in other listed companies) nominated for election/re-election.

Yes.

The auditors to be appointed or re-appointed Yes.

An explanation of the dividend policy, if any dividend is to be declared

Yes.

The amount payable for final dividends Yes.

Documents required for proxy vote Yes.

1) Treatment of Minority Stockholders

(a) State the company’s policies with respect to the treatment of minority

stockholders.

Policies Implementation

Please see below Please see below

The minority shareholders shall be granted the right to propose the holding of a meeting, and the right to propose items in the agenda of the meeting; provided the items are for legitimate business purposes. The minority shareholders shall have access to any and all information relating to matters for which the Management is accountable, except for matters covered by confidentiality agreements (Sec. 7.1.3(b)(c) of the Revised Manual on Corporate Governance).

(b) Do minority stockholders have a right to nominate candidates for board of directors? Yes. Candidates nominated are pre-screened and shortlisted by the Nomination Committee in accordance with the qualifications as provided in the Manual (Sec. 3.2.1.2(c) of the Revised Manual on Corporate Governance).

K. INVESTOR RELATIONS PROGRAM

1) Discuss the company’s external and internal communications policies and how frequently they are reviewed. Disclose who reviews and approves major company announcements. Identify the committee with this responsibility, if it has been assigned to a committee.

Reports or disclosures required under the Manual shall be prepared and submitted by the responsible Committee or officer through the Corporation’s Compliance Officer (Sec. 5.1 of the Revised Manual on Corporate Governance).

2) Describe the company’s investor relations program including its communications strategy to promote effective communication with its stockholders, other stakeholders and the public in general. Disclose the contact details (e.g. telephone, fax and e-mail) of the officer responsible for investor relations.


Details

(1) Objectives Investor Relations compiles and reports documents and requirements To meet the needs of the investing public and shareholders, Investor Relations compiles, reports, documents all requirements and disclosures through the Philippine Stock Exchange, e-mail correspondences or telephone queries, annual reports, and the company website.

(2) Principles

(3) Modes of Communications

(4) Investor Relations Officer Nicole Christine R. Jayme Tel. No. (632) 812 8050 Email address: [email protected]

3) What are the company’s rules and procedures governing the acquisition of corporate

control in the capital markets, and extraordinary transactions such as mergers, and sales of substantial portions of corporate assets?

The Corporation shall comply with requirements of the Corporation Code and other applicable rules and regulations in cases of mergers, and sales of substantial portions of the Corporation’s assets.

4) Name of the independent party the board of directors of the company appointed to

evaluate the fairness of the transaction price. n/a.

L. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

Discuss any initiative undertaken or proposed to be undertaken by the company.

Macay supports its subsidiary’s corporate social responsibility program. ARC Young Leaders Camp (ARCYLC), is ARC’s flagship corporate social responsibility program which , began in 2011 with the aim to uphold the very same values of hard work, dedication and leadership that forged its foundation. Up to 40 underprivileged but deserving Filipino students from public universities, as well as scholars from private colleges, are selected to participate in a three-day workshop that inspires them to create, inspire, and lead in their own communities and eventually, in society and the nation. The camp invites modern heroes from various fields to serve as guest speakers and role models for the youth participants, such as 2009 CNN Hero of the Year Efren Peñaflorida, environmentalist Anna Oposa, and Rags2Riches founder Reese Fernandez, among many others.


M. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL

Disclose the process followed and criteria used in assessing the annual performance of the

board and its committees, individual director, and the CEO/President.

At present, the Corporation is working on finalizing its written policies used in the assessment of the annual performance of the Board and its committees, individual directors and the President. The following presents the initial guidelines used to formulate the policy.

1. Process Criteria

Board of Directors To evaluate the performance of the

Board of Directors as a body as well as those of

its committees, the individual directors and the chief executive, the

Self-Evaluation Form shall be used. The self-

evaluation shall be conducted every year,

the result of which shall be submitted to the

Compliance Officer for consolidation thirty (30) days prior to the date of

yearly Stockholders’ Meeting.

Rating Description

Five (5) - Highest

Leading practice or principle is adopted in the Manual and full

compliance with the same

Four (4)

Leading practice or principle is adopted in the Manual and

compliance has been made but with minor deviation(s) or

incompleteness

Two (2) to Three (3)

Leading practice or principle is adopted in the Manual and

compliance has been made but with major deviation(s) or

incompleteness

One (1) - Lowest

Leading practice or principle is adopted in the Manual but

compliance has not yet been made.

Board Committees

Individual Directors

CEO/President


N. INTERNAL BREACHES AND SANCTIONS

Discuss the internal policies on sanctions imposed for any violation or breach of the corporate governance manual involving directors, officers, management and employees Sec. 9.1 of the Revised Manual on Corporate Governance imposes the following penalties, after notice and hearing, on the company’s directors, officers, staff, subsidiaries and affiliates and their respective directors, officers and staff in case of violation of any of the provision of the Manual:

Violations Sanctions

First Violation The subject person shall be reprimanded.

Second Violation Suspension of office shall be imposed. The duration of suspension shall depend on the gravity of the violation.

Third Violation Removal

The Compliance Officer shall be responsible in identifying and reporting violations of the Manual to the Corporate Governance Committee, which shall conduct hearings and shall recommend to the Chairman of the Board the imposable penalty for such violation, for further review and approval of the Board (Section 9.3, Revised Manual on Corporate Governance).

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