2014 ACGR

 

ANNUAL CORPORATE GOVERNANCE REPORT
(SEC FORM ACGR)

OUTLINE

  1. BOARD MATTERS
    1. BOARD OF DIRECTORS
      1. Composition of the Board.
      2. Brief Summary of Corporate Governance Policies adopted by the Board
      3. Review and approval of vision and mission
      4. Directorship in Other Companies
      5. Shareholding in the Company
    2. CHAIRMAN AND CEO
    3. OTHER EXECUTIVE, NON-EXECUTIVE AND INDEPENDENT DIRECTORS
    4. CHANGES IN THE BOARD OF DIRECTORS
    5. ORIENTATION AND EDUCATION PROGRAM
  2. CODE OF BUSINESS CONDUCT & ETHICS
    1. POLICIES
    2. DISSEMINATION OF CODE
    3. COMPLIANCE WITH CODE
    4. RELATED PARTY TRANSACTIONS
      1. Policies and Procedures
      2. Conflict of Interest
    5. FAMILY, COMMERCIAL AND CONTRACTUAL RELATIONS
    6. ALTERNATIVE DISPUTE RESOLUTION
  3. BOARD MEETINGS & ATTENDANCE
    1. SCHEDULE OF MEETINGS
    2. DETAILS OF ATTENDANCE OF DIRECTORS
    3. SEPARATE MEETING OF NON-EXECUTIVE DIRECTORS
    4. ACCESSTO INFORMATION
    5. EXTERNAL ADVICE
    6. CHANGES IN EXISTING POLICIES
  4. REMUNERATION MATTERS
    1. REMUNERATION PROCESS
    2. REMUNERATION POLICY AND STRUCTURE FOR DIRECTORS
    3. AGGREGATE REMUNERATION
    4. STOCK RIGHTS, OPTIONS AND WARRANTS
    5. REMUNERATION OF MANAGEMENT
  5. BOARD COMMITTEES
    1. NUMBER OF MEMBERS, FUNCTIONS AND RESPONSIBILITIES
    2. COMMITTEE MEMBERS
    3. CHANGES IN COMMITTEE MEMBERS
    4. WORK DONE AND ISSUES ADDRESSED
    5. COMMITTEE PROGRAM
  6. RISK MANAGEMENT SYSTEM
    1. STATEMENT ON EFFECTIVENESS OF RISK MANAGEMENT SYSTEM
    2. RISK POLICY
    3. CONTROL SYSTEM
  7. INTERNAL AUDIT AND CONTROL
    1. STATEMENT ON EFFECTIVENESS OF INTERNAL CONTROL SYSTEM
    2. INTERNAL AUDIT
      1. Role, Scope and Internal Audit Function
      2. Appointment/Removal of Internal Auditor
      3. Reporting Relationship with the Audit Committee
      4. Resignation, Re-assignment and Reasons
      5. Progress against Plans, Issues, Findings and Examination Trends
      6. Audit Control Policies and Procedures
      7. Mechanisms and Safeguards
  8. ROLE OF STAKEHOLDERS
    1. COMPANY'S POLICY AND ACTIVITIES
    2. CORPORATE RESPONSIBILITY
    3. PERFORMANCE ENHANCING MEHANISM FOR EMPLOYEE PARTIFICIPATION
    4. PROCEDURE IN HANDLING EMPLOYEE COMPLAINTS
  9. DISCLOSURE AND TRANSPARENCY
    1. Ownership Structure
    2. Annual Report Disclosure
    3. External Auditor's Fees
    4. Medium of Communication
    5. Disclosure of RPT
  10. RIGHTS OF STAKEHOLDERS
    1. Participation in Annual Stockholders' Meeting
      1. Quorum
      2. System Used to Approve Corporate Acts
      3. Stockholders' Rights
      4. Stockholders' Participation
      5. Modifications made in the recent AGM
      6. Stockholders' Attendance
      7. Proxy Voting Policies
      8. Sending of Notices
      9. Definitive Information Statements and Management Report
      10. Notice of Annual/Special Stockholders
    2. Treatment of Minority Stockholders
  11. INVESTOR RELATIONS PROGRAM
  12. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES
  13. BOARD, DIRECTOR, COMMITIEE AND CEO APPRAISAL
  14. INTERNAL BREACHES AND SANCTIONS

 

UNION BANK OF THE PHILIPPINES'

ANNUAL CORPORATE GOVERNANCE REPORT

A. BOARD MATTERS

1) Board of Directors

Number of Directors per Articles of Incorporation

Fifteen (15)

Actual number of Directors for the year

Fifteen (15)

(a) Composition of the Board

Director's Name

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

If nominee, identify the principal

Nominator in the last election (if ID, state the relationship with the nominator)

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

Justo A. Ortiz

ED

 

 

July 23, 1993

May 25, 2012

Annual

19

Jon Ramon M. Aboitiz

NED

AEV

 

May 24, 1996

May 25, 2012

Annual

17

Vicente R. Ayllon

NED

IL

 

June 27, 1991

May 25, 2012

Annual

21

Victor B. Valepeñas

ED

 

 

Jan. 1, 1998

May 25, 2012

Annual

15

Erramon I. Aboitiz

NED

AEV

 

Oct. 11, 1988

May 25, 2012

Annual

24

Iker M. Aboitiz

NED

AEV

 

May 29, 2009

May 25, 2012

Annual

4

Stephen G. Paradies

NED

AEV

 

Oct. 11, 1988

May 25, 2012

Annual

24

Juan Antonio E. Bernad

NED

AEV

 

Jan. 27, 1995

May 25, 2012

Annual

18

Mayo Jose B. Ongsingco

NED

IL

 

June 24, 2005

May 25, 2012

Annual

7

Ricardo G. Librea

NED

IL

 

May 27, 2011

May 25, 2012

Annual

1

Emilio S. De Quiros, Jr.

NED

SSS

 

Oct. 1, 2010

May 25, 2012

Annual

2

Eliza Bettina R. Antonino

NED

SSS

 

Dec. 17, 2010

May 25, 2012

Annual

2

Daniel L. Edralin

NED

SSS

 

April 7, 2011

May 25, 2012

Annual

2

Armand F. Braun, Jr.

ID

 

Jon Ramon Aboitiz, no relationship

April 3, 1990

May 25, 2012

Annual

__

Carlos B. Raymond, Jr.

ID

 

Robert Rol B. Ramos, no relationship

May 25, 2012

May 25, 2012

Annual

1

Reynato S. Puno

 

ID

 

 

Jan. 1, 2013

-

-

-

(b) Summary of the corporate governance policy that the board of directors has adopted.

The Bank has adopted governance policies and mechanisms serving as its foundation for good governance. These are principally found on its Articles of Incorporation and By-Laws. The Bank nonetheless continues to adopt more policies and mechanisms in accordance with established rules and best practices.

1) Manual on Corporate Governance

The Bank's Manual on Corporate Governance (CG Manual) embodies leading principles and practices on good corporate governance. It lays down, among others, the qualifications and disqualifications of the members of the Board as well as their duties and responsibilities. It further provides for the qualifications of key officers that assist the Board in performing its governance functions, i.e. the Chairman of the Board, the management, corporate secretary, compliance officer, external auditor and internal auditor. The CG Manual is also a compilation of policies on the compliance system and disclosure and transparency aimed at upholding the rights of the Bank's stakeholders. Most importantly, it underscores the Bank's recognition and continuous promotion of the rights of its stockholders.

The Bank's CG Manual is subject to periodic review by the Board, as initiated by its Corporate Governance Committee, based on updates in regulatory and industry best practices.

Among the policies contained in the CG Manual are the following:

Policy on Conflict of Interest

The CG Manual provides that a conflict of interest exists when the personal, business or other related interest of a director, officer or employee adversely interfere in any way, or could reasonably be perceived to adversely interfere, with that of the Bank. It also provides for the duties of Directors, officers and employees to immediately disclose any involvement in material conflict of interest and not to participate in the decision-making process relating to the transaction.

Related Party Transactions

It is the policy of the Bank to ensure that related party transactions are all entered into on arm's length standard. These transactions are made and entered into substantially on the same terms and conditions as transactions with other individuals and businesses of comparable risks. Hence, they likewise go through the same process applicable to ordinary or unrelated party transactions as set forth in the Bank's Purchasing Guidelines. The Bank has in place a Procedural Guidelines for Monitoring Related Party Transactions approved by the Board of Directors.

Alternative Dispute Resolution System

It is the Bank's policy to continue building harmonious relationship with its stockholders and other parties with whom it may have obligations or contract with. It thus adheres to appropriate alternative dispute resolution system for early settlement of conflicts with its stockholders and other parties, as found in its Revised Manual.

Shareholders Benefit

The Bank is committed to protect shareholders' rights, remove impediments to the exercise of these rights and allow shareholders opportunity to seek redress for violation of the same. These rights are found in the CG Manual which include among others, the right to vote right, to exercise pre-emptive right, right to inspection and information, right to dividends and appraisal right.

2) Disclosure and Transparency

The Bank considers timely and fair disclosure of material information relating to the Bank's operations as crucial for the protection of shareholders' rights. It is thus compliant with regulations on disclosure. The Bank submits various periodic and non-periodic reports required under applicable laws and regulations. It submits current reports to the SEC and the PSE, as necessary, to make full, fair, accurate and timely disclosures to the public on material facts or events that may reasonably be expected to affect investors' decision in relation to the Bank's securities.

3) Audit System

The Bank has its Internal Audit Division (IAD) which provides reasonable assurance to the Board, Senior Management, and its stockholders that the Bank's risk management activities are effective. This involves providing assurance that Bank's key organizational and procedural controls are effective, appropriate, and complied with. It also conducts special administrative investigations when required to do so pursuant to the Bank's Code of Conduct. The Division reports directly to the Audit Committee. It has its own charter which directs performance of its functions. IAD is headed by Ms. Myrna E. Amahan, a vice president of the Bank.

The Bank engages the services of an independent external auditor, who examines the financial statements of the Bank in accordance with generally accepted auditing standards and expresses its opinion on the fairness of its presentation upon completion of such examination.

The Bank's Audit Committee has the primary responsibility to recommend the appointment, re-appointment and removal of external auditors, subject to approval by the Board of Directors and confirmation of the stockholders.

4) Fair Securities Dealing

In order to continually uphold transparency and integrity in the trading in its securities, the Bank has adopted a Trading Guidelines and Blackout Policy. This aims to apprise and to ensure compliance by all "Covered Persons" of the Bank with their obligations under the SRC and other securities rules and regulations relating to the trading or dealing of the Bank's shares. Covered Persons refer to directors, principal officers, and all other employees of the Bank who are made aware of undisclosed material non-public information, including their immediate families living in the same household.

To protect the investing public, the Chief Compliance and Corporate Governance Officer issues notices of trading blackout which prohibits the trading of the Bank's shares within defined periods before and after material non-public information are disclosed and made available to the public.

Directors, principal officers of the Bank and the rest of the covered persons are also mandated to report to the Stock Transfer Unit or the Human Resources Services their transactions involving the Bank's shares or any changes therein no later than ONE trading day after such transaction/s.

5) Compliance Program

The Bank has in place a Board-approved Compliance Program that adheres to external rules and regulations especially those issued by the BSP, SEC, PSE, Philippine Deposit Insurance Corporation (PDIC), Anti-Money Laundering Council (AMLC), and other regulatory agencies. The Compliance and Corporate Governance Office, the Office of the Corporate Secretary, and the Bank's various units, are responsible for ensuring compliance with regulatory enactments, statutes or circulars, and other requirements of these regulatory agencies. On 28 October 2011, the Board approved the Bank's revised Compliance Program, which is further designed to ensure adherence not only to all laws, regulations and circulars relevant to its business, but also to the Bank's internal policies, including its Code of Conduct, as well as to industry-accepted best practices.

6) Anti-Money Laundering Efforts

The Bank has its own programs and procedures to support the anti-money laundering efforts of the BSP, AMLC, and other regulatory agencies of the government.

It has a Money Laundering and Terrorist Financing Prevention Program (MLPP), which provides an easy access to laws and regulations pertinent to anti-money laundering, guidelines on know-your-customer (KYC) requirements, the Bank's anti-money laundering training programs, and other relevant information. The Bank's Anti-Money Laundering Committee exercises oversight functions on the Bank's compliance with Anti-Money Laundering Act, as well as other regulations of the BSP, AMLC and other regulatory bodies and agencies.

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

The Board reviews and approves the Bank's vision and mission periodically to ensure their efficiency based on the prevailing conditions of the Bank.

(d) Directorship in Other Companies

(i) Directorship in the Company's Group[2]

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:

Director's Name

Corporate Name of the
Group Company

Type of Directorship (Executive, Non-Executive, Independent). Indicate if director is also the Chairman.

Justo A. Ortiz

Union Properties, Inc.

UBP Securities, Inc. *

UBP Insurance Brokers, Inc.*

Chairman

Chairman

Chairman

Victor B. Valdepeñas

Union Properties, Inc.

UnionBank Currency Brokers Corp.*

Non-Executive

Chairman

Stephen G. Paradies

Union Properties, Inc.

Non-Executive

Armand F. Braun, Jr.

UBP Securities, Inc.*

UBP Insurance Brokers, Inc.*

UnionBank Currency Brokers Corp.*

Non-Executive

Non-Executive

Non-Executive

Erramon I. Aboitiz

UBP Securities, Inc.*

UBP Insurance Brokers, Inc.*

Non-Executive

Non-Executive

* Not operating.

(ii) Directorship 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.

Justo A. Ortiz

Aboitiz Equity Ventures, Inc.

Non-Executive

Jon Ramon M. Aboitiz

  1. Aboitiz Equity Ventures, Inc.
  2. Aboitiz Power Corporation
  3. International Container Terminal Services, Inc.
  4. Bloomberry Resorts Corporation

Executive

Vice Chairman

Non-Executive

Independent Director

Erramon I. Aboitiz

1. Aboitiz Equity Ventures, Inc.

2. Aboitiz Power Corporation

Executive

Non-Executive

Stephen G. Paradies

2.International Container Terminal Services, Inc.

Non-Executive

Emilio S. De Quiros, Jr.

Belle Corporation

Non-Executive

Eliza Bettina R. Antonino

Philex Mining Corporation

Non-Executive

Mayo Jose B. Ongsingco

Keppel Philippines Holdings, Inc.

Non-Executive

Reynato S. Puno

1. San Miguel Corporation

2. Apex Mining

Independent Director

Independent Director

(iii) Relationship within the Company and its Group

Director's Name

Name of the
Significant Shareholder

Description of the relationship

Jon Ramon Aboitiz

AEV

Nominee

Erramon Aboitiz

AEV

Nominee

Iker Aboitiz

AEV

Nominee

Sabin Aboitiz

AEV

Nominee

Stephen Paradies

AEV

Nominee

Juan Antonio Bernad

AEV

Nominee

Emilio De Quiros

SSS

Nominee

Eliza Antonino

SSS

Nominee

Vicente Ayllon

Insular Life

Nominee

Mayo Jose Ongsingco

Insular Life

Nominee

(iv) 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 Director

The guiding principle shall be that the maximum number of directorship or officership for a particular director shall be limited by his ability to perform his duties diligently.

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 companies. In any case, the capacity of directors to serve with diligence shall not be compromised.

Non-Executive Director

CEO

(e) 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:

Title of Class

Name of Beneficial Owner

Number of Shares, Amount and Nature of legal and beneficial Ownership

% of Class

Common

Jon Ramon M. Aboitiz

194

( r )

0.000%

P1,940.00

 

 

Common

Jon Ramon M. Aboitiz

4,579,378

( r )

0.714%

P45,793,780.00

 

 

Common

Stephen G. Paradies

4,068

( r )

0.001%

P40,680.00

 

 

Common

Stephen G. Paradies

420,000

( b)

0.065%

P4,200,000.00

 

 

Common

Erramon I. Aboitiz

194

( r )

0.000%

P1,940.00

 

 

Common

Erramon I. Aboitiz

2,715,808

( b )

0.423%

P27,158,080.00

 

 

Common

Iker Markel Aboitiz

100

( r )

0.000%

P1,000.00

 

 

Common

Iker Markel Aboitiz

322,207

( b )

0.050%

P3,222,070.00

 

 

Common

Armand F. Braun, Jr.

2,126

( r )

0.000%

P21,260.00

 

 

Common

Armand F. Braun, Jr.

682

( b )

0.000%

P6,820.00

 

 

Common

Justo A. Ortiz

4,959,673

( r )

0.773%

P49,596,730.00

 

 

Common

Justo A. Ortiz

5,555

( b )

0.001%

P55,550.00

 

 

Common

Juan Antonio E. Bernad

361

( r )

0.000%

P3,610.00

 

 

Common

Mayo Jose B. Ongsingco

164

( r )

0.000%

P1,640.00

 

 

Common

Victor B. Valdepeñas

3,540,502

( r )

0.552%

P35,405,020.00

 

 

Common

Victor B. Valdepeñas

908

( b )

0.000%

P9,080.00

 

 

Common

Vicente R. Ayllon

118

( r )

0.000%

P1,180.00

 

 

Common

Carlos B. Raymond Jr.

65

( r )

0.000%

P650.00

 

 

Common

Reynato S. Puno

65

( r )

0.000%

P650.00

 

 

Common

Eliza R. Antonino

1

( r )

0.000%

P10.00

 

 

Common

Emilio S. De Quiros Jr.

1

( r )

0.000%

P10.00

 

 

Common

Daniel Edralin

4,094

( r )

0.001%

P40,940.00

 

 

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 Chair and CEO:

Chairman of the Board

Justo A. Ortiz

CEO

Justo A. Ortiz

President

Victor B. Valdepeñas

(b) Roles, Accountabilities and Deliverables

 

Chairman

Chief Executive Officer

Role

CG Manual, Art. II (F)

Shall preside at all meetings of the stockholders and of the Board of Directors

CG Manual, Art. II (F)

Responsible for the general supervision, administration and management of the business of the Bank.

Accountabilities/

Deliverables

CG Manual, Art. II (F)

  1. Ensure that the meetings of the Board are held in accordance with the by-laws or as the Chairman may deem necessary;
  2. Supervise the preparation of the agenda of the meeting in coordination with the Corporate Secretary, taking into consideration the suggestions of the CEO, Management and the directors;
  3. Maintain qualitative and timely lines of communication and information between the Board and Management;
  4. Ensure that the Board is properly organized, effective and meet its duties and responsibilities, including those relating to corporate governance matters;
  5. Facilitate the operations and deliberations of the Board and the fulfillment of the Board's role and responsibilities under its mandate;
  6. Work with the CEO to ensure management strategies, plans and performance presented to the Board;
  7. To lead the Board in determining that the Bank has an effective senior management team;
  8. Ensure that the views of shareholders are communicated to the Board; and
  9. Ensure that the Bank abides by its by-laws and established policies.

CG Manual, Art. II (F)

  1. Develop and recommend strategic plans to the Board that ensure the Bank's profitable growth and achievement of its business objectives;
  2. Successfully implement the strategic plans approved by the Board;
  3. Review and report regularly to the Board on the Bank's overall progress against its business and financial plans and objectives;
  4. Ensure effective disclosure control, internal controls and management information systems are in place;
  5. Manage and oversee the required disclosure and other communications between the Corporation, shareholders, stakeholders and the public;
  6. Ensure that the Bank maintains high standards of ethics, corporate citizenship and social responsibility; and
  7. Such other duties and responsibilities as may be imposed on the CEO by the Board of Directors.

3) Explain how the board of directors plan for the succession of the CEO/Managing Director/President and the top key management positions?

The review of the succession plans for executive directors (Chairman/CEO and President/COO)and top key management positions is done by the Compensation and Remuneration Committee at least once a year. Endorsements, appointments, plansby the Compensations and Remuneration Committeeare made to the Board for their concurrence/approval.

4) Other Executive, Non-and Independent Directors

Does the company have a policy of ensuring diversity of experience and background of directors in the board? Please explain.

The Bank is committed to have diversity in membership in the Board. Subject to the qualifications set forth in the Bank's Corporate Governance Manual, there exists no discrimination against gender and age in the nomination of the members of the Board of Directors. At present, the Bank's Board membership includes a 36-year-old female director.

5) 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 Bank's Manual on Corporate Governance sets the qualifications of directors, one of which is that a director must be fit and proper for the position of a director under the terms and conditions required by Bangko Sentral ng Pilipinas. In determining whether a person is fit and proper for the position of a director, the following matters must be considered:

  • integrity/probity;
  • competence;
  • relevant education/financial literacy/training;
  • diligence; and
  • experience/training

Election of all directors of the Board are confirmed by the Monetary Board of the Bankgo Sentral ng Pilipinas.

6) Define and clarify the roles, accountabilities and deliverables of the Executive, Non-Executive and Independent Directors:

 

Executive

Non-Executive

Independent Director

Role

For the CEO, who is also the chairman of the BAORD, he shall be responsible for the general supervision, administration and management of the business of the Bank.

For the President who is also a director, he shall execute and administer the policies approved by the Board and also exercise such power vested in him by the Board. The President may delegate some of his administrative responsibilities to other officers of the Corporation subject to such rules and limitations which the Board may prescribe.

A director's office is based on trust and confidence. He shall act in a manner characterized by transparency, accountability and fairness.

To exercise independent judgment in carrying out his functions as a director.

Accountabilities

To insure a high standard of best practice for the Bank, its wholly owned subsidiaries and their stakeholders, each Board of shall:

  1. Install a process of selection to ensure a mix of competent directors and officers;
  2. Determine each corporations' purpose, their visions and missions and strategies to carry out their objectives;
  3. Ensure that the Bank complies with all relevant laws, regulations and codes of best business practices;
  4. Identify the corporations' major and other stakeholders and formulate a clear policy on communicating or relating with them through an effective investor relations program;
  5. Adopt a system of internal checks and balances;
  6. Identify key risk areas and key performance indicators and monitor these factors with due diligence;
  7. Properly discharge Board functions by meetingIndependent views during Board meetings shall be given due consideration and all such meetings shall be duly minuted;
  8. Keep Board authority within the powers of the institution as prescribed in the Articles of Incorporation, By-Laws and in existing laws, rules and regulations;
  9. Formulate and implement policies and procedures that would ensure the integrity and transparency of related party transactions; and
  10. Establish and maintain an alternative dispute resolution system in the Bank that can amicably settle conflicts or differences between the corporation and its stockholders, and the corporation and third parties, including the regulatory authorities.

Deliverables

7) Provide the company's definition of "independence" and describe the company's compliance to the definition.

An independent director is defined as a person holding no interests or relationships with the Bank that may hinder his independence from the Bank or Management or will interfere with the exercise of independent judgment in carrying out his responsibilities as a director. He should comply with all the qualifications required of an independent director and does not possess any of the disqualifications therefore as provided in the Securities Regulation Code (SRC) and the Manual of Regulations for Banks (MORB) of the Bangko Sentral ng Pilipinas; and has not withheld nor suppressed any information material to his or her qualification or disqualification as an independent director.

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 had served for five years, does it limit the term for no more than four additional years? Please explain.

The Bank adopted the SEC Rule on Term Limit of Independent Directors, which provides that an independent director can serve for five consecutive years in covered corporations. After the completion of such five-year service, an independent director shall be ineligible for election as such in the same corporation unless he undergoes a two-year cooling off period. During such period, such independent director shall not engage in any activity that disqualifies a person from being elected as an independent director in the same company.

After the cooling off period, an independent director may be re-elected as such in the same company and can serve for another five consecutive years. Thereafter, the independent director shall be perpetually barred from being elected as such in the same company.

8) Changes in the Board of Directors (Executive, Non-Executive and Independent Directors)

(a) Resignation/Death/Removal

Name

Position

Date of Cessation

Reason

Ricardo G. Librea

Non-Executive Director

January 1, 2013

Replaced by Independent Director Chief Justice Reynato Puno to comply with the required minimum number of independent directors.

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

Procedure

Process Adopted

Criteria

a. Selection/Appointment

(i) Executive Directors

Election of all directors is held every year, unless a vacancy occurs within the year, which shall be filled up immediately.

The Nominations Sub-Committee prescreens the qualifications and prepares a final list of candidates. There is a screening policy and parameters in place for the effective review of the qualifications of the directors.

Election of directors is held every year.

The Nominations Sub-Committee prescreens the qualifications and prepares a final list of candidates. There is a screening policy and parameters in place for the effective review of the qualifications of the directors.

Consequently, submitted to the Monetary Board of the BSP are the following requirements necessary for the confirmation of the election -

  1. Biographical Data Sheets of Directors - with all the educational background, business experience and trainings of directors;
  2. Fit and Proper Rule Certification - attesting that they have all the qualifications and none of disqualifications required of directors for banks; and
  3. Acknowledgment Receipt of their duties and responsibilities.
  1. Holder of at least one (1) share of stock of the corporation;
  2. He shall be at least a college graduate or have sufficient experience in managing the business to substitute for such formal education;
  3. He must have attended a special seminar for board of directors conducted or accredited by the Bangko Sentral. Incumbent directors as well as those who will be elected after the approval of Circular No. 296 must attend said seminar within a period of six (6) months from the date of this circular or from the date of their election, as the case may be;
  4. He shall be at least twenty-five (25) years old or the minimum age requirement for Directors by the BSP;
  5. He must be fit and proper for the position of a director of the bank or subsidiary corporation, as the case may be under the terms and conditions required by Bangko Sentral. In determining whether a person is fit and proper for the position of a director, the following matters must be considered:
    • integrity/probity;
    • competence;
    • education;
    • diligence; and
    • experience/training
  6. He shall be assiduous.

(ii) Non-Executive Directors

(iii) Independent Directors

The Nominations Sub-Committee prescreens the qualifications and prepares a final list of candidates. There is a screening policy and parameters in place for the effective review of the qualifications of the directors.

After the nomination, the Nominations Sub-Committee prepares a final list of candidates containing all the information about all the nominees for independent directors, as required by law and makes them available in the Preliminary Information Statement for submission to the SEC and PSE. The name of the person or group of persons who recommended the nomination of the independent director shall be identified in such report including any relationship with the nominee. Only nominees whose names appear on the final of candidates shall be eligible for election as independent directors. No other nominations shall be entertained after the final list of candidates shall have been prepared. No further nominations shall be entertained or allowed on the floor during the actual stockholders'/ memberships' meeting.

Consequently, submitted to the Monetary Board of the BSP are the following requirements necessary for the confirmation of the election -

  1. Biographical Data Sheets of Directors - with all the educational background, business experience and trainings of directors;
  2. Fit and Proper Rule Certification - attesting that they have all the qualifications and none of disqualifications required of directors for banks; and
  3. Acknowledgment Receipt of their duties and responsibilities.
  4. Certification that they have the qualifications and none of disqualifications as independent directors.

Aside from the qualifications required of a regular director, an independent director must also be a person who -

  1. Is not or has not been an officer or employee of the Bank, its subsidiaries or affiliates or related interests during the past three (3) years counted from the date of his election;
  2. Is not a director or officer of the related companies of the Bank's majority stockholder;
  3. Is not a majority shareholder of the Bank, any of its related companies, or of its majority shareholder;
  4. Is not a relative within the fourth degree of consanguinity or affinity, legitimate or common-law of any director, officer or majority shareholder of the Bank, or any of its related companies;
  5. Is not acting as a nominee or representative of any director or substantial shareholder of the bank any of its related companies or any of its substantial shareholders; and
  6. Is free from any business or other relationship with the institution or any of its major stockholders which could materially interfere with the exercise of his judgment, i.e., has not engaged and does not engage in any transaction with the Bank, any of its related companies or any of its substantial shareholders, whether by himself or with other persons or through a firm of which he is a partner or a company of which he is a director or substantial shareholder, other than transactions which are conducted at arm's length and could not materially interfere or influence with the exercise of his judgments.

b. Re-appointment

(i) Executive Directors

Re-appointment process shall follow the process for nomination and election of directors.

For a director to be re-appointed he must possess all the qualifications and none of the disqualifications of a director as provided above.

(ii) Non-Executive Directors

Re-appointment process shall follow the process for nomination and election of directors.

For a director to be re-appointed he must possess all the qualifications and none of the disqualifications of a director as provided above.

(iii) Independent Directors

Re-appointment process shall follow the process for nomination and election of directors.

For a director to be re-appointed he must possess all the qualifications and none of the disqualifications of a director as provided above.

c. Permanent Disqualification

(i) Executive Directors

A director permanently disqualified shall be removed from office in accordance with Sec. 28 of the Corporation Code,

Section 28 of the Corporation Code:

Sec. 28. Removal of directors or trustees. - Any director or trustee of a corporation may be removed from office by a vote of the stockholders holding or representing at least two-thirds (2/3) of the outstanding capital stock, or if the corporation be a non-stock corporation, by a vote of at least two-thirds (2/3) of the members entitled to vote: Provided, That such removal shall take place either at a regular meeting of the corporation or at a special meeting called for the purpose, and in either case, after previous notice to stockholders or members of the corporation of the intention to propose such removal at the meeting. A special meeting of the stockholders or members of a corporation for the purpose of removal of directors or trustees, or any of them, must be called by the secretary on order of the president or on the written demand of the stockholders representing or holding at least a majority of the outstanding capital stock, or, if it be a non-stock corporation, on the written demand of a majority of the members entitled to vote. Should the secretary fail or refuse to call the special meeting upon such demand or fail or refuse to give the notice, or if there is no secretary, the call for the meeting may be addressed directly to the stockholders or members by any stockholder or member of the corporation signing the demand. Notice of the time and place of such meeting, as well as of the intention to propose such removal, must be given by publication or by written notice prescribed in this Code. Removal may be with or without cause: Provided, That removal without cause may not be used to deprive minority stockholders or members of the right of representation to which they may be entitled under Section 24 of this Code.

CG Manual, Article II (C)

Without prejudice to specific provisions of law prescribing disqualifications for directors, the following are permanently disqualified from becoming directors:

  1. Any person finally convicted judicially of an offense involving moral turpitude or fraudulent act or transgressions;
  2. Any person finally found by SEC or a court or other administrative body to have willfully violated, or willfully aided, abetted, counseled, induced or procured the violation of, any provision of the Securities Regulation Code, the Corporation Code, or any other law administered by the SEC or the BSP, or any rule, regulation or order of the SEC or the BSP;
  3. Any person judicially declared to be insolvent, spendthrift or incapacitated to contract;
  4. Any person finally found guilty by a foreign court or equivalent financial regulatory authority of acts, violations or misconduct similar to any of the acts, violations or misconduct listed in the foregoing paragraphs;
  5. Conviction by final judgment of an offense punishable by imprisonment for a period exceeding six (6) years, or a violation of the Corporation Code, committed within five (5) years prior to the date of his election orappointment; and
  6. Directors, officers or employees of closed banks/quasi-banks/trust entities who were responsible for such institution's closure as determined by the Monetary Board.

(ii) Non-Executive Directors

(iii) Independent Directors

The same as the criteria for executive and non-executive directors.

d. Temporary Disqualification

(i) Executive Directors

Directors elected or appointed without possessing the qualifications abovementioned or possessing any of the disqualifications as enumerated herein, shall vacate their respective positions immediately.

Temporary
(disqualified for a specific/indefinite period of time)

  1. Refusal to fully disclose the extent of his business interest as required under the Securities Regulation Code and its Implementing Rules and Regulations, other provision of law or of a circular, memorandum or rule or regulation of the BSP. This disqualification shall be in effect as long as his refusal persists;
  2. Absence or non-participation for whatever reason/s for more than fifty percent (50%) of all meetings, both regular and special, of the Board of Directors during his incumbency, or any twelve (12) month period during said incumbency. This disqualification applies for purposes of the succeeding election;
  3. Dismissal/termination from directorship in another listed bank for cause. This disqualification shall be in effect until he has cleared himself of any involvement in the alleged irregularity;
  4. Persons who are delinquent in the payment of their obligations as defined hereunder:
    1. a. Delinquency in the payment of obligations means that an obligation of the Director with the Bank or any of its subsidiaries, or at least two obligations with other banks/financial institution, under different credit lines or loan contracts, are past due pursuant to Secs. X306 of the Manual of Regulations for Banks, and Sec. 4308Q of the Manual of Regulations for Non-Bank Financial Institutions ;
    2. b. Obligations shall include all borrowings from a Bank obtained by:
      1. A director for his own account or as the representative or agent of others or where he/she acts as a guarantor, indorser, or surety for loans from such financial institutions;
      2. The spouse or child under the parental authority of the director;
      3. Any person whose borrowings or loan proceeds were credited to the account of, or used for the benefit of a director;
      4. A partnership of which a director or his/her spouse is the managing partner or a general partner owning a controlling interest in the partnership; and
      5. A corporation, association or firm wholly-owned or majority of the capital of which is owned by any or a group of persons mentioned in the foregoing Items (i),(ii) and (iv);
        This disqualification shall be in effect as long as the delinquency persists.
  5. Persons convicted for offenses involving dishonesty, breach of trust or violation of banking laws but whose conviction has not yet become final and executory;
  6. Directors and officers of closed banks/quasi-banks/trust entities pending their clearance by the Monetary Board;
  7. Directors disqualified for failure to observe/discharge their duties and responsibilities prescribed under existing regulations. This disqualification applies until the lapse of the specific period of disqualification or upon approval by the Monetary Board on recommendation by the appropriate supervising and examining department of such directors' election/ reelection;
  8. Directors who failed to attend the special seminar for board of directors required under item 3 of subsecs. X141.2/4141Q.2. This disqualification applies until the director concerned had attended such seminar;
  9. Persons dismissed/terminated from employment for cause. This disqualification shall be in effect until they have cleared themselves of involvement in the alleged irregularity;
  10. Persons with derogatory records with the National Bureau of Investigation (NBI), court, police, interpol and monetary authority (central bank) of other countries (for foreign directors and officers) involving violation of any law, rule or regulation of the Government or any of its instrumentalities adversely affecting the integrity and/or ability to discharge the duties of the Bank. This disqualification applies until they have cleared themselves of involvement in the alleged irregularity;
  11. Being under preventive suspension by UBP or any of its subsidiaries;
  12. If the independent director becomes an officer or employee of UBP or any of its subsidiaries, he shall be automatically disqualified from being an independent director; and
  13. Conviction that has yet become final referred to in the grounds for the disqualification of directors.

(ii) Non-Executive Directors

Directors elected or appointed without possessing the qualifications abovementioned or possessing any of the disqualifications as enumerated herein, shall vacate their respective positions immediately.

(iii) Independent Directors

Directors elected or appointed without possessing the qualifications abovementioned or possessing any of the disqualifications as enumerated herein, shall vacate their respective positions immediately.

The same as above. In addition, not possessing any of the qualifications of an independent director disqualifies him as such.

e. Removal

(i) Executive Directors

Section 28 of the Corporation Code:

Sec. 28. Removal of directors or trustees. - Any director or trustee of a corporation may be removed from office by a vote of the stockholders holding or representing at least two-thirds (2/3) of the outstanding capital stock, or if the corporation be a non-stock corporation, by a vote of at least two-thirds (2/3) of the members entitled to vote: Provided, That such removal shall take place either at a regular meeting of the corporation or at a special meeting called for the purpose, and in either case, after previous notice to stockholders or members of the corporation of the intention to propose such removal at the meeting. A special meeting of the stockholders or members of a corporation for the purpose of removal of directors or trustees, or any of them, must be called by the secretary on order of the president or on the written demand of the stockholders representing or holding at least a majority of the outstanding capital stock, or, if it be a non-stock corporation, on the written demand of a majority of the members entitled to vote. Should the secretary fail or refuse to vote. Should the secretary fail or refuse to call the special meeting upon such demand or fail or refuse to give the notice, or if there is no secretary, the call for the meeting may be addressed directly to the stockholders or members by any stockholder or member of the corporation signing the demand. Notice of the time and place of such meeting, as well as of the intention to propose such removal, must be given by publication or by written notice prescribed in this Code. Removal may be with or without cause: Provided, That removal without cause may not be used to deprive minority stockholders or members of the right of representation to which they may be entitled under Section 24 of this Code.

Possession of the grounds for permanent disqualifications and those provided under applicable laws.

(ii) Non-Executive Directors

Possession of the grounds for permanent disqualifications and those provided under applicable laws.

(iii) Independent Directors

Possession of the grounds for permanent disqualifications and those provided under applicable laws.

f. Re-instatement

(i) Executive Directors

Reinstatement process shall follow the process for nomination and election of directors.

For a director to be reinstated he must possess all the qualifications and none of the disqualifications of a director as provided above.

(ii) Non-Executive Directors

Reinstatement process shall follow the process for nomination and election of directors.

For a director to be reinstated he must possess all the qualifications and none of the disqualifications of a director as provided above.

(iii) Independent Directors

Reinstatement process shall follow the process for nomination and election of directors.

For a director to be reinstated he must possess all the qualifications and none of the disqualifications of a director as provided above.

g. Suspension

(i) Executive Directors

The Bank removes a director either permanently or temporarily.

(ii) Non-Executive Directors

(iii) Independent Directors

Voting Result of the last Annual General Meeting

Name of Director

Votes Received (%)

Justo A. Ortiz

82.35%

Jon Ramon M. Aboitiz

82.42%

Vicente R. Ayllon

82.42%

Victor B. Valdepeñas

82.13%

Erramon I. Aboitiz

82.42%

Iker M. Aboitiz

82.42%

Stephen G. Paradies

82.42%

Juan Antonio E. Bernad

82.42%

Mayo Jose B. Ongsingco

82.42%

Ricardo G. Librea

82.13%

Emilio S. De Quiros, Jr.

82.42%

Eliza Bettina R. Antonino

82.42%

Daniel L. Edralin

82.42%

Armand F. Braun, Jr.

82.42%

Carlos B. Raymond, Jr.

82.42%

9) Orientation and Education Program

(a) Company's orientation program for new directors.

The Corporate Governance Committee is responsible for making recommendations to the Board regarding required trainings and continuing education of directors.

All members of the Board have attended a one and a half day corporate governance orientation seminar for bank directors at BSP-accredited institutions in compliance with the MORB. These include extensive discussion on topics involving audit, risk and governance, financial stewardship and accountability.

Newly elected members also undergo orientation on the Bank's businesses as soon as they assume their positions. Representatives from key segments of the Bank present their respective business to newly elected directors. Continuing education is also provided which include training by the Bank and by outside service providers.

(b) In-house training and external courses attended by Directors and Senior Management[3] for the past three (3) years:

DIRECTORS:

IN-HOUSE TRAININGS:

2011

  1. Orientation to UnionBank's Key Units & Business Segments
  2. Leaders Learning Circle
  3. Enterprise Risk Management Workshop For Risk Champions - Risk Identification

2012

  1. Orientation to UnionBank's Key Units & Business Segments
  2. Leaders Learning Circle
  3. AMLA & Information Security Awareness Online Refresher Course

2013

  1. Enterprise Risk Management & Business Continuity Plan Online Refresher Course
  2. Orientation to UnionBank's Key Units & Business Segments

EXTERNAL TRAININGS:

2012

  1. Corporate Social Responsibility - 2012
  2. Aboitiz Future Leaders Summit - 2012
  3. Corporate Governance Orientation Seminar for New Directors for 2012
  4. Enterprise Risk Managment Forum - 2012
  5. Corporate Governance Seminar - 2012

2011

  1. Euromoney Conference - 2011
  2. International Finance Corporation-World Bank Conferece - 2011
  3. FINEX Conference - 2011
  4. Finance Asia Round Table - 2011
  5. PSE/Asia Money Round Table - 2011
  6. Corporate Governance Seminar - 2011
  7. UBP ICAAP (Bankgo Sentral ng Pilipinas) - 2011
  8. Corporate Governance Orientation Seminar for New Directors for 2011
  9. Commodity Risk Management Workshop - 2011

2010

  1. UBS Conference - 2010
  2. Deutsche Bank Global Emerging Markets - 2010
  3. JP Morgan Philippines Conference - 2010

SENIOR MANAGEMENT:

IN-HOUSE TRAININGS:

  1. AMLA & Information Security Awareness Online Refresher Course
  2. Leadership For Business Results
  3. Executive Coaching Workshop
  4. Keys To Great Managing
  5. Leaders Learning Circle
  6. Enterprise Risk Management Workshop For Risk Champions - Risk Identification
  7. Legal Summit
  8. Risk Assessment Workshop
  9. Enterprise Risk Management & Business Continuity Plan Online Refresher Course

EXTERNAL TRAININGS:

  1. Treasury Certification Program
  2. Strategies For Growth - Innovative Talent Management For Competitive Advantage
  3. 2011 ISACA Manila Information Security Summit - Information Security In A Borderless World
  4. Brand Building And Activation - Marketing Strategies Seminar
  5. Counterfeit Detection Workshop
  6. Fraud Master Class
  7. Certificate Course In Strategic Compliance For The Banking Industry
  8. Advanced Sme Banking Excellence 2012
  9. PRMIAS 2012 Operational Risk: Selecting & Maximizing Key Risk Indicators (Kris)
  10. Professional Directors Program (4 Modules) March 8-9 Strategy/Policy, March 15-16 Monitoring/Accountability
  11. BASEL III Masterclass - Best Practices And Frameworks
  12. BASEL III And Interface With Ifrs
  13. Six Sigma Money Belt Training
  14. PFRS - Changes In 2012 And Beyond
  15. Six Sigma Green Belt Training
  16. Sec Compliance With Rules On Disclosures
  17. Finance For Senior Executives
  18. 2nd IT Audit & Fraud Summit
  19. International Commercial Cash Operations Seminar (ICCOS) - A Regional Seminar With International Perspective

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

Name of Director/Officer

Date of Training

Program

Name of Training Institution

Justo A. Ortiz

September 11, 2012

ASEAN Corporate Governance Scorecard Philippine Launch

Institute of Corporate Directors, Securities and Exchange Commission and the Philippine Stock Exchange

May 30, 2012

Sustaining Change Through Values -Based Governance

Institute of Corporate Directors

February 2012

Enterprise Risk Management Forum - The Road Ahead

Aboitiz Equity Ventures

August to November 2012

AMLA & Information Security Awareness Online Refresher Course

Union Bank of the Philippines

September 26, 2012

November 21, 2012

Leaders Learning Circle

Union Bank of the Philippines

Jon Ramon M. Aboitiz

September 27, 2012

Economic Briefing by Leif Eskesen and Trin Nguyen of HSBC

HSBC

November 9-10, 2012

Board Retreat

Aboitiz Equity Ventures

2012

Ancillary Service Briefing

Aboitiz Equity Ventures

2012

Boardbooks User for Training

Aboitiz Equity Ventures

2012

AON Directors & Officers - Liability Insurance

Aboitiz Equity Ventures

Vicente R. Ayllon

June 9-13, 2012

2012 Annual MDRT Meeting

Anaheim, California

October 28 to November 2, 2012

26th East Asian Insurance Congress

Kuala Lumpur, Malaysia

Victor B. Valepeñas

May 30, 2012

Institute of Corporate Directors 9th Annual Dinner

"Sustaining Change Through Values -Based Governance"

Institute of Corporate Directors

2012

Learners' Circle

Union Bank of the Philippines

2012

Enterprise Risk Management

Union Bank of the Philippines

September 11, 2012

ASEAN Corporate Governance Scorecard Philippine Laumch, Mandarin Oriental

Institute of Corporate Directors, ISA

Erramon I. Aboitiz

September 27, 2012

Economic Briefing by Leif Eskesen and Trin Nguyen of HSBC

HSBC

November 9-10, 2012

Board Retreat

Aboitiz Equity Ventures

2012

Ancillary Service Briefing

Aboitiz Equity Ventures

2012

Boardbooks User for Training

Aboitiz Equity Ventures

2012

AON Directors & Officers - Liability Insurance

Aboitiz Equity Ventures

Iker M. Aboitiz

September 27, 2012

Economic Briefing by Leif Eskesen and Trin Nguyen of HSBC

HSBC

2012

Ancillary Service Briefing

Aboitiz Equity Ventures

2012

Boardbooks User for Training

Aboitiz Equity Ventures

2012

AON Directors & Officers - Liability Insurance

Aboitiz Equity Ventures

Stephen G. Paradies

2012

Ancillary Service Briefing

Aboitiz Equity Ventures

2012

Boardbooks User for Training

Aboitiz Equity Ventures

2012

AON Directors & Officers - Liability Insurance

Aboitiz Equity Ventures

2012

Enterprise Risk Management Forum

Aboitiz Equity Ventures

Juan Antonio E. Bernad

2012

Ancillary Service Briefing

Aboitiz Equity Ventures

2012

Boardbooks User for Training

Aboitiz Equity Ventures

2012

AON Directors & Officers - Liability Insurance

Aboitiz Equity Ventures

Mayo Jose B. Ongsingco

March 27-28, 2012

Euromoney Phils. Investment Forum

Euromoney Conferences

May 16 - 17, 2012

InsuranceCom Asia 2012 Conference

InsuranceCom Asia (Hong Kong)

September 7, 2012

Association of Insurers and Reinsurers of Developing Countries (AIRDC) Seminar

AIRDC

September 11, 2012

MAP International CEO Conference

Management Assoc. of the Philippines

September 25, 2012

The Asset 7th Philippine Forum

The Asset

Emilio S. De Quiros, Jr.

2012

Asia Mining Congress

 

2012

ISSA Forum for Technical Commissions - Geneva, Switzerland

ISSA

2012

ISSA Social Security Forum for Asia & the Pacific - Seoul, Korea

ISSA

Carlos B. Raymond, Jr.

July 31 and August 1, 2012

Corporate Governance Seminar

Institute of Corporate Directors

July 31 and August 1, 2012

Orientation to UnionBank's Key Units & Business Segments

Union Bank of the Philippines

Justice Reynato S. Puno (ret.)

2012

Corporate Governance Seminar

San Miguel Brewery Hongkong Ltd.

B. CODE OF BUSINESS CONDUCT & ETHICS

1) Company's policies on business conduct or ethics affecting directors, senior management and employees:

Business Conduct & Ethics

Directors

Senior Management

Employees

(a) Conflict of Interest

The Bank's Manual on Corporate Governance (CG Manual), Art. II (A)

x x x

2. A director, officer or employee of the Bank should not use his position to profit or gain some benefit or advantage for himself and/or his related interests to the detriment of the Bank. He should avoid situations that may compromise his impartiality.

Code of Conduct, Secs. 1.1.8 and 1.1.13

Sec. 1.1.8 - Every employee must avoid circumstances in which his personal interests, financial or otherwise, or relationships with Bank customers, conflict, or may appear to conflict, with the interests of UnionBank. Situations that may lead to actual or apparent conflict include, but are not limited to:

  1. Participating in decisions to do business with customers or suppliers in which you, a close family member, or a friend has an interest or from which personal benefit may accrue, unless there is proper disclosure, and final approval is given by a higher authority, or someone belonging to the same level in the organization as you, who is properly authorized to give such final approval;
  2. Business done with UnionBank only through friendship, family ties, giving or receiving gifts, or to gain favor;
  3. Misuse of UnionBank's name for personal benefit;
  4. Investments and other financial transactions by UnionBank employees for their own account; these may be done as long as those investments and other financial transactions do not involve a conflict of interest with the activities of UnionBank. Employee investment decisions must be based solely on publicly available information.

If an employee is unsure if a circumstance that he finds himself in involves a conflict of interest, he should disclose this to his supervisor, who may consult the appropriate Management unit to assist in resolution.

(b) Conduct of Business and Fair Dealings

CG Manual, Art. II (E) (1)

It is the duty of directors to conduct fair business transaction with the corporation and to ensure that personal interest does not bias Board decisions.

Code of Conduct

1.1. STANDARDS OF PERSONAL CONDUCT

1.1.1. Compliance with UnionBank's Code of Conduct

Every employee is responsible for his own compliance with the Code of Conduct and all other Bank policies, as well as laws and regulations. Supervisors and managers have additional responsibility to help their staff understand and apply these, and to maintain an environment that promotes consistent compliance.

1.1.2. Compliance with the law

Every employee must comply with the letter and intent of the law at all times.

1.1.7. Confidential information

All employees must avoid intentional or unintentional disclosure of sensitive or confidential information. Such information should be used only in connection with their job responsibilities. Sensitive or confidential information may only be shared in the following circumstances:

  1. With other UnionBank employees who have a need and are authorized to have this knowledge;
  2. With third parties where this has been authorized in writing by the customer, UnionBank employee, supplier or other owner of the information;
  3. Pursuant to a statute or regulation, a court order or other legal process.

1.1.11. Investments/personal finances/insider information

UnionBank strictly prohibits any officer or employee of the Bank, whenever and in whatever capacity employed, from trading for his account, or for the profit of family members or friends, on the basis of inside information. UnionBank also prohibits an officer or employee from disclosing inside information to another officer or employee or to persons outside UnionBank so that they may profit from such information.

Employees should exercise prudence in personal financial affairs and should avoid financial situations that could reflect unfavorably on the Bank or themselves. They should manage their finances with care, and in a manner consistent with employment in a fiduciary institution.

1.1.12. Activities outside UnionBank

UnionBank employees are discouraged from serving as directors, trustees, officers or advisors for outside for-profit organizations except in very special circumstances. Prior approval from Chairman/CEO, or President/COO, or any Center Head is required before one may accept such office, or any secondary employment. Such activities must not pose a conflict or the appearance of a conflict with the interests of UnionBank, nor interfere with the employee's ability to perform his UnionBank responsibilities, nor have an adverse impact on the business interests of the Bank.

UnionBank encourages employees to engage in volunteer work within their communities. This may involve non-profit, civic or professional organizations.

1.2. STANDARDS FOR PROTECTION OF BANK ASSETS

1.2.1. Use and safeguarding of UnionBank Assets

All assets owned by UnionBank shall be used solely for its business. They must not be used for personal benefit or personal consumption, except where permitted by UnionBank. However, supervisors may allow a de minimis personal use of Bank assets, such as occasional typing of a personal letter, where the expense to the Bank is so small that accounting for the use would be unreasonable, administratively impracticable or counterproductive.

Every employee is responsible for safeguarding Bank assets under his control. Copyright, trademark or patent protection should be obtained for proprietary ideas, products and services where applicable.

Assets referred to herein include physical property, intellectual property (e.g., computer programs and models), services, customer information and business plans. Copying, selling or distributing information, software and other forms of intellectual property in violation of license agreements is strictly prohibited.

1.3. STANDARDS FOR DEALING WITH CO-EMPLOYEES

1.3.1. Courtesy and respect

Employees of UnionBank should deal with their colleagues, whether superiors, peers, or subordinates, as well as with the Bank's customers and suppliers, with courtesy and respect, without harassment, or physical or verbal abuse.

1.3.2. Objectivity and fairness

UnionBank adheres to the principles of objectivity and fairness in its relationship with its employees. Each employee is expected to do the same in his relationship with the Bank and his co-employees.

1.3.4. Open and honest communication

UnionBank employees must deal openly and honestly with each other.

UnionBank supports an "open door" management policy. The Bank is committed to discussing work-related concerns in a fair, prompt and impartial manner.

1.4. STANDARDS FOR WORKPLACE BEHAVIOR AND CONDITIONS

1.4.1. Diligence required of every employee

Every employee has the responsibility of performing his duties and responsibilities in accordance with the highest ethical and professional standards of the Bank with the diligence of a good father of a family.

The diligence of a good father of a family is that degree of diligence required of an employee to protect the Bank from loss or exposure to risk of loss just as a responsible father would to his family.

1.4.2. Attendance and punctuality

At UnionBank, being at work on time and being available during normal business hours are part of the Bank's commitment to its customers and co-workers.

All employees are required to be punctual and regular in their attendance, and to be at work during their working hours, except during authorized breaks.

1.5. STANDARDS FOR DEALING WITH CUSTOMERS

1.5.1. Know your customers

"Know your customer" is a basic tenet of business at UnionBank. Care must be exercised in selecting those with whom the Bank conducts business. Each business unit must have processes in place for checking the credit and character of its customers and counterparties. These processes must ensure ongoing monitoring of these customers and counterparties, to detect suspicious transactions during the entire period of the relationship. This includes, but is not limited to, suspicious repayments or pre-payments of loans, unusual or suspicious electronic wire transfer activity, misuse of letter of credit transactions, unusual or suspicious location of accounts and unusual number of accounts where not related to appropriate business activities.

UnionBank does not do business with criminals, including, but not limited to drug traffickers and money launderers.

1.5.2. Product and service quality

UnionBank is committed to quality and constantly strives to meet and exceed customers' expectations.

1.5.3. Responsibility to customers

UnionBank recognizes its obligation to be truthful and objective in its dealing with its customers. While the Bank is entitled to employ all fair and honest means to promote its products and services, it shall not, however, knowingly make false representations to customers.

1.5.4. Operating customer accounts

Employees will not operate or make entries to customer accounts unless the transactions are specifically approved by the customer, or appropriate general instructions have been provided by him. All transactions and services must be legal and comply with UnionBank's ethical standards and other policies.

Accounts for which customers request that UnionBank not send statements, or hold on to transaction documents and other correspondence are especially sensitive. Key functions should be segregated through dual control and positive client contact should be established in a prescribed time frame.

1.6. STANDARDS FOR DEALING WITH SUPPLIERS

1.6.1. Objective evaluation of suppliers

All purchases of equipment, supplies and services for UnionBank shall be made on the basis of quality, utility and price offered by the vendor.

Purchasing decisions should be based on objective judgment of the vendor's reliability and integrity, and on the value of the relationship with the vendor, in view of short and long term considerations and objectives.

1.6.3. Responsibility to suppliers

UnionBank upholds the principles of truthfulness, fairness and respect in its dealings with its suppliers. While the Bank may actively negotiate for favorable terms with its suppliers, it shall not knowingly mislead them with respect to competitors' price and terms, the Bank's plans for future purchases, or other particulars of their transactions with the Bank. UnionBank shall not use its vantage position as customer of the supplier, to impose unfair conditions that could not have been obtained by negotiations in good faith, or commit acts or omissions that unjustly breach contractual obligations.

1.7. STANDARDS FOR DEALING WITH THE GOVERNMENT

1.7.1. Compliance with laws and regulations

It is UnionBank's policy to strictly comply with all relevant laws and government regulations. Every effort shall be exerted to ensure that regulatory requirements are complied with promptly. Special care must be applied in areas where the law is evolving or being extended to situations not previously covered.

1.7.2. Tax payment

Tax returns must be filed on a timely basis. The correct amount of taxes, if any, must be paid promptly.

1.8. STANDARDS FOR DEALING WITH THE PRESS

1.8.1. Public relations/press

It is UnionBank's intention to maintain open and consistent communications with the media.

To ensure the accuracy of all information provided, spokespeople are designated to respond to all inquiries. Except for designated spokespeople, individual employees should not respond on UnionBank's behalf to policy inquiries in any public forum, including the Internet, on-line services and the press.

All press inquiries should be forwarded immediately to the unit in charge of Public Relations, or to a designated spokesperson.

(c) Receipt of gifts from third parties

CG Manual, Art. II, (E) (6)

1) To conduct fair business transaction with the corporation and to ensure that personal interest does not bias Board decisions;

Code of Conduct

1.1.9. Receiving gifts and other inducements

Employees of UnionBank should not accept gifts - anything of value, such as an item, a service, free vacation trips, personal use of a vehicle, use of a vacation home, lavish entertainment, etc. - from customers or suppliers. Exceptions to this general rule may be made for gifts of nominal value (generally less than P5,000.00), as long as the gift was not given or received with corrupt intent and could not be perceived as such. Exceptions may only be granted by the Chairman/CEO, the President/COO, and any Center Head.

If a situation where refusing or returning the gift is truly impractical or would adversely affect the relationship, the employee may accept the gift and turn it over to UnionBank, which may then use it for any suitable purpose, such as for public display or raffle prize at company functions. Alternatively, the employee may have the gift appraised and make a donation in that amount to a charity, preferably one supported by the Bank. In every case, the employee must report the gifts received to his Compliance Officer.

(d) Compliance with Laws & Regulations

CG Manual, Art. II (D) (3)

It is the duty of directors to ensure that the Bank complies with all relevant laws, regulations and codes of best business practices.

Code of Conduct

1.7.1. Compliance with laws and regulations

It is UnionBank's policy to strictly comply with all relevant laws and government regulations. Every effort shall be exerted to ensure that regulatory requirements are complied with promptly. Special care must be applied in areas where the law is evolving or being extended to situations not previously covered.

(e) Respect for Trade Secrets/Use of Non-public Information

CG Manual, Art. II, (E) (6)

It is the duty of directors to observe confidentiality.

Code of Conduct

1.2.2. Accuracy and completeness of data and records

The records, data and information owned, used and managed by UnionBank are required to be accurate, updated and complete at all times. Every employee is responsible for the integrity of information, records and reports under his control.

Financial information provided to UnionBank's shareholders, regulatory bodies and others must embody the highest standards of fairness and accuracy. Making false or misleading statements to anyone including internal or external auditors, Bank management, other UnionBank employees or regulators is strictly prohibited and constitutes a falsification of records.

1.2.3. Ownership rights to property

When an employee's employment with UnionBank ceases, whether as a result of retirement, resignation, termination, or otherwise, all rights to property (real, personal and intellectual) and information (including, but not limited to, customer lists, proprietary product designs, systems codes, contracts, product manuals) generated or obtained as part of the employment relationship, remain the exclusive property of UnionBank.

1.2.4. Use of UnionBank's name

UnionBank's name and reputation are Bank assets and should only be used in the furtherance of its business. This name should not be used for the benefit of others, or become associated with any illegal, harmful or improper purpose.

(f) Use of Company Funds, Assets and Information

CG Manual, Art. II, (E) (6)

1) To conduct fair business transaction with the corporation and to ensure that personal interest does not bias Board decisions;

x x x

6) It is the duty of directors to observe confidentiality.

Code of Conduct

1.1.7. Confidential information

All employees must avoid intentional or unintentional disclosure of sensitive or confidential information. Such information should be used only in connection with their job responsibilities. Sensitive or confidential information may only be shared in the following circumstances:

  1. With other UnionBank employees who have a need and are authorized to have this knowledge;
  2. With third parties where this has been authorized in writing by the customer, UnionBank employee, supplier or other owner of the information;
  3. Pursuant to a statute or regulation, a court order or other legal process.

Sensitive or confidential information includes, but is not limited to:

  • Customer information
  • UnionBank proprietary information
  • Internal management information systems, data, and reports
  • Employee (present and past) records
  • Information not available publicly
  • Information arising from our dealings with regulators and government agencies
  • Supplier/vendor information.

1.2.1. Use and safeguarding of UnionBank Assets

All assets owned by UnionBank shall be used solely for its business. They must not be used for personal benefit or personal consumption, except where permitted by UnionBank. However, supervisors may allow a de minimis personal use of Bank assets, such as occasional typing of a personal letter, where the expense to the Bank is so small that accounting for the use would be unreasonable, administratively impracticable or counterproductive.

Every employee is responsible for safeguarding Bank assets under his control. Copyright, trademark or patent protection should be obtained for proprietary ideas, products and services where applicable.

Assets referred to herein include physical property, intellectual property (e.g., computer programs and models), services, customer information and business plans. Copying, selling or distributing information, software and other forms of intellectual property in violation of license agreements is strictly prohibited.

(g) Employment & Labor Laws & Policies

CG Manual, Art. II (D) (3)

It is the duty of directors to ensure that the Bank complies with all relevant laws, regulations and codes of best business practices.

Code of Conduct

1.7.1. Compliance with laws and regulations

It is UnionBank's policy to strictly comply with all relevant laws and government regulations. Every effort shall be exerted to ensure that regulatory requirements are complied with promptly. Special care must be applied in areas where the law is evolving or being extended to situations not previously covered.

(h) Disciplinary action

Disqualification from office, whether permanently and temporarily.

Please see Part A (5) (b) above.

1.1.3. Administrative investigations

Employees are required to cooperate fully with investigations. Failure to do so may result in disciplinary action up to and including termination of employment.

3.3. INVESTIGATION AND DUE PROCESS

3.3.1. Duty to Report Violation

Everyone is tasked to report any actual or suspected violation of Bank's policies and procedures and the provisions of this Code, immediately upon discovery thereof, to his Unit's Compliance Officer (i.e., RSOO; Group/Division Head). Alternatively, the employee may report the incident to any of the following:

  1. Operations Controller;
  2. Internal Audit Division; or
  3. HRG/HRS
(i) Whistle Blower

1.1.4. Reporting actual and potential infractions or risks

An employee who knows or suspects an actual or possible violation of a law, regulation, this Code of Conduct or any UnionBank policy, or who is aware of any condition that creates undue material risk to the Bank should promptly report the same to his or her supervisor. Alternatively, the employee may report the incident or condition to any of the following:

  1. The next higher level of Management
  2. Operations Controller
  3. Internal Audit Division
  4. Human Resource Group/Human Resource Services (HRG/HRS)

The following categories of actual or potential violations must be reported to Internal Audit Division:

  • Violations where the financial loss or risk of loss amounts to P300,000.00 or above
  • Fraud, or other deceits or machinations, whether or not there is loss or risk of loss

1.1.5. Protection for employees who report infractions or risks

No employee who reports an actual or suspected violation of law, regulation, this Code of Conduct, or any UnionBank policy, or a condition that creates undue material risk to the Bank will be retaliated against as a result of having made the report. Questions concerning protection for such an employee should be addressed to the appropriate Compliance Officer or the Human Resource Head.

1.1.6. Rules on disclosure of own violation

The following rules shall apply whenever an employee reports an infraction committed, or an undue material risk to the Bank that is caused by himself. They do not apply, however, to cases where the infraction committed involves fraud or dishonesty:

  1. Any financial gain that he may have obtained as a result of the infraction or condition shall be immediately delivered to the Bank.
  2. If no actual loss is suffered by the Bank as a result of the infraction or condition, or if potential loss created thereby is promptly neutralized, the incident shall have no adverse effect on the employee's performance appraisal or promotion, nor shall it be a ground to impose any penalty on the employee.
  3. If actual loss is suffered by the Bank as a result of the infraction or condition, or potential loss is not promptly neutralized, the incident shall have adverse effect on the employee's performance appraisal and/or promotion as warranted by this Code of Conduct, and/or may be used as basis to impose such penalties allowed to be imposed by this Code, but such adverse effect and/or penalties shall be mitigated as may be appropriate under the circumstances.
  4. The Bank reserves the right not to apply the foregoing rules, or to modify the same with respect to particular employees who commit the same infraction or cause the same undue material risk to the Bank, repeatedly.

(j) Conflict Resolution

Directors shall attempt in good faith to resolve any conflict that may arise between them relating to their rights and responsibilities provided in the Articles of Incorporation, By-Laws and this Manual.

The same. If the conflict involves violations of the Code of Conduct or any of the Bank's policies, it shall be resolved in accordance with administrative investigation process.

2) Has the code of ethics or conduct been disseminated to all directors, senior management and employees?

YES, the Code has been disseminated to all directors, senior management and employees. Officers and employees are required to submit a certification that they received a copy of the Code of Conduct and confirm that they understand the same. A copy of the Code is also posted and made available in the Bank's "Care to be U" site, an intranet page that may be accessed by all directors, officers and employees of the Bank.

3) Discuss how the company implements and monitors compliance with the code of ethics or conduct.

All incoming employees are required to attend an orientation program which includes discussion of the Bank's Code of Conduct. They are also given a copy of the Code which is accompanied by two forms, i.e. copy of certification of compliance with the Code and Disclosure of Conflict of Interest, and a copy of problem escalation report form.

The Code provides a policy on the responsibility of employees for reporting actual or possible violation of a law, regulation, the Bank's Code or any policy. Duty is also imposed upon those who are aware of any condition that creates undue material risk to the Bank to promptly report the same to his or her supervisor. Alternatively, he or she may report the infractions to the next higher in management, Operations Controller, Internal Audit Division and Human Resources Services Group. It also provides a policy for the protection of employees who report infractions or risks.

The Unit Compliance Officers and the Internal Audit Division conduct their fact-finding investigations for violation of the Code for cases falling within their respective jurisdictions. Investigation reports of these bodies, consisting of facts of the case, modifying circumstances, if any, provisions of the Code violated, decisions in previous administrative cases, and any applicable laws and jurisprudence, are submitted to the Discipline Committee

4) Related Party Transactions

(a) Policies and Procedures

Related Party Transactions

Policies and Procedures

(1) Parent Company

CG Manual, Article IV (B) Related Party Transactions

  1. Related party transactions shall mean any transactions between and among the Bank and its joint ventures, subsidiaries, associates, affiliates, major stockholders, officers and directors, including their spouses, or relatives within the first degree of consanguinity or affinity, or by legal adoption, and of interlocking director relationships by members of the Board.
  2. In the ordinary course of business, the Bank may have loans, deposits and other transactions with its certain directors, officers, stockholders and related interests (DOSRI). These transactions shall all be dealt with pursuant to the Bank's Procedural Guidelines for Monitoring Related Party Transactions, duly approved by the Board of Directors.
  3. It is the policy of the Bank to ensure that related party transactions are all entered into on arm's length standard. These transactions shall only be made and entered into substantially on the same terms and conditions as transactions with other individuals and businesses of comparable risks. These transactions shall likewise go through the same process applicable to ordinary or unrelated party transactions as set forth in the Bank's Purchasing Guidelines.
  4. In addition to the existing policies of the Bank and other applicable rules and regulations, the following provisions of the Corporation Code shall also apply:

    A contract of the Bank with one or more of its directors or officers is voidable, at the option of the Bank, unless all the following conditions are present:
    1. That the presence of such director in the board meeting in which the contract was approved was not necessary to constitute a quorum for such meeting;
    2. That the vote of such director was not necessary for the approval of the contract;
    3. That the contract is fair and reasonable under the circumstances; and
    4. That in case of an officer, the contract has been previously authorized by the Board of Directors.
    Where any of the first two conditions set forth in the preceding paragraph is absent, in the case of a contract with a director, such contract may be ratified by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock in a meeting called for the purpose; provided, that full disclosure of the adverse interest of the director involved is made at such meeting; provided, however, that the contract is fair and reasonable under the circumstances.
  5. To ensure the integrity and transparency of related transactions, all material transactions shall be reported under the applicable accounting rules, and other rules and regulations of the BSP and the SEC.

(2) Joint Ventures

(3) Subsidiaries

(4) Entities Under Common Control

(5) Substantial Stockholders

(6) Officers including

spouse/children/siblings/parents

(7) Directors including

spouse/children/siblings/parents

(8) Interlocking director relationship of Board of Directors

(b) Conflict of Interest

(i) Directors/Officers and 5% or more Shareholders

 

Details of Conflict

of Interest (Actual or Probable)

Name of Director/s

None

Name of Officer/s

None

Name of Significant Shareholders

None

(ii) Mechanism

 

Directors/Officers/Significant Shareholders

 

 

Company

 

 

CG Manual, Article IV (A), Governance Policy on Conflict of Interest

The Bank recognizes that related-party transactions and other similar situations may present a risk of conflict of interest and/or improper valuation, or a perception thereof.

Directors, officers, and employees owe a fiduciary duty to the Bank and must therefore avoid any actual or apparent conflict of interest with it.

The Bank has therefore adopted pertinent regulations and policies of the BSP, the SEC and other regulatory agencies in connection with conflict of interest and related party transactions.

A. Conflict of Interest

  1. A conflict of interest exists when the personal, business or other related interest of a director, officer or employee adversely interfere in any way, or could reasonably be perceived to adversely interfere, with that of the Bank.
  2. A director, officer or employee of the Bank should not use his position to profit or gain some benefit or advantage for himself and/or his related interests to the detriment of the Bank. He should avoid situations that may compromise his impartiality.
  3. It is mandatory for all incoming directors and officers of the Bank to disclose under oath, as part of their pre-appointment/pre-employment requirements, a schedule of existing business establishments where they and their related parties have equity interests.
  4. All employees of the Bank shall, pursuant to Bank's Code of Conduct, declare annually that he has not been involved in any circumstance constituting a conflict of interest. If an employee is unsure if a circumstance that he finds himself in involves a conflict of interest, he shall disclose this to his supervisor, who may consult the appropriate Management unit to assist in resolution. The provisions of the Code of Conduct on conflict of interest shall also be applicable and are hereby adopted as an integral part of this Manual.
  5. If an actual or potential conflict of interest arises on the part of a director, officer or employee, he is mandated to fully and immediately disclose the same and should not participate in the decision-making process relating to the transaction.
  6. A director or officer 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 or officer's or employee'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.
  7. Where a director, by virtue of his office, acquires for himself a business opportunity which should belong to the Bank or its subsidiaries, thereby obtaining profits to the prejudice of the latter, he must account to the latter for all such profits by refunding the same, unless his act has been ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall be applicable, notwithstanding the fact that the director risked his own funds in the venture.

Group

5) Family, Commercial and Contractual Relations

(a) Indicate, if applicable, any relation of a family,[4] 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

None

 

 

(b) Indicate, if applicable, any relation of a commercial, contractual or business natureexists between the holders of significant equity (5% or more) and the company:

Names of Related
Significant Shareholders

Type of Relationship

Brief Description

None

 

 

(c) Indicate any shareholder agreements that may impact on the control, ownership and strategic direction of the company:

Name of Shareholders

% of Capital Stock affected
(Parties)

Brief Description of the Transaction

None

 

 

6) Alternative Dispute Resolution

 

Alternative Dispute Resolution System

Corporation & Stockholders

CG Manual, Article X-

The Bank and its stockholders shall attempt in good faith to resolve any conflict that may arise between them relating to their rights and responsibilities provided in the Articles of Incorporation, By-Laws and this Manual, before resorting to court action.

The Bank and its stockholders may opt to settle their conflicts through direct negotiation between them, without the intervention of a third party. If the parties believe that negotiation is not an efficient alternative mode of resolving their dispute, or it does not produce results satisfactory to them, they may opt for other modes of alternative dispute resolution which may include, among others, mediation and arbitration.

If either party believes that the conflict or controversy is not suitable for any alternative resolution mechanisms or if such other mechanisms do not produce results satisfactory to the parties, either party may proceed to court action.

Corporation & Third Parties

In the event of a conflict or controversy between the Bank and another party, including regulatory bodies, which also adheres and agrees to resort to alternative dispute resolution, the Bank undertakes to explore with that other party the resolution of their conflict through negotiation or other alternative mechanism, as agreed upon, before pursuing court action.

If either party believes that the conflict or controversy is not suitable for alternative resolution mechanisms or if such mechanisms do not produce results satisfactory to the parties, either party may proceed to court action.

Corporation & Regulatory Authorities

C. BOARD MEETINGS & ATTENDANCE

1) Are Board of Directors' meetings scheduled before or at the beginning of the year?

Yes. Board and its committees' meetings are set before the start of the year. For 2013, the schedule of meetings was presented to, and approved by the Board during October 24, 2012.

2) Attendance of Directors

Board Name

Date of Election

No. of Meetings Held during the year

No. of Meetings Attended

%

Chairman

Justo A. Ortiz

May 24, 2013

13

12

92

Vice Chairman

Jon Ramon M. Aboitiz

May 24, 2013

13

11

85

Vice-Chairman

Vicente R. Ayllon

May 24, 2013

13

11

85

Member

Victor B. Valdepeñas

May 24, 2013

13

13

100

Member

Erramon I. Aboitz

May 24, 2013

13

12

92

Member

Iker M. Aboitiz

May 24, 2013

13

9

69

Member

Stephen G. Paradies

May 24, 2013

13

9

69

Member

Juan Antonio E. Bernad

May 24, 2013

13

12

92

Member

Mayo Jose B. Ongsingco

May 24, 2013

13

13

100

Member

Emilio S. De Quiros, Jr.

May 24, 2013

13

12

92

Member

Eliza Bettina R. Antonino

May 24, 2013

13

13

100

Member

Daniel L. Edralin*

May 25, 2012

13

6

100

Independent

Armand F. Braun, Jr.

May 24, 2013

13

11

85

Independent

Carlos B. Raymond, Jr.

May 24, 2013

13

13

100

Independent

Chief Justice Reynato S. Puno (Ret.)

May 24, 2013

13

13

100

Member

Sabin Aboitiz**

May 24, 2013

13

6

75

* Director of the Bank from April 7, 2011 to May 24, 2013.
** Elected on May 24, 2013 vice Mr Daniel Edralin.

3) Do non-executive directors have a separate meeting during the year without the presence of any executive? If yes, how many times?

Non-executive directors may always request for a separate meeting during the year without presence of any executive should they deem it necessary.

4) Is the minimum quorum requirement for Board decisions set at two-thirds of board members? Please explain.

The minimum quorum requirement for Board decisions is set at majority based on the provisions of the Corporation Code.

5) Access to Information

(a) How many days in advance are board papers[5] for board of directors meetings provided to the board?

Hard copies of board papers are provided to the board two (2) to three (3) banking days prior to the intended meeting. Soft copies of the board papers are however emailed in advance to directors.

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

Yes, all members of the board have independent access to management and the corporate secretary.

(c) Role of the company secretary.

Section 12 of the Bank's By-laws: The Secretary shall give due notice and keep the minutes of all meetings of stockholders of the Corporation and of the Board of Directors; have custody of the Stock Certificate Book, Stock and Transfer Book and the Corporate Seal; prepare ballots for the annual election and keep a complete and up-to-date roll of the stockholders and their addresses. He shall also perform such duties as are incident to his office and those which may be required of him by the Board of Directors.

In addition, the Bank's Manual on Corporate Governance provides for the following duties and responsibilities -

  1. Gather and analyze all documents, records and other information essential to the conduct of his duties and responsibilities to the Bank, and its subsidiaries, as the case may be.
  2. As to agenda, get a complete schedule thereof at least for the current year and put the Board on notice before every meeting.
  3. Assist the Board in making business judgment in good faith and in the performance of their responsibilities and obligations.
  4. Attend all Board meetings and maintain record of the same.
  5. Submit to the Commission, at the end of every fiscal year, an annual certification as to the attendance of the directors during Board meetings.
(a) Is the company secretary trained in legal, accountancy or company secretarial practices? Please explain should the answer be in the negative.

Yes. The Bank's Manual on Corporate Governance sets the qualifications of the Bank's corporate secretary, i.e. To possess administrative and interpersonal skills, and if he is not the general counsel, to have some legal skills. He must also have some financial and accounting skills.

The Bank's present Corporate Secretary is Atty. Fe B. Macalino. Her profile is provided in SEC Form 20 IS.

(b) 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

 

 

Name of Committee

Details of Procedure

Executive

Members of all board committees may always ask the Corporate Secretary for information they need to prepare in advance for the meetings of different committees. All directors are given portable electronic devices through which the materials are emailed directly to their email addresses.

Audit

Nomination

Remuneration

Corporate Governance

Risk Management

Market Risk

Operational

Trust

6) External Advice

Directors receive external advice such as external opinions on legal matters, financial advisories, etc. The Bank has external consultants that may be referred to by the directors.

7) Change/s in existing policies

Policies of the Bank are subject to periodic review to ensure that they are updated and compliant with existing rules and regulations, and if they are still effective in ensuring sustainable business growth of the Bank and protecting the interests of its stakeholders.

D. REMUNERATION MATTERS

1) Remuneration Process

Disclose the process used for determining the remuneration of the CEO and the four (4) most highly compensated management officers:

Process

CEO

Top 4 Highest Paid Management Officers

(1) Fixed remuneration

The Bank's Compensation and Remuneration Sub-Committee assists the Board of Directors in matters pertaining to the compensation & remuneration of Senior Management.

As one the key executive officers of the Bank, CEO receives salaries, bonuses and other standard bank benefits, as approved by the BSP, in accordance with the performance management philosophy of the Bank based on meritocracy or pay for performance.

The Bank's Compensation and Remuneration Sub-Committee assists the Board of Directors in matters pertaining to the compensation & remuneration of Senior Management.

As key executive officers of the Bank, key executive officers receive salaries, bonuses and other standard bank benefits, as approved by the BSP, in accordance with the performance management philosophy of the Bank based on meritocracy or pay for performance.

(2) Variable remuneration

None.

None

(3) Per diem allowance

None.

None

(4) Bonus

Please see item (1).

(5) Stock Options and other financial instruments

None.

None

(6) Others (specify)

None

None

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

Company's policy on remuneration and the structure of its compensation package.

 

Remuneration Policy

Structure of Compensation Packages

How Compensation is Calculated

Executive Directors

Executive directors are not compensated for services rendered as directors of the Bank. As officers of the Bank, they receive salaries, bonuses and other standard bank benefits, as approved by the BSP, in accordance with the performance management philosophy of the Bank based on meritocracy or pay for performance.

Executive directors of the Bank do not receive compensation as directors of the Bank.

Benchmarking with market is resorted to ensure that compensation or remuneration is aligned with industry.

Non-Executive Director

Non-executive directors receive only per diems of P60,000.00 for each attendance in meetings of the Board and P30,000.00 for committee meetings.

Non-executive directors do not receive compensation for services rendered.

--

Do stockholders have the opportunity to approve the decision on total remuneration (fees, allowances, benefits-in-kind and other emoluments) of board of directors? Provide details for the last three (3) years.

YES. Section 8, Article V of the Bank's By-Laws provides -

Section 8. Directors' Fee for the Board of Directors. A fee to be fixed and determined by the stockholders shall be paid to each Director for attendance of any meeting of the Board of Directors, Executive Committee, or any otter committee of the Board of Directors: Provided, however, that nothing herein contained shall be construed to preclude any Director from serving in any other capacity and receiving compensation therefor.

Remuneration Scheme

Date of
Stockholders' Approval

Increase in Per Diems of non-executive and independent directors

  • P60,000.00 per director for attendance in Board meetings.
  • P60,000.00 per director-chairman or in the latter's absence, director presiding during committee meetings.
  • P30,000.00 per director - member for attendance in committee meetings

May 27, 2011

Independent Directors' Retainer Fees

  • P1,000,000.00 per year

May 27, 2011

3) Aggregate Remuneration

Remuneration Item

Executive Directors

Non-Executive Directors (other than independent directors)

Independent Directors

(a) Fixed Remuneration

 

As directors, they do not receive compensation for services rendered. They are compensated for services rendered as officers (the chairman & CEO and the president & COO) of the Bank.

None

None

(b) Variable Remuneration

None

None

None

(c) Per diem Allowance

Executive directors, i.e. Chairman of the Board who is also its Chief

Executive Officer, and President who is also the Chief Operating Officer receive P3,000.00 and P1,500.00, respectively, for each attendance in Board meetings and P3,000.00 for committee meetings.

The non-executive directors receive only per diems of P60,000.00 for each attendance in meetings of the Board and P30,000.00 for committee meetings.

(d) Bonuses

None

None

None

(e) Stock Options and/or other financial instruments

None

None

None

(f) Others (Specify)

None

None

--

Total

--

--

--

 

Other Benefits

Executive Directors

Non-Executive Director
(other than independent directors)

Independent Directors

1) Advances

None

None

None

2 )Credit granted

None

None

None

3) Pension Plan/Contributions

None

None

None

(4) Pension Plans, Obligations incurred

None

None

None

(5) Life Insurance Premium

None

None

None

(6) Hospitalization Plan

None

None

None

(7) Car Plan

None

None

None

(8) Others (Specify)

None

None

None

Total

--

 

--

 

--

4) Stock Rights, Options and Warrants

(a) Board of Directors

NONE. There are no warrants or options held by the Bank's officers and directors.

(b) Amendments of Incentive Programs -

There were no amendments and discontinuation of any incentive programs introduced in 2012.

5) Remuneration of Management

Name of Officer/Position

Aggregate Compensation

Bonuses

Justo A. Ortiz*

171,368,616.00

42,842,154.00

Victor B. Valdepenas*

Edwin R. Bautista

Eugene S. Acevedo

Jesus Roberto S. Reyes

*Members of the Bank's management.

E. BOARD COMMITTEES

1) Number of Members, Functions and Responsibilities

Committee

No. of Members

Committee Charter

Key Responsibilities

Functions

Power

Executive Director

(ED)

Non-executive Director (NED)

Independent Director

(ID)

Executive

1

5

 

1

Yes

- Approves credit transactions up to its approval limit as delegated by the BOD, including credit exceptions and limit exceptions.

- Approves the sale of ROPA up to its delegated limit.

- Reviews, deliberates and endorses to the BOD credit proposals and ROPA sales beyond its delegated limit.

Audit

 

3

 

2

Yes

-Provides oversight of the Bank's financial reporting and control, as well as the internal and external audit functions.

- Responsible for monitoring and evaluating the adequacy and effectiveness of the internal control system.

- Reviews governance, risk management and controls

Nomination

2

4

1

Yes

-Promulgates the guidelines and criteria governing its conduct of nomination, pre-screening, and selection of candidates for BOD and key officers of the Bank.

Remuneration

1

3

1

Yes

- Assists the Corporate Governance Committee and the Board of Directors by recommending and overseeing the implementation of a program of salaries and benefits for Directors and Senior Management.

Risk Management

1

5

1

Yes

-Develops and oversees risk management program as embodied in the RMC Charter

Trust

2

3

-

Yes

- In charge of the acceptance and closing of trust and other fiduciary accounts.

- Initially reviews assets placed under trustee's fiduciary's custody;

- The investment, reinvestment and disposition of funds or property;

-Reviews and approves of transactions between trust and/or fiduciary accounts; and

- Reviews trust and other fiduciary accounts at least once every twelve (12) months.

Market Risk

2

3

-

Yes

- Sets policies and standards for market risk identification and analysis, measurement, monitoring and control.

Operations Risk

2

3

1

Yes

-Sets policies and standards for identification, analysis, measurement, monitoring and control of operations risk.

Corporate Governance

1

4

2

Yes

- Makes recommendations on the study and evaluation of the structure, charter, policies and practices of the BOD and its committees and to address issues of Corporate Governance

- Ensures the Board's effectiveness and due observance of corporate governance principles and guidelines

2) Committee Members

(a) Executive Committee

Office

Name

Date of Appointment

No. of Meetings Held

No. of Meetings Attended

%

Length of Service in the Committee

From May 2012 to May 2013

Chairman (NED)

Mr. Jon Ramon M. Aboitiz

May 25, 2012

33

24

73

One year

Member (ED)

Mr. Justo A. Ortiz

May 25, 2012

33

31

94

One year

Member (NED)

Mr. Mayo Jose B. Ongsingco

May 25, 2012

33

23

74

One year

Member (ID)

Mr. Armand F. Braun, Jr.*

May 25, 2012

33

32

97

Nine (9) Months

Chief Justice Reynato S. Puno**

March 7, 2013

-

-

-

Two (2) months

Member (NED)

Mr. Erramon I. Aboitiz

May 25, 2012

33

24

73

One year

Member (NED)

Ms. Eliza Bettina R. Antonino

May 25, 2012

33

24

73

One year

Member (NED)

Mr. Daniel L. Edralin

May 25, 2012

33

29

88

One year

* Replaced by CJ Reynato S. Puno effective March 07, 2013.
**Member of the Committee effective March 7, 2013.

(b) Audit Committee

Office

Name

Date of Appointment

No. of Meetings Held

No. of Meetings Attended

%

Length of Service in the Committee

For May 2012 to May 2013

Chairman (ID)

Mr. Armand F. Braun, Jr.

May 25, 2012

15

15

100

One year

Member (NED)

Mr. Stephen G. Paradies

May 25, 2012

15

12

80

One year

Member (ID)

Mr. Carlos B. Raymond, Jr.

May 25, 2012

10

10

100

One year

Member (NED)

Mr. Ricardo G. Librea

May 25, 2012

13

13

100

Seven (7) months

Mr. Mayo Jose B. Ongsingco**

January 1, 2013

2

2

100

Five (5) months

Member (NED)

Ms. Eliza Bettina R. Antonino

May 25, 2012

15

11

73

One year

*Member of the Committee effective January 01, 2013 vice Mr. Ricardo G. Librea

Profile or qualifications of the Audit Committee members.

Armand F. Braun, Jr. (Chairman, Audit Committee) serves as Independent Director of the Bank. He is also currently the Chairman and President of AF Braun Company and Holdings, Inc. He was the President of UnionBank from 1990 to 1997. His business experience includes directorships in UBP Capital Corporation and Union Properties, Inc. before their merger in December, 2004, after which merger, he was a director of the surviving entity, Union Properties, Inc., until July 2005; Alrose Foods Corp., Iligan Pizza Corp., North Iligan Food Services, Inc., Central Iligan Fast foods, Bern Bakery Specialists, Inc. - Store 1, Bern Bakery Specialists, Inc. - Store 2, Beefoods Corp., and Philam Asset Management, Inc.

Stephen G. Paradies, serves as Director of the Bank. He also serves as Director of Union Properties, Inc., Chairman of the Operations Risk Management Committee and Vice Chair of the Audit Committee of the Bank. He is a director of several Aboitiz subsidiaries including Pilmico Foods Corp., Pilmico Animal Nutrition Corp., Aboitiz Construction Group Inc. and City Savings Bank. He sits on the board of Int'l. Container Terminal Services Inc.* and several of its subsidiaries, including ICTSI Int'l. He is currently Senior Vice President/Finance of Aboitiz and Co. Inc, and Senior Vice President/Chief Finance Officer of Aboitiz Equity Ventures, Inc.*

Mayo Jose B. Ongsingco, serves as Director of the Bank. He has been the President and Chief Operating Officer, and a Trustee of Insular Life Assurance Co. Ltd since 2004. He concurrently holds the position of Chairman of the Board for Insular Life Employees' Retirement Fund and Insular Life General Insurance Agency, Inc. He is Vice Chairman and President of Insular Life Management & Development Corp. He is also Vice Chairman of Insular Health Care, Inc., Insular Life Property Holdings, Inc. and Home Credit Mutual Building & Loan Association. His other directorships include Insular Investment Corporation, Insular Life Foundation, Keppel Philippines Holdings, Inc.,* Mapfre Insular Insurance Corp., Pilipinas Shell Petroleum Corp. and PPI Prime Venture, Inc.

Carlos B. Raymond, Jr.(Independent Director) retired from Eli Lilly and Company on February 28, 2003 after almost 24 years with the company. Eli Lilly is a U.S. multinational pharmaceutical company based in Indianapolis, Indiana. His last position was President and General Manager of Eli Lilly Philippines. His previous assignments with Lilly included positions in Puerto Rico, Indianapolis, Singapore as Regional Head of Southeast Asia Operations and at Lilly Taiwan as President/General Manager. He graduated from the University of the Philippines with a degree of B.S. Business Administration. Prior to joining Lilly, he worked at Unicor Inc. (Doctors Pharmaceuticals' marketing arm) for 11 years (July 1968 to May 1979) with his last position as General Manager.

Eliza R. Antonino, serves as Director of the Bank. She is also a Director of Philex Mining Corporation* and Philamlife Tower Management Corporation. In addition, she has been a sitting Commissioner of the Social Security Commission since September 2010.

* Companies listed in the Philippine Stock Exchange, Inc.

Describe the Audit Committee's responsibility relative to the external auditor.

As provided in the CG Manual, the Audit Committee shall provide oversight of the institution's financial reporting and control and internal and external audit functions. It shall be responsible for the setting-up of the internal audit department and for the appointment of the internal auditor as well as the independent external auditor who shall both report directly to the Audit Committee.

(c) Nomination Committee

Office

Name

Date of Appointment

No. of Meetings Held

No. of Meetings Attended

%

Length of Service in the Committee

From May 2012 to May 2013

Chairman (NED)

Mr. Jon Ramon M. Aboitiz

May 25, 2012

2

2

100

One year

Member (ED)

Mr. Justo A. Ortiz

May 25, 2012

2

2

100

One year

Member (NED)

Mr. Erramon I. Aboitiz

May 25, 2012

2

1

50

One year

Member (ID)

Armand F. Braun, Jr.

May 25, 2012

2

2

100

One year

Member (NED)

Mr. Vicente R. Ayllon*

May 25, 2012

1

0

0

Seven (7) months

Member (NED)

Ms. Eliza Bettina R. Antonio

May 25, 2012

2

1

50

One year

Human Resources Director

Non-voting Member

Mr. Norberto M. Belen*

Ms. Michaela Sophia E. Rubio***

May 25, 2012

May 31, 2012

1

1

100

--

One Year

1

1

100

*Retired from the Bank effective May 31, 2012.
**New HR Director vice Mr. Norberto M. Belen.

(d) Remuneration Committee

Office

Name

Date of Appointment

No. of Meetings Held

No. of Meetings Attended

%

Length of Service in the Committee

From May 2012 to May 2013

Chairman (NED)

Mr. Jon Ramon M. Aboitiz

May 25, 2012

1

1

100

One year

Member (ED)

Mr. Justo A. Ortiz

May 25, 2012

1

1

100

One year

Member (NED)

Mr. Vicente R. Ayllon

May 25, 2012

1

1

100

One year

Member (ID)

Mr. Carlos B. Raymond, Jr.

May 25, 2012

1

1

100

One year

Member (NED)

Mr. Erramon I. Aboitiz

May 25, 2012

1

1

100

One year

(e) Trust Committee

Office

Name

Date of Appointment

No. of Meetings Held

No. of Meetings Attended

%

Length of Service in the Committee

From May 2012 to May 2013

Chairman (NED)

Mr. Juan Antonio E. Bernad

May 25, 2012

12

12

100

One year

Member (ED)

Mr. Victor B. Valdepeñas

May 25, 2012

12

12

100

One year

Member (NED)

Mr. Mayo Jose B. Ongsingco*

Mr. Vicente Ayllon **

January 1, 2013

May 25, 2012

10

2

7

1

70

50

Seven (7) months

Five (5) monthes

Trust Officer Non-voting Member

Robert Rol Ramos

May 25, 2012

12

12

100

One year

*Alternate Member of the Committee effective January 01, 2013.
**Member of the Committee effective January 01, 2013.

(f) Market Risk Committee

Office

Name

Date of Appointment

No. of Meetings Held

No. of Meetings Attended

%

Length of Service in the Committee

From May 2012 to May 2013

Chairman (NED)

Mr. Erramon I. Aboitiz

May 25, 2012

12

9

75

One year

Member (ED)

Mr. Justo A. Ortiz

May 25, 2012

12

11

92

One year

Member (NED)

Mr. Mayo Jose B. Ongsingco

May 25, 2012

12

9

75

One year

Member (NED)

Mr. Daniel L. Edralin

May 25, 2012

12

11

92

One year

Member (ED)

Mr. Victor B. Valdepeñas

May 25, 2012

12

11

92

One year

(g) Operations Risk Management Committee

Office

Name

Date of Appointment

No. of Meetings Held

No. of Meetings Attended

%

Length of Service in the Committee

From May 2012 to May 2013

Chairman (NED)

Mr. Stephen G. Paradies

May 25, 2012

4

4

100

One year

Member (ED)

Mr. Edwin R. Bautista

May 25, 2012

4

4

100

One year

Member (ED)

Mr. Teodoro M. Panganiban

May 25, 2012

4

4

100

One year

Member (NED)

Mr. Mayo Jose B. Ongsingco

May 25, 2012

4

3

75

One year

Member (NED)

Ms. Eliza Bettina R. Antonino

May 25, 2012

4

4

100

One year

(h) Risk Management Committee

Office

Name

Date of Appointment

No. of Meetings Held

No. of Meetings Attended

%

Length of Service in the Committee

From May 2012 to May 2013

Chairman (NED)

Mr. Jon Ramon M. Aboitiz

May 25, 2012

12

11

92

One year

Member (ED)

Mr. Justo A. Ortiz

May 25, 2012

12

12

100

One year

Member (NED)

Mr. Mayo Jose B. Ongsingco

May 25, 2012

12

9

75

One year

Member (ID)

Mr. Armand F. Braun, Jr.

May 25, 2012

12

12

100

One year

Member (NED)

Mr. Erramon I. Aboitiz

May 25, 2012

12

11

92

One year

Member (NED)

Mr. Emilio S. De Quiros, Jr.

May 25, 2012

12

4

33

One year

Member (NED)

Mr. Daniel L. Edralin

May 25, 2012

12

12

100

One year

(i) Corporate Governance Committee

Office

Name

Date of Appointment

No. of Meetings Held

No. of Meetings Attended

%

Length of Service in the Committee

From May 2012 to May 2013

Chairman (ID)

Mr. Carlos B. Raymond, Jr.

May 25, 2012

3

3

100

One year

Member (ED)

Mr. Justo A. Ortiz

May 25, 2012

3

3

100

One year

Member (NED)

Mr. Jon Ramon M. Aboitiz

May 25, 2012

3

2

67

One year

Member (NED)

Mr. Vicente R. Ayllon*

Mr. Ricardo G. Librea

January 1, 2013

May 25, 2012

1

3

0

2

0

67

Five (5) months

Seven (7) months

Member (ID)

Mr. Armand F. Braun, Jr.

May 25, 2012

3

2

67

One year

Member (NED)

Mr. Erramon I. Aboitiz

May 25, 2012

3

2

67

One year

Member (NED)

Mr. Emilio S. De Quiros, Jr.

May 25, 2012

3

2

67

One year

*Member of the Committee effective January 01, 2013 vice Mr. Ricardo G. Librea.

3) Changes in Committee Members

Indicate any changes in committee membership that occurred during the year and the reason for the changes:

Name of Committee

Name

Reason

Executive

1. Mr. Vicente R. Ayllon

1. Alternate member of the Committee effective August 24, 2012.

2. Mr. Mayo Jose B. Ongsingco

2. Regular member of the Committee effective August 24, 2012

3. Mr. Armand F. Braun, Jr.

3. Replaced by Chief Justice Reynato S. Puno

4. Chief Justice Reynato S. Puno

4. Member of the Committee effective March 07, 2013.

Audit

Mr. Mayo Jose B. Ongsingco

Replaced Mr. Ricardo G. Librea effective January 01, 2013.

Trust

Mr. Vicente R. Ayllon

Member of the Committee effective January 01, 2013.

Operations Risk Management

Chief Justice Reynato S. Puno

Alternate member of the Committee effective March 07, 2013.

Corporate Governance

1.Mr. Carlos B. Raymond, Jr.

1. Chairman of the Committee effective July 27, 2012.

2. Mr. Stephen G. Paradies

2. Alternate member of the Committee effective October 24, 2012.

4) Work Done and Issues Addressed

Describe the work done by each committee and the significant issues addressed during the year.

Name of Committee

Work Done

Issues Addressed

 

Executive

Exercise such functions and powers which are reserved for the Board during intervals between meetings of the Board of Directors, except the power to initiate reversals of, or departure from fundamental policies, procedures and guidelines prescribed by the Board of Directors, and such other restrictions as the Board may determine, including the limitation of their functions to those which are recommendatory or advisory.

Various.

 

Audit

On External Audit

  • Approval of the 2011 year-end audit results
  • Approval of the 2011 audited financial statements of the Bank
  • Approval of the 2012 Annual Audit Plan
  • Discussion of the 2012 Interim Audit Results
  • Discussion of the 2012 year-end audit results On Internal Audit
  • Approval of the 2012 Annual Audit Report as well as the revisions made as necessary
  • Evaluation of the quarterly accomplishment and annual/interim reports
  • Approval of several important decisions
  • Discussion of assurance reports
  • Discussion of 44 case investigations
  • Evaluation and discussion of proposed revisions to the IAD Manual and Audit Charters to ensure that these are in accordance with the International Standards for the Professional Practice of Internal Auditing.
  • Approved the decision to engage SGV to conduct Information Technology Process (IT) and Infrastructure Assessment
  • Discussed and gave instructions relating to the following assurance engagement reports:
    • 108 branch assurance engagements
    • 15 Head Office/Subsidiaries andassurance engagements
  • The Committee gave special commentaries on the results of case investigations - suggestions to improve existing processes to prevent recurrent of similar cases.

Nomination

Nomination process for the election of the members of the Bank's Board of Directors and corporate officers.

Regulatory requirements and best practice in nomination of members of the board of directors and key officers.

Remuneration

Assistance to the Board of Directors by recommending and overseeing the implementation of acompensation and remuneration programfor thethe Bank's Senior Management.

Review of key leader development,retentionand succession.

Compensation review of key leaders to align to market practice.

Key leader assessment, development, deployment.

Corporate Governance

1. Review of governance related regulatory updates and industry best practices, including, among others -

  • SEC's Term Limit for Independent Directors
  • Philippine Stock Exchange Corporate Governance Guidelines Disclosure
  • BSP' Guidelines in Strengthening Corporate Governance Standards in Financial Institutions
  • ASEAN Corporate Governance Scorecard.

2. Approval of the Bank's compliance with Philippine Stock Exchange Corporate Governance Guidelines Disclosure

3. Approval of the updated the Anti-Money Laundering Terrorist Financing Prevention Program and Corporate Governance Manual

4. Discussion of the highlights of the BSP Return of Examination

Governance-related issues such as-

1. Board structure and composition, i.e. term limit for independent directors, minimum number of independent directors, chairmanship in board committees exercising oversight functions.

2. Regulatory requirements by the BSP, SEC and PSE

Risk Management

  1. Review and Approval of the 2012 ICAAP Document
  2. Review and Approval of the Bank's Capital Management Manual
  3. Review of the Bank's Enterprise Risk Management Program
  4. Monitoring of the Bank's Capital Adequacy Ratio on a monthly basis
  5. Review of the Bank's Credit Stress Testing
  6. Review of the Bank's Loan Portfolios and Past Due Trends on a monthly basis
  7. Review of the Bank's Exposure to Various Industry Sectors
  8. Notation of the Bank's Exposure to the Real Estate Industry
  9. Approval of New Product Programs and Amendments
  10. Review of the Bank's Credit Risk Profile for Corporate and Commercial Banking Loan Portfolios
  11. Notation of the various Credit Review Reports
  12. Review and Notation of the Bank's ongoing Legal Cases
  1. Legal Process for the handling of Auto Loan NPL's
  2. Documentary Deficiencies for Auto, Mortgage and Business Line/ SME Loan Portfolios
  3. Revision of credit policies and guidelines in response to BSP Findings
  4. Accreditation of Developers for the Bank's Mortgage Lending Business
  5. Simplification of Documentation to accelerate foreclosure procedures.

Market Risk

  1. Monthly monitoring of the Bank's investment portfolios and liquidity positions against existing Board approved risk limits
  2. Review the Bank's quarterly stress testing results on the market risk, Interest rates risk on the Banking Book and liquidity risk.
  3. Review and approve the Client Suitability for Clients
  4. Discuss and approve alternative Investments
  5. Review and approve the revised EAR methodology and risk limits
  6. Review and approve the Treasury risk limits
  7. Review and approve the pre-settlement risk factors

Regular monitoring

Regular monitoring

Improve the Client Suitability for Clients

Diversify the investment portfolio

Enhance the current EAR procedure and risk monitoring

Define the risk appetite

Update the pre-settlement risk factors used for earmarking against the approved credit lines

 

Operations Risk

Reviewed status reports coming from various units responsible in the following:

  • Technology
  • Fraud Investigation
  • Card Fraud Management
  • Information Security
  • Business Continuity Management
  • Operational Risk Management
  • New Products and Services

Regular monitoring

Trust

ADMINISTRATION

1. Adherence to Basic Standards

2. Continuously update the Trust Committee of all the activities of TISG.

3. Complying with the Bank's and BSP rules and regulations.

4. Comprehensive review of accounts.

Strengthening the maker and checker function in TISG.

Strengthening Board and Trust Comm oversight

Strengthening Compliance

Improvement of self assessment process

LIMIT BREACHES

Diligently monitoring all limit breaches

Strengthening Risk Monitoring

SYSTEMS

System creation and enhancement of programs for process improvement

System Enhancement

5) Committee Program

Name of Committee

Planned Programs

Issues to be Addressed

Executive

Programs aligned to its functions and powers that are reserved for the Board during intervals between meetings of the Board of Directors, except the power to initiate reversals of, or departure from fundamental policies, procedures and guidelines prescribed by the Board of Directors, and such other restrictions as the Board may determine, including the limitation of their functions to those which are recommendatory or advisory.

Various

Audit

  • Monthly Audit Committee meetings
  • Activities to achieve:
    • Oversight over the Bank's financial management /reporting and disclosure
    • Oversight on risk management and internal controls
    • Oversight on management and internal audit
    • Oversight over external audit
  • Various audit findings resulting from the assurance engagements conducted by the External and Internal Auditors
  • Evaluation the performance of the External Auditors as well as the Internal Auditor
  • Approval Annual Audit Plan for both External and Internal Audits as well as revisions thereto, when necessary
  • Discussion of the results of the case investigations conducted by Internal Audit
  • Approval of audit rating systems

Nomination

Nomination process for election of the members of the Board of Directors and key officers for fiscal year 2013.

  • Regulatory requirements for nomination of members of the Board of Directors and key officers.
  • Nomination issues, i.e. qualifications of candidates

Remuneration

  1. Participation in Total Rewards/Market Survey
  2. Key Leader/Talent Inventory Review
  1. Remuneration matters
  2. Talent acquisition and maintenance

Corporate Governance

  1. Conduct of quarterly meetings
  2. Regular updating of governance policies to raise the bar for corporate governance.
Governance-related issues.

 

Risk Management

  1. Review of the Bank's Large Exposures
  2. Enterprise Risk Management - Identification of Key Risk Indicators and Validation of the current risk mitigation processes
  3. Review of the Bank's Internal Credit Risk Rating Systems for Corporate and Commercial Banking

Streamlining of operational procedures for consumer finance products

Market Risk

  1. Scan alternative investments
  2. Review and approve the Treasury risk limits
  1. Diversify the investment portfolio
  2. Define the risk appetite

Operations Risk

Review of Bank wide Operational Risk Assessments and development of Operational Key Risk Indicators

Enhanced monitoring of potential operational risk exposures

Trust

1. Process improvement in TISG processes towards Financial and Operational Excellence

2. Documenting operational and compliance processes

3. Continuous Compliance with the Bank / BSP's rules and regulations

4. Introduction of additional monitoring reports adhering towards Risk Free transactions

5. System creation and enhancement of hardware / programs for process improvement

Strengthening Operations and Account Management Processes

Strengthening monitoring processes and additional monitoring reports

System Enhancements

F. RISK MANAGEMENT SYSTEM

1)

(a) The Bank's Board and Senior Management believe that the entity's strong risk management culture and system constitute the foundation for undertaking its various business endeavors and defining its strategic directions.

The strength of a bank's risk management is dependent on the interaction of the following principal components:

  1. People - ensuring that the Bank's officers and staff are competent and well-trained via careful selection, continuous training and performance monitoring; and that business units are well-equipped to execute business strategies and manage theirExperienced officers are given the proper authority and limits to evaluate and decide on matters that are within their scope of responsibility.
  2. Culture - defining the tone of the organization, its values and philosophy, expressed through mandates and other governanceMore importantly, this involves the setting of the institution's behavior and commitment towards a risk awareness culture.
  3. Processes and systems - ensuring an appropriate segregation of duties and responsibilities, and putting in place the necessary controls that allow for checks andA key aspect of this component is the management of technology risks.

    Risk appetite determines how risks are viewed and addressed by the entity as a whole. The Bank's risk appetite defines in general terms its risk-taking capacity given acceptable business opportunities that the Bank is willing to pursue. This is expressed and guided by the various limits that are mandated and delegated by the Board of Directors and Shareholders.

(b) UnionBank's risk governance structure is embedded in its organizationalThere are basically four components of the structure: (1) the business units, (2) the independent risk management units together with the corporate staff functions (legal, technology, comptrollership, and human resources), (3)internal audit, and (4) the Board risk committees.

The overall decision rests with the Board and its Committees. The independent Risk Management Units that assist the respective Board Committees, the Senior Management and its committees and the Business Unit Heads execute the mandates of the Board. Other units performing corporate staff function such as the Controllership, etc. serve as support units.

(c) to (e) The Board risk committees meet on a regular basis throughout the year and monitor the effectiveness of the risk management activities in place. All product programs, policy manuals and process manuals require Board approval and are continuously reviewed and updated to adhere to the changing business environment. The overall risk management results are also reviewed on an annual basis through the Internal Capital Adequacy Assessment Process.

2) Risk Policy

(a) Company

Risk Exposure

Risk Management Policy

Objective

Credit

The Bank is governed by Board-approved credit underwriting policies and credit limits which should comply at all times with regulatory standards. Any exception from these limits shall require prior approval from the appropriate credit authority. Among these limits are:

  • Internal Single Borrower's Limit ("SBL")
  • Industry Exposure Limit
  • Product Limit
  • Individual Borrower's Limit
  • Investment / Portfolio Limit, and
  • Directors, Officers, Stockholders, and other Related Interests ("DOSRI") Limit.
  • To ensure that UnionBank's credit policies and procedures are adequate and are constantly updated to meet the changing demands of the business.

Market

The Bank shall be governed by Board-approved market risk limits, such as VAR, Position Limits, Loss Alert Limits, Portfolio Limits, among others. The limits are monitored on a regular basis and exceptions, if any, are reported to Senior Management and Market Risk Committee for appropriate action, as necessary.

To ensure that risk limits, systems and processes are tested and updated

Interest Rate in Banking Book

The Bank shall be governed by Board-approved interest rate risk limits in the banking book, specifically EAR Limits. The EAR Limits are the monetary amounts of risk or potential loss deemed tolerable by top management for the accrual portfolios (interest rate repricing gaps). These limits are endorsed by the MRC and approved by the BOD. These limits are reviewed annually or as deemed necessary. The limits are monitored at least on a quarterly basis and exceptions, if any, are reported to Senior Management and Market Risk Committee for appropriate action, as necessary.

To ensure that risk limits and processes are tested and updated

Liquidity

The Bank shall be governed by Board-approved liquidity risk limits, specifically MCO Limits and Liquidity Ratio Limits. The limits are monitored at least on a monthly basis and exceptions, if any, are reported to Senior Management and Market Risk Committee for appropriate action, as necessary.

To ensure a sound liquidity management process within the Bank and maintaining liquid assets and sufficient capital.

Operational

The Bank will not undertake any business activity or process without instituting appropriate measures to avoid, mitigate, or transfer operational risk. It has in place well-defined Board and Management oversight functions, control processes and mitigation measures, as well as reporting and escalation procedures to ensure that the Bank will not incur major or catastrophic losses

To ensure that the Bank has:

  • processes with sufficient controls to protect the Bank against fraud, as well as sufficient monitoring and reporting systems to allow it to recognize any transactional errors as well as potential fraudulent transactions;
  • sustainable and competent personnel to deliver all the products and services that it offers;
  • managed the systems, especially service critical solutions (e.g. such as the Bank's core banking system, Finacle) to have a high level of availability and redundancy; and
  • adequate protection against unforeseen natural events (e.g. calamities, fire, etc).

Compliance

The Bank, as a matter of policy and practice, will not undertake any activity that violates rules prescribed by regulatory authorities

 

The Bank to communicate to units that failure to comply with laws and regulations may result in any, or a combination of some, or all, of the following consequences: fines, imprisonment, disqualification of officers, revocation of product license, nullification of contracts, damages, reputational damage, limited business potential or growth and/or cessation of operations.

 

Strategic

UnionBank shall be guided by its vision and purpose, core values and strategic objectives in formulating its business plans and shall endeavor to align its activities with its 10-year strategic roadmap.

The Bank to ensure alignment of UnionBank's strategic goals, the business strategies developed to achieve those goals, the resources deployed against these goals, and the quality of implementation.

Reputation

The Bank shall adhere to the highest corporate and ethical standards in conducting its business activities. All officers and staff shall be governed by the Bank's Board-approved Code of Conduct to promote integrity, professionalism, and good corporate governance. The Bank shall, likewise, observe Anti-Money Laundering Rules and Know-Your-Customer ("KYC") guidelines to further safeguard the Bank's reputation

The Bank to ensure that the it shall always be concerned with maintaining a good reputation to its stakeholders and its reputation will not be tainted

(b) Group

The Bank's Enterprise Risk Management Policy is adopted by the group to the extent it is applicable.

(c) Minority Shareholders

Indicate the principal risk of the exercise of controlling shareholders' voting power. NONE.

3) Control System Set Up

(a) Company

Risk Exposure

Risk Assessment
(Monitoring and Measurement Process)

Risk Management and Control
(Structures, Procedures, Actions Taken)

Credit

  • At the transactional level, the Bank uses credit scoring models or rule-based approaches in determining the likelihood of default for a particular transaction.
  • At the portfolio level, the Bank measures credit risk through an analysis of the non-performing loans ("NPL") Ratio and default experience for each of the loan portfolios.
  • An assessment of the potential loan losses, in turn, are subject to the establishment of loan loss reserves using two methodologies, the credit classification process (as required by the BSP) and the loan impairment process (following Philippine Financial Reporting Standards).
  • The Bank also uses credit stress tests, which is a more comprehensive tool for measuring credit risk, to determine the potential credit losses under a more adverse scenario or to assess a potential credit concentration risk in its lending portfolio.
  • Strategies, policies and limits that are approved by the Board of Directors
  • Well-structured and standardized credit approval process and credit scoring system for each of its business and/or product segment
  • Independent unit performs credit analysis and review for both retail and corporate financial products to ensure consistency in UnionBank's risk assessment process
  • Risk Reporting to Risk Management Committee

Market

  • Business Managers identify the price risks associated with the different products and activities involved in their respective businesses
  • Day-to-day management of the market risk is performed through daily valuation of the positions, calculation of risk measures and monitoring against the above limits.
  • As market risks vary for each treasury product, a risk measurement and management process appropriate for the product is developed and is subject to the approval of the MRC
  • The Bank uses the standardized approach for market risk as prescribed by BSP under Circular Nos. 360 and 538. This accounts for the possible loss that may be incurred on its trading activities
  • The Bank also uses internal VaR models as a means of monitoring its trading positions as well as its AFS securities
  • Stress testing is a technique used by the Bank to gauge its vulnerability to exceptional but plausible changes
  • Performs backtesting of VaR calculations against actual trading outcomes (250 observations) at least on a quarterly basis to assess the accuracy of the internal VaR model of the Bank.
  • All mathematical models used by back office systems for revaluation and for risk management and management and monitoring are independently validated
  • Daily valuation of the positions, calculation of risk measures and monitoring against the above limits are performed by the Treasury Operations and Treasury Middle Office. Daily reports are generated and submitted to the business unit concerned and the Market Risk Management Division
  • Risk Reporting to Market Risk Committee

Interest Rate in Banking Books

  • Employs "gap analysis" or also known as Earnings-at-Risk (EAR) to measure the interest rate sensitivity of its assets and liabilities
  • Maturity/re-pricing schedules can be used to generate simple indicators of the interest rate risk sensitivity of both earnings and economic value to changing interest rates.
  • Supplement the EAR through a stress tests on the repricing mismatches are conducted quarterly and are also presented to the Market Risk Committee
  • Risk Reporting to Market Risk Committee

Liquidity

  • The Bank recognizes the existence of liquidity risk in all its business activities, as well as the interconnection between different risks and its effect on liquidity risk.
  • The Bank's captures and quantifies the main sources of liquidity risk, as well as, communicates the complexity and interconnection of other risks.
  • The Bank uses a variety of methods, models and controls to manage liquidity. These methods and models include risk limits, cash flow projections, liquidity ratios and key liquidity indicators
  • The Bank will measure the additional capital charge needed from liquidity risk when a negative liquidity gap exists
  • Use of Maximum Cumulative Outflow (MCO) model. An MCO Limit is set and approved by the Board of Directors to control the amount of maximum cumulative outflow
  • The Bank uses liquidity ratios to monitor and manage its liquidity. The MRC approves the ratios to be used for examining the performance of the Bank and for mapping-out areas where improvement is needed
  • Stress testing of the MCO Report which involves simulating stress events and analyzing the resulting liquidity profile of the Bank.
  • A liquidity contingency plan is formulated to set out the amount and the sources of funds (such as unused credit facilities) that are available to the Bank and the circumstances under which the Bank may use such funds. The Contingency plan is reviewed annually and presented to the MRC
  • Risk Reporting to MRC

Operational

  • Review of existing organizational structure and clear identification of each function's core mandate;
  • Identification of critical core processes of each area / function; and
  • Identification of vulnerabilities in the function in terms of
    • Process risk;
    • People Risk;
    • System Risk;
    • Event Risk;
    • Business risk; and
    • Legal risk.
  • The identified risks are formally documented through the use of the Risk Identification and Control Self Assessment Form
  • One of the basic policies in place is the implementation of proper segregation of duties and responsibilities
  • In terms of managing products and services, key guidelines are being followed to ensure that risks are being managed.

- First, no new products or services are implemented without performing operations risk assessment.

- Second, the same requirement is applied to existing products and services.

  • Reviews are being done and effectiveness of existing controls are being assessed -
  • As new regulations are issued, the Bank's operational manuals are reviewed and updated accordingly.
  • The Bank recognizes that its success is greatly dependent on having competent and qualified personnel in all areas of the Bank -
    • Rigid hiring process
    • Continuous trainings
    • Pay-for-Skill programs
    • Productivity-Based Performance Appraisal System
    • Formal Succession Plan for key and critical positions
  • On the technology side, the Bank has implemented the Control Objectives for Information and related Technology (COBIT) framework as the basis for its Information Technology Policies and Systems Manual (ITPSM).
  • For all technology-related activities and initiatives, a management committee named Technology Steering Committee (TSC), is in place to provide oversight function. With its members composed of Senior Management coming from both the business and the operational sides of the Bank, it provides a comprehensive and high level guidance on technology-related issues that can impact the Bank.
  • Bank has also put in place a redundant or mirroring set of IT infrastructure. The core systems of the Bank including the physical equipment and system have been duplicated at two sites, one in Ortigas Center and the other in Makati City, providing reasonable assurance of the continuity of operation in case of failure of one of the sites.
  • Bank has employed the use of third party consultants to test the vulnerability of its systems and provide expert advice on how to further protect the Bank's systems and infrastructure. This is further complemented by the Bank performing its own internal vulnerability test and assessment.
  • As a means of enhancing the security of the Bank's IT systems, the Bank attained ISO27001:2005 Information Security Management System Certification in 2011.
  • As part of ensuring preparedness by the Bank in incidents involving systems downtime, the Bank regularly performs Disaster Recovery Tests. The test results shall be used as basis for fine-tuning the plans.
  • The Bank recognizes that it needs reasonable assurance that potential threats which may cause business disruptions are adequately handled. The Bank has developed and regularly updates its Business Continuity Plan to ensure that the Bank can still continue to deliver its products and services in the event of business disruptions and catastrophic events.
  • To further prepare the Bank to handle such events, an auxiliary committee which is the Workplace, Health, Safety and Security Committee, was formed to focus on monitoring and assessing specific situations and events and to give feedback to the Business Continuity Steering Committee.
  • To further ensure that the risks of these events occurring are properly and adequately controlled and mitigated, the Bank's Internal Audit has employed a risk-based audit framework
  • Risk Reporting to Operations Risk Management Committee

Compliance

  • The failure to comply with laws and regulations may result in any, or a combination of some, or all, of the following consequences: fines, imprisonment, disqualification of officers, revocation of product license, nullification of contracts, damages, reputational damage, limited business potential or growth and/or cessation of operations.
  • Erring or non-complying officers or employees shall also be dealt with according to the Bank's Code of Conduct
  • Compliance risk is managed through UnionBank's policies and compliance system. Said policies and compliance system are approved by the Board of Directors.
  • The Board oversees the implementation of the Bank's compliance system and program, as well as other relevant policies and guidelines.
  • Senior Management, particularly the Bank's Policy Committee (PolCom), provides for and espouses compliance policies, ensuring that the same are observed. Senior Management is responsible for the effective management of the Bank's compliance risk.
  • The Bank's compliance system, in line with the Revised Compliance Framework for Banks[6], is particularly designed to identify and mitigate business risks, which may erode the Bank's franchise value. The Bank's compliance system involves a Compliance Program or manual ("Compliance Program", for brevity), which is distinct from the Bank's risk and internal audit programs.
  • Clear and open communication lines within the Bank to educate and address compliance matters.
  • The Bank's Compliance Program is reviewed and updated annually, or as necessary, in order to maintain the highest level of compliance performance by the entire institution and to incorporate changing responses to evolving internal and external conditions.
  • Reporting to the Corporate Governance Committee and the Board.

Strategic

  • The Bank's strategic and business planning framework begins with an assessment of its inherent strengths and weaknesses, its competitive advantages within the context of its external environment
  • The Bank conducts an annual strategic planning process that seeks to articulate its 10-year vision. Within this process, the Bank considers and ensures strategic, business and reputation are adequately addressed.
  • The Bank as part of its business planning process also looks at its external environment to ensure that plans and strategies are also aligned with its reading of external forces that affect it.
  • As part of the Bank's performance monitoring, mid-year review is conducted by the Board for it to track actual business results against budget and assess sufficiency of the Bank's current budget for the remainder of the year.

Reputation

  • Reputation risk exposure is present throughout the organization, thus Banks have the responsibility to exercise an abundance of caution in dealing with its customers and community.
  • This risk is present in activities such as asset management and regulatory compliance. This then requires the Bank to be diligent in their responsibility of exercising caution in dealing with customers and the community
  • The Bank uses its Corporate Governance rating as a means to assess its ability to manage its reputation risk
  • As business practices evolve to address new operating environments with respect to reputation risk, the Bank has always been concerned with maintaining a good reputation to its stakeholders
  • A reputation management framework was developed in 2012 which aims to provide a structure through which the bank cam build, enhance, protect and if needed, recover its reputation. The framework has taken into consideration the various factors that can affect the bank's reputation, categorized as Critical, Performance, and Differentiating Characteristics
  • Reporting to the Risk Management Committee

(b) Group

The Bank's control system set up is adopted by the group to the extent it is applicable.

(c) Committee

Board Committees- UnionBank of the Philippines

 

Composition

Function

Reporting Function

Limits

Board of Directors ("Board")

Fifteen (15) Directors, two of them are independent directors

- Responsible for the overall risk strategy of the bank.

- Establishes the strategic direction and risk taking capacity of the Bank and is responsible for approving risk management strategies, objectives and policies.

Shareholders

Not applicable

Executive Committee ("ExeCom")

Seven (7) members of the BOD, including the Chairman

- Approves credit transactions up to its approval limit as delegated by the BOD, including credit exceptions and limit exceptions.

- Approves the sale of ROPA up to its delegated limit.

- Reviews, deliberates and endorses to the BOD credit proposals and ROPA sales beyond its delegated limit.

Board of Directors

Credit Authority Limits:

Clean Limit: more than 30M up to 400M

Sale of ROPA

Real Estate: 10.0 MM and any sale with loss

Risk Management Committee ("RMC")

Seven (7) members of the BOD, including the Chairman and President (as an alternate member)

- Primarily responsible for the development and oversight of risk management program as embodied in the RMC Charter

Board of Directors

Not applicable

Market Risk Committee ("MRC")

Chairman, President and Three (3) other members of the BOD

- Responsible for setting policies and standards for market risk identification and analysis, measurement, monitoring and control.

Board of Directors

Not applicable

Operational Risk Management Committee ("ORMC")

Three (3) members of the BOD and Two (2) Senior Management officers

- Responsible for setting policies and standards for identification, analysis, measurement, monitoring and control of operations risk.

Board of Directors

Not applicable

Audit Committee ("AuditCom")

Five (5) members of the BOD, at least two of them are independent directors

-Providing oversight of the Bank's financial reporting and control, as well as the internal and external audit functions.

- Responsible for monitoring and evaluating the adequacy and effectiveness of the internal control system.

- Review of governance, risk management and controls.

Board of Directors

Not applicable

Corporate Governance Committee ("CorpGov Com")

Seven (7) members, comprised of six (6) members of the Board of Directors, two (2) of whom are independent directors; and one (1) member from the Bank's senior management

- Make recommendations on the study and evaluation of the structure, charter, policies and practices of the BOD and its committees and to address issues of Corporate Governance

- Ensures the Board's effectiveness and due observance of corporate governance principles and guidelines

Board of Directors

Not applicable

Nominations Sub-committee

(under the Corp. Governance Committee)

Three (3) voting members of the BOD, one of whom is an independent director, and one (1) non-voting member who is the Human Resources Director

-Promulgates the guidelines and criteria governing its conduct of nomination, pre-screening, and selection of candidates for BOD and key officers of the Bank.

Corporate Governance Committee

 

Board of Directors

Not applicable

Compensation and Remuneration Sub-Committee (under the Corp. Governance Committee)

Three (3) members of the BOD, one of whom is an independent director

- Tasked to assist the Corporate Governance Committee and the Board of Directors by recommending and overseeing the implementation of a program of salaries and benefits for Directors and Senior Management.

Corporate Governance Committee

 

Board of Directors

Not applicable

Trust Committee ("TrustCom")

Five (5) members: three are members of the BOD, President, Trust Officer

- In charge of the acceptance and closing of trust and other fiduciary accounts.

- Initial review of assets placed under trustee's fiduciary's custody;

- The investment, reinvestment and disposition of funds or property;

-The review and approval of transactions between trust and/or fiduciary accounts; and

- The review of trust and other fiduciary accounts at least once every twelve (12) months.

Board of Directors

Not applicable

G. INTERNAL AUDIT AND CONTROL

1) Internal Control System

(a) The system of internal control is conceptual in nature. It is the integrated collection of control mechanisms used to achieve desired results. A control is any mechanism or practice used to enhance the probability that required results will be achieved.

Internal auditors must systematically evaluate the nature of the organization's operations and systems of internal control to assess the extent to which they may be relied upon to:

      • ensure the integrity of management data;
      • ensure that the organization's assets are safeguarded;
      • ensure compliance with policies, plans, procedures, standards, laws and regulations; and
      • promote effectiveness, efficiency and economy in organizational practices.

Internal controls comprise the plan of organization and the methods and measures adopted to safeguard assets, comply with laws and regulations, check the accuracy and reliability of management data, promote operational efficiency and encourage adherence to prescribed managerial policies. These controls embrace the policies, procedures and practices established by management as well as the plan of organization and other measures intended to promote and facilitate their implementation.

Internal control is the whole system of control, financial or otherwise, established by management in order to carry on the business of the organization in an orderly manner.

The characteristics of a sound system of internal control include:

  • a plan of organization providing segregation of responsibilities and duties appropriate for safeguarding the organization's resources, and accountability for the economical and efficient utilisation of such resources;
  • a system of authorisation and recording procedures adequate to provide control over resources;
  • sound, formal practices to be followed in the performance of duties and functions of each of the organisational units;
  • procedures to ensure the selection of personnel of a quality commensurate with their responsibility; and checks and balances to ensure desired results are achieved.

Types of control include:

  • management;
  • organisation;
  • accounting; and
  • physical controls.

Answers to items b to e:

The Board of Directors is able to review the effectiveness of the internal control system through the Internal Audit function. Monthly, the Internal Audit reports to the Audit Committee which is a board level committee. The Audit Committee Chairman also reports to the Board of Directors on the highlights of the audit activities during the monthly board meetings. Annually, Internal Audit prepares an annual audit report covering the preceding year's audit activities.

Audit reports include the indication of period covered or the time reference point. Internal Audit has criteria (i.e., Control Process Exposure) and guidelines in giving out assessment on the effectiveness of the internal controls.

The frequency of the review of a set of internal controls (either by process, unit, or system) by the Internal Audit depends on the annual audit planning results considering regulatory requirements (Treasury and Trust processes are required by the Banko Sentral ng Pilipinas to be audited/assessed yearly).

2) Internal Audit

(a) Role, Scope and Internal Audit Function

Role Scope

Indicate whether In-house or Outsource Internal Audit Function

Name of Chief Internal Auditor/Auditing Firm Reporting process

IAD's main objective shall be to monitor, evaluate, add value, and improve the effectiveness of the Bank's operations, internal controls, risk management system, and governance processes by:

  1.  Ascertaining that the Bank policies, Central Bank regulations, and other statutory requirements are carried out properly and are adhered to by the entire Bank, its officers, and employees.
  2. Determining that the accounting records, financial statements, and management information reflect fairly and accurately the financial condition and the results of actual operations. This is also to detect and prevent fraud and other losses.
  3. Evaluating the adequacy, effectiveness, and efficiency of the existing internal control system and recommend improvements when necessary in coordination with the appropriate unit of the Bank.
  4. Conducting special investigations as required, based on the Code of Conduct of the Bank.

It is the responsibility of the IAD Head to:

  1. Develop a flexible annual audit plan for all the assignments to be performed including their timing and frequency, using an appropriate risk-based methodology, incorporating any risks or control concerns identified by management during the previous year. The plan is to be submitted to the Audit Committee for review and approval.
  2. Submit periodic reports to the Audit Committee summarizing the results of audit activities undertaken compared to the annual audit plan as well as a report on the sufficiency of division resources. This also includes the status of the recommendations made and issues raised, as well as other information to keep the audit committee in touch with emerging trends and best practices in internal auditing.
  3. Conduct an independent review on the methodology used in assessing the various risks faced by the Bank in consultations with the Bank's supervisory authorities. Included also is the evaluation of the Audit Charter.
  4. Provide a year-end report to the Audit Committee regarding the performance of the division for the year, based on real critical success factors, key performance indicators, and other measures of performance. This also includes a detailed list of expenditures for the year with recommendations on cost-saving improvements; next year's proposed budget, as well as a summary of accomplishments for the year by the IAD personnel.
  5. Foster a cooperative and healthy working relationship with the external auditor to reduce incidence of duplication of audit effort and encourage appropriate mutual sharing of information from both sides, to achieve efficient coordination on the overall audit effort.
  6. Develop policies on the retention or the segregation of engagement records, and their release to internal and external parties, specifically:
    1. A policy relating to the various types of engagements that specifies the content and format of engagement records and how internal auditors shall handle their notes.
    2. A policy that specifies the length of retention for engagement records according to the Bank's policies and requirements.
    3. Policies on IAD's responsibility for ensuring the control and security of engagement records, including the handling and granting of requests for access.
  7. Maintain a professional audit staff with sufficient skills, knowledge, and experience, as well as the professional certification/s required.
  8. Ensure that the IAD complies with sound auditing principles; with adequate disclosure to the Audit Committee of compliance or non-compliance with the International Standards for Professional Practice on Internal Auditing (ISPPIA) as well as with the Information Systems Auditing Standards issued by the Information Systems Audit and Control Association (ISACA).

Internal Audit Division. It is the responsibility of the IAD to:

  1. Perform appropriate reviews of all Bank units provided for in the IAD scope based on the following types of assurance engagements:
    1. Financial Audits. These aim to assess the reliability of accounting systems and information of resulting financial reports.
    2. Compliance Audits. These aim to assess the quality and appropriateness of the systems established to ensure compliance with laws, regulations, policies, and procedures.
    3. Operational Audits. These aim to assess the quality and appropriateness of other systems and procedures used and to analyze the Bank's organizational structures and to evaluate the adequacy of the methods and resources applied.
    4. Management Audits. These aim to assess the quality of management's approach to risk and controls in the framework of the Bank's objectives.
  2. Provide consulting or advisory services without compromising IAD independence, in evaluating and assessing significant merging/consolidating functions and/or new/changing services, processes, operations, and control processes coincident with their development, implementation, and/or expansion.
  3. Conduct the investigation of suspected financial irregularities and fraudulent activities and other violations whether reported to or uncovered in the course of regular audits, in the manner provided for in the Bank's Code of Conduct.
  4. Undertake studies or presentations and/or investigations on issues and concerns raised by the Audit Committee and/or Senior Management.
  5. Interact with the various governance groups as needed (i.e. risk management, compliance, legal, and external audit).

Every activity and every entity of the Bank shall fall within the scope of the IAD. Included are all UnionBank of the Philippines (UBP) branches, UBP Head Office units, UBP Information Technology divisions and systems, UBP subsidiaries, and UBP affiliates.
The scope of internal audit shall include transaction testing and assessment of specific internal control procedures; and the examination and evaluation of the following:

  1. adequacy and effectiveness of the internal control systems, procedures of safeguarding assets, system of assessing capital in relation to the estimate of organizational risk;
  2. application and effectiveness of risk management procedures and risk assessment methodologies;
  3. accuracy and reliability of the accounting system and of the resulting financial reports,  management and financial information systems, including the electronic information system and electronic banking services;
  4. effectiveness of compliance system and the implementation of established policies and procedures; and
  5. management's effectiveness in meeting its set objectives
In-house Myrna E. Amahan

The audit report comprising of the audit findings/observations is discussed first with the Management involved in the area covered.  This happens during the exit meeting with the Audit Client Management present.  The audit report is finalized after the exit meeting and then its highlights are reported and discussed during the Audit Committee meeting.  Audit Committee meeting is held monthly.

The Audit Committee Chairman also reports to the Board of Directors on the highlights of the audit activities during the monthly board meetings.  Annually, Internal Audit prepares an annual audit report covering the preceding year audit activities.  The highlights of this annual report are also presented to the Board of Directors in a meeting.

 

(b) Do the appointment and/or removal of the Internal Auditor or the accounting /auditing firm or corporation to which the internal audit function is outsourced require the approval of the audit committee? YES.

Approval & Removal of Internal Auditor are covered in the Audit Committee Charter, Authority portion: "Review hiring decisions, including appointment, compensation, evaluation, retention, and dismissal of the Internal Audit Division Head. "

Approval & Removal of External Auditor are covered in the Audit Committee Charter, Responsibilities portion: "Review the performance of the external auditors and exercise final approval on the appointment or discharge of the auditors."

(c) Discuss the internal auditor's reporting relationship with the auditDoes 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. Internal Auditor's reporting relationship with the Audit Committee and statement of unfettered access to all records are covered in the Audit Committee Charter as follows:

Internal Auditor's reporting relationship with Audit Committee:

Audit Committee Charter, Responsibilities:

  • Review with management and the Internal Audit Division Head the charter, plans, activities, staffing, and organizational structure of the internal audit function.
  • On a regular basis, meet separately with the Internal Audit Division Head to discuss any matters that the committee or internal audit believes should be more appropriately discussed privately

Audit Charter, Independence:

To ensure independence, IAD operates under the direct control of the Audit Committee. It reports regularly to the Audit Committee. It shall operate only under the direct control of the Audit Committee and shall be given an appropriate standing within the Bank to be free from bias and interference. The division shall be free to report its findings and appraisals internally at its own initiative to the Audit Committee.

Audit Charter, Authority:

The Division, as authorized by the Audit Committee, has unrestricted access to all functions, records, property, and personnel of the Bank subject to existing mandate and applicable laws. This includes the authority to allocate resources, set frequencies, select subjects, determine scopes of work, and apply the techniques required to accomplish the audit engagement objectives.

(d) Resignation, Re-assignment and Reasons

Name of Audit Staff

Reason

Rainier C. Agacita

Transferred to another company

Chester P. del Prado

Resigned to have a long break from work

Raymond V. Custodio

Transferred to another company

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

Progress Against Plans

The following tables shows the main audit plan coverage for 2012 and the statuses as of December 31, 2012. As of report date, all are completed.

Full Scope audit of TISG (spill over from 2011)

completed

Full Scope audit of HR (spill over from 2011)

completed

Full Scope audit of Treasury (Spill over from 2011)

completed

Full scope audit of Loans and Lending Processes

ongoing

Full scope audit of Corporate Accounting/ Regulatory

ongoing

 

Full scope audit of Market Risk Unit

completed

Full scope audit of ICAAP

completed

Full scope audit of Security

ongoing

Full scope audit of TISG (2012)

ongoing

Full scope audit of Compliance

ongoing

Full scope audit of Treasury

ongoing

CPS - Central Clearing Process

completed

General IT Controls (including SSM)

completed

Business Continuity Plan (Overall, ORM)

ongoing

Full Scope Branch Audit

completed

Limited Scope Branch Audit

completed

Branch Spot Audit

completed

Cash Services Division

completed

Other Assurance Services

 

Issues[7]

N/A

Findings[8]

No material findings noted in 2012.

Examination Trends

Risk-based auditing is being implemented. To ensure that high risk areas are being covered, inputs from Senior Management are being considered. With the implementation of the Enterprise Risk Management (ERM), risk-based auditing implementation will further be improved as the Internal Audit will adopt the outputs of the ERM in determining the areas to focus on. Utilizing the outputs of ERM will also increase efficiency as the planning process will be shortened.

(f) Control Policies and Procedures

Disclose all internal audit controls, policies and procedures that have been established by the company and the result of an assessment as to whether the established controls, policies and procedures have been implemented under the column "Implementation."

Policies & Procedures

Implementation

The following documents contain the internal audit controls, policies and procedures that govern the Internal Audit activities and they are based on the ISPPIA:

  • Internal Audit Charter - defines our roles and responsibilities. It ensures as well our independence.
  • Personnel-related policies - include Job descriptions/Duties and Responsibilities that document the expectations from each level of auditor; and qualifications for each auditor level.
  • Audit planning and reporting - describes our process from planning up to reporting to the Board of Directors.
  • Fraud investigation - contains the duties and responsibilities of Internal Audit in relation to fraud investigation. It also describes the required reporting procedure.
  • Corporate Governance - contains the duties and responsibilities of Internal Audit in relation to the Corporate Governance.
  • Advisory/consulting engagements - describes the advisory/consulting activities that Internal Audit may provide and the requirements from the Internal Audit from planning up to reporting with regard to the advisory/consulting activities.
  • Service level agreement - contains provisions defining the expectations from Internal Audit and from the audit clients.
  • Coordination with external related parties - guides the auditor on the coordination of audit activities with other assurance providers in order to ensure adequate audit coverage and to minimize duplicate efforts.
  • Quality Assurance & Improvement Program (QAIP) - designed to provide reasonable assurance to the various stakeholders of the Internal Audit activity that Internal Audit: (1) performs its work in accordance with its Charter, which is consistent with The Institute of Internal Auditors International Standards for the Professional Practice of Internal Auditing (Standards) and Code of Ethics; (2) operates in an effective and efficient manner; and (3) is perceived by stakeholders as adding value and improving Internal Audit's operations.
  • Manual deviations, review and updates - contains the policies on ensuring that the manual is followed by the auditors. It also includes the provision for the regular review and updating of the Audit Manual.
  • - A compilation of the standard audit programs - We refer to these audit programs but we may modify them to suit the audit objectives of the engagement that will be executed.

Based on our last self-assessment, Internal Audit generally conforms to the established audit policies and procedures (which are aligned with the International Standards for the Professional Practice of Internal Auditing (ISPPIA)).

(g) Mechanism and Safeguards

Mechanism established by the company to safeguard the independence of the auditors, financial analysts, investment banks and rating agencies :

Auditors

(Internal and External)

Financial Analysts

Investment Banks

Rating Agencies

Internal Audit functionally reports to the Audit Committee. Maintenance of its independence is also addressed in its charter and Audit Manual.

For external auditor, we check who the partners are in the auditing firm being considered. They should not have relationships with the owner/stakeholders of the Bank that may impair their independence. The selection of the external auditor is subject to the approval of the Audit Committee.

The Bank's Investor Relations Office reviews reports and write-ups prepared by Financial Analysts, Investment Banks and Rating Agencies for accuracy and consistency of financial information, and for protection of confidential and sensitive information. Discussions on financial performance and strategic direction are meant to provide deeper appreciation and understanding of the Bank's unique culture and competitive advantages, resulting from conduct of competitor scan and benchmarking exercises, and are neither meant to influence or change perceptions / opinions nor insinuate growth or earnings potential to achieve favorable rating / assessment.

(h) The Bank's Compliance Officer shall continue to be the officer who will attest to the company's full compliance with the SEC Code of Corporate Governance.

H. ROLE OF STAKEHOLDERS

1) Company's policy and activities

 

Policy

Activities

Customers' welfare

The Bank recognizes its obligation to be truthful and objective in its dealing with its customers. While it is entitled to employ all fair and honest means to promote its products and services, it does not, however, knowingly make false representations to customers. All employees of the Bank deal with its depositors and customers in a manner that creates value for them through appropriate and sound banking practices.

The Bank is cognizant of, and consistently observes the Bank Secrecy Law, Anti-Money Laundering Act, and other laws governing the banking industry.

The Bank provides in its website information on consumer protection such as safe surfing guidelines and other security awareness information for its depositors and customers.

The Bank provides in its website information on consumer protection such as safe surfing guidelines and other security awareness information for its depositors and customers.

Several activities were also conducted to promote customers' welfare -

  1. Economic Briefing for Valued Clients, "Ensuring Success Amidst Global Challenges - July 17, 2012
  2. UnionBank supports GSIS Pensioners' Day - 2012
  3. UTalk-Kasosyo sa Asenso - April 13, 2012

The following information campaigns are for the protection of customer are also found in the Bank's website -

  1. Safe Surfing Guidelines
  2. Eye Opener for UnionBank Clients
  3. Weblinking Practices
  4. Consumer Protection

Supplier/contractor selection practice

The Bank upholds the principles of truthfulness, fairness and respect in its dealings with its suppliers. It continues to build and maintain good relations with them, honoring agreements which are entered into in conformity with the law and public policy.

All purchases of equipment, supplies and services for the Bank are made on the basis of quality, utility and price offered by the vendor. While the Bank may actively negotiate for favorable terms with its suppliers, it does not knowingly mislead them with respect to competitors' price and terms, its plans for future purchases, or other particulars of their transactions. The Bank does not use its vantage position as customer of the supplier, to impose unfair conditions that could not have been obtained by negotiations in good faith, or commit acts or omissions that unjustly breach contractual obligations.

 

Environmentally friendly value-chain

The Bank is an environment-sensitive organization. It is committed to environmental protection especially in areas encompassed by its business operations. Through the years, it has provided and promoted programs advocating environment preservation and supports activities for advancing environment awareness and protection.

In 2012, the Bank held activities espousing environment protection awareness among employees, e.g., Think Green, Go Green - Tree Planting in Manila & Cebu. Brown bag sessions were organized to discuss climate change and earth hour.

 

Community interaction

The Bank keeps its duty to the public to provide banking services and products suitable to their needs. It will continuously uphold its commitment to meaningful and efficient services carried out in its realm of strong governance standards.

The Corporate Philanthropy and Social Responsibility (CPSR) Unit of the Bank is the implementing body of its commitment to making the difference for the community with the purpose of connecting with and enabling society.

The Bank's CPSR's flagship program is the UnionBank Learning System: Developmental Reading Integrated with Values Education for Good Citizenship.

In 2012, CPSR's programs, include among others, Classrooms / School Building Donation to Barugo National High School, Leyte; Relief Assistance for Habagat Victims; Donation for 100 houses in Xavier Ecoville, Lumbia, CDO City for Typhoon Sendong Beneficiaries.

Other activities showing interaction with community are, Giving Goes Social and Books for U Donation Drive.

Anti-corruption programmes and procedures?

1.1.9. Receiving gifts and other inducements

Employees of UnionBank should not accept gifts - anything of value, such as an item, a service, free vacation trips, personal use of a vehicle, use of a vacation home, lavish entertainment, etc. - from customers or suppliers. Exceptions to this general rule may be made for gifts of nominal value (generally less than P5,000.00), as long as the gift was not given or received with corrupt intent and could not be perceived as such. Exceptions may only be granted by the Chairman/CEO, the President/COO, and any Center Head.

If a situation where refusing or returning the gift is truly impractical or would adversely affect the relationship, the employee may accept the gift and turn it over to UnionBank, which may then use it for any suitable purpose, such as for public display or raffle prize at company functions. Alternatively, the employee may have the gift appraised and make a donation in that amount to a charity, preferably one supported by the Bank. In every case, the employee must report the gifts received to his Compliance Officer.

1.1.10. Giving/offering gifts and other inducements

No employee shall offer or make payments, other inducements or provide lavish entertainment to government officials or customers in order to sell UnionBank's products or services. An exception to this general rule applies to promotional gifts provided to large classes of customers, e.g., credit card and consumer account opening promotions.

1.1.11. Investments/personal finances/insider information

UnionBank strictly prohibits any officer or employee of the Bank, whenever and in whatever capacity employed, from trading for his account, or for the profit of family members or friends, on the basis of inside information. UnionBank also prohibits an officer or employee from disclosing inside information to another officer or employee or to persons outside UnionBank so that they may profit from such information.

Employees should exercise prudence in personal financial affairs and should avoid financial situations that could reflect unfavorably on the Bank or themselves. They should manage their finances with care, and in a manner consistent with employment in a fiduciary institution.

1. Leaders Learning Circle

2. Cascade of UNIONBANK DNA (composed of our Purpose (mission), Vision, Values and Brand)

- The Bank's DNA establishes its identity, aligns its people's goals to the goals of the Bank and guides employee behaviors.

Safeguarding creditors' rights

www.unionbankph.com) and periodic "UnionBanker" newsletters, where its shareholders and investors are informed of important announcements and disclosures in addition to the Bank's submissions to regulatory bodies. It has an Investor Relations Office (IRO) whose mission is to strengthen the Bank's relations with outside parties through the development and implementation of an investor relations program.

The Bank provides in its website information on consumer protection such as safe surfing guidelines and other security awareness information for its depositors and customers.

The following information campaigns are found in the Bank's website -

  1. Safe Surfing Guidelines
  2. Eye Opener for UnionBank Clients
  3. Weblinking Practices
  4. Consumer Protection

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

YES. A separate report on corporate philanthropy and social responsibility may be found in the Bank's annual report as well as in its website, particularly:
http://www.unionbankph.com/index.php?option=com_content&view=article&id=2335&Itemid=966

3) Performance-enhancing mechanisms for employee participation.

(a) Policy for its employees' safety, health, and welfare

The Bank is committed to provide its employees with a workplace free of sexual harassment, as well as harassment based on factors such as race, color, religion, age, marital status, sexual orientation, or disability.

The Bank ensures that its employees are competent, dedicated and upright through proper talent selection and acquisition. Employees are given proper orientation and training to improve and further develop their skills and potentials. To facilitate this, the Bank has established its own university known as the "UnionBank University" comprising of various academies where employees get relevant training in various disciplines important to the Bank's success.

Employees receive salaries, bonuses, other standard and fringe benefit loan program, as approved by the BSP, in accordance with the performance management philosophy of the Bank based on meritocracy or pay for performance. These benefits include health compensation packages for employees and their qualified dependents.

Rank and file employees are protected through proper representation during collective bargaining with the management.

(b) Please see immediately succeeding pages for data relating to health, safety and welfare of the Bank's employees.

(c) The Bank's training and development programmes for its employees.

The Bank ensures that its employees are competent, dedicated and upright through proper talent selection and acquisition. It sees to it that employees are given proper orientation and trainings to improve and further develop their skills and potentials. Training is delivered through its Corporate University - The UnionBank University with the mission to "grow leaders and build expertise by providing strategically-aligned functional and developmental programs in the advancement of the Bank's Human Capital value. There are nine (9) disciplines under the UnionBank University that caters to the different competencies needed for the bank, viz-

  1. Sales Academy
  2. Marketing Management Development Academy
  3. Operations Academy
  4. Six Sigma Academy
  5. Risk Management Academy
  6. Leadership and Management Academy
  7. IT Academy
  8. Finance Academy
  9. Self-Mastery Academy

Employees also undergo trainings via the Bank's E-Learning system. They are also given external trainings provided by local and international institutions. Please see immediately succeeding pages for the data.)

(d) State the company's reward/compensation policy that accounts for the performance of the company beyond short-term financial measures.

Employees receive salaries, bonuses and other standard bank benefits and fringe benefit loan program, as approved by the BSP, in accordance with the performance management philosophy of the Bank based on meritocracy or pay for performance.

4) The Bank's procedures for handling complaints by employees concerning illegal (including corruption) and unethical behaviour.

The Bank's Code of Conduct empowers and guides all employees and other persons to whom it may be applicable in certain instances. It is divided into three parts, namely, Ethical Standards, Disciplinary Action, and Procedure for Administrative Due Process.

The Code provides a policy on the responsibility of employees for reporting actual or possible violation of a law, regulation, the Bank's Code or any policy. Duty is also imposed upon those who are aware of any condition that creates undue material risk to the Bank to promptly report the same to his or her supervisor. Alternatively, he or she may report the infractions to the next higher in management, Internal Audit Division and Human Resources Services Group. It also provides a policy for the protection of employees who report infractions or risks.

The Unit Compliance Officers and the Internal Audit Division conduct their fact-finding investigations for violation of the Code for cases falling within their respective jurisdictions. Investigation reports of these bodies, consisting of facts of the case, modifying circumstances, if any, provisions of the Code violated, decisions in previous administrative cases, and any applicable laws and jurisprudence, are submitted to the Discipline Committee.

The Discipline Committee, after determination that the investigation reports of the fact-finding bodies are complete, deliberates on the propriety of the offense established by the fact-finding bodies and the recommended disciplinary actions therefore. Should there be a need for further clarification, the Discipline Committee summons the employee concerned for clarificatory conference. The employee concerned may be accompanied by a counsel or any Bank employee or union officer (for rank and file). The Discipline Committee thereafter submits its recommendation on the case to the center head of the employee involved.

Also embodied in the Code is the Bank's policy that no employee will be retaliated against as a result of having made the report. Questions concerning protection for such an employee should be addressed to the appropriate Compliance Officer or the Human Resources Director.

I. DISCLOSURE AND TRANSPARENCY

1) Ownership Structure

(a) Holding 5% shareholding or more

 

Shareholder

Number of Shares

Percent

Beneficial Owner

1

Aboitiz Equity Ventures, Inc.

277,552,776

43.27%

--

2

The Insular Life Assurance Co., Inc.

103,359,204

16.11%

--

3

PCD Nominee Corporation (Filipino)

68,186,404

10.63%

VARIOUS

4

Social Security System

69,777,289

10.88%

--

5

Social Security System - PCD (Filipino)

33,369,243

5.20%

--

 

 

Name of Senior Management

Number of Direct Shares

Number of Indirect Shares / Through (name of record owner)

% of Capital Stock

1

ACEVEDO, EUGENE SERING

97,938

-

0.02

%

2

BAUTISTA, EDWIN RIEGO

898,201

-

0.14

%

3

REYES, JESUS ROBERTO SANTOS

164,632

25,500

0.03

%

4

LAPEZ, GENARO VISARRA

142,210

-

0.02

%

5

PANGANIBAN, TEODORO MACARAIG

597,496

-

0.09

%

6

ROMULO, BEATRIZ BARREDO

331,857

-

0.05

%

5

ABACAN, CATALINO SANTIAGO

79,529

-

0.01

%

6

ABASTILLAS, ROBERTO FONTANILLA

272,192

-

0.04

%

7

CASTRO, RAMON ROXAS

362,960

-

0.06

%

8

DUARTE, RAMON GARRIZ

59,529

-

0.01

%

9

GONZALEZ, JOYCE SANVICENTE

153,457

-

0.02

%

10

ILAGAN, CESAR GONZALES

90,274

-

0.01

%

11

MACALINO, FE BECINA

97,052

-

0.02

%

12

MATUTINA, ANGELO DENNIS LUNA

29,216

-

0.00

%

13

SANTIAGO, MANUEL DE GUZMAN JR.

11,905

-

0.00

%

14

TOLENTINO, CEFERINO PONCE JR.

59,529

-

0.01

%

15

VILLANUEVA, JOSE LEVI SOCO

39,407

-

0.01

%

16

CARAGUE, PAUL PATRICK MORABE

25,494

-

0.00

%

17

CERVANTES, MARDONIO C.

31,559

-

0.00

%

18

FAJARDO, ANTONINO AGUSTIN SAYO

101,290

-

0.02

%

19

INTALAN, LEONIDES F.

123,289

-

0.02

%

20

JALANDONI, MA. JOSEFINA ESTRELLA

20,470

-

0.00

%

21

MATIAS, RAMON DE SANTOS

102,653

-

0.02

%

22

PALANG, RAQUEL POLICARPIO

9,710

500

0.00

%

23

RUBIO, MICHAELA SOPHIA ESPINA

15,545

-

0.00

%

24

AMAHAN, MYRNA EVANGELISTA

-

2,432

0.00

%

25

ANDAL, ERMELINDO SALAZAR JR.

11,124

-

0.00

%

26

BAUTISTA, MA. CATHERINE ESCALONA

44,583

-

0.01

%

27

BERNAD, MA CECILIA TERESA SANTOS

21,148

-

0.00

%

28

CHEUNG, CATHERINE MONTECILLO

10,456

-

0.00

%

29

DARVIN, GERARD DELA ROSA

15,874

-

0.00

%

30

DE VERA, RAMON VICENTE DEL VILLAR II

64,761

-

0.01

%

31

DELA CRUZ, REBECCA MOLINA

20,637

-

0.00

%

32

GATDULA, JOYVALERIE BULAONG

119,834

-

0.02

%

33

GO, JULIE CHUA

138,350

-

0.02

%

34

LONTOC, CONCEPCION PERLA POBLETE

19,795

-

0.00

%

35

MACEREN, MA. CRISTINA PANINGBATAN

19,795

-

0.00

%

36

MILAN, DOMINIC ROA

8

-

0.00

%

37

PASTORAL, ALICIA ALMARIA

384

-

0.00

%

38

PINEDA, EDWIN GARCIA

75,385

163

0.01

%

39

QUIAMBAO, PETER ISMAEL F.

30,965

-

0.00

%

40

TUMAO, MARIE AIMEE SILVA

284,056

-

0.04

%

41

AGUILAR, JUNICE A.

-

5,401

0.00

%

42

BAUTISTA, CATHERINE ANNE PANGANIBAN

1,942

-

0.00

%

43

BAUTISTA, SUSAN ENCARNACION

1,994

0.00

%

44

CONTRERAS, HANNAH THERESA SIA

14,405

-

0.00

%

45

CRUZ, SOCORRO JESSYMEL TUASON

21,998

-

0.00

%

46

FAJARDO, MILA DALISAY

-

2,432

0.00

%

47

GERONIMO, RACHEL CHRISTINE TAGAYSAY

10,318

-

0.00

%

48

GUILLEN, JOSE GERARDO ENRIQUEZ

9,009

-

0.00

%

49

LAYUG, STELLA MARIE LOCSIN

-

1,263

0.00

%

59

MAKALINAW, EDNA

2,802

-

0.00

%

50

MARIANO, MA. ELOISA JOVITA MUYOT

2,913

-

0.00

%

51

NICDAO, DERRICK JIMENEZ

2,233

-

0.00

%

52

ROXAS, JOSE MARIA ONGPIN

-

3

0.00

%

53

SANTOS, ENRIQUE ABELLERA

2,486

-

0.00

%

54

SURTIDA, MARIA MAGDALENA VAZQUEZ

2,340

-

0.00

%

55

TIONGSON, FIDES CHUA

30,717

-

0.00

%

56

TOLENTINO, JO-ANN FATIMA LIBED

86,853

-

0.01

%

57

TORREGOSA, ERMILINDA PENALOSA

-

1

0.00

%

58

REYES, ALEJANDRO E.

7,001

-

0.00

%

2) Does the Annual Report disclose the following:

Key risks

Yes

Corporate objectives

Yes

Financial performance indicators

Yes

Non-financial performance indicators

Yes

Dividend policy

Yes

Details of whistle-blowing policy

Yes

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

Yes

Training and/or continuing education programme attended by each director/commissioner*

No

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

Yes

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

Yes

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

Yes

*Trainings and/or continuing education programmes attended by each director/commissioner are provided in the biographical data sheets submitted to the BSP after every election.

3) External Auditor's fee

Name of auditor

Audit Fee

Non-audit Fee

 

Punongabayan & Araullo

 

P6,325,000 exclusive of VAT and out-of-pocket expenses.

 

None

4) Medium of Communication

The Bank uses the following modes of communication for disseminating information -

  1. Regulatory reports submitted to the BSP, the SEC and PSE.
  2. Website - unionbankph.com
  3. Investor Relations Office
  4. Social media, i.e. Facebook, Twitter
  5. UnionBank - quarterly newsletter about the Bank
  6. Media Releases and Press conferences
  7. Analysts' Briefin

5) Date of release of audited financial report: April 4, 2012

6) Company Website

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

Business operations

Yes

Financial statements/reports (current and prior years)

Yes

Materials provided in briefings to analysts and media

Yes

Shareholding structure

Yes

Group corporate structure

Yes

Downloadable annual report

Yes

Notice of AGM and/or EGM

Yes

Company's constitution (company's by-laws, memorandum and articles of association)

Yes

7) Disclosure of RPT

From SEC Form 17-A

There were no transactions during the last two (2) years with any director, officers or any principal stockholders (owning at least 10% of the total outstanding shares of the company) which were not in the ordinary course of business. All related transactions, pursuant to the Bank's Revised Manual on Corporate Governance, are all entered into on arm's length standard. These transactions shall only be made and entered into substantially on the same terms and conditions as transactions with other individuals and businesses of comparable risks. The Bank has no parent company.

Bank's significant transactions with its related parties are shown in the succeeding pages.

J. RIGHTS OF STOCKHOLDERS

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

(a) Quorum

Details on the quorum required to convene the Annual/Special Stockholders' Meeting as set forth in its By-laws.

Quorum Required

A quorum in any meeting, whether regular or special shall consist of stockholders owning the majority of the subscribed capital stock exclusive of Treasury Stock, represented in person or by proxy. Except as otherwise provided by law, a majority of such quorum shall decide any question that may come before the meeting.

(b) System Used to Approve Corporate Acts

Systems used to approve corporate acts.

System Used

All corporate acts are subject to approval of the Board of Directors via voting system. While approval of some corporate acts is delegated to the Executive Committee, they are still subject to confirmation by the board.

Description

(c) Stockholders' Rights

Stockholders' Rights under

The Corporation Code

Stockholders' Rights not in

The Corporation Code

Voting Right

Shareholders shall have the right to elect, remove and replace directors and vote on certain corporate acts in accordance with the Corporation Code.

None.

Right to inspect corporate books

All shareholders shall be allowed to inspect corporate books and records including minutes of Board meetings and stock registries and shall be furnished with annual reports, including financial statements, without cost or restrictions.

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 of the Bank's shares dealings, with the company, relationships among directors and key officers, and the aggregate compensation of directors and officers.

Right to propose holding of meetings

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.

Right to Dividends

Shareholders have the right to dividends, which shall be declared and paid out of the Bank's unrestricted retained earnings as often and at such times as the Board may determine after making provision for necessary reserves in accordance with law and the regulations of the BSP.

Appraisal Right

The shareholder's 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 Section 82 of the Corporation Code.

Dividends

Declaration Date

Record Date

Payment Date

January 27, 2012

March 13, 2012

April 11, 2012

March 04, 2013

March 20, 2013

April 18, 2013

(d) Stockholders' Participation

1. Measures adopted to promote stockholder participation in the Annual/Special Stockholders' Meeting.

Measures Adopted

Communication Procedure

Early dissemination of Notice of Annual Stockholders' Meeting

The Bank encourages its shareholders to attend annual stockholders' meeting and exercise their right to elect directors. A month before the annual meeting, shareholders are furnished with copies of the Bank's Preliminary Information Statement, accompanied by its Annual Report and Audited Financial Statements.

Minority shareholders are granted the right to propose the holding of a meeting, and recommend items for inclusion in the agenda, provided these for legitimate business purposes.

Proxy System

If shareholders cannot personally attend in ASMs and cast their votes, they are given the right to vote by proxy.

Boardroom Chat

The Bank's website provides an avenue to communicate with the Bank's Chairman and CEO, President and COO, and other key executives for comments and suggestions through the "Chat With Our CEO" and the "Executive Lounge" facilities.

Stockholders may visit -

http://www.unionbankph.com/index.php?option=com_content&view=article&id=549&Itemid=330

2. State the company policy of asking shareholders to actively participate in corporate decisions regarding:

a. Amendments to the company's constitution

The Bank complies with the requirement of Sec. 16 of the Corporation Code in amending its Articles of Incorporation. Proposed amendments in the Bank's Articles of Incorporation are included in the Notice of Annual Stockholders meeting that is distributed to the stockholders one month before the scheduled meeting.

b. Authorization of additional shares

The Bank complies with the requirement of Sec. 38 of the Corporation Code in amending its Articles of Incorporation.

c. Transfer of all or substantially all assets, which in effect results in the sale of the company

The Bank complies with the requirement of Sec. 40 of the Corporation Code in amending its Articles of Incorporation.

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

YES.

a. Date of sending out notices: For 2012 ASM: April 4, 2012

For 2013 ASM: April 4, 2013

b. Date of the Annual/Special Stockholders' Meeting: 2012 ASM: May 25, 2012

2013 ASM: May 24, 2013

4. Questions and answers/open forum during the 2012 Annual Stockholders' Meeting.

Stockholder Atty Elias Dulalia congratulated the Board of Directors, management and employees of UnionBank for its remarkable performance in 2011 and commended the Bank as the Best Bank.

Stockholder Mr. Reynaldo Tecechian acknowledged the notes to Financial Statements in DVD format and also Mr. Valdepeňas' plans for the incoming years. Another stockholder Mr. Emilio Dela Cruz suggested that UnionBanl would partner with supermarkets.

5. Result of Annual/Special Stockholders' Meeting's Resolutions

Resolution

Approving

Dissenting

Abstaining

1. Re-appointment of Punonbayan and Araullo as the Bank's External Auditor

Required number of votes.

None

None

2. Declaration of Cash Dividends

Required number of votes.

None

None

3. Election of the members of the Board of Directors

Required number of votes.

None

None

6. Date of publishingthe result of the votes taken during the most recent AGM for all resolutions:

The results of all items taken up during the annual stockholders meeting dated May 25, 2012 and MAY 24, 2013 were submitted to the SEC on May 25, 2012 and May 24, 2013, respectively.

(e)Modifications

There are no modifications made in the Annual/Special Stockholders' Meeting regulations during the most recent year and the reason for such modification:

(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

MR. JUSTO A. ORTIZ - CHAIRMAN & CEO

MR. VICENTE R. AYLLON - VICE-CHAIRMAN

MR. VICTOR B. VALDEPENAS - DIRECTOR/ PRESIDENT &COO

MR. JUAN ANTONIO E. BERNAD - DIRECTOR

MR. MAYO JOSE B. ONGSINGCO - DIRECTOR

MR. RICARDO G. LIBREA - DIRECTOR

MR. DANIEL L. EDRALIN - DIRECTOR

MR. EMILIO S. DE QUIROS - DIRECTOR

MS. ELIZA BETTINA R. ANTONINO - DIRECTOR

MR. ARMAND F. BRAUN, JR. - INDEPENDENT DIRECTOR

MR. CARLOS B. RAYMOND, JR. - INDEPENDENT DIRECTOR

MR. EDWIN R. BAUTISTA - SR. EXECUTIVE VICE-PRESIDENT

MR. EUGENE S. ACEVEDO - SR. EXECUTIVE VICE-PRESIDENT

MR. JOSE ROBERTO S. REYES - SR. EXECUTIVE VICE-PRESIDENT

MS. GUIA C. LIM - EXECUTIVE VICE-PRESIDENT

MR. TEODORO M. PANGANIBAN - EXECUTIVE VICE-PRESIDENT

MR. GENARO V. LAPEZ - EXECUTIVE VICE-PRESIDENT

MR. JOSE LEVI VILLANUEVA - SENIOR VICE-PRESIDENT

MR. NORBERTO M. BELEN - SENIOR VICE PRESIDENT/
HUMAN RESOURCE DIRECTOR

ATTY. CESAR G. ILAGAN - SENIOR VICE-PRESIDENT/CONTROLLER

MR. ROBERTO F. ABASTILLAS - SENIOR VICE-PRESIDENT

MR. RAMON R. CASTRO - SENIOR VICE-PRESIDENT

MR. RAMON G. DUARTE - SENIOR VICE-PRESIDENT

MR. MANUEL G. SANTIAGO, JR. - SENIOR VICE-PRESIDENT

ATTY. MARISSA B. ESPINO - VICE-PRESIDENT/ CHIEF COMPLIANCE & GOVERNANCE OFFICER

MR. ALEJANDRO E. REYES - VICE-PRESIDENT/ AML Officer

MR. ROBERT ROL B. RAMOS - VICE-PRESIDENT/ Trust Officer

MS. MYRNA E. AMAHAN - VICE-PRESIDENT/Internal Audior

MS. MARIA GOOLSBY - DIRECTRESS-CORPORATE SOCIAL RESPONSIBILITY

ATTY. FE B. MACALINO - SENIOR VICE-PRESIDENT/CORPORATE SECRETARY

May 25, 2012

By ballot

0.191%

73.486%

73.677%

Special

No special meeting held in 2012.

 

 

 

 

 

(ii) Does the company appoint an independent party (inspectors) to count and/or validate the votes at the ASM/SSMs? The Bank's Stock Transfer Agent assists the Bank in counting and/or validating votes at annual stockholders' meeting.

(iii) The Bank's common shares carry one vote for one share.

(g) Proxy Voting Policies

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

 

 

Company's Policies

Execution and acceptance of proxies

Proxy forms are disseminated together with the notice of annual stockholders' meeting and other reportorial requirements (SEC Form 20-IS), audited financial statements, etc.) Instructions are given on the accomplishment of the proxy together with all the requirements of the SEC.

Proxy forms are required to be submitted no later than ten (10) days before the scheduled annual stockholders' meeting. Proxies are required to present valid identification cards containing a photograph and signature.

Notary

Not required.

Submission of Proxy

Not later than 10 days before annual stockholders' meeting.

Several Proxies

SRC Rule 20 (11) (b) (ix

Validity of Proxy

Valid for subsequent meetings within a period of Five (5) years from the date of the proxy unless otherwise instructed.

Proxies executed abroad

SRC Rule 20 (11) (b) (xvii)

Invalidated Proxy

(SRC Rule 20 (11) (b) (xix)

Validation of Proxy

SRC Rule 20 (11) (b) (xx)

SRC Rule 20 (11) (b) (xxii)

Violation of Proxy

Section 144 of the Corporation Code and Section 54 of the SRC

(h) Sending of Notices

Policies

Procedure

By-Laws of the Bank, Article IV, Section 1 (c) -

Notice of Annual/Special Stockholders's meeting shall be delivered personally, mailed, postage prepaid, at least fifteen (15) days prior to date thereof, addressed to each stockholder at his address appearing on the books of the Corporation. In such notice there shall appear, in addition to the date, hour and place of such meeting, a statement of the matters to be taken up at such meeting as well as publication of the Notice of the Meeting in three (3) newspapers of general circulation

Notice of Annual Stockholders' Meeting is submitted first to the SEC and PSE prior to its dissemination to stockholders. The notice is accompanied by Preliminary Information Statement (SEC Form 20 -IS), proxy form (in case of proxy solicitation), audited financial statements, and other reports required to be submitted pursuant to the Securities Regulations Code.

(i) Definitive Information Statements and Management Report

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

3,000

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

April 29, 2012

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

April 29, 2012

State whether CD format or hard copies were distributed

CD format

If yes, indicate whether requesting stockholders were provided hard copies

Yes

(j) The Bank's Notice of Annual/Special Stockholders' Meeting, which is distributed together with SEC Form 20-IS, 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

2) Treatment of Minority Stockholders

(a) Company's policies with respect to the treatment of minority stockholders.

Policies/ Implementation

Article III (A) 1. Rights of Shareholders/Investors/ Minority Interests

The Bank recognizes that the most cogent proof of good corporate governance is that which is visible to the eyes of its investors. Therefore the following provisions are issued for the guidance of all internal and external parties concerned, as governance covenant between the Bank and all its investors:

1. Rights of Shareholders/Investors/Minority Interests

The Board shall be committed to respect the following rights of the stockholders:

1.1. Voting Right

  1. Shareholders shall have the right to elect, remove and replace directors and vote on certain corporate acts in accordance with the Bank Code.
  2. Cumulative voting shall be used in the election of directors.
  3. A director shall not be removed without cause if it will deny minority shareholders representation in the Board.

1.2. Pre-emptive Right

All stockholders shall have pre-emptive rights, unless the same is denied in the articles of incorporation or an amendment thereto. They shall have the right to subscribe to the capital stock of the Bank. The Articles of Incorporation shall lay down the specific rights and powers of shareholders with respect to the particular shares they hold, all of which shall be protected by law so long as they shall not be in conflict with the Bank Code.

1.3. Power of Inspection

All shareholders shall be allowed to inspect corporate books and records including minutes of Board meetings and stock registries in accordance with the Bank Code and shall be furnished with annual reports, including financial statements, without cost or restrictions.

1.4. Right to Information

  1. 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 of the Bank's shares dealings, with the company, relationships among directors and key officers, and the aggregate compensation of directors and officers.
  2. 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.
  3. The minority shareholders shall have access to any and all information relating to matters for which the management is accountable for and to those relating to matters for which the management shall include such information and, if not included, then the minority shareholders shall be allowed to propose to include such matters in the agenda of stockholders' meeting, being within the definition of "legitimate purposes".

1.5. Right to Dividends

  1. Shareholders shall have the right to receive dividends subject to the discretion of the Board.
  2. The Bank shall be compelled to declare dividends when its retained earnings shall be 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 Bank 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 Bank, such as when there is a need for special reserve for probable contingencies.

1.6. Appraisal Right

The shareholder's 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 Section 82 of the Corporation Code of the Philippines, under any of the following circumstances:

  1. 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;
  2. 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 of the Philippines; and
  3. In case of merger or consolidation.

2. DUTY TO PROMOTE SHAREHOLDERS' RIGHTS

It shall be the duty of the directors to promote shareholder rights, remove impediments to the exercise of shareholders' right and allow possibilities to seek redress for violation of their rights. They shall encourage the exercise of shareholder's 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.

(b) Do minority stockholders have a right to nominate candidates for board of directors?

YES. The Bank's By-Laws does not distinguish on who has the right to nominate candidates for the board of directors. Section 1 (c & d), Article IV of the By-Laws provide -

x x x

(d) Any stockholder shall be allowed to vote either in person or by proxy duly executed in writing signed by the person represented, and presented to the Secretary before the meeting commences.

(e) The election shall be by ballots, and every stockholder entitled to vote shall have the right to vote in person or by proxy the number of shares of stock standing in his own name on the stock books of the Corporation at the time the books are closed in accordance with the provisions of Section 2, Article II of these by-laws and said stockholder may vote, such number of shares and give one candidate as many votes as the number of directors to be elected multiplied by the number of his shares shall equal, or he may distribute them on the same principle among as many candidates as he shall see fit: Provided, that the whole number of votes cast by him shall not exceed the number of shares owned by him as shown by the books of the Corporation multiplied by the whole number of directors to be selected. And, provided, that no stock declared delinquent by the Board of Directors for unpaid subscriptions shall be voted.

x x x

K. INVESTORS RELATIONS PROGRAM

1) Company's external and internal communications policies

The Investor Relations (IR) Program is principally anchored on the UnionBank's values, particularly Integrity and Magis - Do more, Do better, Do greater, directed towards upholding the best interest of all stakeholders. The IR Program is, likewise, guided by relevant policies on personal and professional conduct, and external and internal communications, as contained in but not limited to the Bank's Code of Conduct, Reputation Risk Management Framework and Manual, Manual on Corporate Governance, Memorandum on Process for Resolution of Confidentiality and Privacy Violation, and subsequent revisions / amendments thereof. As a general rule, Bank policies are reviewed on a per-need basis as determined by the appropriate governing body.

All communications originating from the Investor Relations Office (IRO), including reportorial and disclosure requirements, are in conformance with relevant regulations and are in accordance with the Bank's Code of Conduct, which embodies the highest standards of ethical principles including trust, honesty, objectivity, fairness, respect for others, open communication and executional excellence. The Bank's Code of Conduct, among others, prohibits use and disclosure of sensitive or confidential or inside information, and dissemination of false or misleading statements. The IRO's endeavors are also grounded on the Manual on Corporate Governance, which institutionalizes the principles of good corporate governance and sets the duties owed by the Board of Directors and management to preserve alignment with best practices for the Bank, its wholly owned subsidiaries and their stakeholders.

All external and internal communications prepared by the IRO are subject to the review and approval of at least one of the following, depending on the nature of the disclosure: Chairman and CEO, Financial Controller, and the Chairman of the Reputation Risk Management Committee for accuracy of information and protection against disclosure of confidential and sensitive information. Pursuant to the Memorandum on Process for Resolution of Confidentiality and Privacy Violation, should there be issues or risks on confidentiality or privacy violation, the matter shall be referred to the Compliance and Corporate Governance Office (CCGO) by the unit responsible for preparing the disclosure, such that these issues or risks may be reconciled jointly by them against regulatory requirements and benchmarked against practices of peer banks. In case of failure to reconcile the issues or risks against the regulatory requirements, the recommended action on the matter shall be brought forward by the concerned unit and the CCGO to the Enterprise Risk Management (ERM) for approval or modification. If needed, the ERM shall escalate to the following until final resolution of the matter is achieved: (1) Risk Management Committee and (2) Corporate Governance Committee.

The reputation risk management committee, chaired by the head of the bank's Public Relations group, is responsible, among others, for ensuring that messages communicated are consistent for all stakeholders, as embodied in the Reputation Risk Management Framework and Manual. The IRO is a member of the committee, along with other units of the Bank, namely; Marketing Director, Brand Council, Human Resources, Culture and Organization Transformation Officer, Compliance, Channels Management, Risk Management, and Legal.

2) Company's investor relations program

 

Details

(1) Objectives

The Investor Relations Program aims to educate and keep the investing community abreast with UnionBank's performance, strategies and management actions relative to the operating environment and competitive landscape. It endeavors to go beyond merely providing accurate, timely and relevant information, following the traditional accounting reportorial standards. These it does by creating value through the delivery of business reporting; evaluating performance against peers, benchmarks and the banking industry; building and maintaining harmonious relationship with financial analysts, investment banks, rating agencies, investors and other interested parties; analyzing implication of current and prospective regulations; and assessing perceptions or opinions of the Bank based on news articles, write-ups, rating reports, and the like.

The Investor Relations Office (IRO) holds a vital role in benchmarking the Bank's performance and capturing public sentiments, which are intended to provide the Board of Directors and Senior Management with insights and valuable feedback useful for direction-setting and decision-making.

(2) Principles

The guiding principles of UnionBank's Investor Relations Program are:

  • Observance of highest standards of ethical principles including trust, honesty, objectivity, fairness, respect for others, open communication and executional excellence to uphold the best interest of all stakeholders
  • Adherence to the principles of good corporate governance to preserve alignment with best practices
  • Conformance with relevant regulations
  • Timely dissemination of material, relevant and accurate information to all stakeholders
  • Prohibition on the use and disclosure of sensitive or confidential or inside information, and dissemination of false or misleading statements
(3) Modes of Communications

UnionBank Website: The UnionBank's website (www.unionbankph.com) is designed to allow equal access to information and services for all users, such as investors, financial analysts, regulators, investment banks, rating agencies, the investing public, and other interested parties. It contains, among others, an archive of reportorial and disclosure requirements, and press releases of the Bank and the contact information of the IRO. It provides as well an avenue to communicate with the Bank's Chairman and CEO, President and COO, and other key executives for comments and suggestions through the "Chat With Our CEO" and the "Executive Lounge" facilities.

Meetings/Discussions: The IRO conducts face-to-face meetings with investors, financial analysts, investment banks, rating agencies, the investing public, and other interested parties on a per-need or per-request basis. Supplementing the disclosed financials which follow accounting reportorial standards, discussions focus on business reporting to provide deeper appreciation and understanding of the Bank's unique culture and competitive advantages, resulting from conduct of competitor scan and benchmarking exercises. Conference calls are conducted for investors and analysts residing outside of the Philippines. Should the subject matters of interest call for a specific area of expertise, the IRO may invite other Bank executives to participate in the discussion.

Telephone / E-mail Queries: The IRO, likewise, responds to investors' and analysts' queries or concerns via telephone and e-mail. Subject matters outside the scope of IRO's expertise are coordinated with the appropriate business units to best address the needs / requirements. Feedback is immediately given to acknowledge receipt of the query or concerns, which may include the target date for completion or resolution.

Regulatory reports and disclosures: The IRO is regularly involved in the preparation of regulatory reports and disclosures, which include among others the Quarterly Management's Discussion and Analysis or Plan of Operation of SEC Forms 17Q and 17A, and Business and General Information of SEC Form 17A. Regulatory reports are coordinated with the Bank's Regulatory Reporting Unit for submission while disclosure requirements are coursed through Internet Services and/or Marketing Division for posting or dissemination. It also handles quarterly updating of the Bank's Fact Sheet, which presents the Bank's DNA - purpose, strategic imperatives, and brand attributes; ownership structure; distribution network; customer base; financial performance, key financial ratios relative to the banking industry, recent achievements and market commendations, awards and accolades, among others. The IRO, likewise, is responsible for supporting the Chairman and CEO and the President and COO in the preparation of visual presentations during Annual Stockholders' Meeting, Board Meetings, and Quarterly Analysts' Briefings.

(4) Investors Relations Officer LEAH C. DELA CRUZ

Manager, Controllership Group - Investor Relations Office

E-mail: lcdelacruz@unionbankph.com

Contact Nos: +(63) 917-8508480 / +(63) 2-6676388 local 8190

Fax No.: +(63) 2-6366298

Office Address: 18/F UnionBank Plaza, Meralco Avenue cor Onyx and Sapphire Roads, Ortigas Avenue, Pasig City 1605

3) 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 Bank complies with the regulatory requirements of the BSP and SEC in acquisition of corporate control in the capital market and extraordinary transactions such as mergers and sales of substantial portions of corporate assets.

In its last acquisition, the Bank engaged CLSA EXCHANGE CAPITAL, INC., an independent party, to evaluate the fairness of the transaction value.

L. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

Initiatives undertaken by the company for 2012.

Initiative

Beneficiary

EDUCATION AND VALUES FORMATION

The UnionBank Learning System : Developmental Reading Integrated with Values Education for Good Citizenship

530,000 Primary Level Pupils , 13,000 Teachers and 5,400 Elem. Schools of various schools every year

Young Minds Academy - RAFI (Ramon Aboitiz Foundation Inc. )

Secondary and Tertiary Levels

University of Santo Tomas - Lumina Pandit II Project

University of Sto. Tomas Tertiary Level and Graduate School Level

Society of St. Paul's

Secondary Level OF St. Paul

Christ Youth in Action

Tertiary Level

Classrooms / School Building Donation to Barugo National High School 500 high school population of Barugo National High School

CORPORATE DONATION

Donation as Member of Aboitiz Group of Companies Weather Philippines Foundation/ disaster risk management
Donation to the general funds of Kalipay Negrense Abused Children in Visayas

GOVERNANCE

Donation to Institute of Solidarity in Asia Local Government Units (LGUs), National Government Agencies (NGAs), and Civil Society.

ARTS AND CULTURE

Heritage and Arts Academies of the Philippines (HAPI)

Knowledge of Indigenous People in the Academe

Publication of "El Campeon " of Instituto Cervantes de Manila

Philippine Heritage and Literature

OTHER DONATIONS

Relief Operations

 

Relief Assistance for Habagat Victims

Greater Manila Area Habagat/Flood victims and other affected people

Donation to Ramon Aboitiz Foundation Inc. Typhoon Pablo Victims

Rehabilitation

 

Xavier University

100 houses in Xavier Ecoville, Lumbia, CDO City for Typhoon Sendong Beneficiaries

M. BOARD, DIRECTOR, COMMITTEE AND CEO APPRAISAL

 

Process

Criteria

Board of Directors

Appraisal is done by the conduct of self-assessment of the members of the Board.

The Compliance and Corporate Governance Office (CCGO) presents the proposed self-rating form to the Corporate Governance Committee, which in turn, endorses the same for approval of the Board.

The self-rating form is divided into two parts. For the first part, each director is asked to rate (whether fair, excellent or needs improvement) his or her level of fulfillment to each duty as an individual member of the Board. The director is also asked for his or her comments on or observation for every duty specified in the form. The second part is answered by each director as part of the Board, acting as a collegial body. For each statement relating to the responsibilities of the Board, he or she will be asked to choose from the responses, i.e. (1) Strongly Agree, (2) Agree, (3) Disagree, (4) Strongly Disagree, (5) Undecided.

The Board self-assessment is conducted annually and the results are discussed by the Corporate Governance Committee prior to its submission and communication to the Board. The Corporate Governance Committee oversees the conduct of assessment of the Board and its Committees.

The self-assessment form is composed of varying statements based on the roles, functions and responsibilities of the Board found under the Bank's Manual of Corporate Governance, the SEC Corporate Governance Self-Rating Form and Revised Code of Corporate Governance, the Organization for Economic Co-operation and Development (OECD) Policy Brief on Corporate Governance of Banks in Asia, and the Basel Committee on Banking Supervision's Corporate Governance Guidelines.

Individual Directors

Board Committees

The members of the board committees also conduct periodic self-assessment of their specific committees' performance. The Corporate Governance Committee oversees the periodic assessment of the board committees.

The self-assessment form for each committee is prepared by the CCGO subject to approval by the respective committees.

Each approved board committee self-assessment form is accomplished by members of the committee. Results are discussed by each committee.

The self-assessment forms for each committee are comprised of varying statements based on their duties and responsibilities contained in the Bank's CG Manual as well as the BSP's Manual on Regulations for Banks.

CEO/President

The Board, through its Compensation and Remuneration Committee, also conducts an annual performance review of the Bank's Chairman/CEO and President/COO. The review consists of an assessment of the Chairman/CEO and President/COO's leadership in the attainment of the Bank's strategic initiatives

The review consists of an assessment of the Chairman/CEO and President/COO's leadership in the attainment of the Bank's strategic initiatives.The reviewincludeskey results on the Bank's financials, operational efficiencies, innovations, customer franchise and brandgrowth, people development and engagement,compliance and governance.

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

Violations

Sanctions

Article IX of the Bank's CG Manual provides :
First violation

Reprimand

Second violation

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

Third violation

The maximum penalty of removal from office shall be imposed.

 

ACGR


[1] Reckoned from the election immediately following January 2, 2012.

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

[3] Senior Management refers to the CEO and other persons having authority and responsibility for planning, directing and controlling the activities of the company.

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

[5] Board papers consist of complete and adequate information about the matters to be taken in the board meeting. Information includes the background or explanation on matters brought before the Board, disclosures, budgets, forecasts and internal financial documents.

[6] BSP Circular No. 747

[7] "Issues" are compliance matters that arise from adopting different interpretations.

[8] "Findings" are those with concrete basis under the company's policies and rules.

img-reports

Governance Reports

Annual Corporate Governance Report (ACGR)

Corporate Governance Report

icon-board

Board Governance

View our board members here

View board
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Manual on Corporate Governance

View our manual here

Read manual
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Awards & Citations

View UnionBank’s awards and citations here

View awards
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1 Make sure that the website address appearing on your browser starts with https://ebanking.unionbankph.com and a padlock symbol (🔒) beside it. If you see something different or there is no address appearing, please do not proceed and report to us immediately.

2 You can only type in your password or PIN using the virtual keyboard.

3 Keep your device virus-free. Make sure you have an updated anti-virus software.

4 To secure your account, we strongly advise you to avoid downloading your banking documents using a public computer




For more information, please visit the Safe Surfing Guidelines page or call our 24-hour Customer Support at (02) 8418600.
1 Make sure that the website address appearing on your browser is Union Bank of the Philippines and has a padlock symbol (🔒) beside it. If you see something different or there is no address appearing, please do not proceed and report to us immediately.

2 You can only type in your password or PIN using the virtual keyboard.

3 Keep your device virus-free. Make sure you have an updated anti-virus software.

4 To secure your account, we strongly advise you to avoid downloading your banking documents using a public computer




For more information, please visit the Safe Surfing Guidelines page or call our 24-hour Customer Support at (02) 8418600.
1 Make sure that the website address appearing on your browser starts with https://ebanking.unionbankph.com and a padlock symbol (🔒) beside it. If you see something different or there is no address appearing, please do not proceed and report to us immediately.

2 Keep your device virus-free. Make sure you have an updated anti-virus software.

3 To secure your account, we strongly advise you to avoid downloading your banking documents using a public computer




For more information, please visit the Safe Surfing Guidelines page or call our 24-hour Customer Support at (02) 8418600.
1 Make sure that the website address appearing on your browser is Union Bank of the Philippines and has a padlock symbol (🔒) beside it. If you see something different or there is no address appearing, please do not proceed and report to us immediately.

2 Keep your device virus-free. Make sure you have an updated anti-virus software.

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For more information, please visit the Safe Surfing Guidelines page or call our 24-hour Customer Support at (02) 8418600.
1 Make sure that the website address appearing on your browser starts with https://ebanking.unionbankph.com and a padlock symbol (🔒) beside it. If you see something different or there is no address appearing, please do not proceed and report to us immediately.

2 Keep your device virus-free. Make sure you have an updated anti-virus software.

3 To secure your account, we strongly advise you to avoid downloading your banking documents using a public computer




For more information, please visit the Safe Surfing Guidelines page or call our 24-hour Customer Support at (02) 8418600.
1 Make sure that the website address appearing on your browser is Union Bank of the Philippines and has a padlock symbol (🔒) beside it. If you see something different or there is no address appearing, please do not proceed and report to us immediately.

2 Keep your device virus-free. Make sure you have an updated anti-virus software.

3 To secure your account, we strongly advise you to avoid downloading your banking documents using a public computer




For more information, please visit the Safe Surfing Guidelines page or call our 24-hour Customer Support at (02) 8418600.