COVER SHEET 4 4 0 9 SEC Registration Number A B O I T I Z T R A N S P O R T S Y S T E M ( A T S C ) C O R P O R A T I O N (Company’s Full Name) 1 2 T H U. N. F L O O R T I M E S A V E. C O R N E R E R M I T A M A N I L A P L A Z A T A F T B U I L D I N G A V E. (Business Address: No. Street City/Town/Province) MA. LEAH B. TOPACIO TOPACIO 0202-5287602 / 0202-5287608 (Contract Person) (Company Telephone Number) 1 2 3 1 2 0 - I S Month Day (Form Type) 4th Thursday of May Month (Fiscal Year) Day (Annual Meeting) Definitive Definitive Information Statement (Secondary License Type, If Applicable) N/A Corporation Finance Department Dept. Requiring this Doc. Amended Articles Number/Section Total Amount of Borrowings 2,112 Total No. of Stockholders Domestic Foreign To be accomplished by SEC Personnel concerned File Number LCU Document ID Cashier STAMPS Remarks: Please use BLACK ink for scanning purposes. SECURITIES AND EXCHANGE COMMISSION SEC FORM 2020-IS INFORMATION STATEMENT PURSUANT TO SECTION 20 OF THE SECURITIES REGULATION CODE 1. Check the appropriate box: [ ] Preliminary Information Statement [X X] Definitive Information Statement 2. ABOITIZ TRANSPORT SYSTEM (ATSC) CORPORATION Name of the Registrant as specified in its charter 3. PHILIPPINES Province, country or other jurisdiction of incorporation or organization 4. SEC Identification Number _____4409 4409________ 4409 5. BIR Tax Identification Code ___000 000000-313313-401___ 401 6. 12th Floor, Times Plaza Building U.N. Ave. corner Taft Avenue, Ermita, Manila Address of principal office Postal Code 1000 7. (02) 02) 528528-7171 / 528528-7516 / 528528-7602 and 528528-7608 Registrant’s telephone numbers, including area code 8. June 22, 2011 at 3:00 PM, 11th floor Opal Function Room (Penthouse), Midas Hotel, 2702 Roxas Boulevard, Pasay City Date, time and place of the meeting of security holders 9. Approximate date on which the Information Statement is first to be sent or given to security holders June 01, 2011 10. Securities registered pursuant to Sections 8 and 12 of the Code or Sections 4 and 8 of the RSA (information on number of shares and amount of debt is applicable only to corporate registrants): Title of Each Class Common Stock Redeemable Preferred Stock 11. Number of Shares of Common Stock Outstanding or Amount of Debt Outstanding 2,446,136,400 4,560,417 4,560,417 Are any or all of registrant's securities listed in a Stock Exchange? X] NO [ ] YES [X If yes, disclose the name of such Stock Exchange and the class of securities therein: Philippine Stock Exchange - Common Stock and Redeemable PreferredStock PreferredStock 2 ABOITIZ TRANSPORT SYSTEM (ATSC) CORPORATION NOTICE OF REGULAR ANNUAL MEETING OF STOCKHOLDERS PLACE: PLACE 11th Floor Opal Function Room (Penthouse), Midas Hotel 2702 Roxas Boulevard, Pasay City DATE: DATE June 22, 2011 TIME: TIME 3:00 P.M. Dear Stockholder: You are cordially invited to attend the Regular Annual Meeting of Stockholders of Aboitiz Transport System (ATSC) Corporation (the "Company" or “ATS”), which will be held on June 22, 2011 at the 11th Floor Opal Function Room (Penthouse), Midas Hotel, 2702 Roxas Boulevard, Pasay City at 3:00 PM. The agenda for the meeting is as follows: 1. 2. 3. 4. 5. 6. 7. Call to Order Certification of Notice Determination and Declaration of Quorum Approval of Minutes of the Special Stockholders’ Meeting held on July 15, 2010 Annual Report for the year ended December 31, 2010 Election of the Members of the Board of Directors Amendments to the First, Second and Sixth Articles of the Company’s Articles of Incorporation, changing the Company’s corporate name, business purpose, and increase in the number of directors. [Please refer to Annex “A” for the summary of amendments proposed] 8. Amendment of Section 2, Article III of the Company’s By-Laws, to increase the number of directors. [Please refer to Annex “A” for the summary of amendments proposed] 9. Approval and Ratification of all Acts and Resolutions of the Board of Directors and Management for the period covering May 28, 2010 to April 28, 2011 10. Other Matters 11. Adjournment Only stockholders of record in the books of the Company at the close of business on May 20, 20 2011 will be entitled to vote at said stockholders’ meeting. Manila, Philippines, May 06, 2011. ======================== We are not soliciting your proxy. However, if you would be unable to attend the meeting but would like to be represented thereat, you may accomplish the enclosed proxy form and submit the same on or before June 15, 2011 to the Office of the Corporate Secretary at the G/F Ortigas Bldg., Ortigas Avenue, Pasig City 1605. Validation of proxies shall be held on June 17, 2011 at 9:00 a.m. at the Office of the Corporate Secretary. Thank you. 3 Annex “A” Summary of Proposed Amendments to ATS’ Articles of Incorporation and By-Laws A. Amendment of the Company’s Articles of Incorporation, specifically the following articles: 1. First Article: To change the corporate name “Aboitiz Transport System (ATSC) Corporation” to “ATS Consolidated (ATSC), Inc.” 2. Second Article: To include the following purposes: (a) To conduct the business of rendering technical services requirement to customers nationwide for refrigerated marine container vans and related equipments or accessories including but not limited to repair and maintenance, equipment rental and leasing, technical consultancy and training, selling of spare parts, components and accessories, service contracting and to act as service agent on behalf of the various domestic and foreign container manufacturer with services but not limited to performing warranty and nonwarranty repair services, selling of service parts, components and accessories, and consultancy services; and (b) To conduct and transact any and all lawful business, and to do or cause to be done any one or more of the acts and things herein set forth as its purposes, within or without the Philippines, and in any and all foreign countries, and to do everything necessary, desirable or incidental to the accomplishment of the purposes or the exercise of any one of more of the powers herein enumerated, or which shall at any time appear conducive to or expedient for the protection or benefit of this corporation. Sixth Article: To increase the number of directors from nine (9) to thirteen (13). B. Amendment of the Company’s By-Laws, specifically Section 2, Article III, III to increase the number of directors from nine (9) to thirteen (13). 4 INFORMATION STATEMENT (SEC FORM 2020-IS) A. GENERAL INFORMATION WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY Item 1. DATE, TIME AND PLACE OF MEETING OF SECURITY HOLDERS Date of meeting Time of meeting Place of meeting : : : June 22, 2011 3:00 P.M. 11th Floor Opal Function Room (Penthouse), Midas Hotel, 2702 Roxas Boulevard, Pasay City Approximate date of mailing of this Statement : May 31, 2011 Registrant’s Mailing Address : 12th Floor, Times Plaza Bldg. UN Ave. corner Taft Ave. Ermita, Manila Item 2. DISSENTERS’ RIGHT OF APPRAISAL Under the Corporation Code, a dissenting stockholder shall have the right of appraisal or the right to demand payment of the fair value of his shares in the following instances: a. any amendment to the articles of incorporation which has the effect of changing or restricting the rights of any stockholder or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any class, or of extending or shortening the term of corporate existence; b. sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets; c. merger or consolidation. In the foregoing cases, any stockholder who wishes to exercise his appraisal right must have voted against the proposed corporate action, made a written demand on the corporation within thirty (30) days after the date on which the vote was taken for payment of the fair value of his shares as well as complied with all other requirements provided under Title X of the Corporation Code. Failure to make the demand within such period or comply with the requirements provided under Title X of the Corporation Code shall be deemed a waiver of the appraisal right. If the proposed corporate action is implemented or effected, the corporation shall pay to such stockholder, upon surrender of the certificate or certificates of stock representing his shares, the fair value thereof as of the day prior to the date on which the vote was taken, excluding any appreciation or depreciation in anticipation of such corporate action. If within a period of sixty (60) days from the date the corporate action was approved by the stockholders, the withdrawing stockholder and the corporation cannot agree on the fair value of the shares, it shall be determined and appraised by three (3) disinterested persons, one of whom shall be named by the stockholder, another by the corporation, and the third by the two thus chosen. The findings of the majority of the appraisers shall be final, and their award shall be paid by the corporation within thirty (30) days after such award is made. No payment shall be made to any dissenting stockholder unless the corporation has unrestricted retained earnings in its books to cover such payment. Upon payment by the corporation of the agreed or awarded price, the stockholder shall forthwith transfer his shares to the corporation. The following agenda for the stockholders’ meeting to be held on June 22, 2011 call for the approval by stockholders representing at least two-thirds (2/3) of the Aboitiz Transport System (ATSC) Corporation’s (the “Registrant”, the “Company”, or “ATS”) outstanding capital stock: 1. Approval of the amendment to the First Article of the Articles of Incorporation of ATS, to change the corporate name “Aboitiz Transport System (ATSC) Corporation” to “ATS Consolidated (ATSC), Inc.” 2. Approval of the amendment to the Second Article of the Articles of Incorporation of ATS, to include the following purpose: a. To conduct the business of rendering technical services requirement to customers nationwide for refrigerated marine container vans and related equipments or accessories including but not limited to repair and maintenance, equipment rental and leasing, technical consultancy and training, selling of spare parts, components and accessories, service contracting and to act as service agent on behalf of the various domestic and foreign container manufacturer with services but not limited to performing warranty and non-warranty repair services, selling of service parts, components and accessories, and consultancy services; and b. To conduct and transact any and all lawful business, and to do or cause to be done any one or more of the acts and things herein set forth as its purposes, within or without the Philippines, and in any and all foreign countries, and to do everything necessary, desirable or incidental to the accomplishment of the purposes or the exercise of any one of more of the powers herein enumerated, or which shall at any time appear conducive to or expedient for the protection or benefit of this corporation. 3. Approval of the amendment to the Sixth Article of the Articles of Incorporation of ATS, to increase the number of directors from nine (9) to thirteen (13). 4. Approval of the amendment of Section 2, Article III of the Company’s By-Laws, to increase the number of directors from nine (9) to thirteen (13). These proposed corporate actions may give rise to a possible exercise by stockholders of their appraisal right. Item 3. INTEREST OF CERTAIN PERSONS IN OR OPPOSITION TO MATTERS TO BE ACTED UPON No director or officer of the Company at any time since the beginning of the last fiscal year or any nominee for election as a director of the Company or any associate of any of the foregoing persons has any substantial interest, direct or indirect, by security holdings or otherwise, in any matter to be acted upon in the stockholders’ meeting other than their re-election to their respective positions. No director has informed the Company in writing that he intends to oppose any action to be taken by the Company at the meeting. B. CONTROL & COMPENSATION INFORMATION Item 4. VOTING SECURITIES SECURITIES AND PRINCIPAL HOLDERS THEREOF (1) The Registrant has 2,446,136,400 outstanding common shares and 4,560,417 outstanding redeemable preferred shares as of May 17, 2011. Each common share shall be entitled to one vote with respect to all matters to be taken up during the annual stockholders’ meeting. Holders of redeemable preferred shares do not have the right to vote, except on matters specified in 2 Section 6 of the Corporation Code with respect to which holders of non-voting shares shall nevertheless be entitled to vote, i.e.: (1) (2) (3) (4) (5) (6) (7) (8) Amendment of the articles of incorporation; Adoption and amendment of by-laws; Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property; Incurring, creating or increasing bonded indebtedness; Increase or decrease of capital stock; Merger or consolidation of the corporation with another corporation or other corporations; Investment of corporate funds in another corporation or business in accordance with this Code; and Dissolution of the corporation. Accordingly, during the annual stockholders’ meeting, holders of both common and redeemable preferred shares shall each be entitled to vote with respect to the following: a) Approval of the amendment to the First Article of the Articles of Incorporation of ATS, to change the corporate name “Aboitiz Transport System (ATSC) Corporation” to “ATS Consolidated (ATSC), Inc.”; b) Approval of the amendment to the Second Article of the Articles of Incorporation of ATS, to include the following purpose: (i) To conduct the business of rendering technical services requirement to customers nationwide for refrigerated marine container vans and related equipments or accessories including but not limited to repair and maintenance, equipment rental and leasing, technical consultancy and training, selling of spare parts, components and accessories, service contracting and to act as service agent on behalf of the various domestic and foreign container manufacturer with services but not limited to performing warranty and non-warranty repair services, selling of service parts, components and accessories, and consultancy services; and (ii) To conduct and transact any and all lawful business, and to do or cause to be done any one or more of the acts and things herein set forth as its purposes, within or without the Philippines, and in any and all foreign countries, and to do everything necessary, desirable or incidental to the accomplishment of the purposes or the exercise of any one of more of the powers herein enumerated, or which shall at any time appear conducive to or expedient for the protection or benefit of this corporation c) Approval of the amendment to the Sixth Article of the Articles of Incorporation of ATS, to increase the number of directors from nine (9) to thirteen (13); d) Approval of the amendment of Section 2, Article III of the Company’s By-Laws, to increase the number of directors from nine (9) to thirteen (13); (2) The record date for determining stockholders entitled to notice and to vote during the annual stockholders meeting and also to this information statement is May 20, 2011. (3) At each election for directors, every common stockholder shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected, or to cumulate his vote by giving one candidate as many votes as the number of such directors multiplied by the number of shares shall equal, or by distributing such votes on the same principle among any number of candidates. 3 (4) Security ownership of certain record and beneficial owners and management. Security ownership of certain record and beneficial owners of five per centum (5%) or more of the outstanding capital stock of the Registrant as of April 30, 2011: Title of Class Class Name and Address of Record Owner and Relationship with ATS Common 1. Negros Navigation Co., Inc. Pier 2, North Harbor, Manila (PARENT PARENT COMPANY) COMPANY Preferred 2. PCD Nominee Corporation (Filipino) No. of Shares Held Percent of Class Filipino 2,400,141,995 98.12% Filipino 2,962,151 64.95% Name of Beneficial Owner and Relationship with Record Owner Citizenship Negros Navigation Co., Inc. Authorized Representative: Mr. Sulficio O. Tagud Jr. President Various Various Clients 37/F Enterprise Building Ayala Avenue, Makati City (STOCKHOLDER) Negros Navigation Co., Inc. (“NENACO”) is one of the oldest domestic shipping companies in the Philippines. It was organized and registered with the Securities and Exchange Commission (SEC) on 26 July 1932 for the purpose of transporting passengers and cargoes at various ports of call in the Philippines. NENACO is 99.03% owned by KGLI-NM Holdings, Inc. Security Ownership of Management – Record and Beneficial Owners as of April 30, 2011: Title of Class Common Name of Beneficial Owner and Position Jon Ramon M. Aboitiz Chairman of the Board Citizenship Filipino Amount and nature of ownership (Indicate record and/or beneficial) Percent of Class 10 – “direct” 126,460 – “indirect” 0.01% Record Owner: Lekeitio & Company. Inc. Common Common Common Common Common Common Common Common Sulfico O. Tagud, Jr. President and CEO Filipino Jeremias E. Cruzabra Director Filipino Mark E. Williams Director American Michelle Lu Director Chinese Enrique M. Aboitiz, Jr. Jr Director Bob D. Gothong Director Amb. Raul C. Rabe Independent Director Filipino Francis Chua Independent Director Filipino TOTAL 1,000 – “indirect” Record Owner: PCD Nominee Corporation (Filipino) 1,000 – “indirect” Record Owner: PCD Nominee Corporation (Filipino) 0.00% 1,000 – “indirect” Record Owner: PCD Nominee Corporation (Non-Filipino) 10 – “indirect” Record Owner: PCD Nominee Corporation Filipino 0.00% 1,000 – “indirect” Record Owner: PCD Nominee Corporation (Non-Filipino) Filipino 0.00% 148 – “direct” 0.00% 0.00% 0.00% 1,000 – “indirect” Record Owner: PCD Nominee Corporation (Filipino) 10 ,000– ,000– “direct” 0.00% 0.00% 10,158”directt”; 131,470“indirect”b” Security Ownership of the Directors and Officers in the Registrant as a Group: Common is 141,628 shares. 4 Voting trust holders of 5% or More No person holds more than five per centum (5%) of a class under a voting trust agreement or similar arrangement. Changes in Control In December 28, 2010, NENACO purchased the shareholdings of Aboitiz Equity Ventures, Inc. (AEV) in ATS comprising 1,889,489,607 common shares at a purchase price of approximately PhP3.55 billion and the shareholdings of Aboitiz & Company, Inc. (ACO) in ATS comprising 390,322,384 common shares at a purchase price of approximately PhP734 million. In February 2011, as a result of the mandatory Tender Offer, NENACO purchased an additional 120,330,004 common shares in ATS. NENACO now owns 2,400,141,995 common shares of ATS, equivalent to 98.12% Item 5. DIRECTORS AND AND EXECUTIVE OFFICERS Board of Directors, Including Independent Directors and Executive Officers The names, ages, citizenship, position and offices held or will hold, and brief description of business experience during the past 5 years (except those years stated otherwise) and other directorships held in reporting companies, including name of each company, of all directors and executive officers are as follows: Mr. Jon Ramon M. Aboitiz, 62 years old, Filipino, has served as Chairman of the Board since 2002 and a Director since 1996. His other positions include Chairman of the Board of Directors of Aboitiz Equity Ventures, Inc., Aboitiz and Company. Inc., and Aboitiz Jebsen Bulk Transport Corporation, and Vice Chairman of the Board of Directors of Union Bank of the Philippines and Aboitiz Power Corporation; President of Aboitiz Foundation, Inc. and Trustee and Vice President of the Ramon Aboitiz Foundation, Inc. He graduated with a degree in Commerce major in Management from the University of Santa Clara, California, U.S.A. Mr. Sulficio O. Tagud, Jr., 60 years old, Filipino, has served as President, Chief Executive Officer, and Director of ATS since December 2010. He has also served as the Chairman and President of KGLI-NM Holdings, Inc. since July 2008; Chairman and Chief Executive Officer of NENACO since August 2004; and President of One Urban Resource and Property Management Company since September 2003. He graduated Class Valedictorian with a Bachelor of Science degree in Business Administration, major in Economics (Magna Cum Laude) at Xavier University, Cagayan De Oro City. He also completed his Masters in Industrial Economics at the Center for Research and Communication in Manila, and Masters in Business Administration at the Ateneo de Manila University. He also completed Real Estate Development Program at the Urban Land Institute at Washington, D.C., U.S.A. Mr. Jeremias E. Cruzabra, Cruzabra 44 years old, Filipino, has served as Director of ATS since December 2010. He has also served as the Chief Finance Officer of NENACO since April 2004; Chief Finance Officer and Board Director of KGLI-NM Holdings, Inc. since July 2008; Court-Appointed Receiver of Selegna Holdings Corporation since November 2006; Chief Finance Officer (and later Trustee) of Sapphire Securities, Inc. (owned by the Brunei Investment Agency) from 1997 to 1999. He started his career with SGV & Co. (a member company of Ernst & Young) from 1988 to 1992. Mr. Cruzabra, who is a Certified Public Accountant (CPA), graduated with a Bachelor of Science degree in Commerce, major in Accounting (Magna Cum Laude) from the University of Luzon, and has completed his Masters in Business Administration at Murdoch University in Perth, Western Australia. Amb. Raul Ch. Rabe, 70 years old, Filipino, has been an Independent Director of ATS since December 2010. He has also served as a member of the Board of Directors of KGLI-NM Holdings, Inc. since July 2008; Bancommerce Investment Corporation since 2007; PET Plans, Inc. since 2007; Vivant 5 Corporation since 2002; Bank of Commerce since 2001; Corporate Secretary of Manila Economic and Cultural Office since 2001, and of Counsel for Rodrigo, Berenguer and Guno since 1999. He graduated with a Bachelor of Arts degree at the University of Santo Tomas, and Bachelor of Laws degree from the Ateneo de Manila Law School. He also completed the Colombo Plan Scholarship on Diplomacy at the Australian Institute of Foreign Service in Canberra, Australia. Mr. Mark E. Williams, 37 years old, American, has served as Director of ATS since December 2010. He has also served as Investment Director of KGLI-KSCC since 2008. He obtained his Bachelor of Science degrees in Accounting, Business Administration, and Finance at the University of Akron in Akron, Ohio, U.S.A. He completed his Juris Doctorate degree at Case Western Reserve University, Cleveland, Ohio, U.S.A., and also obtained a Masters degree in Business Administration, concentration in Finance, from Weatherhead School of Management of the same university. Ms. Michelle Lu, 50 years old, Chinese, has served as Director of ATS since December 2010. She is the Managing Director of the China-ASEAN Capital Advisory Company and advisor to the China-ASEAN Investment Cooperation Fund. Prior to this role, Ms. Lu was Managing Director and Head of Infrastructure China at Standard Chartered Bank, with responsibility for managing the Standard Chartered IL & FS Asia Infrastructure Growth Fund. She has also held senior management roles at Macquarie Bank, Temasek Holdings and Hutchison Port Holdings. Her extensive experience in private equity investment includes shipping, ports, airports, toll roads, wastewater treatment, renewable energy, metal and mining, and telecom. She graduated with a Bachelor of Science in Physics at the Beijing Normal University in China, and obtained a Masters Degree in Business Administration from San Jose State University, California, U.S.A. Mr. Enrique M. Aboitiz, Jr., Jr. 56 years old, Filipino, has served as President and Chief Executive Officer of ATS from May 1999 upto December 2010 and a Director since 1997. He is a member of the Risk Management Committee. He is also the Director and Senior Vice President of Aboitiz and Company, Inc; Director and President of Aboitiz Jebsen Bulk Transport Corporation; Director and Chairman of the Board of Aboitiz Power Corporation (AP); Director of Aboitiz Equity Ventures, Inc. (AEV), Amanpulo Resorts, MacroAsia Corporation, E-Media Foundation, Pilmico Foods Corporation and Aboitizland, Inc. He also sits as the Chairman of AEV Board’s Risk Management Committee, Chairman of AP Board’s Strategy Committee, and Member of AP Board’s Corporate Governance Committee. He graduated with a degree of Bachelor of Science in Business Administration (Major in Economics) from Gonzaga University, Spokane, Washington U.S.A. Mr. Bob D. Gothong, Gothong 55 years old, Filipino, has served as Vice Chairman of the Board of ATS since September 2002 upto December 2010 and a Director of ATS since 1997. Mr. Gothong was also a Chairman of the Risk Management Committee and a member of the Company’s Audit and Corporate Governance Committee of ATS in 2010. Chairman and Chief Executive Officer of One Wilson Place Holdings, Inc.; Director of Philippine National Oil Co.; Ramon Aboitiz Foundation, Inc., and Vice Chairman of Carlos A. Gothong Holdings, Inc. He graduated with a degree of Bachelor of Science in Commerce Major in Transportation and Utilities and Minor in Finance from the University of British Columbia, Vancouver, Canada. Mr. Francis Chua, 60 years old, Filipino, has served as an Independent Director of ATS since January 2011. His current positions include Honorary Consulate General of the Republic of Peru in Manila; President and Eminent Adviser of the Philippine Chamber of Commerce and Industry; Chairman of the Philippine Chamber of Commerce and Industry Foundation, CLMC Group of Companies, and Green Army Philippines Network Foundation; President of DongFeng Automotive, Inc. and Philippine Satellite Corporation; Director of Philippine Stock Exchange, National Grid Corporation of the Philippines, Bank of Commerce, Basic Energy, and Overseas Chinese University; and Trustee of Xavier School Educational Trust Fund, and Adamson University. He graduated with a Bachelor of Science degree in Industrial Engineering the University of the Philippines. Atty. Amado R. Santiago III, 44 years old, Filipino, has served as the Corporate Secretary of ATS since December 2010. He is the Managing Partner of the Santiago & Santiago Law Offices and is engaged in the general practice of law. He specializes in corporate litigation, which includes corporate 6 rehabilitation proceedings under the Securities and Exchange Commission Rules on Corporate Recovery, Interim Rules of Procedure on Corporate Rehabilitation and the Rules of Procedure on Corporate Rehabilitation. He is also engaged in the practice of taxation law. He received his Bachelor of Science degree in Management, major in Legal Management (1988) from the Ateneo de Manila University. He graduated from the Ateneo de Manila School of Law in 1992 and is a member of the Philippine Bar. Atty. Manuel Eduardo C. Carlos, 35 years old, Filipino, has served as the Assistant Corporate Secretary since December 2010. He is the Associate Lawyer of the Santiago & Santiago Law Offices. Under this law firm, he specializes in corporate mergers and acquisitions and corporate housekeeping. He is also engaged in the practice of taxation law. He acts as corporate counsel, director and/or corporate secretary/assistant corporate secretary of various corporate clients. He received his Bachelor of Science degree in Management, major in Legal Management (1997) from the Ateneo de Manila University. He graduated from the Ateneo de Manila School of Law in 2002 and is a member of the Philippine Bar. EXECUTIVE OFFICERS Ms. Lilian P. Cariaso, 51 years old, Filipino, Treasurer, Executive Vice President – Chief Finance Officer, Corporate Information Officer since 2004, and Chief Resource Officer since 2009. She has been with ATS since 2004. She is a Director of SuperCat Fast Ferry Corporation, Aboitiz One, Inc., Aboitiz Project TS Corporation and SQL Wizard. She graduated with a Bachelor of Science degree in Commerce, major in Accounting (Summa Cum Laude) from the University of San Carlos and earned her Masters degree in Business Management from the University of the Philippines. Ms. Susan V. Valdez, 50 years old, Filipino, Executive Vice President – Chief Executive Officer of the 2GO Freight Division since 2004, and President and Chief Executive Officer of Aboitiz One, Inc. and Aboitiz One Distribution, Inc. since 2009. She has been with ATS since November 1981. She graduated with a Bachelor of Science degree in Commerce, major in Accounting (Cum Laude) from St. Theresa’s College and earned her Masters degree in Management, major in Business Management from the University of the Philippines. She also completed the Program for Management Development from Harvard Business School, Boston, U.S.A. Ms. Evelyn L. Engel, 58 years old, Filipino, Executive Vice President – Chief Executive Officer of the Passage Division since 2004 and President and Chief Executive Officer of ScanAsia Overseas, Inc. since 2009. Her other positions include Director of Catena Services, Inc. and SQL Wizard, Inc. She has extensive experience in General Management with solid background on Sales and Marketing, Human Resource and Information Technology. She graduated with a Bachelor of Arts degree in Economics from St. Paul University. Mr. Rafael L. Sanvictores, 53 years old, Filipino, Senior Vice President for Passenger Services since 2006. He has been with ATS since 1980. He graduated with a Bachelor of Arts degree in Economics from San Beda College. Mr. Wilmer A. Alfonso, Alfonso 58 years old, Filipino, Vice President for Ports Services since 2006. He has been with ATS since January 1971. He holds the following positions: Chairman of Catena Services, Inc., Attina Security Services Inc., and Vestina Security Services Inc., President of North Harbor Tugs Corp.; President of United South Dockhandlers, Inc. and President of Supersail Services Inc. Mr. Alfonso is a Certified Public Accountant. He graduated with a Bachelor of Science degree in Accounting from the University of San Carlos. Ms. Magdalena A. Anoos, 54 years old, Filipino, Vice President for Materials Management and has been with ATS since 2003. She graduated with a Bachelor of Science degree in Commerce, major in Accounting (Cum Laude) from University of San Carlos. She also completed the Senior Executive Program at Columbia Business School, New York, U.S.A. She received the ‘Division Governor of the Year’ award from the Philippine Toastmasters District 75 in 2005 and Advanced Toastmaster Gold award by Toastmasters International in 2006. 7 Ms. Charity Joyce S.D. Marohombsar, 44 years old, Filipino, Vice President for Customer Interaction Center since 2003 and for RORO, and Vice President for Customer Management Group of ScanAsia Overseas, Inc. since 2009. She graduated with a Bachelor of Arts degree from the Ateneo de Naga University. Ms. Norissa L. L. Ridgwell, 55 years old, Filipino, Senior Vice President and Chief Operating Officer of 2GO Freight Operations since 2009. She has been with ATS since 1994. She graduated with a Bachelor of Science degree in Commerce, major in Management from Silliman University. Ms. Shelley U. Rapes, 52 years old, Filipino, Vice President - Chief Information Officer since 2009. She has been with ATS since 1989. She graduated with a Bachelor of Science degree in Mathematics (Cum Laude) from the University of San Carlos, and finished the Management Development Program from the Asian Institute of Management Ms. Annacel A. Natividad, 41 years old, Filipino, Vice President and Chief Finance Officer of the Passage Division since 2005, and Chief Finance Officer of Scanasia since 2010. She has been handling the Risk Management Division since 2007. She has been with ATS since January 1998. She graduated with a Bachelor of Science degree in Commerce, major in Accounting from the University of Santo Tomas, and finished her Masters degree in Business Administration from De La Salle UniversityGraduate School of Business. Mr. Oscar Y. Go, 58 years old, Filipino, Vice President for Sales-Special Accounts since 2002. He has been with ATS since 2002. Prior to joining the company, he was Vice President of the Lorenzo Shipping Company. He graduated with a Bachelor of Science degree in Business Management from Colegio de San Juan de Letran. Mr. Joel Jesus M. Supan, 53 years old, Filipino, Vice President for Security, Safety and Compliance. He has been with ATS since 2004. He is the Founder and Proprietor of Stonewall Security Concepts; Director and President of Ethics Call System, Inc., and Founder of Balikatan ng mga Tanod ng Ari-Arian at Yaman (BANTAY). He graduated with a Bachelor of Science degree from the Philippine Military Academy in 1981. Ms. Ellen F. Bolus, 41 years old, Filipino, Vice President for 2GO Freight Operations since 2009. She has been with ATS since 1995. She graduated with a Bachelor of Science degree in Tourism from the University of the Philippines and earned her Masters degree in Business Administration from the Ateneo Graduate School of Business in 2003. Ms. Noemi G. Sebastian, Sebastian 49 years old, Filipino, Vice President of Human Resources for Results and Quest Consulting Group since 2009, and Vice President of Corporate Communications since 2010. She has been with ATS since 2003. She graduated with a Bachelor of Science degree in Business Administration (Cum Laude) from the University of the Philippines. Mr. Andrew Jude D. Deyto, 39 years old, Filipino, Vice President for Sales and Marketing of the Passage Division since 2010. He has been with ATS since 1994. He graduated with a Bachelor of Science degree in Industrial Engineering from the Ateneo de Davao University, and completed the Masters degree in Business Administration of the Ateneo Regis Program from the Ateneo Graduate School of Business in 2002. Nomination Committee and Nominees for Election as Members of the Board of Directors The incumbent directors will be nominated as members of the Board of Directors for the ensuing year (2011-2012). In compliance with SEC Guidelines on the Nomination and Election of Independent Directors under SRC Rule 38, the Company Board created on February 26, 2003 a Nomination Committee (which was consolidated with the Compensation/Remuneration Committee in August, 2009.) In January 2011, the 8 new composition of the Company’s Board appointed the following as Chairman and members of the Compensation/Remuneration and Nomination Committee: Chairman: Members: Mr. Sulficio O. Tagud, Jr. Mr. Mark E. Williams Ms. Michelle Lu The Compensation/Remuneration and Nomination Committee promulgated the guidelines which govern the conduct of the nomination of the members of the Company Board. It had pre-screened and short listed all candidates and came up with the following individuals as nominees for independent directors for the ensuing year (2011-2012): (1) Amb. Raul Rabe as nominated by Mr. Mark Williams (2) Mr. Francis Chua as nominated by Ms. Michelle Lu The nominating persons are not related to the nominees within the fourth degree of consanguinity. Further, the Committee approved on July 20, 2005 the Company’s Amended By-Laws incorporating the procedures for the nomination and election of Independent Directors under Rule 38 of the Securities Regulation Code, as the same may be amended from time to time. Period in Which Directors and Executive Officers Should Serve The directors and executive officers should serve for a period of one (1) year and until the election and qualification of their successors. Terms of Office of a Director The nine (9) directors shall be stockholders and shall be elected annually by the stockholders owning a majority of the outstanding common shares of the Registrant for a term of one (1) year and shall serve until the election and qualification of their successors. Any vacancy in the board of directors other than removal or expiration of term may be filled by a majority vote of the remaining members thereof at a meeting called for that purpose if they still constitute a quorum, and the director or directors so chosen shall serve for the unexpired term. Further, in April 2011, the Board approved a resolution to increase the number of directors from nine (9) to thirteen (13). The said proposal is still subject to the ratification by the Company’s stockholders during the upcoming annual stockholders’ meeting. Significant Employees The Corporation and its subsidiaries consider the contribution of every employee important to the fulfillment of its goals. Family Relationships Messrs. Enrique M. Aboitiz, Jr. and Jon Ramon Aboitiz are cousins and are related within the fourth degree of consanguinity. Other than the ones that are disclosed above, there are no other family relationships within the fourth degree of consanguinity known to the Registrant. Involvement in Certain Legal Proceedings To the knowledge and/or information of ATS, none of its nominees for election as directors, the present members of its Board of Directors or its executive officers, is presently or during the last five (5) years 9 been involved in any legal proceeding in any court or government agency on the Philippines or elsewhere which would put to question their ability and integrity to serve ATS and its stockholders. With respect to its nominees for election as directors, the present members of its Board of Directors and its executive officers, the Company is not aware that during the past five (5) years up to even date of: (a) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (b) any conviction by final judgment of such person in a criminal proceeding, excluding traffic violations and other minor offenses; (c) such person being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, by any court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining, barring, suspending or otherwise limiting such person’s involvement in any type of business, securities, commodities or banking activities; and (d) such person being found by a domestic or foreign court of competent jurisdiction (in a civil action), the Commission or comparable foreign body, or a domestic or foreign exchange or other organized trading market or self regulatory organization, to have violated a securities or commodities law or regulation and the judgment has not been reversed, suspended, or vacated. Certain Relationships and Related Transactions In the ordinary course of business, the Registrant has transactions with subsidiaries, associates, and other related companies consisting of shipmanagement services, charter hire, management services, courier services, purchases of steward supplies, availment of stevedoring, arrastre, trucking, rental and repair services. The Registrant needs these services to complement its services to the freight and passage customers. The identification of the related parties transacting business with the Registrant and how the transaction prices were determined by the parties are discussed in Note 23 of the consolidated financial statements. The Registrant will continue to engage the services of these related parties as long as it is economically beneficial to both parties. The Corporation has no transaction during the last two years or proposed transaction to which it was or is to be a party in which any of its directors, officers, or nominees for election as directors or any member of the immediate family of any of the said persons had or is to have a direct or indirect material interest. Resignation or Refusal to Stand for ReRe-election by Members of the Board of Directors No Director has declined to stand for re-election to the board of directors since the date of the last annual meeting of the Registrant because of a disagreement with the Registrant on matters relating to the Registrant operations, policies and practices. In December 2010, as a result of NENACO’s purchase of AEV’s and ACO’s shares in ATS, the following directors have tendered their resignations: 1. Mr. Jon Ramon M. Aboitiz, Chairman of the Board; Compensation/Remuneration and Nomination Committee (but was re-appointed in January 2011 as director and Chairman of the Board) 2. Mr. Enrique M. Aboitiz, Jr., Member, President and CEO; Risk Management Committee and Compensation/Remuneration and Nomination Committee (but re-appointed as director on the same date) 3. Mr. Mikel E. Aboitiz, Member; Risk Management Committee 4. Mr. Erramon I. Aboitiz, Member 5. Mr. Bob D. Gothong, Member; Risk Management Committee (but re-appointed as director on the same date) 6. Mr. Justo A. Ortiz, Member; Audit and Corporate Governance Committee 7. Mr. Sabin M. Aboitiz, Member; Audit and Corporate Governance Committee 8. Mr. Washington Z. Sycip, Independent Director; Audit and Corporate Governance 10 Committee and Risk Management Committee 9. Ms. Emily A. Abrera, Independent Director; Compensation/Remuneration and Nomination Committee Item 6. COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS The following table summarizes certain information regarding compensation paid or accrued during the last three fiscal years and to be paid in the ensuing fiscal year to the Registrant Chief Executive Officer and each of the Registrant four other most highly compensated executive officers: SUMMARY OF COMPENSATION TABLE BONUS Amounts in Thousands of Pesos (‘000s) SALARY (13th and 14th Months Pay) 22,372 29,640 21,955 3,729 4,960 3,659 23,911 25,938 25,213 2,545 4,830 4,202 OTHER COMPENSATION TOP FIVE HIGHLY COMPENSATED EXECUTIVES: ENRIQUE M. ABOITIZ JR.* – CHIEF EXECUTIVE OFFICER EVELYN L. ENGEL – CHIEF EXECUTIVE OFFICER – PASSAGE AND PRESIDENT-CEO SCANASIA, INC. SUSAN V. VALDEZ – CHIEF EXECUTIVE OFFICER – FREIGHT AND PRESIDENT-CEO OF ABOITIZ ONE INC. GROUP LILIAN P. CARIASO – CHIEF FINANCE OFFICER, CORPORATE INFORMATION OFFICER AND CHIEF RESOURCE OFFICER NORISSA L. RIDGWELL – SVP-COO 2GO FREIGHT (2010 ONLY) CHARITY JOYCE MAROHOMBSAR – CUSTOMER CARE MANAGEMENT OF 2GO SCANASI A (2011 ONLY) All above named officers as a group All officers and directors as group unnamed 2009 2010 Projected 2011 2009 2010 Projected 2011 - The Company has no significant or special arrangements of any kind as regard to the compensation of all officers and directors other than the funded, noncontributory tax-qualified retirement plans covering all regular employees. Each director receives a monthly allowance of P80,000 except for the Chairman of the Board who receives P120,000 a month. Further, a per diem of P30,000 is given to each Director and P45,000 for the Chairman for every Board meeting attended. As agreed with NENACO, ATS’ parent company, such allowances and per diems will be shared equally by both companies whenever meetings are held on the same day. Except for the regular company retirement plan, which by its very nature will be received by the officers concerned only upon retirement from the Company, the above-mentioned directors and officers do not receive any profit sharing nor any other compensation in the form of warrants, options, bonuses, etc. Likewise, there are no standard arrangements that compensate directors directly or indirectly, for any services provided to the Company either as director or as committee member or both or for any other special assignments. Item 7. INDEPENDENT PUBLIC ACCOUNTANTS The accounting firm of SGV & Co. (SGV) has been ATS' Independent Public Accountant since year 1977. This is reckoned to be the approximate date based on the available records. Representatives of SGV will be present during the annual meeting and will be given the opportunity to make a statement if they so desire. They are also expected to respond to appropriate questions if needed. 11 In August 2009, the Board of Directors of ATS approved the consolidation of its Audit Committee to the newly created Audit and Corporate Governance Committee. The incumbent members of the said Committee are Francis Chua as chairperson, Michelle Lu and Mark Williams as members, and Evan McBride and Geoffrey Seeto as ex-officio members. At its regular board meeting on April 23, 2009, the Board of Directors approved a resolution to delegate to the Board of Directors the authority to appoint the Company’s external auditors. The stockholders ratified the same resolution during its annual stockholders meeting. In compliance with SEC guidelines on the rotation of external auditors under its SRC Rule 68, Paragraph 3(b)(iv), ATS has already adopted and incorporated the said guidelines in its Code of Corporate Governance. Mr. Ladislao Z. Avila Jr. has been the signing partner since fiscal year 2006. He will be replaced starting fiscal year 2011 in compliance with the five years rotation requirement under SRC Rule 68, Paragraph 3(b)(iv). (1) External Audit Fees and Services Estimates for December 31, 2011 Audit Fees Audit-Related Fees P 1,000,000 Year ended December 31, 2010 P 1,000,000 Year ended December 31, 2009 P 1,000,000 All Other Fees TOTAL P 1,000,000 P 1,000,000 P 1,000,000 Audit Fees This represents professional fees for financial assurance services rendered for the Company’s Annual Financial Statements, review and opinion for SEC Annual Report. Audit-Related Fees This represents professional fees for technology and security risk services rendered by the external auditor in connection with the Audit on Company’s Annual Financial Statements. All Other Fees This represents fees for services rendered in reviewing and issuing opinion with regards to the Company’s annual reportorial requirement with Maritime Industry Authority (MARINA). Audit services provided to the Company by external auditor, SGV, have been pre-approved by the Audit and Corporate Governance Committee. The Audit and Corporate Governance Committee has reviewed the magnitude and nature of these services to ensure that they are compatible with maintaining the independence of the external auditor. (2) Changes in and Disagreements With Accountants on Accounting and Financial Disclosure There was no event in the past years where SGV and the Company had any disagreements with regard to any matter relating to accounting principles or practices, financial statement disclosure or auditing scope or procedure. 12 C. OTHER MATTERS Item 8. MERGERS, CONSOLIDATIONS, ACQUISITIONS AND SIMILAR MATTERS Investment in Supercat Fast Ferry Corporation In November 2010, the board of ATS approved a resolution to increase its investment in SFFC by 350,000 common shares at a subscription price of P70 million thereby increasing its ownership from 160,000 common shares to 510,000 common shares. SFFC is in the business of providing fast craft passenger services under the SuperCat brand name. Disposition of investments in ABOJEB, AJMSI, JMI and JMBVI In December 2010, the ATS’ board approved the sale of ATS’ 62.5% equity in Aboitiz Jebsen Bulk Transport Corporation, Aboitiz Jebsen Manpower Solutions, Inc. and Jebsen Maritime, Inc, to Aboitiz Equity Ventures, Inc. (AEV) for a total price of P 355,908,432. The companies are engaged in bulk transport, manning and crew management, and ship management. The board also approved the sale of the 50% interest of ATS in Jebsen Maritime (BVI) Limited, a chartering company, to Aboitiz & Company, Inc. (ACO) for P 44,000,000. The sale of ATS’ shareholdings in the Aboitiz Jebsen companies is in line with the sale of AEV’s and ACO’s respective shares in ATS. The said sale of AEV’s and ACO’s investments in ATS, however, does not include its interests in its joint venture companies with the Jebsen Group of Norway. Item 9. ACTION WITH RESPECT TO REPORTS The minutes of the last special stockholders’ meeting held on July 15, 2010 and the Annual Report of Management for the year ended December 31, 2010 will be submitted to the stockholders for their approval. Item 10. MATTERS NOT REQUIRED TO BE SUBMITTED All corporate actions to be taken up at the annual stockholders’ meeting this June 22, 2011 will be submitted to the stockholders of the Registrant for their approval in accordance with the requirements of the Corporation Code. Item 11. AMENDMENT OF OF ARTICLES OF INCORPORATION AND BYBY-LAWS For approval of the stockholders this June 22, 2011 meeting is the resolution of the Board to amend the First Article of the Articles of Incorporation of the Company as follows (proposed amendment underscored): "FIRST: That the name of the corporation shall be ATS CONSOLIDATED (ATSC), INC. (formerly "Aboitiz Transport System (ATSC) Corporation") Doing business under the name and style of "ATS”, “2GO”, “2GO Together”, “SuperFerry", “SuperFerry Travel and Leisure”, and “Cebu Ferries”” This amendment is in relation to the terms of the acquisition by NENACO of AEV’s and ACO’s shareholdings in ATS, wherein the Aboitiz family required NENACO, within a reasonable period, to 13 remove any reference of the name “Aboitiz” from the corporate name, letterheads and other corporate profiles of ATS. Further, the Board resolved to amend the Second Article of the Articles of Incorporation of the Company to include the following purposes: (a) The business of rendering technical services requirement to customers nationwide for refrigerated marine container vans and related equipments or accessories including but not limited to repair and maintenance, equipment rental and leasing, technical consultancy and training, selling of spare parts, components and accessories, service contracting and to act as service agent on behalf of the various domestic and foreign container manufacturer with services but not limited to performing warranty and non- warranty repair services, selling of service parts, components and accessories, and consultancy services; and (b) To conduct and transact any and all lawful business, and to do or cause to be done any one or more of the acts and things herein set forth as its purposes, within or without the Philippines, and in any and all foreign countries, and to do everything necessary, desirable or incidental to the accomplishment of the purposes or the exercise of any one of more of the powers herein enumerated, or which shall at any time appear conducive to or expedient for the protection or benefit of this corporation. The purpose of the above-mentioned amendment is to include the business purposes of Reefer Van Specialist, Inc., which was merged into ATS. The Board also resolved to amend the Sixth Article of the Articles of Incorporation and Section 2, Article III of the By-Laws, of the Company, to increase the number of directors from nine (9) to thirteen (13). The purpose of the said amendments is to mirror the board of ATS with that of its parent company. The foregoing resolutions will be submitted to the stockholders of the Company during the June 22, 2011 stockholders’ meeting for ratification. Item 12. OTHER PROPOSED ACTIONS The following matters shall likewise be submitted, for ratification, to the stockholders representing at least a majority of the outstanding voting capital stock of the Registrant: a) Ratification of all acts of the Board of Directors and Board Committee for the period covering May 28, 2010 through April 28, 2011 adopted primarily in the ordinary course of business (including those which have been the subject of previous disclosures to the Securities and Exchange Commission and the Philippine Stock Exchange during said period), such as: i. ii. iii. iv. v. vi. vii. approvals for the acquisition, lease, disposition of vessels as well as other personal and/or real properties; approval to lease space for CDO Ticketing Office; appointment of lawyers and/or attorneys-in-fact in connection with legal proceedings (including amicable settlement proceedings) affecting the Registrant and/or its assets; appointment of replacement to directors/officers who rendered their respective resignations; appointment of authorized representative in negotiations with Keppel Cebu Shipyard, Inc.; confirmation of authorized representative appointed in dealing with PDTC; approval for the availment of certain credit facilities, execution of a collateral trust agreement and appoinment of UBP as trust agent; 14 viii. ix. x. xi. xii. xiii. xiv. xv. xvi. xvii. xviii. xix. xx. xxi. xxii. xxiii. xxiv. b) approval for treasury matters related to opening of accounts and bank transactions (including removal of/revisions to authorized bank signatories); authority to apply for VAT exemption under RA 9295; authority to apply for local government permits; authority to apply for registration of certain trademarks; authority to enter into asset swap transaction; authority to subscribe additional shares in SFFC; authority to accept BOI terms and conditions; authority to enter shipping agreements with Nestle Philippines, Inc.; appointment of authorized representatives to make purchases for loyalty awards and prizes; authority to sell its investments in ABOJEB, AJMSI, JMI and JMBVI; and authority to declare cash dividends. approval of the 2011 Budget; acceptance of pre-approval’s terms and conditions of the company’s registration with BOI; general authority of the president to pass resolutions for day-to-day operations of the company; approval of the 2010 audited financial statements; approval for the availment of credit facilities with BDO; approval of the execution of suretyship in favor of BPI; Minutes of Stockholders Meeting held last July 15, 2010 During the Special Stockholders Meeting held, stockholders representing at least twothirds of the outstanding capital stock of the Corporation approved the statutory merger of ATS and its wholly owned subsidiary Reefer Van Specialists Inc. with ATS as the surviving corporation. Item 13. VOTING PROCEDURES As to each matter, which is to be submitted to a vote of security holders, furnish the following information: (a) Vote required for Approval The affirmative vote of stockholders representing at least a majority of the outstanding voting common shares of the Registrant is required for the approval and/or ratification: i. Minutes of Previous Special Stockholders’ Meeting; ii. Management Annual Reports for the preceding year; iii. Election of the Board of Directors; and iv. All Acts and Resolutions of the Board of Directors and Management since May 28, 2010. The affirmative vote of stockholders representing at least two-thirds (2/3) of the outstanding capital stock of the Registrant is required for the approval and/or ratification of the following matters: i. Amendments to the First, Second and Sixth Articles of the Company’s Articles of Incorporation, changing the Company’s corporate name, business purpose, and increase the number of directors; 15 ii. (b) Amendment of Section 2, Article III of the Company’s By-Laws, to increase the number of directors; Method by which Votes will be counted At each meeting of the stockholders, every stockholder shall be entitled to vote in person or by proxy, for each share of stock held by him, which has voting power upon the matter in question. As provided in Section 7, Article II of the By-laws of the Registrant, except upon demand by any stockholder, the votes upon any question before the meeting, except with respect to procedural questions that shall be determined by the Chairman of the meeting, shall be by viva voce or show of hand. The method and manner of counting the votes of shareholders shall be in accordance with the general provision of the Corporation Code of the Philippines. The counting of votes shall be witnessed by representatives from the Company’s external auditor, SGV, stock and transfer agent Securities Transfer Services, Inc. (STSI) and the Company’s Corporate Secretary. 16 SIGNATURE PAGE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this report is true, complete and correct. This report is signed in the City of Manila on May 24, 2011. Lilian P. Cariaso Corporate Information Officer 17 MANAGEMENT REPORT 1 I. CONSOLIDATED AUDITED FINANCIAL STATEMENTS The Consolidated Audited Financial Statements for the year ended and as of December 31, 2010 are attached to this report. II. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES There was no event in the past years where SGV and the Corporation had any disagreements with regard to any matter relating to accounting principles or practices, financial statement disclosure or auditing scope or procedure. III. MANAGEMENT’S DISCUSSION AND ANALYSIS Key Performance Indicators Indicators (KPI) The following KPI’s are used to evaluate the financial performance of ATS and its subsidiaries: a. Revenues – ATS revenues are mainly composed of freight and passage revenues and they are recognized when the related services are rendered. Total Revenue for the three months ended March 31, 2011 is P3.0 billion. Further, in 2010, total revenue is P11.6 billion compared to P10.5 billion in 2009. b. Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) - is calculated by adding back interest expense, amortization and depreciation into income before income tax, excluding extraordinary gains or losses. EBITDA for March 31, 2011 is P115 million while in 2010, the Company’s EBITDA is P742million. c. Income before income tax (IBT) (IBT) – is the earnings of the company before income tax expense. The Loss Before Income Tax for 2010 is P1.5 billion, 326% lower compared to P679.0 million in 2009. ATS reflected close to P897 million other charges brought about by Impairment loss on ships in operation and finance costs. The Loss Before Income Tax for March 31, 2011 is P320.3 million. d. DebtDebt-toto-equity ratio – is determined by dividing total liabilities over stockholders’ equity. ATS’ debt-to-equity ratio in 2010 is 2.14:1:00. ATS’ debt-to-equity ratio in 2011 is 2.37:1:0. Total liabilities increased by P304 million due to additional borrowings and Total equity stood at P3. 7 billion or 7% lower compared to 2010 due to the loss for the first quarter of 2011. e. Current ratio – is measured by dividing total current assets by total current liabilities. The Company’s current ratio in 2010 is 0.56:1:00. Further, the Company’s current ratio as of March 31, 2011 is 1.05:1:00. Total current assets is P5 billion or 6% higher than 2010. Total current liabilities are P4.7 billion or 43% decrease compared to 2010. The following table shows comparative figures of the Top Five key performance indicators (KPI) for 2010, 2009, and 2008 (amounts in millions except for the financial ratios) based on the consolidated financial statements of ATS as well as each of its subsidiaries: Consolidated ATS and Subsidiaries Revenues EBITDA (a) IBT (b) Debt-to-Equity Ratio (c) Current Ratio (d) March 31, 2011 Dec. 31, 2010 Dec. 31, 2009 Dec. 31, 2008 3,048 11,611 10,510 10,273 115 742 1,394 944 (320) (1,536) 679 119 2.37:1.0 2.14:1.00 1.05:1.00 1.1:1.00 1.05:1.00 0.56:1.00 0.9:1.00 0.9:1.00 18 Consolidated Aboitiz One, Inc and Subsidiaries Dec. 31, 2010 Revenues EBITDA (a) IBT (b) Debt-to-Equity Ratio (c) Current Ratio (d) Dec. 31, 2009 Dec. 31, 2008 4,770 317 216 3.34:1.00 0.9:1.00 3,876 210 191 4.0:1.0 0.9:1.0 2,987 219 139 3.9:1.0 0.9:1.0 Dec. 31, 2010 599 219 27 2.3:1.00 0.1:1.0 Dec. 31, 2009 443 147 79 4.9:1.0 0.1:1.00 Dec. 31, 2008 Dec. 31, 2010 1050 126 137 2.20:1.00 1.46:1.00 Dec. 31, 2009 966 197 195 6.34:1.00 1.18:1.00 Dec. 31, 2008 Supercat Fast Ferry Corporation Revenues EBITDA (a) IBT (b) Debt-to-Equity Ratio (c) Current Ratio (d) 377 42 (19) 11.7:1.0 0.1:1.0 MCC Transport Philippines, Inc. Revenues EBITDA (a) IBT (b) Debt-to-Equity Ratio (c) Current Ratio (d) 863 (132) (131) -6.81:1.00 0.87:1.00 a) Earnings before interest, taxes, depreciation and amortization (calculated by adding back interest expense and amortization and depreciation into income before income tax, excluding extraordinary gains and losses). b) Income before income tax c) Total liabilities / total stockholders’ equity d) Total current assets / total current liabilities Quarter Ended March 31, 2011 Consolidated Income Statement ATS’ first quarter 2011 revenues reached P3.0 billion. Total revenues reflects a 3% decline versus last year since 2010 still includes the Aboitiz Jebsen Group of Companies, including international ship chartering , shipmanagement and crewing businesses. In December 2010, ATS then principal shareholders, Aboitiz Equity Ventures, Inc. (AEV) and Aboitiz and Company (ACO), sold their combined shareholdings of 93.2% in ATS to Negros Navigation (NENACO) for a price of P1.8813 per share or a total of P4.3 billion. The sale however excluded the Aboitiz Jebsen group of companies. The Company sold its 62.5% equity stake in each of Aboitiz Jebsen Bulk Transport Corporation, Aboitiz Jebsen Manpower Solutions, Inc. and Jebsen Maritime Inc. to AEV for a total price of P 355.9 million. .It also sold its 50% equity stake in Jebsen Management (BVI) Limited to AEV for P 44.0 million. Buyers AEV and ACO paid the full price last January 2011. Local freight business of ATS reflected a 6% increase versus last year as both volumes and freight rates were higher. Similarly, passage business increased 7%. ATS has all 18 vessels operating during the quarter. Last year, three of the Company’s large SuperFerry vessels were under maintenance and drydocking, limiting its operating capacity. Supply chain business continues to grow with revenues from the sale of goods generated by the trading business posting a 32% increase due to a rise in number of principals. 19 Vessel fuel costs, the Company’s single largest expense, posted a 21% increase due to higher fuel prices and volume. ATS has responded by implementing upward rate adjustments to its freight rates. Another set of adjustments are set to be applied during the second quarter of the year. Terminal expenses increased because of higher transshipment and outside service expenses. Cost of sales also increased from higher sale of goods. 2010 overhead and charter hire expenses includes those relating to the sold international ship charter business. The rise in expenses coupled by higher finance costs from higher debt contributed to a P228 million loss. Earnings per Share Earnings Per Share is computed by dividing Net Income Attributable to Equity Holders of the Parent over weighted average number of common shares outstanding for the year. Earnings per share for the first three months of 2011 stood at (P0.09)/share compared to (P0.06)/share last year. The figures above are in P’MM except otherwise indicated Other changes (+/(+/-5% or more) in the financial statement not covered in the above discussion None. Balance Sheet Current assets reached close to P5.0 billion. Receivables of P2.7 billion posted an 8% increase brought about by higher other trade receivables. Property and equipment reduced by P299 million to total P5.8 billion largely due to depreciation. Interest bearing debt rose P1.3 billion to reach P5.3 billion in March 2011. P4.0 billion of short term debt was refinanced to long term. Accounts payable of P3.4 billion lowered by 22% as last year’s dry 20 docking costs of vessels are being settled. Total equity of P3.7 billion decreased by P248 million or 6% due to lower retained earnings brought about by losses incurred during the first quarter of 2011. The figures above are in P’MM except otherwise indicated Other changes (+/(+/-5% or more) in the financial statement not covered in the above discussion None. Cashflow Statement ATS borrowed funds to pay down its payables. Total capital expenditures of P346 million is much lower versus P1.3 billion last year as most of the vessels in 2010 were on scheduled drydocking and maintenance and there were vessel acquisitions last year. Cash and cash equivalents at the end of the period stood at P863.4 million. 21 Fiscal Year 2010 vs. 2009 Consolidated Income Statement Aboitiz Transport System (ATSC) Corporation (ATS), for the most part of 2010, operated on limited capacity as most of its fleet was on scheduled dry-docking and maintenance. Consolidated revenues increased by P1.1 billion compared to the previous year to reach P11.6 billion. Revenue from supply chain solutions, specifically trading, contributed to higher revenues overall. Local freight business also registered an increase of 1%, contributing a total of P5.3 billon in 2010. The market was being served by chartering freighter vessels in the absence of its own vessels that were on drydock and maintenance. Freight utilization reached 94% on SuperFerry vessels. 2GO has fully integrated its total supply chain solutions business, the objective of which is to provide a more seamless solution to clients. Both Zoom in Packages (ZIP) and Reefer Van Specialists (RVSI) have been merged with ATS. ZIP’s business focus is on full container load (FCL) and loose container load (LCL) cargo while RVSI focuses on the cold chain business, which involves the transport of frozen and perishable goods. Merging these companies is seen to result in cost efficiencies and better synergies and ultimately serving customers better. Passenger business, inclusive of auxiliary revenues, reduced by P59 million or 3% to register at P2.18 billion revenues from P2.24 billion in 2009. It was able to however, maximize its limited operating capacity achieving load factors of 79%. Total cost and expenses reached P12.2 billion, 21% higher than 2009. This is largely brought about by higher fuel expense as a result of rising average fuel prices. Given the uncertain fuel price behavior, ATS continues to undertake various initiatives to mitigate its negative impact including the use of less expensive type of fuel. Terminal expenses increased due higher outside services costs. The expanding trading business also contributed to higher cost of sales. ATS registered a P808.7 million Net Loss Attributable to Holders of the Parent. ATS booked a onetime Impairment loss on ships in operation of P778.8 million. Finance costs of P228.8 million are substantially higher versus last year from increased interest bearing loans. ATS borrowed funds to finance the purchase of three roll-on roll-off passenger vessels and two fast crafts. ATS also benefited from deferred income tax of P472.7 million. In December 2010, ATS principal shareholders, Aboitiz Equity Ventures, Inc. (AEV) and Aboitiz and Company (ACO), sold their combined shareholdings of 93.2% in ATS to Negros Navigation (NENACO) for a price of P1.8813 per share or a total of P4.3 billion. The sale however excluded the Aboitiz Jebsen group of companies, which includes international freight chartering, ship management and manpower businesses. The Company sold its 62.5% equity stake in each of Aboitiz Jebsen Bulk Transport Corporation, Aboitiz Jebsen Manpower Solutions, Inc. and Jebsen Maritime Inc. to AEV for a total price of P 355.9 million. .It also sold its 50% equity stake in Jebsen Management (BVI) Limited to AEV for P 44.0 million. Buyers AEV and ACO paid the full price last January 2011. ATS recognized a net gain of P213 million from this sale. During the period, ATS recorded P305.4 million in net income from discontinued operations generated from the Aboitiz Jebsen group. Earnings Per Share Earnings Per Share is computed by dividing Net Income Attributable to Equity Holders of the Parent over weighted average number of common shares outstanding for the year. Earnings per share for 2010 stood at (P0.33)/share. This is lower versus 2010 because of the net loss generated. 22 The figures above are in P’MM except otherwise indicated Consolidated Balance Sheet and Cash Flow Statement As of December 31, 2010, consolidated assets of ATS amounted to P12.4 billion, posting a 17% increase from December 31, 2009 of P10.6 billion. Property plant & equipment registered a 27% increase from 4.8 billion to 6.1 billion from the acquisition of three ropax vessels and higher vessel refurbishments & improvements. Assets of the company were being re-fleeted and modernized to increase operating efficiencies. Higher deferred income taxes from 256 million to 717 million also contributed to the increase in overall assets or 181% and higher other non-current assets from 263 million to 390 million or 48%. Total current assets reflected a 2% decrease from P4.8 billion to P4.7 billion as of December 31, 2010. The decrease was mainly attributed to lower cash and cash equivalents from 1.1 billion to 764 million. The P332M decrease was offset by higher freight receivables and non-trade receivables relating to the sale of the Aboitiz Jebsen group of companies. Receivables from service fees and insurance and other claims however reflected a decrease as of the period. Total liabilities amounted to P8.5 billion, a 55% increase from 2009. Total interest bearing loans stood at P4.1 billion. This is inclusive of the P2 billion five-year corporate fixed rate note facility issued last May to finance vessel acquisitions and maintenance. Trade and other payables also registered higher than last year bought about by higher accrued expenses and dividends payable. ATS declared special cash dividends equivalent to P0.15 per share to all stockholders on record as of December 15, 2010. The special cash dividend represents the sales proceeds of the Aboitiz Jebsen companies, net of taxes and other related costs. The dividend payment was made on January 12, 2011. 23 Stockholders’ Equity decreased by 24% to P3.9 billion from P5.2 billion as of December 31, 2009 mainly due to lower retained earnings brought about by the net loss for the period. Balance Sheet 24 Cashflow Statement Total capital expenditures reached P3.4 billion mainly because of vessel acquisitions and dry-docking of five vessels to ensure their future reliability. These expenditures were financed by long-term debt. Cash and cash equivalents at the end of the period stood at P764.2 million. Fiscal Year 2009 versus 2008 Consolidated Consolidated Income Statement Aboitiz Transport System (ATS) ended the year 2009 with net income attributable to equity holders of parent of P546.1 million, a 559% improvement over just P82.8 million in 2008. Consolidated revenues increase P237 million, largely from the sale of goods and service fees. In September 2009, ATS lost a ship and the Maritime Industry Authority thereafter temporarily suspended the remainder of its fleet. This greatly affected freight and passenger business. All vessels ultimately passed the Maritime Industry Authority’s audit and inspection and were cleared for sailing shortly after the suspension. All ATS vessels, their cargo and passengers are fully insured to the extent mandated by law. Devastating typhoons, affecting overall operations although ATS responded with speed and resources, also plagued the last quarter of 2009. Local freight business contributed P5.2 billon in 2009, an 8% or P148 million decrease from the same period in 2008. Passenger business, inclusive of auxiliary revenues, reduced by P343 million or 13% to register at P2.2 billion revenues from P2.6 billion in 2008. On the other hand, ATS’ overall value added business, inclusive of supply chain, jumped P709 million to reach P2.5 billion in 2009. ATS continues to build on this business with bright industry prospects. Fuel costs and charter hire costs dropped in 2009 leading to a P353 million decline in operating expenses and 48% improvement in earnings before interest, taxes, depreciation and amortization (EBITDA) to register at P1.4 billion in 2009. Earnings Per Share Earnings Per Share is computed by dividing Net Income Attributable to Equity Holders of the Parent over weighted average number of common shares outstanding for the year. Earnings per share for 2009 stood at P0.22/share. This is higher versus 2008 because of higher net income. Consolidated Balance Sheet and Cash Flow Statement On April 30, 2009, the principal stockholders of ATS namely, Aboitiz Equity Ventures and Aboitiz and Company, received a firm and final advice from KGLI-NM Holdings, Inc., that the proposed acquisition of ATS shares will no longer proceed based on the terms agreed upon in the Memorandum of Agreement signed on September 23, 2008. ATS and Negros Navigation however, agreed to continue to explore service and process improvements for better margins and cost benefits to both companies. As of December 31, 2009, consolidated assets of ATS amounted to P10.6 billion, posting a 13% increase from December 31, 2008 of P9.4 billion. Total current assets reflected a 15% increase from P4.2 billion to P4.8 billion as of December 31, 2009. The increase was mainly attributed to higher Non-trade receivables by P266.6 million directly related to the SuperFerry 9 incident and higher Inventories such as materials, parts and supplies by P164.8 million. 25 ATS’ net Property and Equipment increased by P580.3 million. Assets of the company were being refleeted and modernized to increase operating efficiencies. Slowly, ATS is increasing its capacities after it sold vessels in the past to capitalize on high market rates. In 2009, internally generated funds were used to purchase two freighters, two fast crafts, and one roro-passenger vessel at very competitive rates. In addition to asset purchases, funds were also use for the regular maintenance of its assets, including drydocking and vessel improvements. Total liabilities amounted to P5.5 billion, a 13% increase from 2008. Total interest bearing debt was up by P100.1 million from P1.3 billion in 2008. ATS continued to be committed in gearing towards a more solid financial position and delivering positive cash flows. Trade and other payables showed a P177.5 million or 5% addition from 2008 mainly from the increase in trade payables. Stockholders’ Equity likewise increased by 12% to P5.2 billion from P4.6 billion as of December 31, 2008 due to higher net income of December 31, 2009. Cash generated from operations amounted to P1.1 billion. Total capital expenditures for the period stood at P1.9 billion. Cash and cash equivalents at the end of the year was at P1.1 billion. Material Changes (+/(+/-5% or more) in the financial statement Income Statement • 2% higher total revenues due to: o 20% increase in service fees from higher warehousing revenue. o 49% increase in sale of goods due to full year operation of Scanasia Overseas, Inc., (Scanasia) a supply chain company acquired by Aboitiz One, Inc. in June 2008. • 2% lower costs and expenses as a result of: o 6% lower operating expense primarily due to 34% lower fuel price, 19% lower food and subsistence, 41% lower sales concessions and 32 percent lower commissions. o 27% lower terminal costs due to lower transshipment fees. Balance Sheet • 13% higher total assets due to: o 18% higher net receivable primarily due to increase in non-trade receivables. o 52% increase of inventories because of higher merchandise inventory and higher materials, parts and supplies of spare parts. o 11% higher prepaid expenses o 328% higher investment in associates from MCCP’s improved results of operations and additional investment with Kerry-Aboitiz Logistics Inc. (KALI), the joint venture with Kerry Logistics Network of Hong Kong or KLN. o 14% higher property and equipment from additional vessels purchased. • 68% higher loans payable from additional bank borrowings • 12% higher stockholders’ equity from higher retained earnings Fiscal Year 2008 versus 2007 Consolidated Income Statement ATS ended the year 2008 with consolidated revenues of P12.9 billion, a 16% increase versus P11.1 billion in 2007. Freight business contributed P7.6 billion in revenues in 2008, a 9% or P616.1 million increase from P7.0 billion in 2007. The Company’s freight rates per twenty-equivalent unit (TEU) rose 16% as freight capacity is being filled up with its own supply chain and value added business. ATS has been reducing its reliance on spot and market cargo which is more price driven. In 2008, capacity remained at the same level as last year with close to 250,000 TEUs, at 88% utilization rate. 26 Passage business reduced by P41.1 million to register at P2.99 billion revenues (inclusive of auxiliary income) from P3.03 billion in 2007. The average rate per passenger had gone down by 5% as it continued to offer year-round promotional rates to drive up demand and face stiff competition from the airlines. Similar to the freight business, ropax passage capacity remained at the same level as the previous year with over 3.3 million passengers but with a much higher utilization rate at 70%, the highest attained in 4 years. For the year 2008, much of the Company’s efforts were geared towards developing its value-added business where it believes much of its future will lie. Aboitiz One Distribution, Inc.’s new warehouse with 22,000 pallet positions located in Taguig City has been operational since the beginning of 2009. In addition, Aboitiz One, Inc. purchased in June of 2008, Scanasia, a company engaged in the business of sales, marketing, warehousing and transportation of temperature-controlled and ambient food products to its customers in the Philippines. These resulted in a 28% increase in service fees to P1.01 billion and 418% increase in sale of goods to P1.2 billion in 2008. Total costs and expenses jumped 14% with fuel, its single biggest expense, being the highest contributor to the rise in costs. Average fuel price for the year jumped 43% from the previous year. ATS directed its efforts in minimizing the impact of rising fuel costs by using less expensive type of fuel, lowering volume consumption and increasing freight rates. Cost of sales directly related to the supply chain business also registered an increase with the acquisition of Scanasia. ATS’ other income totaling P190.4 million is much lower than last year’s of P842.8 million. In 2007, ATS reflected a P748.9 million gain on disposal of property and equipment generated mainly from the sale of three vessels. Despite the rising costs, earnings before interest, taxes, depreciation and amortization (EBITDA) increased to 4% or P36 million versus December 31, 2007. ATS registered P99.4 million in net income from continuing operations. ATS ended the year with net income attributable to equity holders of parent of P82.8 million. This is lower compared to P420.0 million in 2007 since ATS registered after tax gain on disposal of three vessels of P405.0 million. Earnings Per Share Earnings per share for 2008 stood at P0.03/share. This is lower versus 2007 because of lower net income. Consolidated Balance Sheet and Cash Flow Consolidated assets as of December 31, 2008, amounted to P9.4 billion. Its receivables of P2.0 billion increased by 6% as a result of higher trade receivables by P113.6 million from last year. Property and equipment is maintained at P4.2 billion. During the period in review, Goodwill of P256.5 million was reflected in the books from the purchase of SOI. Total liabilities reached P4.8 billion, 17% higher compared to 2007. The increase was a result of higher Interest bearing debt amounted to P1.3 billion in 2008 versus P570.2 million in 2007. The funds were utilized for the expansion of its supply-chain business, the purchase of a vessel under its Cebu Ferries brand and fuel-efficient fast craft vessels under its SuperCat brand. Stockholders’ Equity stood at P4.6 billion, a slight 2% increase over the previous year. Cash generated from operations amounted to P1.1 billion. Total capital expenditures for the period stood at P1.1 billion. The bulk of the capital expenditures were accounted for by the purchase of a vessel under its Cebu Ferries brand and fuel-efficient fast craft vessels under its SuperCat brand. Cash and cash equivalents at the end of the year was at P1.1 billion. 27 Material changes (+/(+/- 5% or more) in the financial statements Income Statement • 9% increase in freight revenues is largely due to higher average freight rates and increased revenues from its subsidiary companies Zoom in Packages and Aboitiz One, Inc. • 4% decrease in passage revenues is due to lower volume and average passenger rates • 418% higher revenues from sale of goods generated by its value added businesses, Scanasia, a company purchased by Aboitiz One, Inc. in June 2008 and Aboitiz One Distribution, Inc. • 28% higher service fees revenues from logistics, warehousing and sales merchandise. • 37% increase in other revenues is due to overall higher passage auxiliary revenues. • 25% increase in total revenues largely from the increase in freight revenues. • 8% increase in operating expenses primarily due to 28% rise in fuel costs • 20% increase in terminal expenses largely due to the 125% increase in transportation and delivery costs which comprises the bulk of the company’s terminal expenses. • 414% increase in cost of sales because of Scanasia, a company acquired in June 2008. • 88% reduction on gain on disposal of property and equipment primarily because of the sale of three vessels in 2007. • 18% lower net finance costs due to lower interest bearing debt for the year. • 141% lower net foreign exchange gain is due to the weakening of the peso against the dollar throughout the year. • 1963% higher equity in net losses of associates is due to the Company’s share in MCC Philippines’ net loss. • 42% higher other income is largely attributable to management fee income rendered to third party entities. • 74% lower income tax principally because of lower taxable income. • 80% lower net income attributable to equity holders of parent largely because of vessel sales in 2007. Balance Sheet • 6% higher net receivables due to higher trade receivables • 39% higher inventories because of higher materials, parts and supplies and higher fuel inventory. • 220% increase in loans payable mainly to finance the expansion of its supply-chain business • 5% higher accounts payable and other current liabilities largely due to higher trade payables All of these material changes were explained in detail in the management’s discussion and analysis of financial condition and results of operations stated above. Other Information Other material events and uncertainties known to management that would address the past and would have an impact on ATS’ future operations are discussed below. i. Total fuel/lubes expense is a major component of ATS’ total cost and expenses. Fuel prices continue to rise amidst turmoil in the Middle East and Africa. Fuel oil MTD May 2011 is US$105/barrel. ATS is constantly looking for ways to reduce fuel consumption to lessen the impact of the increasing fuel prices on the bottom line. ii. Except as disclosed in the management discussion and notes to the financial statements, there are no other known events that will trigger direct or contingent financial obligation that is material to ATS, including any default or acceleration of an obligation. There are also no other known trends, events or uncertainties that have had or that are reasonably expected to have a material favorable or unfavorable impact on revenues or income from operations. 28 iii. All significant elements of income or loss from continuing operations are already discussed in the management discussion and notes to financial statements. Likewise any significant elements of income or loss that did not arise from ATS’ continuing operations are disclosed either in the management discussion or notes to financial statements. iv. There is no material off-balance sheet transaction, arrangement, obligation, and other relationships of ATS with unconsolidated entities or other persons created during the reporting period. v. Seasonal aspects of the business are considered in ATS’ financial forecast. vi. ATS does not expect any liquidity or cash problem within the next twelve months. Capital expenditures are funded through cash generated from operations and additional borrowings. Outlook With its full fleet now in operation, focus will be on maximizing earnings. We aim to continue providing value added services at the lowest cost. Super Ferry vessels, with lower cost per slot can command higher service margins from its frequency, speed, reliability and overall better service. The strengthening of the Peso will help keep the company competitive. We are experiencing a thriving economy, with freight and passenger market growing at 9% and 14% respectively during the period in review. With no scheduled dry-docking in 2011, ATS is poised and ready to capitalize on the growth. Furthermore, ATS, jointly with NENACO, is expected to be a better and stronger company, creating greater value to shareholders. IV. BRIEF DESCRIPTION OF THE GENERAL NATURE AND SCOPE OF THE BUSINESS OF THE REGISTRANT AND ITS SUBSIDIARIES ATS is the only integrated transport solutions provider in the country. Its principal business units are engaged in the movement of people operating under brand names ‘SuperFerry’, ‘SuperCat’, and ‘Cebu Ferries’ and the movement of cargos operating under the brand name ‘2GO’. ATS’ array of services geared towards cargo movements includes containerization, RoRo services, logistics and supply chain solutions. As of December 31, 2010, ATS has a total fleet of 23 operating vessels, of which 19 are company-owned ships. ATS’ was formed and organized in May 26, 1949 under the corporate name William Lines, Inc. It is majority owned by NENACO, one of the oldest domestic shipping companies in the Philippines. Many companies work together to bring the brands of ATS to life. They enable us to deliver on our brand promises. There are instances when two or more companies work together to provide the products and service offered by a single brand, such as the case of 2GO, which has evolved into a total supply chain solutions provider. In 2010, ATS has 9 operating subsidiaries and affiliates, Aboitiz One, Inc. (AONE), Supercat Fast Ferry Corp. (SFFC), Zoom in Packages, Inc. (ZIP), Reefer Van Specialists, Inc., Aboitiz Jebsen Bulk Transport Corporation (ABOJEB), Aboitiz Jebsen Manpower Solutions, Inc. (AJMSI), Jebsen Maritime Inc. (JMI), Jebsen Management (BVI) Limited and MCC Transport Philippines, Inc (MCCP). However, ZIP and RVSI were merged into ATS by way of a statutory merger in July and September 2010, respectively. Further, in December of the same period, the Board of ATS approved to sell its 62.5% equity stake in ABOJEB, AJMSI and JMI to AEV. The Board also approved the sale 50% ownership in JMBVI to ACO. Both sales were a result of the implementation of the terms and conditions for the acquisition by NENACO of AEV’s and ACO’s shares in ATS. 29 Significant Operating Subsidiaries of ATS Aboitiz One , Inc. Business Development AONE was incorporated on July 20, 1978. It is 100% owned by ATS. It is in the business of offering supply chain solutions in accordance with customers’ needs. A-One’s operation is supported by a logistical backbone which comprises delivery vans, motorcycles, trucks and vans, refrigerated trucks and vans, prime movers and trailers. The company has more than 237 retail outlets and agents at various strategic locations nationwide, providing customers easy access and convenience. Through AONE’s subsidiaries, it offers a whole range of 2GO supply chain solutions. Supply chain solutions include warehousing services, transport and logistics, sales and merchandising and trade marketing. AONE Subsidiaries HapagHapag-Lloyd Philippines, Inc. (HLP) HLP was incorporated on April 23, 1992. It is 85% owned by AONE. It is in the business of acting as an agent of Hapag-Lloyd AG, a global shipping container line engaged in global door-to-door container transport. Hapag-Lloyd AG provides global shipping services to major trade lanes such as Europe, Asia, North America, Canada, the Middle East and the South American East Coast. Aboitiz Projects T.S. Corporation (APTSC) APTSC was incorporated on August 5, 1996. It is 50% owned by AONE. It is in the business of project cargo transportation and management, which involves the haulage and transportation of heavy and bulk-sized equipment such as those used in mining, power plants and telecommunication infrastructure. It is a joint venture between AONE and Hansameyer Global Transport Pte. Ltd., a transportation company headquartered in Germany specializing in project transport logistics and engineering project management consultancy. Aboitiz One Distribution Inc. (AODI) AODI was incorporated last January 15, 2007. It is 100% owned by AONE. It is in business of providing complete supply chain management. Scanasia Overseas Inc. (Scanasia) The 100%-purchase of Scanasia in June 2008 completes AONE’s portfolio for a full supply chain solutions provider. Scanasia was incorporated on September 13, 1985. It is in the business of sales, marketing, warehousing and transportation of temperature-controlled and ambient food products to its customers in the Philippines. It is the Philippines’ premier chilled distributor carrying approximately 80% of the products in the chiller section in any supermarket today. It currently represents 19 international principals carrying 46 brands and 4 domestic/local principals carrying 39 brands. Scanasia has nationwide coverage for both retail and foodservice segments. Scanasia is considered as brand builders versus regular trading companies. 30 Kerry – Aboitiz Logistics Inc. (KALI) KALI was incorporated in March 30, 2009. It is effectively 51% owned by AONE. It is engaged in the business that aims to offer innovative, cost effective and reliable services on international air and sea freight and cargo forwarding, cargo consolidation, as a project cargo and break bulk agent, warehousing and distribution, trucking and door-to-door delivery. With the global clout of Kerry Logistics and the domestic dominance of ATS, KALI is poised to provide better service to its clients Supercat Fast Ferry Corporation SFFC was incorporated on June 20, 2001. It is 100% owned by ATS. It is in the business of providing fast craft passenger services under the SuperCat brand name. At present, SFFC operates six fast craft vessels with a total gross weight of 1,355 tons and a total passage capacity of 1,484 passengers. Its vessels service the ports of Cebu, Ormoc, Tagbilaran, Batangas and Calapan. MCC Transport Transport Philippines, Inc. MCCP was incorporated on May 11, 2007. It is 33% owned by ATS. It is in the business of providing containerized services in the Philippines. Vessel Fleet As of December 31, 2010, ATS has a total fleet of 19 company-owned operating vessels. The fleet consists of 7 fast crafts under the brand name ‘SuperCat’, 10 RoRo/Pax vessels including 6 under the ‘SuperFerry’ brand, 4 vessels under ‘Cebu Ferries’ brand, and 2 freighters under the ‘2GO’ brand. ATS vessel fleet has a combined Gross Registered Tonnage of approximately 98,849 metric tons, total passenger capacity of approximately 14,164 passengers and aggregate cargo capacity (including those under MCCP, a joint venture of the registrant) of approximately 4,168 twenty-foot equivalent units (TEUs). Land, Buildings and Warehouses The Company owns several pieces of land and a number of buildings and warehouses. These are used in the normal course of business. Details of said properties are attached to the Company’s SEC Form 17-A under Schedules E.1 and E.2. Ports of call ATS’ extensive presence throughout the country is carried out through its branch operations and agency networks. These are located primarily in Bacolod, Batangas, Butuan, Cagayan de Oro, Calapan, Cebu, Cotabato, Davao, Dumaguete, General Santos, Iligan, Iloilo, Manila, Nasipit, Ormoc, Ozamis, Surigao, and Zamboanga. Market Share As of December 31, 2010, ATS continues to dominate the Philippine Sea Travel with 63% market share in the passage service specifically in ports that they serve. Freight market share is estimated at 44%. Legal Proceedings There are certain legal cases filed against ATS and its subsidiaries in the normal course of business. Management and its legal counsel believe that they have substantial legal and factual bases for their position and are of the opinion that losses arising from these cases, if any, will not have material adverse impact on the consolidated financial statements. 31 V. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Names and Business Background of the registrant’s directors and executive officers are discussed in the information statement on page nos. 5-8. VI. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS A. Market Information Information The Common Stock of the Corporation is listed at the Philippine Stock Exchange. As of latest market date, April 30, 2011, the market price of the Company’s common stock is P1.92 per share. Below is the range of high and low bid information for the Company’s common equity for each quarter within the last two fiscal years and any subsequent interim period: B. High Low 2011 First Quarter P = 1.95 P = 1.77 2010 First Quarter Second Quarter Third Quarter Fourth Quarter P = 1.20 1.18 1.24 2.14 P = 1.02 1.02 1.09 1.09 2009 First Quarter Second Quarter Third Quarter Fourth Quarter P = 1.62 1.66 1.34 1.22 P = 1.42 1.20 1.16 1.12 Stockholders The number of common shareholders of record as of April 30, 2011 was 1,994. stockholders as of April 30, 2011 are as follows: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. Name Negros Navigation Co., Inc. PCD Nominee Corporation (Filipino) Francis C. Zosa, Jr. Union Properties, Inc. Abacus Securities Corporation Santiago Tanchan III Constantine Tanchan PCD Nominee Corporation (Foreign) Harrison Abella Ong Ramon Rivero Fast Cargo Transport Corp. Union Bank of the Philippines Philips Multiemployer Retirement Plan Prudential Guarantee & Ass Inc. AMA Rural Bank of Mandaluyong, Inc. Alexander J. Tanchan Ramon R. Rivero Elizabeth Chiu No. of Shares Held 2,400,141,995 10,285,114 7,200,000 1,578,125 1,530,000 1,262,500 1,262,500 1,199,243 890,062 757,500 744,875 744,875 631,250 458,287 441,875 430,260 404,000 378,750 The top 20 common % to total 98.12 0.42 0.29 0.06 0.06 0.05 0.05 0.05 0.04 0.03 0.03 0.03 0.03 0.02 0.02 0.02 0.02 0.02 32 19. Iker Aboitiz 20. Francisco Benedicto C. 372,389 349,125 0.02 0.01 Dividends Declaration In December 01, 2010, the Board approved the declaration of a special cash dividend equivalent to P0.15 per share to all ATS stockholders of record as of December 15, 2010. The special cash dividend represents the sales proceeds of the Aboitiz Jebsen companies net of taxes and other related costs. Dividends were paid last January 12, 2011. Further, there were no dividends declared during the period 2008, 2009 and the 1st quarter of 2011. VII. CORPORATE GOVERNANCE There have been studies relating managerial behaviour and organizational performance to good corporate governance. While academic research and institutional studies have very limited explanatory power to draw substantive conclusions about the impact of corporate governance on corporate performance, there is plenty of hard evidence to show that investors pay more for wellgoverned companies. There is also widespread recognition on the importance of transparency and accountability both in government and in the business community. As businesses continue to open up to the global market and liberalization happens, the decisionmaking process becomes more diffused. This brings up the level of accountability of corporate leaders to all their stakeholders, including employees, customers and in particular, their shareholders. In ATS, no less than the Board of Directors, at the top of the company’s corporate governance structure, who takes the lead. It is the Board who is tasked to strike a balance between conformance and performance; long-term strategy and day-to-day operations; form and substance. The Board is the key to the success of any corporate governance directive. BOARD STRUCTURE They say that the Board is only as good as the people who form it. Up until the ATS buyout in December 28, 2010, the ATS Board was composed of nine (9) members, two (2) of which are independent directors highly respected in the industry. Jon Ramon M. Aboitiz, Chairman Bob D. Gothong Enrique M. Aboitiz, Jr. Erramon I. Abotiz Roberto E. Aboitiz / Mikel A. Aboitiz Justo A. Ortiz Sabin M. Aboitiz Washington Z. Sycip, Independent Director Emily A. Abrera, Independent Director Roberto E. Aboitiz was officially replaced by Mikel A. Aboitiz as Director during the Board meeting held May 27, 2010. A new board was formed upon the completion of the ATS sale to NENACO. Jon Ramon M. Aboitiz, Chairman Sulficio O. Tagud, Jr. Jeremias E. Cruzabra Mark E. Williams Michelle Lu 33 Enrique M. Aboitiz, Jr. Bob D. Gothong Francis Chua, Independent Director Amb. Raul C. Rabe, Independent Director BOARD MEETINGS In the January 27, 2011 report to the SEC, the ATS Corporate Secretary’s Certification on Directors’ Attendance in Board Meetings summarized the attendance record of the members of the Board of Directors of the corporation for the period January 1, 2010 to December 28, 2010. Director Jan 21 P P P P P P P P P NA NA NA NA NA NA NA Feb 10 X P P P X X P X P NA NA NA NA NA NA NA Feb 26 P X P P P P P P P NA NA NA NA NA NA NA Mar 25 P P P P P P P X P NA NA NA NA NA NA NA Meetings Held in 2010 May Jul Sep Nov 27 29 14 11 P P P P P P X P P P P P X P X P NA NA NA NA P P P P P P P P X P P P P P P P NA P X P NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA Dec 01 X P X X NA P P P P X NA NA NA NA NA NA Dec 28 P P P P NA X P X X P P P P P P X P/M Jon Ramon M. Aboitiz 8/10 Bob D. Gothong 8/10 Enrique M. Aboitiz, Jr, 9/10 Erramon I. Aboitiz 7/10 Roberto E. Aboitiz 3/4 Justo A. Ortiz 8/10 Sabin M. Aboitiz 10/10 Washington Z. Sycip 6/10 Emily A. Abrera 9/10 Mikel A. Aboitiz 3/5 Sulficio O. Tagud, Jr 1/1 Jeremias E. Cruzabra 1/1 Raul C. Rabe 1/1 Michelle Lu 1/1 Mark E. Williams 1/1 William Moses 0/1 P = Present X = Absent M = Maximum Number of Meetings that the relevant Board Member could have attended during the period January 1 to December 28, 2010 NA = “Not Applicable” because the Board Member was not a member of the Board during the relevant meeting date. BOARD COMMITTEES The Board has three (3) committees—the Nomination and Compensation Committee, the Audit and Corporate Governance Committee, and the Risk Management Committee. The Board and its committees oversee and advise management in developing the company’s financial and business goals, oversee its public disclosures and the processes behind them, and evaluate management's performance in pursuing and achieving those goals. NOMINATION AND COMPENSATION COMMITTEE The Nomination and Compensation Committee is mainly responsible for • Establishing the criteria for the selection of directors and senior management and recommend Board nominees and committee membership. • Establishing the overall compensation philosophy of the company including directors and employee compensation, benefits and incentive plans. 34 This committee is likewise is responsible in reviewing the management development and succession policies. In 2010, the committee membership was as follows: Chairman Members : Jon Ramon M. Aboitiz : Enrique M. Aboitiz, Jr. Emily. A. Abrera, Independent Director Xavier Jose Aboitiz, Ex-Officio member Lilian P. Cariaso, Ex-Officio member Mr. Xavier Jose Aboitiz is the Senior Vice President for Human Resources of Aboitiz Equity Ventures, Inc. (AEV). Ms. Lilian P. Cariaso is the Executive Vice President, Chief Financial Officer and Chief Resource Officer of ATS. Starting January 2011, the appointed members of the committee are as follows: Chairman Members : Sulficio O. Tagud, Jr. : Michelle Lu Mark E. Williams AUDIT AND CORPORATE GOVERNANCE COMMITTEE The Board Audit and Corporate Governance Committee has oversight function over the audit activities performed by the company’s internal auditors and the nominated external auditor for the year. The committee oversees internal and disclosure controls and procedures. The committee also takes the lead in promulgating and overseeing the principles of corporate governance by reviewing committee charters, directors’ independence as well as code of ethics for executives, employees and directors. Composition The Board Audit and Corporate Governance Committee is composed of three (3) board members, one (1) of which is an independent director and two (2) ex-officio members. Chairman Members : Washington Z. Sycip, Independent Director : Justo A. Ortiz Sabin M. Aboitiz Stephen G. Paradies, Ex-Officio member Lilian P. Cariaso, Ex-Officio member Stephen G. Paradies is Senior Vice President and Chief Finance Officer of AEV. For 2011, the new Board Audit and Corporate Governance Committee is as follows: Chairman Members : Francis C. Chua, Independent Director : Michelle Lu Mark E. Williams Geoffrey Seeto, Ex-Officio member Evan C. McBride, Ex-Officio member Committee Meetings The Audit and Corporate Governance Committee met three (3) times in 2010. All three meetings were duly attended by the committee members. 35 In its meetings, the committee tables for discussion the audit master plan for the year; the highlights of internal audit results and the corresponding action plans; the performance of the internal audit team; the selection and approval of the external auditor for the year and their audit timetable; and the presentation and endorsement for Board approval of the prior year’s audited financial statements. In the presentation of the audit master plan for the year, the committee reviews and assesses the robustness of the audit risk assessment methodology used by internal audit as this becomes the basis in allocating its limited manpower resources to auditable units that are rated to be comparatively riskier than others. A detailed Audit Committee Report for 2010 is presented in a subsequent section. RISK MANAGEMENT COMMITTEE The ultimate accountability over risk oversight and risk management in the organization rests with the Board. However, the Risk Management Committee, as a Board subcommittee, is responsible in leading the organization’s strategic direction in the management of material business risks such that leaders are able to make informed decisions. The committee also provides oversight for the establishment, implementation, and effectiveness review and assessment of the company’s risk management framework. The ATS Risk Management Committee in 2010 was composed of the following: Chairman Members : Bob D. Gothong : Enrique M. Aboitiz, Jr. Mikel A. Aboitiz Washington Z. Sycip, Independent Director Rolando C. Cabrera, Ex-Officio member Lilian P. Cariaso, Ex-Officio member Annacel A. Natividad, Ex-Officio member For 2011, the composition of the Risk Management Committee has been nominated as follows: Chairman Members : Amb. Raul C. Rabe, Independent Director : Enrique M. Aboitiz, Jr. Michelle Lu Geoffrey Seeto, Ex-Officio member Evan C. McBride, Ex-Officio member EXECUTIVE EXECUTIVE COMPENSATION POLICY Meritocracy based. This is the corporate compensation philosophy for executive remuneration in ATS. Commensurate compensation is given based on the annual performance evaluation of its executives. Any change in compensation is subject to full discussion and concurrence by the Board upon the review and recommendation of its Board Nomination and Compensation Committee. COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT The table of the monthly fixed allowance and per diem per meeting attendance of the ATS Board of Directors in 2010 is shown below. Compensation Monthly Fixed Allowance Board Meeting Per Diem Committee Meeting Per Diem Director P80,000 P30,000 P30,000 Chairman of the Board P120,000 P45,000 36 Total compensation paid/accrued for services in all capacities provided by the Directors and ATS Senior Management during the year ended December 31, 2010 amounted to P65.3 million. This covers basic salary, the statutory 13th month pay and the performance bonus. BOARD SELFSELF-ASSESSMENT In 2009, ATS adopted another corporate governance measure—the Board Self-Assessment Survey. The goal of the self-assessment survey is to further enhance board performance and thereby strengthen corporate management. The survey allows the Board and its committees to assess their effectiveness in governance both as individuals and as a group. The self-assessment also helps the Board to meet standards and expectations imposed on them by the people they are supposed to serve—investors, shareholders—as well as regulatory bodies. In 2010, the same survey was conducted. The results are as follows. Directors who Participated in the Survey (9 of 9) % Participation Individual Assessment 9 100% Group Assessment 9 100% The results of the Individual Assessment survey revealed, among others, that all board members have formally attended the corporate governance seminar and each ensure that principles of good corporate governance are complied at all times. The board members act in the best interest of the company and its stakeholders in a manner characterized by transparency, accountability and fairness. They also keep themselves informed of industry developments and business trends. Each member thinks they have contributed in formulating the overall strategic direction of the company but believes it can be further improved. The results of the Board Performance Assessment survey showed overall satisfaction in board performance. The board has been described to have an open atmosphere, with members always willing to discuss any issue that comes up. Within its satisfaction are frequency of board meetings, relevancy of the agenda and discussion points and the well-prepared, clear, concise and accurate materials that members receive five days before the scheduled meeting. Most members of the board have shown preference in a yearly evaluation of the Board, CEO and officers. They also wish to visit company facilities and encourage managers and line leaders (vs management executives) to present to the Board for additional insight. Moving forward, the Board's time and attention should be more focused on the sustainability of each subsidiary and the Group. This includes cost effectiveness and future profitability, strengthening of balance sheet and lowering debt as well as the competitive advantages of both the company and the various industry segments it operates. Discussion should also be centered on risk management, overall strategic direction and corporate social responsibility. PRESENTATION OF RESULTS AND ANALYSTS MEETING The Company’s financial results are presented to its investors and other interested parties during the Annual General Stockholders Meeting, the last of which was held at the Mandarin Oriental Hotel in Makati City on May 27, 2010. Also, the ATS Investor Relations Office together with selected finance leaders hold Quarterly Briefings with analysts from various financial institutions to keep them abreast on the performance of the company. Advance announcements for both these meetings are done through a regulatory release as well as through the web. 37 The ATS website www.atsc.com.ph serves as the venue to release the results of business operations that include the Annual Financial Report, Quarterly Analysts Briefing, SEC filings and PSE disclosures. Information in the web provides equal access opportunity to all ATS stakeholders and the general public. SOCIAL RESPONSIBILITY In the pursuit of the mission to become more responsible corporate citizens, efforts of ATS on corporate social responsibility programs for 2010 were geared towards three (3) main areas: education, social advocacy and environmental protection and rehabilitation. CODE OF BUSINESS CONDUCT The ATS Code of Business Conduct serves to guide employees actions aligned with the Company’s corporate values. The Code consists of policies relating to ethical and legal standards of behaviour that ATS expects of its employees. Its applicability extends to all the business units in the organization. The Code explicitly states the corresponding disciplinary actions that include suspension and termination for violations committed against company policies and the Code. WHISTLEBLOWING For several years now, ATS has given its employees the opportunity to access in good faith, thru its intranet-based Bureaucracy site, key leaders in management when they observe unethical and improper practices or any wrongful conduct in the organization. Unethical and improper practices shall mean any act or manner of behaviour that does not conform to the approved standard of social and professional behaviour covered in the company’s Code of Conduct. Confidentiality of the whistleblower is maintained to the greatest extent possible to ensure, not just the integrity of the employee and but of the intranet site as well. A separate channel is open to employees who want to report observations related to unlawful and/or criminal acts as well as health and safety violations that pose a threat to the well-being of an employee or to the security and reputation of the business. T his channel is also available in the corporate intranet as the Security, Safety and Compliance Office Incident Report System (IRS). CORPORATE GOVERNANCE SCORECARD While companies are not expressly mandated to comply with recommended best practices on corporate governance, the “comply-or-explain” approach employed by the SEC and PSE through its Corporate Governance scorecard and disclosures definitely exerted pressure for companies to comply. For the past 4 years, ATS has participated in the assessment of corporate governance standards and practices of publicly listed companies. This is an annual appraisal conducted by the Institute of Corporate Directors in partnership with the Securities and Exchange Commission. ATS corporate governance scorecard has improved from its 70% rating in 2007 to 90.3% in 2009 or from a second quartile ranking up to the Silver Category. The company is waiting for its 2010 scorecard. The improvement is a testimony of the company’s unwavering pursuit of systemic corporate governance reforms within the organization. OUTLOOK For any company, more so for publicly listed companies such as ATS, the practice of good corporate governance is believed to bring about added shareholder value. Thus, there is a willingness to pay a premium for well-governed companies. 38 Under the new management, there is assurance to uphold the same level of commitment to the standards and principles of good corporate governance. The direction is to lead the business to a healthy and robust future as businesses become more complex and as markets become more open and global. FURTHER INFORMATION The following are available on www.atsc.com.ph/IR/governance • ATS Corporate Governance • ATS Articles of Incorporation • ATS Code of Business Conduct • ATS By-Laws • ATS Anti-Money Laundering Statement of Policies & Procedures INFORMATION TECHNOLOGY GOVERNANCE As the business environment becomes more challenging, IT has to stay relevant in order to support the strategy and the requirements of the business. Cost Management In 2010, ATS IT continued with its efforts to optimize investments and reduce cost without sacrificing existing capabilities. Even as the IT team posted budget savings, they were able to deliver 88 projects that made business processes more efficient, improved the maturity level of IT processes, and helped reduce costs. Some of the cost reduction initiatives were: a) Virtualization which is a means of maximizing the existing servers by running more applications in them. b) Adoption of Open source technologies resulting in savings in license costs. c) Network rationalization which aims to reduce network bandwidth costs. The next wave of IT cost management strategies includes looking at more opportunities to use Public Cloud Computing, Software-as-a-Service (Saas), and simplifying the systems in ATS. The ongoing integration in 2GO gave opportunity to the development of a new IT architecture roadmap, which was aptly called One2Go. The end objective of the One2Go project is to improve customer service, help key users make better decisions, and reduce overall operational cost. All these can be made possible through better information management and reporting, and simplifying the IT architecture. There is a similar roadmap for the passage business’ main system called Nexus. Part of the roadmap is the Ticket-less project which is targeted to be completed in 2011. The project is good for the environment by using less paper. It also makes ticket purchase more convenient for our customers. Technology obsolescence will always be an issue in any organization and it needs to be addressed responsibly. If not done, it may affect the availability and reliability of our critical systems that are used to serve our customers. The strategy of ATS for the past years has been to replace old servers gradually. It also started upgrading its Oracle databases and application server software to more recent versions. This is just one of the many initiatives in support of our Enterprise Risk Management program. 39 Governance As part of the IT Governance program, the Company undertook major initiatives to address audit and risk management issues. First, we engaged a consultant for the enhancement of IT’s Disaster Recovery Plan (DRP). Second, the Company went into the documentation of Policy Standards Procedure Guidelines (PSPG) of IT process improvements, including Project Management methodology and Software Development LifeCycle (SDLC). And finally, the Company introduced the IT Balanced Scorecard that will serve as feedback mechanism on IT’s overall performance. Since the key to all these accomplishments is the many talents in ATS IT, the Company maintains an environment of continuous learning, attractive compensation, and practice of meritocracy in the Company’s IT team. This resulted in a manageable 7.7% attrition rate in IT in 2010. Innovation The role of IT in ATS has slowly evolved to include new capabilities that help the business units find ways to innovate. With approval from top management, the newly-created IT Innovation Team has launched a project that will support 2GO’s retail business. This state-of-the-art technology will serve as a vehicle in forging new partnership prospects with other companies, partnerships that will soon deliver new and exciting services to every Filipino and bring in additional revenues for ATS. The Information Technology of ATS continuously adapts to the changing business landscape and will endlessly introduce and foster the use of IT and technology-enabled innovations that are of strategic value to the business as the Company transforms into a new and better organization. ENTERPRISE WIDE RISK MANAGEMENT PROGRAM With the objective of keeping the focus on raising Enterprise Risk Management (ERM) awareness throughout the whole organization, ATS Risk Management Team started the development of Strategic Risk Management. Strategic risk management encompasses all activities intended to identify risks, solve problems, adapt to change, and successfully execute plans. Risk is now viewed not merely on losses and damages but more importantly becoming a tool in achieving the corporate objectives, realizing opportunities present in identified risks and shifting focus from preventive activities to more pro-active approach supporting frontlines on its objectives. With the integration of several subsidiary companies into ATS, operational risks were also reviewed there were risks which were downgraded as a result of the implementation of the action plans to mitigate the identified risks. Each business unit has appointed a Risk Management champion and they are monitoring their own respective identified risks, ensuring that risk actions were properly implemented. There are two major programs under ERM that is being held annually in ATS, focusing on vessel operations and training of vessel officers and crew. First is the Vessel Performance System (VPS). It is a “Friendly” competition between vessel crew, both technical and hotel management, in search of the best over all managed vessel in the ATS Fleet. The objective of VPS is to improve overall performance of vessels on 4 major areas: Vessel Maintenance Vessel, Crew and Passenger Safety, Security and Passenger Satisfaction. Insurers have shown favorable interest on this. The winner in 2010 is SuperFerry 1. The other program is the Vessel Officers Conference. It is an annual gathering of vessel officers, with focus on strengthening Vessel Officers’ expertise on handling our vessels. It also provides updates on vessel operations and management, since this event is also attended by representatives from Freight, 40 Passage and Shipmanagement. It is also an avenue for discussion of vessel-related issues and eventually providing solutions. In 2010, carrying the theme “Developing Resilient Vessel Officers through Fostering Accountability”, ATS Vessel Officers Conference succeeded in getting the commitment of vessel officers to be more accountable in their actions and be better prepared to face future challenges. AUDIT COMMITTEE REPORT The Board Audit Committee (AudCom) is an independent operating body directly reporting to the Board of Directors. It assists the Board in the carrying out its functions by providing an oversight role in ensuring the integrity of the company’s financial reports, its compliance with regulatory requirements, and the performance of the company’s internal audit function. The AudCom maintains an effective working relationship with the Board by providing them information necessary in making good governance and audit-related decisions. Membership The Board Audit Committee is composed of three (3) Directors and two (2) Ex-Officio members. Prior to the ATS buyout by NENACO on December 28, 2010, the Board AudCom members are as follows: Washington Z. Sycip, Chairman, Independent Director Sabin M. Aboitiz, Director Justo A. Ortiz, Director Stephen G. Paradies, Ex-Officio Lilian P. Cariaso, Ex-Officio Under the new ownership, the Board AudCom for 2011 has been appointed and named as follows: Francis C. Chua, Chairman, Independent Director Michelle Lu, Director Mark Williams, Director Geoffrey Seeto, Ex-Officio Evan McBride, Ex-Officio Meetings The Board AudCom held three (3) meetings in 2010. All meetings were attended by the AudCom members. Committee Member Washington Z. Sycip Sabin M. Aboitiz Justo A. Ortiz Feb 25 July 29 Nov 25 In its first meeting for the year, the AudCom reviews, discusses and endorses for Board approval the previous year’s Audited Financial Statements of ATS presented by the company’s external auditing firm. The following are likewise presented to the AudCom in February—the general assessment of the company’s internal control system and the internal audit plans and programs for the year. In subsequent meetings, internal audit reports are presented and discussed extensively. For 2010, discussion highlights were focused in the areas of vessel and passenger safety and security as well as new systems-related audits particularly the implementation of SAP in its supply chain businesses. The selection and approval of the external auditor for the year is agreed upon and endorsed to the Board during the AudCom’s midyear meeting. 41 General Assessment of Internal Controls The framework of control, risk management and governance processes are generally sound, adequate and working effectively within the ATS group of companies. The culture of accountability is apparent with the general adherence of employees to management policies and directives in order to achieve company objectives. The internal control system is effectively designed to safeguard assets; to secure the relevance, reliability and integrity of information and as far as possible the completeness and accuracy of records; and to ensure compliance with statutory requirements. For 2010, while most business units posted increases in their audit ratings compared to the previous year, the less-than-satisfactory results of the supply chain finance and SAP systems audits pulled down the total group average rating. Various measures are being undertaken by management including organizational restructuring across all business units to allow streamlining of functions for the effective execution of responsibilities. Continuous enhancement of performance metrics, strict implementation of KPI monitoring, and speedy resolution of audit issues raised are likewise given focus to assure company objectives are met. Moving forward, ATS management is responsible in maintaining the internal control system and ensuring that resources are properly applied in the manner and to the activities intended. The AudCom is pleased to note that the business units have been proactive in addressing recommendations with regards to the enhancement of the internal control environment. Risk Management Risk management is fast becoming an ingrained concept and way-of-life in the organization. However, the establishment of a comprehensive Business Continuity Plan remains a major area that needs top management support and directive to see it to completion. Corporate Governance Good corporate governance is practiced not because it is required by law but because it promotes ATS core values of transparency, openness, and accountability. For ATS, corporate governance and a value-oriented management are pillars of business resilience. ATS’ adherence to good business practices is evidenced by the results of the annual nationwide corporate governance scorecard conducted by the Institute of Corporate Directors. From a 70% rating in 2007, the ATS score has improved to 90.3% (Silver Category). External External Audit In July 2010, the AudCom endorsed for Board approval the renewal of SGV as the company’s external auditor for the year 2010. SGV and Co, the external auditor of ATS, provided an overview of the audit work to be conducted for the 2010 statutory audit during the November AudCom meeting. The audit work focused mainly on audits of internal controls and how these safeguard the financial reporting including the financial statements of the company. 42 Noteworthy, in compliance with corporate governance policy, SGV reported during the November 2010 meeting, that it will be replacing its Lead Financial Audit Partner, Ladislao Z. Avila, in 2011 as it is his fifth year as SGV partner assigned to ATS. 2010 Financial Results During the period covered by this report, the new Board AudCom concurred with the opinions expressed by ATS’ external Auditor, SGV and Company, on the overall presentation of the financial statements of the company. The audit also included an evaluation of the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management. The audit concluded that the balance sheets and the related statement of income and expenses, cash flows, changes in capital and reserves present fairly, in all material aspects, the financial position of ATS. Based on the judgment about quality of accounting principles, SGV disclosed that the accounting principles used by ATS are in compliance with the Philippine Financial Reporting Standards. Significant accounting principles are disclosed in the notes to the financial statements, as required by the standards. Internal Audit In accordance with established Standards and Code of Ethics of the profession, the Internal Audit Department (IAD) continually strives to improve the proficiency, effectiveness and quality of the Internal Audit activities. The IAD reported to the Board AudCom, in its meeting held March 02, 2011, the annual general assessment of the company’s compliance and procedures. Highlights on the validation of the operational effectiveness of key activities and controls within these policies and procedures were likewise presented. The assessment focused on policies and procedures relating to processes in finance, operations, and IT systems. A summary update on management action plans for audit issues raised requiring follow-up was also presented. The accomplishments realized by IAD in 2010 were not without difficulties. There were a number of constraints and limiting factors such as unfilled manpower plantilla and underestimated number of man days to cover engagements for first-time audits and new auditable units. Despite above operational challenges and with available resources at hand, IAD continued to deliver its value-adding services to help improve operations; to serve the shareholders and management of ATS; to partner with the business units in enhancing current performance and future competitiveness, and to supply a source of future management talent and be an active participant in the improvement of ATS. Approval Approved by the ATS Board Audit Committee and signed on its behalf by: Mr. Washington Z. Sycip Chairman, ATS Board Audit Committee 43 Name and Address – Request for SEC Form 1717-A Annual Report Any Stockholder, upon request, will be provided with a copy of the Company’s Annual Report in SEC Form 17-A without charge. The name and address of the person whom such written request is to be directed is as follows: LILIAN P. CARIASO CHIEF FINANCE OFFICER ABOITIZ TRANSPORT SYSTEM (ATSC) CORPORATION CORPORATION 12/F TIMES PLAZA BUILDING U.N. COR TAFT AVE., ERMITA, ERMITA, MANILA This Information Statement and the Annual Report in SEC Form 17-A will be posted at ATS’ website: http://www.atsc.com.ph http://www.atsc.com.ph 44 45
© Copyright 2024