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ANNUAL REPORT BOARD OF DIRECTORS MANAGEMENT AND EVALUATION ON CORPORATE GOVERNANCE

Board of Directors No. 255

CORPORATE AUDIT

FEBRUARY 27, 2015

Board of Directors Management and Evaluation Report on Compliance with Good Governance Practices – Corporate Audit

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CONTENT

INTRODUCTION ....................................................................................................... 3

Overall Objective ....................................................................................................... 4

Specific Objectives .................................................................................................... 4

Scope ........................................................................................................................ 4

General Procedure for the Evaluation ....................................................................... 4

I FOLLOW-UP ON THE 2014 EVALUATION ACTION PLAN .................................. 5

II OTHER IMPROVEMENTS IN PRACTICES DURING 2014.................................. 6

III CORPORATE GOVERNANCE PRACTICES EVALUATION 2014 ...................... 7

OVERALL CONCLUSIONS ..................................................................................... 48

ANNEX .................................................................................................................... 49


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INTRODUCTION When we talk about Corporate Governance in ISAGEN, we are referring to the set of principles, values and practices that govern relationships of authority and decision-making, and thus we recognize and respect the rights of shareholders and investors, we declare the transparency of our management and are open in providing information concerning the business, seeking the sustainability of the Company in the long term. According to Corporate Bylaws, among the responsibilities of the Board of Directors are the following: approving the Company's Corporate Governance practices, evaluating them and enforcing their fulfillment. According to the Board Agreement and the Audit Committee Bylaws, it is a function of the Audit Committee to support the Board of Directors, among others, in evaluating compliance with corporate governance practices and in providing the Board with a Management and Evaluation Report on Corporate Governance practices, to be presented at the Shareholders' Assembly. According to the Organizational Audit Mission and Organizational Audit Bylaws, compliance with the corporate governance practices that the Organization has defined or adapted should be evaluated, taking into account international benchmarks. In compliance with the above function, the Corporate Governance practices conducted by ISAGEN during the period 1 January to 31 December 2014 were evaluated by Organizational Audit and the Statutory Auditor in relation to Control Mechanisms.


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Overall Objective To verify compliance with Corporate Governance practices in ISAGEN.

Specific Objectives

• To verify how decisions are made on a day-to-day basis and that governance criteria are complied with (transparently and in accordance with the authorizations given)

• To verify that the Corporate Governance practices defined in ISAGEN are properly implemented

• To assess knowledge and application by ISAGEN Executives, Managers and Employees of the Corporate Governance practices

Scope To verify compliance with Corporate Governance practices in ISAGEN.2014.

General Procedure for the Evaluation The Evaluation of Practices was carried out considering the following methodology: Código País (Country Code) Survey: A survey was performed on the degree of adoption regarding the measures suggested in the Code of Best Corporate Practices, as defined in Circular 028 of 2007, from the Financial Superintendence of Colombia. Self-Assessment Questionnaires on Transparency: A self-assessment questionnaire was given to all employees, whose purpose was focused on evaluating behavioral transparency practices regarding: Conflicts of Interest, Stock Trading, Business Ethics, control and prevention of money laundering, and verifying the extent to which they know and have complied with the guidelines established by the Company through the Corporate Governance Code, the Declaration of Ethical Behaviors and Manual on Response to Unethical Situations. It also sought to identify which aspects could be improved upon. Also, a second questionnaire was incorporated this year intended exclusively for the Directors of ISAGEN who are accountable for compliance with Transparency Practices of their employees, prevention of fraud risk and management of situations that may give rise to conflicts of interest in relation with the manner they manage these matters with their Teams so that they may reflect on such issues. Evaluations and monitoring: Aspects of Corporate Governance were verified as control points in internal evaluations conducted by the Organizational Audit team and external control bodies. Additionally, monitoring was conducted on the results of the Company's management, the Balanced Scorecard (BSC) and requests, complaints and claims from stakeholders, among others. .


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I FOLLOW-UP ON THE 2014 EVALUATION ACTION PLAN As a result of the previous evaluation, the actions implemented in 2014 are set out below:

The implementation of the Fraud Risk Management Project was completed, which becomes a Program under the responsibility of Organizational Audit, through the Compliance Management Work Group. In Audit Committee meeting No. 109 the Organizational Audit Work Plan was approved, which includes the “Compliance Management Plan” as one of its main activities.

The Protocol was developed for Fraud Investigation, which consists in defining a procedure for any investigation to meet all required formalities.

The “Devolution of Balances to Shareholders” Work Plan continued with the purpose of managing devolution of balances derived from the execution of the ISAGEN Shares Sale Program that was carried out in the year 2007.

The identification of risks, causes and controls of the operating and strategic layers was strengthened through risk matrix updating workshops. Similarly, organizational risks were reviewed in the Management and Audit Committees, added to pertinent training and a week dedicated to training on Integral Risk Management at ISAGEN.


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II OTHER IMPROVEMENTS IN PRATICES DURING 2014 Among the practices implemented during 2014 as improvements, the following are highlighted: In Board Meeting No. 243 of April 2014, in order to incorporate measure 33 of the

Codigo Pais (Country Code) issued by the Finance Superintendence of Colombia, the in house (in situ) Protocol for Management of Conflicts of Interest was amended, providing for the Board members to declare any actual or potential conflicts of interest they may be involved in and to also include in such declaration any contracts that they, or their related parties, have with ISAGEN.

Pursuant to the provision set out in Board Meeting No. 214 held on February 27,

2014 (and General Shareholders Assembly 033 of 25 March 2014), a new function for the Board of Directors in set out, which becomes section 37 of article 16 in the Board of Directors Regulations, consisting in setting guidelines relative to organizational sustainability.

The Board Affairs Committee was renamed as Management and Corporate Governance Committee, in accordance with the update of Agreement 135 of 2013 (regulations of the Board of Directors). Similarly, a new function is assigned to said Committee, which consists in monitoring and offering recommendations relative to Corporate Sustainability and Engagement with Stakeholders to the Board of Directors.

Pursuant to that provided for in Board Meeting No. 243 of 24 Aril 2014, the renaming of the Organizational Audit team to Corporate Audit and, further, the Compliance Management Team is created.

In October, the Shareholder Day took place in Bogota and Medellin, which is an opportunity to share different issues related to management of the business and to listen to the shareholders’ concerns. Three main topics were discussed: Social and Environmental Management; interpretation of Financial Statements; Dialogue and Commitment of ISAGEN with its Shareholders.

Strengthening of engagement with “Retail” shareholder practices, which implied improving relations with commercial advisors of stockbrokers, as they are the intermediaries between the stockholders and the issuers. Therefore, the following activities were carried out with positive results:

Better acquaintance with stock brokers

Confirmed effectiveness of activities carried out by ISAGEN, aimed at identifying the needs and preferences of the stakeholders concerning engagement practices.

The General Manager met with retail stockholders of Valores Bancolombia, introducing the Company and its future strategy.

During 2014 engagement continued with Stock Market Analysts in relation with their knowledge about ISAGEN’s business, both in person and via the Web.

The Compliance Management Work Group was created, whose mission is to verify regulatory compliance and external commitment activities of the Organization,


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intended to contribute to ensuring compliance with its external and internal regulations.

ISAGEN, through the General Secretariat, offered to all workers an online course on Corporate Governance, specifically focused on employee obligations related to Conflicts of Interest; Negotiation of ISAGEN Securities; prevention of engagement risks; negotiations with economic associates; disclosure of information and management of confidential information.

III CORPORATE GOVERNANCE PRACTICES EVALUATION 2014

At December 31, 2014, the number of shareholders was 28,525, representing a decrease of 6.37% compared to December 31, 2013 as follows:

Shareholders at December 31, 2013: 30.466

Shareholders at December 31, 2014: 28.525

Percentage change (decrease): 6,37%

NAME TOTAL

SHARES % SHARE

Ministry of Finance and Public Credit 1,570,490,767 57.61%

EPM 358,332,000 13.14%

Pension Funds 335,976,496 12.32%

Local minority shareholders 265,813,957 9.75%

Foreign minority shareholders 195,458,780 7.17%

Total 2,726,072,000 100.00%

Within the sale process commenced in the year 2013, supported by the Nation through Decree 1609/2013, later amended by Decree 2316/2013 in relation with the sale price of shares, the First Stage of the Sale and Award of Shares owned by the Nation, Ministry of Finance and Public Credit) in ISAGEN S.A. E.S.P. was executed, which was intended for Beneficiaries of Special Conditions (employees, former employees and solidarity sector). On February 11, 2014, the Colombian Stock Exchange reported the results of the award resulting from said First Stage, as follows:

Subscription price per share $ 3,178

Number of shares offered 1,571,919,000

Number of Shares demanded in Valid Acceptances 1,428,233

Total amount demanded in Valid Acceptances $ 4,538,924,474

Number of shares awarded 1,428,233

Total amount awarded $ 4,538,924,474

Date of award notice February 11, 2014


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On February 18, 2014, the Nation announced to the stakeholders the commencement of the Second Stage of the Sale Program. The foregoing as per the terms of the Second Stage Regulations and after conclusion of the First Stage of the Sale Program. On March 28, 2014, the Ministry of Finance and Public Credit, reports that it was notified by the Council of State, of the provisional suspension of ISAGEN’s sale process, with respect to which the Nation filed an appeal before the First Section of the Council of State, on which basis the Council of State, on May 23, 2014, revoked the suspension of the sale process. On July 23, 2014, the Nation announced to the Prequalified Investors the Auction date, time and venue, all other Auction conditions, and the deadline for submittal of the Offer Documents. All of the foregoing is in accordance with the Second Stage Regulations, after the conclusion of the Prequalification Process. On August 23, 2014, the Ministry of Finance and Public Credit, reports that the Colombian Government has decided to extend the sale process of the Nation’s stake in ISAGEN, thus extending the Schedule for up to one year. With regard to compliance with the practices defined compliance with the practices set out in the Governance Code, the following is applied:

1. COMPANY IDENTIFICATION 1.1 NATURE AND BUSINESS PURPOSE During the year there were no statements on the nature and business purpose of the Company.

1.2 APPLICABLE REGULATIONS The Company had a defined mechanism to manage the regulations applicable to it, identify changes, define the actions required for the implementation of new regulations and to comply with the responsibilities and commitments established therein. During the year 2014, a work team was created: Compliance Management, whose mission is to verify activities aimed at regulatory compliance and external commitments of the Organization for contributing to the assurance of the Company’s external and internal regulations. Within the audits performed during 2014, both internally and externally, overall compliance with applicable regulations was evidenced. There were no condemnatory cases for failure to comply with the regulations.

Audit Conclusion – Company Identification Upon validation of the elements that make up the Company Identification, it is concluded that the Company has proper Governance practices in place related to this matter and, furthermore, actions were taken and pursued for its strengthening.


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2. POLICY FRAMEWORK The policy framework for Corporate Governance practices describes the structure and mechanisms that guide the actions of the Company.

2.1 MANAGEMENT MODEL With regard to this section, the Corporate Governance Code states: "ISAGEN has a model that guides corporate management. The Company Management Model describes the principles, values and business purposes and how to carry out work in order to improve productivity and competitiveness. This model includes its approach to Society in general and its stakeholders in particular, and is dynamic over time." During the year, the following major events occurred in relation to the Management Model, which are summarized as follows: The Business Transformation project was continues, which consists in structuring

ideas for development of the action lines of the Over-arching Purpose. During the year, the following activities were performed:

Benchmarking with other companies.

Innovation sessions were held, aimed at generating ideas to be submitted to the Management Committee by the Transformation Generation Group to obtain feedback that would enable its prioritization.

The Management Committee was provided with the detailed Plan of actions to be carried out during the years 2014 and 2015 in the Project, where it is worth highlighting the commencement of prototypes intended to dwell deeper on the initiatives and to structure the business cases.

The annual Strategic Planning exercise was carried out for the period 2015 – 2019, which was revised and adjustments were made to the Mission, the Over-arching Purpose and the Strategy. Included below are the adjustments made by the drafting committee appointed by the Board of Directors on September 26, 2014:

ITEM CURRENT VERSION PREVIOUS VERSION

Mission ISAGEN develops projects for the generation, production, and sale of electric energy, providing associated solutions to meet its clients’ energy needs and create business value. Company management is aligned with the highest ethical standards, maintains social and environmental responsibility, uses good economic judgment and is focused on customer service.

ISAGEN develops the capacity for the generation, production and sale of electric energy, intended to meet its clients’ needs and create business value. Management is aligned with ethics, customer service, economic judgment and social and environmental responsibility.

Over-arching Purpose

By generating intelligent energy, we are contributing towards the prosperity of society.

“We generate intelligent energy and prosperity for society.”


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ITEM CURRENT VERSION PREVIOUS VERSION

To this end, we employ behaviors, knowledge and technologies that seek climate change mitigation, business competitiveness, sustainable human development and the creation of shared value with stakeholders.

We generate efficient energy contributing to climate change mitigation, maintain business competitiveness in the industry, using collaborative networks and practices that are coherent with sustainable human development and generate shared value with stakeholders.

Strategy By diversifying power generation technologies, expanding geographic coverage, developing energy solutions, and exploring and developing new business aimed at its Over-arching Purpose and framed under its values and principles, ISAGEN will be recognized as an industry leader because of its integrity, efficiency and competitiveness.

“In the year 2020, ISAGEN will be recognized in Latin America for the generation and sale of energy based on clean technologies, through the co-creation of value and prosperity with its Stakeholders”. To such end, we must:

• Be competitive on knowledge management of clean generation technologies.

• Lead the Cluster in Colombia to achieve an integral management of water resources.

• Maintain the competitive edge as to engagement with the communities in the areas where we operate.

• Build energy solutions with our clients, seeking to improve their competitiveness and environmental performance.

• Leverage on a culture known for its ethics, values, competences and high performance.

Each of the objectives in the strategic map are planned based on the Strategy, the

results of milieu analysis and identified strategic issues. Further, it considers the various items of the Overarching Purpose to ensure progress in its path, it being clear that this is a long term challenge.

Similarly, the Balanced Scorecard of Indicators 2015-2019 was prepared for each perspective – Value, Clients and Market, Internal and Learning – added to the strategic objective, including indicators, goals and initiatives considered to measure the progress and effectiveness of the 2015-2019 Institutional Development Plan.

The changes presented in ISAGEN’s Management Model were related to the definition and organization of process works, as follows:


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DATE MANAGEMENT

CHANGE DESCRIPTION

March 2014

General Management

Change of General Secretariat mission Change of name and mission of the Legal Management

team to Business Legal Management The Legal Representation team is created

March 2014

Financial Management

Adjustments introduced to the mission of the Value Management process headed by the Financial Management

Adjustments introduced to its mission of the Value Development team and its name is changed to Financial Strategy and Development

Teams’ mission adjusted as follows: Integral Risk Management and Financial Resources Management.

Work teams’ mission is adjusted as follows: Capitals Management, Treasury, Accounting and Fiscal Management

The Fiscal Management team is created, which is part of the Accounting and Fiscal Management

The Goods Management team and its Procurement and Foreign Trade work group are transferred to the Administrative Management

March 2014

Administrative Management

The Goods Management team and its Procurement and Foreign Trade work group are transferred from the Financial to the Administrative Management

April 2014

General Management

The name is changed from Organizational Audit for Corporate Audit and its Mission is adjusted

The Audit Work Team is transformed into the Internal Audit Work Team and its Mission is adjusted

The Compliance Management Work Team is created

May 2014

Project Management

The Pre-construction Project team is created with a Cañafisto Project work team

The Amoyá and Cañafisto Projects’ work teams are eliminated

July 2014

Production Management

The Supply Team is created

August 2014

General Management

The name of the Corporate Brand Management is changed for Corporate Relations and its mission is adjusted

Pursuant to the faculties conferred by the Board of Directors to the General Manager of ISAGEN S.A. E.S.P., in agreement No. 4 of April 21, 1995, said changes were implemented as authorized by the General Manager and as submitted to the Board of Directors.

As related to Business Responsibility issues that strengthen the policy framework, key achievements during 2014, which strengthened the Company’s commitments with its stakeholders, were:

With respect to Employees, some key results are related to:


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o Life projects: flexible work and extended maternity leave; studies abroad and English for all; and corporate volunteer work

o Declaration of Ethical Behavior o Wellbeing programs o Interrelations program o Human Rights Virtual Diploma Program (Virtual School) o Ethics Discussion Groups (DCE) o DCE Review (DCE Promotion Group) o Post-conflict talks (Agencia Colombiana para la Reintegración –

Colombian Agency for Reintegration) o Group discussion on peace and post-conflict (Human Rights Day) o Inclusion of potential leaders in the school for executives o English for All program o Competition for studies abroad o Awareness campaigns on resource protection o Engagement dialogs with employees to review commitments and focus

on actions There were opportunities for interacting in business meetings, focal groups and group discussions, the Wellbeing and Coexistence Committees and the Declaration of Ethical Behaviors promoting group meetings. ISAGEN continued encouraging and supporting its customers in Integrated

Energy Management programs to contribute to their productivity and care for the planet

ISAGEN, being aware of the importance of generating a business culture to serve the human beings it interacts with, encouraged dialogues and involvement among all its stakeholders.

The XIII Annual Convention of ISAGEN was held, mainly focused on: “an electric energy market willing to accept the challenges of sustainability”, with participation of: Former Mines and Energy Minister, Director of the Clean energy for Colombia program, among other industry and business challenge experts, 50 industrial end users, 29 members of the Technological Partners Network and the country’s grid operators.

In terms of suppliers, the Supplier Relations and Development Program was strengthened, as follows:

o Approaches encouraged among University, Students, Company and

Suppliers, as part of the pilot program called “First Steps”, whereby an exercise was carried out to disseminate the Global Compact, with a publication of the case in chapter 11 “FIRST CONTACT PILOT PROGRAM. A CONTRIBUTION FOR THE DISSEMINATION OF THE GLOBAL COMPACT IN MEDELLIN, COLOMBIA”, in “The UN Global Compact: Fair Competition and Environmental and Labor Justice in International Markets Advances in Sustainability and Environmental Justice, Volume 16, 199-216”, edited by Liam Leonard, Maria-Alejandra Gonzalez-Perez; ISBN: 978-1-78441-295-1.

o The Fifth Annual Convention for ISAGEN Suppliers was held.


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o The Supplier Performance Evaluation Project continued, which seeks to

strengthen quality assurance, risk mitigation, relations and the

development of suppliers, with these factors representing a platform for

supplier development programs and the operational availability of the

plants

o Relations opportunities were expanded: Internal discussions, courses / training, the Supplier Development Program in Santander and eastern Antioquia, and as well as relations roundtables.

o The Business Responsibility Course was also available for suppliers at ISAGEN’s suppliers’ school, which was attended by 70 suppliers during 2014.

During the year the following recognition was achieved, validating the Corporate Responsibility practices.

o Following the analysis performed by Sustainalytics, which is a leader in sustainability research and analysis, with 20-year experience, ISAGEN was chosen as one of the 20 companies in Colombia with the highest commitment to sustainability.

o For the second consecutive year and, after evaluating 34 companies in emerging markets, ISAGEN was included in the Dow Jones Sustainability Index, the most stringent global indicator to determine sustainability management coherence.

o A score of 100/100 was obtained on business transparency practices. This is the first time in 7 years, which is the time of the measurement, in which a company achieves the highest possible rating.

o ISAGEN adheres to the water mandate, a Global Compact initiative. o For the Company, an integrated water management is vital , which was

clearly expressed during the three water meetings in which it participated and invited representatives from private sector, politics, non-government organizations and civil society, together with el Espectador and WWF.

o CINCEL recognized ISAGEN as the second company relative to Organizational Climate among 73 Latin-American organizations with over 100 employees.

o The Outstanding Brand award is received, which is granted by the Industry and Trade Superintendence as a result of different legal actions aimed at preserving this Company hallmark.

2.2 DECLARATION OF ETHICAL BEHAVIOR (DEB) With regard to this section, the Corporate Governance Code states: "ISAGEN has defined ethical standards under which the Company and employees seek to conduct their business, personal and institutional relationships. This Declaration of Ethical Behavior (DEB) was developed by employees as a reaffirmation of the mutual moral commitment between them and the Company, and between both parties and the stakeholders.” Throughout the year there were no changes in the Declaration of Ethical Behaviors; however, the updating process began with the following actions standing out:


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1. Employee survey on matters related to Ethics 2. Group meetings attended by Directors and Employees seeking to compile all

change recommendations for the Declaration, assisted by an External Advisor. 3. Appointment of new members of the Ethics Committee.

Business Ethics practices were maintained and strengthened through the following activities:

The Audit Committee supervised the planning and execution of the ethics management program for the year 2014. Similarly, it reported to the Ethics Committee its follow-up and review by semester of the cases that were reported and reviewed, as well as their validation status.

New employees that joined the Organization received training on issues related

to transparency practices during their induction process

The Fraud Risk Management project was completed and in the year 2015 it becomes a Fraud and Corruption Management Program, intended to develop a fraud prevention, detection and treatment strategy.

The anti-corruption program, pursuant to Law 1474/12, was implemented and

was available to stakeholders on the website.

Reflection on target culture and corporate values was commenced by the Management Team.

The communication plan was executed, including the promotion of corporate values.

The Measurement of Organizational Climate, Psychosocial Risk and Labor Harassment was performed. As a result, ISAGEN was ranked as the second company relative to Organizational Climate among 73 Latin-American organizations with over 100 employees.

Group discussions organized by the Declaration of Ethical Behavior Promoting Group continued.

Definition, structuring and startup of the Dissemination Strategy of ISAGEN’s in- house working coexistence committee.

Work continued on the promotion and dissemination of ethics with all

stakeholders through publications, statements, the provision of information,

brochures, banners, etc.

The concerns received through the Ethics Line were known, analyzed and

addressed promptly by the Ethics Committee and reported to the Audit

Committee.

The work of the Ethics Committee continued regarding the Technology Partner

Network as an overseer of best practices among them.

The Labor Coexistence Committee continued to work on its training and

structure

In general, employees reported situations to their managers that could involve them in a potential conflict of interest

Organizational Audit evaluated the Organization's control environment and fraud risk level during the year

The Declaration of Ethical Behavior Promoting Group began its update in a participative manner.


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ISAGEN achieved a rating of 100/100 on corporate transparency awarded by Transparencia por Colombia (Transparency for Colombia), again achieving recognition as the utilities company with the highest standards in policies and mechanisms of corporate transparency.

Employees completed the Self-Assessment survey on Transparency Practices, as

part of the review and follow up of Good Governance practices, which is the responsibility of Organizational Audit in relation with: Conflicts of Interest, Securities Negotiation, Control and Prevention of Money Laundering and Financing of Terrorism, and Business Ethics. The purpose was to verify the level of awareness and attention among employees regarding the guidelines set out by the Company in the Corporate Governance Code, the Declaration of Ethical Behavior, the Manual for Responding to Unethical Situations and other Good Governance documents, added to identifying areas that can be improved.

The self-assessment survey was completed by 96.53% of total employees as of 31

December 2014 (662 employees). The consolidated survey showed the following results related to Business Ethics: 98.8% of the responses indicated that they know and understand the purpose

of the Declaration of Ethical Behavior. The main reason for some employees

stating not to know it is because its updating process began during 2014, which

has not concluded and, therefore, some employees stated bot being aware of

said update.

97.80% reported their compliance with the Declaration of Ethical Behavior. The main reasons for the remaining negative answers, according to feedback obtained, are caused by:

o Untimely submittal of declaration of potential conflicts of interest or

negotiation of Company shares o As stated in the previous question, because the Declaration had been

updated and they were not aware of it. o Having joined the Organization recently.

98.89% of employee answers indicated that they know and understand the purpose of the Ethics Line. No comments were received from employees who stated not knowing it.

2.20% (14 employees) indicated that they had become aware of cases of

unethical behavior, in which a Company employee was involved. Out of these,

0.34% (2 employees) indicated having reported this to the Ethics Line. As regards other cased know and not reported, these will be reported to the Administration for investigation and definition of the action plan to be followed.

In terms of the Manual for Responding to Unethical Situations, the following was

ascertained:

88.06% of employee answers reported that they know and understand the purpose of the Manual for Responding to Unethical Situations. Those who gave a negative answer (70 employees), will be reported to the administration for then to be properly briefed. Similarly, 15.59% of the answers (99

http://www.isagen.com.co/comunicados/Transparencia_por_Colombia.pdf


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employees) indicating that they did neither know, nor understand the guidelines set out in the Manual for Responding to Unethical Situations for a potential Fraud situation.

In terms of Control and Prevention of Money Laundering, the following was

ascertained:

73.43% indicated that they know and understand ISAGEN’s manual of self-regulation and management of risk related to money laundering and financing of terrorism. 25.94% that they did not understand it and 0.63% indicated that it does not apply to them

0.47% (3 employees) indicated that during 2014 they, as employees of ISAGEN, had perceived some signs of alter pursuant to the definition in the manual of self-control and management of risk related to money laundering and financing of terrorism.

2.3 SELECTION CRITERIA FOR MAIN SUPPLIERS - ACQUISITION OF GOODS AND SERVICES

With regard to this section, the Corporate Governance Code states: "The acquisition of goods and services required to ensure continuity in the performance of ISAGEN's activities, in accordance with its strategies and its Institutional Development Plan, is based on objective criteria and principles of good faith, transparency, economy, fairness, responsibility, self-regulation, celerity and social and environmental responsibility. Additionally, ISAGEN observes the principles of administrative functions and fiscal management. ISAGEN has in place Internal Procurement Regulations to enforce the principles set out, which may be consulted in the website www.isagen.com.co, in the Institutional/Supplier Information section”. In accordance with that reviewed, it is concluded that the selection of suppliers was performed under objective and transparent criteria and consistent with the provisions of the Procurement Regulations and other principles that are applicable to it by law. However, during the year recommendations were made to strengthen the supplier selection process, through Procurement Agreement No. 125 that took effect in October 2012. Among the actions that were undertaken to strengthen these issues, are: The Audit Committee continued to monitor the Company's major procurement

(values estimated as equal to or more than 20,000 MMW).

The Procurement Advisory Committee also did this during the year through fortnightly meetings in order to comply with the provisions of Article No. 12 of Procurement Agreement No. 125.

The Supplier Performance Evaluation Project continued, seeking to strengthen quality assurance, risk mitigation, supplier engagement and development, all factors being a platform for supplier development programs and operational availability of the plants.

http://www.isagen.com.co/


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ISAGEN had a procedure to mitigate the risks arising from commercial, cooperation and working interactions or relationships with individuals or companies belonging to its stakeholders and that may potentially be sanctioned on risk lists.

Audit Conclusion – Policy Framework Having reviewed the elements of the Policy Framework, it can be concluded that the Company has appropriate Corporate Governance practices related to this issue, and furthermore they were implemented and maintained, and actions were taken to strengthen them. However, the following is recommended: Keep employees informed regarding the current status of the Project to update the

Declaration of Ethical Behavior. Continue working to make the company aware of the Manual to Respond to

Unethical Situations, the fraud guidelines, and the functioning of the Ethics Line, in order to maintain the level of commitment observed in terms of Ethics and Transparency.

The Ethics Committee must analyze the results of the self-assessment survey on

transparency practices to then define its work plan. Train employees in relation with ISAGEN’s Manual for self-regulation and

management of risk related to money laundering and financing of terrorism. Continue the work on continuous promotion of ethics among all stakeholders.


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3. PREVENTION, RESOLUTION AND DISCLOSURE OF CONFLICTS OF INTEREST The Corporate Governance Code states that “the members of the Board of Directors and Board Committees, General Manager and ISAGEN employees must act with diligence and loyalty toward the Company and shall refrain from participating directly or indirectly in decisions and / or behavior regarding which there is or may be a conflict of interest, and the procedure for Prevention, Resolution and Disclosure thereof is defined by the Board of Directors and ISAGEN employees." The actions taken to strengthen this issue during the year were:

A change was introduced in the Protocol for Management of Conflicts of Interest (on

Site) in the Board of Directors during 2014, as follows:

To incorporate measure 33 of Código País (Country Code), in section 5.3, the declaration related to the contracts that they or their related parties have with ISAGEN is added, which reads: “Similarly, such declaration must incorporate the list of contracts entered into with ISAGEN by the Director, relatives, partners and other related parties. The same report will be received from the new members of the Board of Directors at the second session they attend, at the latest”.

Awareness activities were carried out with Executives and others were held with

Employees in relation with conflict of interest issues.

ISAGEN designed and implemented a Corporate Governance e-learning program aimed at carry out self-instruction on responsibilities of employees and directors with respect to Corporate Governance, which includes negotiation of securities and declaration of conflicts of interest; nonetheless, it was evidenced that only 6% of the employees have satisfactorily completed this course. In relation to the disclosure of conflicts of interest for Board members, and in

compliance with the protocol for their disclosure, the following occurred:

It was recorded in the Board of Directors Minutes that as no information was presented that would involve the commercial strategy of ISAGEN or would provide competitive advantages to third parties, the withdrawal of Drs. Juan Esteban Calle and Jesús Arturo Aristizábal as representatives of EPM was not necessary. Nevertheless, the conflict of interest was stated.

Declaration and withdrawal of Drs. Juan Esteban Calle Restrepo and Jesús Arturo Aristizábal Guevara from the meetings when discussing issues relative to the Sale of the Nation’s Shareholding to ISAGEN.

During the Board of Directors sessions when issues relative to the sale of the Nation’s Shareholding in ISAGEN were discussed, it is recorded that prior to starting discussions of this topic and up to the presentation about the negotiation of the OPIC credit, the representatives of Empresas Públicas de Medellín in the Board of Directors, doctors Juan Esteban Calle Restrepo and


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Jesús Arturo Aristizábal Guevara withdrew from the meeting. As they advised the Board of Directors, through their President, about EPM’s interest to participate in the sale of the Nation’s Shareholding in ISAGEN, and reiterating that their acts in the Board of Directors will continue to abide by its Internal Regulations, which includes the Protocol for management of conflicts of interest within the Board of Directors, doctors Calle and Aristizábal will continue to abstain from participating in discussions related to the process of sale of the Nation’s Shareholding in ISAGEN or any other issue that could influence the decision of EPM in this regard, thus withdrawing from the meetings for as long as those discussions take place.

Doctor José Fernando Isaza Delgado declared having a conflict of interest in the discussions related to the Use of the Pro-National University Stamp in ISAGEN, pursuant to Law 1697 of 2013 and its regulatory decree No. 1050 of 2014, as he considers to have bonds with the National University that could bias him in any decision made on this matter.

Doctor Luis Ernesto Mejía Castro declared his conflict of interest situation regarding the memorandum of understanding and the confidentiality agreement that ISAGEN is entering into with Cerrito Capital, firm with which it maintains a permanent technical and administrative assistance tie; therefore, he stated that, within or outside the Board of Directors, he will abstain from participating in the direct or indirect actions and interventions in the activities, deliberations and/or decisions related to the firm Cerrito Capital with respect to the aforementioned confidentiality agreement and the potential underlying business.

The Board members made these declarations in a timely manner and the response to their statements are recorded in the corresponding minutes. However, there are the following observations:

Sessions were identified in which at the time of declaring the conflict of interest the action taken by the Director was not documented in the Minutes as to whether he withdrew or stayed in the meeting, abstaining from his contributions, among others.

In terms of access to information, it was defined that even though the tool has options related to the restriction of information to the Executives who declare their conflicts of interest, it is not been used effectively.

In relation to the disclosure of conflicts of interest for employees, the following was noted:

During 2014, 78 cases were reported in the mailbox “CONFLICTS OF INTEREST”, where the situations that could place an employee in a possible conflict of interest.

Of the 78 inquiries received, only (4) were explicit statements constituting a

potential conflict where employees were withdrawn from the conflict-generating activity.


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However, there are the following observations:

o Sometimes the declaration of the potential situation that would generate the conflict of interest is not declared by the employee in a timely manner.

o Regarding some Executives that received declarations of potential conflict of interest situations, they did not respond or responded in an untimely manner, because they failed to respond within eight (8) days of the concern or before the situation materialized. Additionally, in some responses it was evidenced the lack of appropriation of the procedure as regards the extent of their responsibility, as an inactive role is assumed or there is little guidance the potential risk that the employee could be facing and the procedure that they should follow.

o On the issue of conflicts of interest, an enquiry was made to employees through the self-assessment questionnaire on transparency practices, regarding the knowledge, understanding and application of the procedure, and mechanism for reporting potential conflicts of interest.

The self-assessment was completed by 96.53% of all employees as of 3 December

2014 (662 employees). As a result of the Self-Assessment on Transparency practices related to this issue, the following is concluded: 94.38% reported that they know and understand the process that exists in

ISAGEN for the prevention, resolution and disclosure of conflicts of interest. 5%

(32 employees) indicated that they not know or understand it and 0.17% (1

person) indicated that it does not apply to them.

2.42% of the employees reported having a family member in the companies or stakeholders, where performance of their activities in ISAGEN, includes the negotiation, contracting or coordination of contract activities with said companies. Only 1.87% of the foregoing reported this to their manager via an email with a copy to the mailbox "CONFLICTSOFINTEREST". Similarly, all employees that declared the situation obtained the respective response from their manage4s as to the actions to be followed.

95.47% (611 employees) reported that they had not received gifts or accepted invitations of a non-institutional nature, from any customer, supplier or contractor. 100% of employees who reported that they had received gifts reported this situation to their immediate manager, with a copy to the conflicts of interest mailbox and subsequently received pertinent instructions to deal with said situation.

According to the survey, in 2014, 21.60% (138 employees) undertook activities such as: Studies (Undergraduate, Diploma Courses, Specializations, Masters, Doctorates or others); gave lectures, classes, advice or consultancy. Of those that undertook academic activities, 47.83% (67 employees) informed their immediate manager and received the respective instructions.


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8.35% (53 employees) confirmed having performed other activities that generate personal or family revenues, outside ISAGEN, such as: company partner, board of directors, external consultancy, investment, rental, cattle farming, agriculture, etc. Of those employees, only 41.51% reported activities as indicated in the Conflicts of Interest procedure.

Of the total responses received, 1.58% (30 employees reported knowing of other cases that could be considered conflicts of interest.

Audit Conclusion – Prevention, Resolution and Disclosure of Conflicts of Interest Having reviewed the elements comprising the Management of Conflicts of Interest, we can conclude that the Company has appropriate Corporate Governance practices in relation to this issue, activities were carried out for their strengthening, and the members of the Board and its Committees, the General Manger and ISAGEN employees acted in accordance with current regulations; however, some recommendations are offered seeking to strengthen handling of situations that could represent a potential conflict of interest: With employees Continue the strategy of disseminating the conflict of interest procedure in order to

strengthen knowledge and application by all employees.

It is important to continue working with Executives on the ownership of the

procedure to apply relative to declarations of potential conflict of interest situations among their reporting employees and/or Executives, in order to achieve timely detection and treatment thereof.

It is recommended to strengthen the learning process, fostering e-learning on

Corporate Governance, as it is a tool containing all the information required to know the obligations of employees and Executives relative to Corporate Governance in ISAGEN.

With the Board of Directors and its Committees Continue monitoring this issue by implementing practices defined to such end and

making adjustments that are deemed pertinent.


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4. FAIR TREATMENT OF SHAREHOLDERS 4.1 SHAREHOLDER RIGHTS With regard to this section, the Corporate Governance Code states: "Shareholders have the rights enshrined in the Commercial Code, in particular in Article 379 and Article Fifteen - Shareholder Rights in Corporate Bylaws. The Company shall inform its shareholders through its web page www.isagen.com.co, in the Shareholder Information section, regarding the procedure for administrative breaches and sanctions that shareholders have in order to enforce the protection of their rights with the Financial Superintendence, in accordance with Article 49 and 53, Law 964 of 2005." In relation to Shareholder Rights, the following was observed: Shareholders received the necessary information that would enable them to make

decisions related to their investment in a thorough, timely manner.

Shareholders participated in the deliberations of the Shareholders General Assembly, voted in it, and had the company books and papers available to them within fifteen business days prior to meetings of the Assembly. Similarly, the Shareholders General Assembly, summoned 5 business days in advance, pursuant to that provided for in the General Assembly Regulations, respected the rights of all shareholders in accordance with the norms and practices set forth in the Corporate Governance Code.

Shareholders received dividends subject to the provisions of law or the Corporate Bylaws and the Shareholders Agreement.

All Shareholders could freely trade the shares during the year.

The procedure for protecting the shareholders of listed firms, such as ISAGEN,

was available to Shareholders on the website (www.isagen.com.co) in accordance with Article Fifteen of the Corporate Bylaws and pursuant to the provisions of Article 379 of the Commercial Code.

4.2 RULES FOR PROFIT DISTRIBUTION According to the Corporate Governance Code “When ISAGEN earns profit during its financial year, the Company's net profits shall be calculated in accordance with the definitions contained in Article Forty - Profits in the Corporate Bylaws”. During the Regular Shareholders General Assembly held on March 25, 2014, it was approved to distribute net profits amounting to $433,966,089,368 obtained in the period January 1 to December 31, 2013, as follows:

Establish the reserve established in Article130 of the Tax Code, for a value of $74,129,644,922.

Establish a reserve in the amount of $165,002,762,772 to preserve the Company’s financial soundness, risk rating and commitments to creditors, which in turn supports the execution of its expansion plan.


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Release $22,434,256,726 for the payment of dividends, found in the reserve established for compliance with Article 130 of the Tax Code.

Allocate the reserve released in section 3 for the payment of cash dividends equivalent to $8,229517315023228 per share on 2,726,072,000 outstanding shares.

Distribute, as cash dividends, 100% of the net profit equal to $194.833.681.674, equivalent to $71.47048268 per share on 2,726,072.000 outstanding shares.

Pay an ordinary cash dividend of $74.00 per share, payable on April 30, 2014. The ex-dividend period will be from 24 to 29 April 2014.

Pay an extraordinary cash dividend of $5.70 per share, payable on April 30, 2014. The ex-dividend period will be from 24 to 29 April 2014.

On April 30, 2014 the dividends were paid as defined in the Shareholders General

Assembly.

4.3 SPONSHORSHIPS According to provisions of the Corporate Governance Code, "The sponsorships awarded by the Company's Management to the various public and private entities, must comply with the criteria of business suitability, ethics and fairness. Sponsorships exceeding 176 minimum monthly wages must have the prior approval from the Board of Directors." During the year, sponsorships were approved for a total average of $700 million, none of them exceeding 176 MLMS; therefore, no authorization from the Board of Directors was necessary. Sponsorships were approved in accordance with the general delegations of authority. Sponsorships in 2014, are broken down as follows:

NUMBER SPONSORSHIPS

TOTAL details

>100 million, < 50 2 $179 million

ISAGEN, as sponsor of 3D Room in Parque Explora ($95 million)

Community Christmas in area of influence in Eastern Antioquia ($84 million)

>50 million, < 10 21 $320 million

2014 Executive Assembly COCME - WEC (40 million)

Planeta Azul Booklet "Cuidar el agua es cuidar la vida” (Caring for Water is Caring for Life") (20 million)

Support to Community Christmas in the Miel I area of influence. (24 million)

> 10 million 60 $201 million

4.4 SPECIALIZED AUDITS


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According to provisions of the Corporate Governance Code, “A plural number of shareholders representing at least ten percent (10%) of the Company's outstanding shares, as well as investors who own at least twenty percent (20%) of the total securities issued by the Company to the public market, may request, at their cost and responsibility, a specialized audit on the Company's financial statements, for which they must employ a widely renowned auditor.” No requests for specialized audits were received from the Shareholders or investors.

4.5 SHAREHOLDER SERVICE The Corporate Governance Code states that “In order to facilitate the interaction of ISAGEN's governance bodies with its shareholders and investors, the Company has a shareholder service office, which is coordinated by the director of the Financial Resources Management team, and will channel their requirements and needs, as well as the provision of the information they request pursuant to this Code and the law.” The activities that reflect Corporate Governance practices in terms of Shareholder service are as follows: To meet the requirements of Shareholders (information, requests, complaints or

claims), the Company kept various contact channels available to them: shareholder

personal service offices, helpline (Call Center), Web page, the sending of physical

and virtual communications, and email.

There was a system for tracking and early warning on the requirements registered.

During 2014, 34,097 requests were received from the Company's Shareholders (21% less than in 2013), which are broken down as follows:

TYPE OF REQUIREMENT

RECEIVED VARIATION % 2014 2013

Claim 10 14 -29

Information 9,210 13,111 -30

Request 3,098 5,058 -39

Complaint 14 38 -63

Others 21,765 24,999 -13

TOTAL 34,097 43,220 -21

On average, 99% of the requirements were resolved, of which 187 (1% of total requirements) were resolved out of the term limits established.

Of the total requirements, 87 were pending, but not due, as of December 31, 2014, 86 of them from shareholders in relation with information updates, and one complaint related to a shareholder who claims recognition of 6-year interest on payment.

Shareholder credit balances:

For the shareholders who bought shares in the ISAGEN share sale process carried

out in 2007 and that were overdue in the payment of the outstanding balance, the


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guarantees applicable to their shares were enforced, which means that the shares

they had not paid were taken away, as well as those corresponding to the initial

payment.

Due to the appreciation in the share price after payment of the outstanding amount and a fine to the Nation, certain credit balances for these individuals were generated. Since then, work has been done on dissemination of this information, in order for these people to claim or provide a payment instruction.

Work continued on returning these balances to shareholders, with returns pending

at December 31, of 75 forms (3% of the total) compared to 80 forms in 2013.

During 2014, returns amounted to $3,466,454 that correspond to a total of 5 forms, with a total value to be returned amounting to $106.5 million.

In December 2014, the campaign to manage the credit balance by Fiduciaria Bancolombia, based on the detailed information provided by ISAGEN, following the end of the balance reconciliation process.

The Audit Committee conducted semiannual monitoring on service to requests, complaints and claims received from Shareholders, in Committee No. 106 of August 28, 2014 and No. 111 of February 11, 2015.

4.6 SHAREHOLDER DUTIES In accordance with that defined in the Corporate Governance Code, “The shareholders shall be loyal to society and must abstain from participating in actions or behaviors implying conflicts of interest in accordance with that provided for in Article Sixteen – Duties of Shareholders in the Corporate Bylaws”. At the date of preparing this report, there was no knowledge of any act related to

the breach of duties by Shareholders.

4.7 TRANSACTIONS WITH AFFILIATES OR ECONOMICALLY RELATED PARTIES The Shareholders Agreement and the Corporate Governance Code state: “The transactions and relationships that ISAGEN has with Affiliates or Economically Related Parties for the purchase and sale of goods and services, shall be conducted on the basis of objective criteria and under market conditions, within the terms, conditions and costs that the Company usually experiences with unrelated third parties”. To such end, Affiliates or Economic Associates are understood as:

The Nation and the other Shareholders that own more than 10% of ISAGEN's shares:

o The Nation: 57.61%

o Empresas Públicas de Medellín: 13-14% Companies in which the Nation or any shareholder holding more than 10% of

ISAGEN's shares, has a stake greater than 50%


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Related companies or those attached to different Ministries or Administrative Departments.

Parties are: Energy Purchase and Sale, Reliability Charge Purchase and Sale;

Procurement of Goods and Services. These transactions met the criteria defined in the Corporate Governance Code; they did not benefit the majority shareholders (Nation and EPM), or their Affiliates or Economically Related Parties.

Additionally, the Corporate Governance Code states “ISAGEN's General Manager will submit a semiannual report to the Board of Directors on transactions for the purchase and sale of goods and services with Affiliates or Economically Related Parties that have been concluded within that period, and will also include the conditions thereof.”

Half-yearly, the General Manager will submit a report to the Audit Committee on the Monitoring of transactions with Affiliates and Economically Related Parties:

The report on the transactions made in the first half of 2014 was reviewed in Audit Committee No. No. 106 held August 2014.

The report on the transactions made in the second half of 2014 was reviewed in Audit Committee No 111 of February 2015.

Additionally, the Audit Committee, in Meeting No. 109 held December 1, 2014, se

conducted the latest review of the Criteria for the Negotiation, Purchase and Sale of Goods and Services with Affiliates and Economically Related Parties.

4.8 DISPUTE RESOLUTION The Corporate Governance Code states: “Conflicts that occur during the course of the corporate contract between the Company and the shareholders, or between shareholders: shall be resolved in the first instance, by direct settlement through amiable compositeurs or through conciliation, with the intervention of conciliation and arbitration centers, and as a last resort, by an Arbitration Tribunal in the manner provided in Article Forty-Four - Dispute Resolution in the Corporate Bylaws”. During 2014 there were no disputes during the course of the corporate contract

between the Company and shareholders, or between shareholders directly.

4.9 COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE The Corporate Governance Code states: “Where a shareholder believes that a provision of the Corporate Governance Code has been ignored or breached, they may write to the shareholder service office, located at ISAGEN's main office. This document shall bear the name, identity card, address, phone number and city of the complainant; to ensure that it will be possible to reply to their request, the coordinator of the Office shall forward the above request to the Board of Directors, which will review and respond to it.”

During the year, a concern was received in the Ethics Line from a Shareholder in relation with the negotiation of shares during the sale process. Said concern was analyzed by the Ethics Committee, based on information requested to Organizational


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Audit, having concluded that there was no evidence of collusion or corrupt practices or against minority shareholders that should have been reported to any regulating body by ISAGEN.

4.10 TRADING OF SHARES AND OTHER COMPANY SECURITIES

4.10.1 CRITERIA FOR THE TRADING OF SHARES AND BONDS BY MANAGERS, EXECUTIVES AND EMPLOYEES The Corporate Governance Code states: “The main members and alternates of the Board, the General Manager and their alternates, the Management Team's Executives, and in general all ISAGEN employees, must comply with the criteria and procedures established by the Board of Directors for the purchase and disposal of shares and other Company securities.” Through Board Agreement No. 112 of October 29, 2009, the criteria and procedures for the acquisition and disposal of shares and other Company securities, were adopted by its Management and Employees. At 31 December 2014, there were a total 2,726,072,000 outstanding shares. Of this

total, the share owned by the Company's Employees and Executives compared to the previous year is as follows:

POSITION SHARES AT DECEMBER

31, 2013 % SHARE 2013

SHARES AT DECEMBER

31, 2014 % SHARE 2014

Board Members 17.244 0,0006% 15.473 0,0006%

Managers 36.230 0,0013% 61.861 0,0023%

Executives 620.644 0,0228% 772.185 0,0283%

Coordinators 53.865 0,0020% 165.598 0,0061%

Employees 905.688 0,0332% 1.508.873 0,0553%

Total 1.633.671 0,0599% 2.523.990 0,0926%

Direct transactions were performed by members of Board and Management Team, which have the appropriate authorization, in accordance with the provisions of Board Agreement 112. During the year, 43,824 transactions were made: 23,061 purchase transactions and 20,763 sale transactions. In all transactions there was compliance with the provisions of Agreement No. 112

of 2009, in relation to: not conducting negotiations or transactions in order to speculate; not use, directly or through an intermediary, privileged information for personal gain or the benefit of a third party; and reporting to the General Manager, through the Secretary General, on transactions made, indicating the terms under which these have been carried out.

Regarding the reporting of ISAGEN securities trading by Employees,

Executives, the Management Team and Board of Directors, compliance was seen with employees’ responsibility to report transactions made to the General Manager through the Secretary General, as provided in the Agreement.


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As a supplementary measure, a self-assessment questionnaire on Transparency Practices was given to employees, whose purpose was focused on assessing compliance with Corporate Governance practices and identifying areas for improvement. Regarding the issue of stock trading, the following was specially inquired about: the knowledge, understanding and application of the procedure for trading in Company securities.

The self-assessment questionnaire was completed by 96.53% of all employees at December 31, 2014 (662 employees). As a result of the Self-Assessment on Transparency Practices related to the negotiation of securities, the following was obtained:

77.78% of respondents stated that they know and understand the criteria and

procedure that exists in ISAGEN for the trading of shares and other securities (bonds)

by Employees. 19.52% (123 employees) reported that they weren't aware of it and

2.70% (17 employees) indicated that it did not apply to them.

El 100% of those that performed trading (purchase, sale, pledge) of ISAGEN shares or bonds during 2014, reported it entirely, in accordance with the criteria and

procedures set forth in Agreement No. 112 of 2009. Except for ISAGEN shares that were acquired during the Nation’s shares sale Program, pursuant to that provided for in Board of Directors Agreement No. 112, article Eleven : “ARTICLE ELEVEN: EXCEPTIONS”. Except for shares acquired in the Nation’s share sale program, in the first half of 2014 the following operations were performed by Board of Directors, Management Team and Employees:

NUMBER OF SHARES

OPERATION

TYPE OF PERSON

Board of Directors and Management

Employees TOTAL

Purchase 0 90,683 90,683

Sale 0 211,209 211,209

Note: Figures correspond to the number of shares that were negotiated.

As a result of the Nation’s ISAGEN shares sale program with the solidarity sector, in its first stage, in February 2014, 213 transactions took place with employees and Executives, awarded directly by the Stock Exchange of Colombia - BVC. This purchase of shares, pursuant to that provided for in Board of Dire tors Agreement No. 112, article Eleven: “ARTICLE ELEVEN: EXCEPTIONS”, did not require being specifically reported:


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TYPE NNUMBER OF SHARES

Management Team 25,631

Employees 253,122

Workers 733,118

TOTAL SHARES 1,011,871

The Audit Committee in its meetings No. 106 del of August 28, 2014 and No. 111 of

February 11, 2015, reviewed the negotiations of securities with both, Company Employees and Executives.

4.10.2 BAN ON REPRESENTING SHARES AT THE SHAREHOLDERS GENERAL ASSEMBLY The Corporate Governance Code states: “Except in cases of legal representation, the managers and, in general, the employees of the Company, may not represent shares other than their own at meetings of the Shareholders General Assembly while in performance of their duties, nor delegate the powers conferred upon them. They may not vote on the financial statements and year-end accounts, or on settlement accounts”. At the Regular Shareholders General Assembly meetings of 2014: a) Regular Shareholders General Assembly held on March 25, 2014 and b) Extraordinary Shareholders General Assembly held on November 26, 2014, the Company employees did not represent shares other than their own, except in legal representation cases, pursuant to that provided for in article 185 of the Commercial Code..

4.10.3 SHARE REPURCHASE POLICY In relation to this section the Corporate Governance Code states: “The Company's share repurchase policy must be strictly under the terms established in law”. There were no cases of share repurchase.

Audit Conclusion – Fair Treatment of Shareholders As a result of the review conducted, it can be concluded that the practices relating to the Fair Treatment of Shareholders were complied with and strengthened. Overall the Company provided information extensively to its shareholders participating in the profits and they had options for interaction with ISAGEN's governance bodies. Transactions with affiliates and related parties were performed in accordance with objective criteria and under market conditions. Similarly, the Board of Directors, the General Manager, the Management Team and employees complied with the criteria established by the Board of Directors. Recommendations:


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Continue with the work being done to return the respective balances pertaining to the 2007 share sale process, and the periodic reconciliations between ISAGEN and banks in order to detect inconsistencies in payments to shareholders.

Review and update Agreement 112 of 2009, keeping in mind the lessons learned

since their preparation and approval. Define a mechanism for new employees when they join the Company so as to

make them aware of all issues related to the negotiation of ISAGEN securities (Agreement 112 of 2009).

Strengthen the education process by encouraging Corporate Governance e-

learning, as it is a tool that contains all the information required to know the obligations of Employees and Executives with Corporate Governance at ISAGEN.

As regards management of the system to address requests, petitions, claims and

complaints, it is recommended to define criteria relative to the recording and follow-up status of the requirements received in relation with “expired cases” , “resolved out of the time limit”, and “pending not due”, and design controls intended for a structured, monthly follow-up. Further, design the structure of the results report file, both for the monthly report and the half-yearly report, and establish the controls required to ensure the integrity and consistency of data contained therein.

Design and implement follow-up controls over the contract with Fiduciaria

Bancolombia for service to the shareholders and, moreover, have Financial Management verify from time to time the reasonability of responses given to the shareholders.


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5. THE COMPANY AND ITS GOVERNANCE

5.1 SHAREHOLDERS GENERAL ASSEMBLY The Corporate Governance Code states: “The Shareholders General Assembly will meet in Regular and Special meetings. Regular sessions of the Shareholders General Assembly shall be held each year as defined by law and Article Nineteen - Calls and Meetings of the Shareholders General Assembly in the Corporate Bylaws”. In order to comply with this practice, the following was verified:

During 2014 no amendments were made to the Shareholders General Assembly

Regulations, and said regulations are available at ISAGEN’s website.

In Board meeting No. 237 of October 24, 2013, the date, time and venue of the Shareholders General Assembly were established, to be held on March 25, 2014, at 10:00 a.m. at the facilities of the Plaza Mayor Convention Center in Medellin. Subsequently, in Board meeting No. 241 of February 27, 2014, the Board approved the agenda and topics to be discussed during the Shareholders Meeting. Likewise, in Board meeting No. 251 of October 31, 2014, the call, date and agenda for the Shareholders Extraordinary Meeting of November 26, 2014 were approved.

Upon validation of the Bylaws and decisions made during the Shareholders General Assemblies of the year 2014, it is concluded that the decision issues correspond to those set out in the Bylaws as the responsibility of the Assembly, as follows:

Election of Chairman for Shareholders General Assembly of 2014

Election of Commission for Approval of Minutes of meetings

Approval of Financial Statements, with cutoff date at December 31, 2013

Approval of profit appropriation and distribution proposal for the year 2013, submitted by the Board of Directors to the Assembly

Reform to articles 28 and 29 of ISAGEN Bylaws

Election of members of 2013-2015 Board of Directors

The calls to the Shareholders General Assembly were made as follows:

Shareholders Ordinary General Assembly of March 25, 2014, through a first notice published in the newspapers El Tiempo and El Colombiano on March 2, 2014, with an additional reminder on March 16, 2014. This information was circulated with more than the fifteen-day notice established in the Corporate Bylaws and ISAGEN’s Shareholders General Assembly Regulations for regular meetings.

Shareholders Extraordinary General Assembly of November 26, 2014, notice published in the newspaper El Tiempo on November 9, 2014.

This information was published with more than the five days advance notice established in the Corporate Bylaws and ISAGEN’s Shareholders General Assembly Regulations for regular meetings. .


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Additionally, other media were used to circulate the call to Assembly sessions, such as: ISAGEN’s website, social networks, Call Center, etc.

Information pertinent to the holding of Shareholder Assemblies (agenda and

relevant information on the topics for discussion) was made available to the Shareholders at the time of the call, that is, with the advance notice established by the Bylaws and the Law, at the Shareholders Service Office in Medellin, the regional offices in Bogotá, Cali and Barranquilla, and the website, www.isagen.com.co., in the Investors’ section..

It was confirmed that the shareholders that attended the Shareholders General Assemblies of 2014 were registered in the shareholders book.

All questions were answered and published in ISAGEN’s website with the respective

answers. There were no questions made during the Shareholders Extraordinary General Assembly.

All decisions taken by the Shareholders General Assembly were complied with and

implemented by ISAGEN. The decisions are published in ISAGEN’s website.

The Regular Assembly was held on March 25, 2014, with the following characteristics:

Upon verifying the quorum to begin the meeting, it was found that 67.35% of the Company's subscribed and paid shares were represented and, therefore, there was sufficient quorum to deliberate and decide

The majority of the Board Members were present

Shareholders could vote freely, and the meeting's agenda was approved and carried out

The Assembly was broadcast on the Web page (www.isagen.com.co)

Minutes were taken, which were signed by the Chairman, Secretary and members of the Review Committee

These minutes were duly sent to the Financial Superintendence, Utilities Superintendence, among others, and were registered at the Chamber of Commerce.

The Extraordinary Assembly was held on November 26, 2014, with the following

characteristics:

Upon verifying the quorum to begin the meeting, it was found that 86-04% of the Company's subscribed and paid shares were represented and, therefore, there was sufficient quorum to deliberate and decide

The majority of the Board Members were present

Shareholders could vote freely, and the meeting's agenda was approved and carried out

The Assembly was broadcast on the Web page (www.isagen.com.co)

Minutes were taken, which were signed by the Chairman, Secretary and members of the Review Committee

These minutes were duly sent to the Financial Superintendence, Utilities Superintendence, among others, and were registered at the Chamber of Commerce.

http://www.isagen.com.co/


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5.2 BOARD OF DIRECTORS 5.2.1 COMPOSITION The Corporate Governance Code states: “The Board of Directors consists of seven (7) main members with their respective personal alternates. At least three (3) of the main members and their respective alternates shall be independent in accordance with the independence criteria defined below.” This management body consisted of seven (7) main members with their respective

personal alternates, of which five (5) were independent members. No Company executive was part of the Board of Directors.

At December 31, 2013, the Board of Directors was comprised by: :

MAIN ALTERNATE

General Vice Minister Ministry of Finance and Public Credit DR. CAROLINA SOTO LOSADA

Director General of Public Credit and National Treasury DR. MICHEL JANNA GANDUR

Vice Minister of Energy

Ministry of Mines and Energy

DR. ORLANDO CABRALES SEGOVIA

Independent DR. TOMÁS GONZÁLEZ ESTRADA

Independent DR. JUAN CARLOS ESGUERRA

Independent DR. NICOLÁS ECHAVARRÍA MESA

Independent DR. LUIS ERNESTO MEJÍA CASTRO

Independent DR. JORGE HUMBERTO BOTERO ANGULO

Independent General Manager Empresas Públicas de Medellín DR. JUAN ESTEBAN CALLE RESTREPO

Independent DR. JESÚS ARTURO ARISTIZÁBAL GUEVARA

Independent DR. JOSÉ FERNANDO ISAZA DELGADO

Independent DR. ANDRÉS FELIPE MEJÍA CARDONA

Independent DR. GONZALO RESTREPO LÓPEZ

Independent DR. ANDRÉS ESCOBAR ARANGO

During the year the following changes occurred:

In February 2014 doctors Gonzalo Restrepo López and Nicolás Echavarría, presented their resignation to the Board of Directors.

In August 2014, doctors Tomas Gonzales and Andrés Escobar, were appointed Minister of Mines and Energy and Technical Vice Minister of Finance and Public Credit, respectively. Therefore, they ceased to have capacity as Independent Members of the Board of Directors, which did not affect the minimum number of independent members required.


34 34

Dr. Carlos Fernando Eraso Calero became member of the Board as of his designation as Energy Vice Minister on October 8, 2014. Similarly, Dr. Orlando Cabrales Segovia left on the same date.

Subsequently, Board meeting No. 251 of October 31, 2014, upon request of the Ministry of Finance, decided to call an Extraordinary Assembly intended to fill in the Board vacant position for the remaining period (April 2013 – March 2015), in view of the potential exit of doctors Andrés Escobar Arango and Tomás Gonzales Estrada, for their recent appointment in the Government. In compliance with the above, on November 26, 2014, the Shareholders Extraordinary General Assembly was held, where approval was granted for the appointment of new members of ISAGEN’s Board of Directors as follows: Doctors Luz Helena Sarmiento Villamizar, Carlos Cure Cure, Orlando Cabrales Segovia, and Juan José Echavarría Soto.

At December 31, 2014, the Board of Directors was comprised as follows:

MAIN ALTERNATE

General Vice Minister Ministry of Finance and Public Credit DRA. CAROLINA SOTO LOSADA

Director General of Public Credit and National Treasury Ministry of Finance and Public Credit DR. MICHEL JANNA GANDUR

Vice Minister of Energy

Ministry of Mines and Energy DR. CARLOS FERNANDO ERASO CALERO

Independent DR. ORLANDO CABRALES SEGOVIA

Independent DR. JUAN CARLOS ESGUERRA

Independent DRA. LUZ HELENA SARMIENTO VILLAMIZAR

Independent DR. LUIS ERNESTO MEJÍA CASTRO

Independent DR. JORGE HUMBERTO BOTERO ANGULO

Independent General Manager Empresas Públicas de Medellín DR. JUAN ESTEBAN CALLE RESTREPO

Independent DR. JESÚS ARTURO ARISTIZÁBAL GUEVARA

Independent DR. JOSÉ FERNANDO ISAZA DELGADO

Independent DR. ANDRÉS FELIPE MEJÍA CARDONA

Independent DR. CARLOS CURE CURE

Independent DR. JUAN JOSÉ ECHAVARRÍA SOTO

5.2.2 ROLES AND RESPONSIBILITIES The Corporate Governance Code states “The roles and responsibilities of the Board of Directors are those set forth in Article Twenty-eight - Functions of the Board of Directors in the Corporate Bylaws. It is responsible for, among other thing, the general approach for the management of the company's business, in accordance with the guidelines set by the Shareholders General Assembly” The Board deliberated as provided in Article No. 32 of the Corporate Bylaws with

the presence of at least six (6) members, of which at least one of them was a main member. Decisions were taken in accordance with attendance to the Meeting, with the affirmative vote of at least four (4) members and in some cases unanimously.


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Regarding the Roles and Responsibilities of Board members, it was seen in the various minutes, that the Board fulfilled its roles and responsibilities in accordance with Article 28 of the Corporate Bylaws. The issues addressed, among others, are summarized below:

Monitoring of Management Commitments

Monthly Reports (Progress in Generation, Commercial and Financial Projects, Regulations and Energy Situation)

Annual Report on Corporate Control System

Evaluation Results of Board of Directors and its Committees –2013 Management and Action Plan

General Manager Evaluation - 2013 Management

Salary increase

Audit Committee Bylaws

External Audit Report on 2013 Management and Results

Financial Projections

Approval of 2013 Financial Statements 2013 COLGAAP & NIIF and its Notes

Expert opinion of the Statutory Auditor

Profit Distribution Project

Annual Corporate Governance Report

Letter from the Board and General Manager to Shareholders – Management Report

General Secretariat Report on Compliance with Agreement 096 of 2007

Sundry items for Assembly

Agenda for Assembly sessions

2014 Financing Management

Sale of Nation’s Shareholding in ISAGEN

Reorganization of Organizational Audit Team

Salary Updating for SINTRAISAGEN workers

Appointment of Chairman and Vice Chairman of the Board

Evaluation of Sogamoso Project vis-à-vis the IHA Sustainability Protocol

Issues related to the sale of electricity to Venezuela

2014 Financial Result Scenarios

Risk Management System

Donations Report

General Manager Vacation

Amoya Event Report

Resignation to Alternate Legal Representation

Benefits from the upgrading of impellers in the San Carlos plant

Implementation of Pro National University Stamp in ISAGEN

Contractual Provisions in Energy Sale Contracts

Comptrollership Office 2013 Report and Improvement Plan

Approval of Board Minutes

Accounting Policies

Manual on self-regulation and management of risk of money laundering and financing of terrorism

Committee items of each of its Board Committees: Corporate Management and Governance; Audit Committee and Finance and Investment Committee

Cash Budget and its amendments


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Extraordinary Shareholders General Assembly

Analysis of Termocentro Viability with LPG fuel

Sustainability trends and results of dialogues with Stakeholders

Institutional Development Plan 2015 – 2019

Budget 2015

Management of water resource in ISAGEN

Achievements in 2014

Protocol on Conflicts of Interest Management in Board meetings

Integration of Board of Directors Committees

Corporate Risk

Financial Condition and General Debt

Financial Projections

5.2.3 ELECTION The Corporate Governance Code states “Members are elected through the electoral quotient system, in accordance with the proportional representation of share ownership, for a period of two (2) years and may be reelected or removed at any time by the General Assembly.” Pursuant to the Corporate Bylaws, the Board of Directors was elected for a period

of two years, and in this regard, the list that Nation proposed to the Shareholders General Assembly 2013 to form the Board for the period April 2013 - March 2015, was published on ISAGEN's website

The Assembly approved the composition of the Board of Directors proposed for the period 2013 - 2015, by a majority, with a vote of 96.49%, 2.09% against and 1.42% abstention, of the shares represented at the meeting.

The Shareholders Extraordinary General Assembly of November 26, 2014 approved by a majority the new composition of the Board of Directors proposed for the remaining period 2013 - 2015, with a vote of 90.68% in favor, 2.77% against and 6.55% abstention, of the shares represented at the meeting.

5.2.4 QUALITY OF BOARD MEMBERS

The Corporate Governance Code states: “The members of the Board must be professionals of high moral and ethical quality, with analytical, managerial and leadership skills, and as a whole must have knowledge and experience in the energy industry, finance, risk, strategy, legal and commercial aspects, and at least three (3) of the main members and their alternates must be independent”.

Regarding the Quality of Board members, for each nomination and appointment it was concluded that the Board as a whole, met the qualities and skills required in the Code of Good Governance.


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5.2.5 INDEPENDENT MEMBERS The Corporate Governance Code states: “At least three (3) of the main members and their alternates shall be independent, in accordance with the independence criteria defined below.” In addition, the Shareholders Agreement describes that: “The Nation, pursuant to the provisions of Article 44, Law 964 of 2005, shall submit, for consideration by the Assembly, a list to elect the independent members of ISAGEN's Board of Directors, in compliance with the provisions of Decree 3923 of 2006”. The Board of Directors was comprised of seven main members with their personal

alternates, five of which (main members and alternates) were independent. The Board of Directors included a position for representatives of the 10 minority

shareholders with the greatest equity interest, along with their respective alternate, which were, Dr. Luis Ernesto Mejía Castro and Dr. Jorge Humberto Botero Angulo. Similarly, in the Shareholders Extraordinary General Assembly they were ratified as representatives of Minority Shareholders.

In the Shareholders Extraordinary General Assembly held on March 25, 2014, they presented their Management Report as representatives of the Minority Shareholders.

5.2.6 MEETINGS AND QUORUM The Corporate Governance Code states: “The regular and special meetings of the Board of Directors, with regard to notice, quorum, voting, minutes and documents, are carried out in accordance with the conditions laid down in Article Thirty: Notice, Information and Meetings of the Board and Article Thirty two: Quorum and Majority in the Corporate Bylaws”. Regarding Meetings and quorum, the following was observed: The Board met monthly during the year. Notices of meetings, the provision of

information to its members, and its operation in general, were carried out in accordance with the rules established in the Corporate Bylaws and the Corporate Governance Code and in Agreement 135 whereby the regulations of the Board and Directors and the Committees is formalized.

The Board met on fourteen (14) occasions, which corresponded to 14 regular sessions, as required by the paragraph of Article 30 of the Corporate Bylaws and two (2) extraordinary sessions.

The corresponding minutes were prepared during each meeting, which were signed

by its Chairman and Secretary. The percentage of attendance to the Board of Directors during the year and relative

to the previous year, was:


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AREA ATTENDANCE 2013

ATTENDANCE 2014

Attendance by position 98.8% 94.9%

Attendance by main member 85.2% 90.8%

Attendance by alternate member 92.6% 63.3%

Bearing in mind that one main position was vacant since March until November, the percentage of attendance of main members plus the attendance of the alternate to the main vacancy was 90.8%. Therefore, alternate members’ attendance was 63.3%. Likewise, during 2014, until the Shareholders Extraordinary General Assembly was held in November 2014, when the Board of Directors was restructured, there was an alternate member vacancy.

5.2.7 BOARD ADVISORS The Corporate Governance Code states: “The Board Regulations set the criteria based on which it can hire external advisors, to help with areas deemed necessary for decision making”.

The hiring of Dr. Germán Olano Jaramillo as an external advisor to the Board for the

Ethics Committee continued, as approved in Board Meeting No. 235 of August 29, 2013.

5.2.8 BOARD COMMITTEES The Corporate Governance Code states: “To directly address its responsibilities, the Board has three standing Committees, which establish guidelines, monitor defined actions, evaluate results, and present proposals for improving management in aspects under their responsibility”.

The Management and Corporate Governance Committee met eight (8) times during

the year.

The most important issues discussed at the meetings were:

Monitoring of Management Commitments

Results of Evaluation of Board of Directors Management 2013

Evaluation of General Manager Management 2013

Salary Increase

Board Action Plan

Proposal for Monitoring of Relations with Stakeholders

Good Governance Practice – Codigo Pais Survey

Results of the Reputation & Brand Study

Proposal of Methodology for General Manager Performance Evaluation

Resignation to Alternate Legal Representation

Strategic Analysis

Monitoring of Board Action Plan and Board Perspectives

Communication Strategic Review– Dattis -


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New Código País (Country Code) and Action Plan

Declaration of Conflicts of Interest

Evaluation of Board of Directors, Committees and General Manager

Institutional Development Plan 2015-2020 (Overarching Purpose, Mission and Strategy)

Report on monitoring of dialogues with Stakeholders

Shareholders Extraordinary General Assembly

Labor opinion on retroactivity of severance pay

The Finance and Investment Committee met six (6) times during the year. The most important issues discussed at the meetings held were:

Monitoring of Management commitments

Financing 2014

Profit Distribution Project

Evaluation of OPIC substitute financing

Monitoring of credit actions with OPIC insurance

Limits of VaR in treasury surplus portfolio

Direct Depositor Costs

Financial Projections 2014-2033

Monitoring of Financial Results 2014

Monitoring of Project Study Plan

Monitoring of Cost of Capital

Budget 2014

Monitoring of WACC

Sogamoso Opportunity Cost

Commercial contracting strategy

Internationalization Issues

The Audit Committee met eleven (11) times during the year. The most important issues were:

With regard to the evaluation of Financial Results: o Review of Annual Financial Statements and Notes to the Audited

Financial Statements 2013 o Monitoring of Financial Statements under Colombian Standards and

International Standards (IFRS) o Review of the Contingencies and Litigation Update (quarterly) o Review of 2014 Planning and Results of 2013 Tax and Accounting

Management o Monitoring of Cash Surpluses

• With regard to the Corporate Control System:

o Annual monitoring of the Corporate Control System 2013 o Review of the progress and results of the Annual Audit Plan

With Regard to Organizational Audit: o Evaluation by the Audit Committee on Organizational Audit 2013


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Results of the Self-Assessment on Organization Audit in compliance with International Standards on Auditing

Approval of Organizational Audit's 2014 work plan

With regard to External Control Bodies o Annual Report on Internal Accounting Control System for the General

Accounting Office 2013

o Expert Opinion from the Statutory Auditor 2013

o Statutory Audit Annual Work Plan 2014

o Statutory Audit Reports 2014 o Statutory Auditor Evaluation 2014

o Proposal for hiring Statutory Auditor 2015 - 2016 o Annual Report from the External Auditors on Management and Results 2013

o Comptroller General of the Republic Report and Improvement Plan 2013

o With regard to Corporate Risk o Monitoring of Risk Management 2013 and Work Plan 2014 o Monitoring the of the Corporate Risk situation o Assurance Program Evaluation

The Board Committees acted in accordance with established regulations with

regard to their composition, responsibilities and operation. Regarding the composition of the Committees, there was compliance with the

provisions of the Corporate Governance Code and Board Agreement No. 135 that governs them. Additionally, they are composed of Board members that have the appropriate training and experience for their purposes.

In relation to their responsibilities and operation, as provided in the regulations,

during 2014 the Committees reviewed issues in greater detail and made the necessary recommendations to the Board, thus fulfilling the purpose for which they were created.

The conformation of the Committees during the year was the following:

The Management and Corporate Governance Committee at December 31, 2013, was comprised by the following Board members: Drs. Luis Ernesto Mejía Castro, Gonzalo Restrepo López, Jesús Arturo Aristizábal Guevara, Andrés Felipe Mejía Cardona, Tomás González Estrada, Nicolás Echavarría and Germán Arce Zapata. In February 2014, doctors Gonzalo Restrepo López and Nicolás Echavarría Mesa presented their resignations as members of the Board of Directors. Subsequently, the Board No. 251 of October 31, 2014, upon request of the Ministry of Finance, decided to call an Extraordinary Shareholders Assembly to fill the Board seat vacancies for the remaining period (April 2013 – March 2015), in view of the possible withdrawal of doctors Andrés Escobar Arango and Tomás Gonzales Estrada, because of their recent appointments in the Government.


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In compliance with the above, on November 26, 2014, the Shareholders Extraordinary Assembly was held where the nominations proposed were approved appointing as new members of the Board of Directors of ISAGEN Doctors Luz Helena Sarmiento Villamizar, Carlos Cure, Orlando Cabrales Segovia, Juan José Echavarría Soto. Pursuant to the Shareholders Extraordinary Assembly, Board of Directors No. 252 of November 28, 2014, approved the new composition of the Board Committees. At December 31, 2014, the Corporate Management and Governance Committee was comprised by doctors: Luis Ernesto Mejía Castro, Jesús Arturo Aristizábal Guevara, Andrés Felipe Mejía Cardona, Carolina Soto Lozada, Juan Carlos Esguerra Portocarrero, Luz Helena Sarmiento Villamizar and Orlando Cabrales Segovia.

The Finance and Investments Committee at December 31, 2013, was comprised by doctors: Michael Janna Gandur, José Fernando Isaza Delgado, Andrés Escobar and Jorge Humberto Botero.

In accordance with Board meeting No. 252 of December 26, 2014, the new composition of the Finance and Investments Committee was the following: Doctors Carlos Fernando Eraso Calero, Jorge Humberto Botero Angulo, José Fernando Isaza Delgado, Michel Janna Gandur, Luis Ernesto Mejía Castro, Carlos Cure and Juan José Echavarría Soto.

The Audit Committee at December 31, 2013 was comprised by the following Board members: Doctors Andrés Felipe Mejía Cardona, Jesús Arturo Aristizábal Guevara, José Fernando Isaza Delgado, Nicolás Echavarría and Jorge Humberto Botero Angulo.

In accordance with Board meeting No. 252 of December 26, 2014, the new composition of the Finance and Investments Committee was the following: Doctors Andrés Felipe Mejía Cardona, Jorge Humberto Botero Angulo, Jesús Arturo Aristizábal Guevara, José Fernando Isaza Delgado, Luz Helena Sarmiento Villamizar and Michel Janna Gandur.

5.2.9 INFORMATION FOR DECISION-MAKING The Corporate Governance Code states: “In order for the Board to have all the necessary facts for decision making, they must have access to relevant information on such issues, in accordance with agenda contained in the notice. When a Board member is appointed for the first time, the Company will provide information regarding it and its environment, as well as the duties, responsibilities and authority that come with being a member of the Board of Directors. It is the responsibility of the new Board members to attend this induction, at the latest, before the second Board meeting they attend”. Information for decision-making was provided in a timely manner to members of the

Board and Board Committees.


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Corporate management was monitored at Board meetings based on information

provided by Management. Similarly, compliance with the commitments made by Management to the Board was evident.

Upon the entry of the new Board members, the Company provided them with information regarding it and its environment in a personalized manner and performed the respective induction, and also covered matters related to the duties, responsibilities and authority that come with being a member of the Board.

In addition, new Board members were provided with training on the Web application that allows them to query the information for each meeting.

5.2.10 INELIGIBILITY AND CONFIDENTIALITY OF INFORMATION

According to the provisions of the Corporate Governance Code “When there are discussions and decision-making on issues in Board meetings that involve ISAGEN's business strategy or others that give it competitive advantage or are related to its market competitiveness, Board members that represent or belong to competing companies are ineligible to participate and decide on these issues, and therefore they should partially withdraw from the meeting, evidence of which shall be recorded in the minutes and in any case, the following should be applied: the provisions of existing legislation, these Bylaws and ISAGEN's Corporate Governance Code in relation conflicts of interest for managers.” With respect to ineligibilities and confidentiality of information, the following was observed: When one of its members saw the possible existence of a conflict of interest,

records were seen in the Board's minutes of their temporary withdrawal from the meeting while the issue was discussed.

At the meetings, when the Business Report was addressed, a record was made

when, due to no information being submitted that involved the Company's business strategy or gave a competitive advantage to third parties, it was not necessary for Dr. Juan Esteban Calle and Dr. Jesús Arturo Aristizábal Guevara to withdraw from the meeting, who are representatives of Empresas Públicas de Medellín, in accordance with the provisions of the Corporate Governance Code.

5.2.11 EVALUATION AND COMPENSATION The Corporate Governance Code states: “The Board of Directors will evaluate its annual management through the mechanism it defines. To this end, it may enjoy third party facilitation. Based on its findings, comments and recommendations, the appropriate improvement plans will be defined. The Board shall report through its Chairman on the operation of the Board and its evaluation. The Shareholders General Assembly shall determine the compensation for Board members, both for attending the meetings of the Board and the Board Committees, in accordance with market benchmarks”.


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Regarding the evaluation of the Board, the following was noted: At meeting No. 253 of December 19, 2014, the Board defined the evaluation

methodology that would be applied to its management during the year coming to end; in this regard and after analysis of their advantages, it decided to continue with the methodology used for evaluating management in 2013. The foregoing seeking to help mature the scheme and make it possible to compare over time the various aspects evaluated.

Management was evaluated based on five aspects: i) Contributions and commitments, (ii) Performance of the Board, (iii) Performance of the Management and Corporate Governance Committee, (iv) Performance of the Audit Committee and (v) Performance of the Finance and Investment Committee. The results were analyzed in Board of Directors No. No. 254 held January 30, 2015.

This evaluation was supplemented by a perspective from Management, for which

the members of the Company's Management Committee, who permanently attend Board meetings, completed a form that was very similar to those of the Board members, in which they were asked about the performance of the Board and its Committees. The overall results of the evaluation, out of a total of 5 points, are as follows,

where scores are high performance indicators:

Contribution and Commitment: 4.76

Performance of the Board: 4.67

Performance of the Management and the Corporate Governance Committee: 4.86

Performance of the Audit Committee: 4.94

Performance of the Finance and Investments Committee: 4.74

It was noted that the overall rating places the Board in a strong range, after the application of five ranges in each variable. However, certain aspects were identified that will be part of its action plan, with a view to continuous improvement. Also, during the year, the action plan resulting from last year was addressed in order to strengthen its management.

Overall, the evaluation again confirmed its high standards of commitment,

impartiality, independence, the defense of the interests of all shareholders, loyalty, efficiency, knowledge, among many others, while, faithful to the commitment to continuous improvement, improvement opportunities were reiterated, related specifically to the holding of meetings, something that nevertheless saw improvement over prior periods and on which the Board has worked decisively.

The resulting action plan is as follows:

Monitoring by Management of the presentations of regulatory issues.

Reviewing timing of Management and Corporate Governance Committee.

Giving continuity and emphasizing on the “Protocol on the Efficient Holding of Meetings of the Board of Directors”, which gathers the following needs:

o Management to be clearer and concrete in its presentations o Optimizing of Board and Committee times


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With regard to the compensation of the Board, the following was noted: : At the Shareholders General Assembly held March 27, 2012, the Nation's proposal

regarding board fees was approved, recognizing 4.5 MMW per meeting of the Board and Committees by way of fees.

In relation to the payment of fees for attendance to the Board and Board Committees, the provisions of the Shareholders General Assembly were complied with.

5.2.12 REGULATIONS OF THE BOARD OF DIRECTORS The Corporate Governance Code states: “The Regulations of the Board of Directors, subject to the law, the Corporate Bylaws and the provisions of the Company's Corporate Governance, contain the rules for convening and holding meetings and the operation of the Board" These regulations can be consulted by going to section: Information for shareholders and investors / Corporate Governance / Corporate Governance Documents.

With regard to the calling and holding of meetings, the information was posted in a timely manner on the website section for reference.

Changes were made to the Board regulations, which are summarized as

follows:

As provided for in Board meeting No. 214 of February 27, 2014 (and General Assembly 033 of March 25, 2014), a new function of the Board of Directors was introduced, which becomes section 37 of article 16 in said document, which consists in establishing guidelines on business sustainability. Similarly, a new function is introduced for the Management and Corporate Governance Committee, consisting in monitoring and offering recommendations relative to sustainability.

Further, as provided for in Board meeting No. 243 of April 24, 2014, renaming is approved from Organizational Audit to Corporate Audit and, therefore, that of Team Manager to Corporate Auditor.

5.3 GENERAL MANAGER 5.3.1 ROLES AND RESPONSIBILITIES The Corporate Governance Code states: “The roles and responsibilities of the General Manager are set forth in Article Thirty-Five - Functions of the General Manager in the Corporate Bylaws. They are responsible for the management of the Company, its legal representation and the management of its business, with the number of alternates established in the bylaws, who shall replace them during their temporary or permanent absences. The General Manager has a voice in the Board meetings, but no vote in its decisions”


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The General Manager fulfilled the roles and responsibilities as set out in Article 35 of the Corporate Bylaws.

5.3.2 APPOINTMENT AND COMPENSATION The Corporate Governance Code states: “The Board of Directors appoints ISAGEN's General Manager and their alternates, removes and reappoints them, and sets the compensation of the principal based on market benchmarking. The appointment of the General Manager is performed considering that they must be a professional with minimum work experience of ten (10) years and of five (5) years in management positions, with high professional and ethical standards, knowledge of the energy industry and management and leadership skills” ISAGEN has compensation guidelines. All ISAGEN employee positions are

evaluated through a recognized methodology called HAY. At meeting No. 240 held January 30, 2014, the Board established the compensation policy for the year and it was noted that the compensation to the General Manager complied with the policy.

The Board of Directors, in meeting No. 234 held July 25, 2013, approved the Long Term Incentives System put to its consideration by the Management and Corporate Governance Committee. Additionally, it authorized the General Manager to approve the respective regulations and these were sent to the Board members with no comments.

5.3.3 EVALUATION The Corporate Governance Code states: “The evaluation of the General Manager is conducted by the Board in accordance with compliance with the commitments and responsibilities it has assigned to them and the achievement of the targets set for the indicators of the Company's Institutional Development Plan, which is approved, updated, implemented and evaluated annually”. During the first half of 2014, the Board of directors requested the Administrative

Management to review and enhance the performance evaluation of the General Manager. Hence, Management, in its Board meeting No. 253 of December 19, de 2014 approved the new methodology, which was applied on the results for the year 2014.

There are two inputs for evaluating the General Manager (i) The evaluation of compliance with indicators from the Institutional Development Plan (annual head office result for variable compensation) and (ii) The evaluation of compliance with commitments assigned by the Board and Committees for 2014.

The result of the evaluation performed in Board Meeting No. 254 held January 30, 2015, was 109.10 points, with average compliance with commitment results of 100%.

5.4 EXECUTIVES


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The Corporate Governance Code states: “In order to ensure that work is done under professional and ethical standards, the selection, evaluation and compensation of persons holding managerial positions is performed in accordance with the following criteria: Managerial positions are awarded based on the merits of the candidates within the Company and in the labor market relative to the required profile. Evaluation is conducted with a formal and systematic instrument called the Performance Management System, whose basic input is the definition and evaluation of plans at the corporate and process level. The compensation of executives is based on market benchmarks. The same principles and procedures apply to the selection and evaluation of other Employees in the company.” In the selection processes conducted during the year, internal and external

regulations related to the issue were applied and individuals met the defined job profile. The entries and promotions of executives were as follows:

DATE NAME POSITION EQUIPMENT APPOINTMENT

RECORD

15-jan-14 LILIANA PATRICIA TORO HERNÁNDEZ

PLANT MAINTENANCE COORDINATOR

TERMOCENTRO PLANT

No. 11 of February 3, 2014

27-jan-14 YANET ELVIRA ARCOS OVIEDO PLANT MAINTENANCE COORDINATOR

SOGAMOSO PLANT No. 10 of February 3, 2014

27-jan-14 ADRIANA MARÍA OCHOA OCHOA PLANT MAINTENANCE COORDINATOR

JAGUAS PLANT No.12 of February 3, 2014

03-feb-14 EDGAR RIAÑO GARCÍA PLANT MAINTENANCE COORDINATOR

SOGAMOSO PLANT No. 8 of January 28, 2014

03-mar-14 GUSTAVO ENRIQUE ARCE BARRERA


SOGAMOSO PLANT Internal transafer

03-mar-14 VIVIANA ANDREA GÓMEZ PEÑALOZA


TERMOCENTRO PLANT

No. 19 of Marcfh 7, 2014

10-mar-14 JAVIER HERNANDO QUINTERO DÍAZ


SOGAMOSO PLANT No. 9 of January 28, 2014

01-abr-14 JUAN CARLOS BETANCUR CALLE


MIEL No. 21 of March 18, 2014

07-abr-14 CARLOS ALBERTO SERNA MACHADO

PLANT MAINTENANCE COORDINATOR SAN CARLOS

PLANT Internal transfer

01-may-14 MARGARITA DEL PILAR GIRALDO DE ORTIZ

LEGAL REPRESENTATION LEADER

LEGAL REPRESENTATION

No. 38 of May 14, 2014

05-may-14 JOVAN ALFONSO CANO CANO LEGAL REPRESENTATION LEADER

COMMERCIAL OPERATION ASSURANCE DIRECTOR

No. 37 of April 29, 2014


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DATE NAME POSITION EQUIPMENT APPOINTMENT

RECORD

03-jun-14 AMPARO ELISA PRECIADO HOYOS FISCAL MANAGEMENT COORDINATOR

ACCOUNTING AND FISCAL MANAGEMENT

No. 54 of June 17, 2014

03-jun-14 CLAUDIA LILIANA SANDOVAL VERA PLANT MAINTENANCE COORDINATOR

AMOYA PLANT No. 39 of May 21, 2014

03-jun-14 ANDRÉS FELIPE MOLINA MEJÍA PLANT MAINTENANCE COORDINATOR

JAGUAS PLANT Internal Transfer

17-jun-14 ANDRÉS GUTIÉRREZ GALLEGO INTERNAL AUDIT LEADER

CORPORATE AUDIT No. 57 of June 17, 2014

14-jul-14 MARIO ALBERTO CARRILLO BOGOTÁ


AMOYA PLANT No. 59 of July 2, 2014

28-jul-14 JULIO CÉSAR TENORIO SALGUERO SUPPLY LEADER SUPPLY No. 76 of August 13, 2014

01-ago-14 OSCAR FERNANDO CIFUENTES VALENCIA

COMPLIANCE MANAGEMENT COORDINATOR

CORPORATE AUDIT No. 72 of July 21, 2014

02-sep-14 LUIS ALFREDO RESTREPO BRAVO ADMINISTRATIVE COORDINATOR

SOGAMOSO PLANT No. 79 of August 27, 2014

01-nov-14 JAVIER CARDONA SALAZAR ENVIRONMENTAL COORDINATOR

ENVIRONMENTAL / SOGAMOSO

No. 102 of November 25, 2014

01-nov-14 GABRIEL JAIME ÁLVAREZ ÁLVAREZ PLANT MAINTENANCE COORDINATOR

AMOYÁ PLANT / MECHANICAL MAINTENANCE

No. 104 of November 25, 2014

01-dec-14 RUBEN OSPINA ARGUELLES PLANT MAINTENANCE COORDINATOR

SOGAMOSO PLANT / CIVIL MAINTENANCE

No. 92 of October 27, 2014

In compliance with defined evaluation procedures, all Executives were

evaluated in accordance with the commitments made to their immediate manager.

In terms of the compensation of Executives, as was stated, at meeting No. 240 held

January 30, 2014, the Board of Directors established the compensation policy for the year, and it was observed that the compensation given complied with this policy..

Audit Conclusion – The Company and its Governance According to the review performed and the results obtained, it is concluded that the Company has practices and demonstrates suitable application of the principles governing the Company and its Governance.


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The Board of Directors met dutifully during the year and gave general guidance for the management of the company's business, in accordance with the guidelines set by the Shareholders General Assembly and the Company's Management complied with this in accordance with its commitments and responsibilities.


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6. CONTROL MECHANISMS

6.1 INTERNAL CONTROL The Corporate Governance Code states: “ISAGEN has defined its Corporate Control System as the set of elements that interact to ensure corporate aims. Control is performed by promoting self-regulation and conducting permanent assessments of the Corporate Control System's elements. The Board's Audit Committee establishes guidelines, monitors the defined actions, evaluates results and presents proposals for improving the Corporate Control System”. ISAGEN has defined its Corporate Control System as the set of elements that interact to ensure corporate aims. From the point of view of the control elements, it was concluded that ISAGEN had a

Corporate Control System that functioned reasonably. During 2014 activities were undertaken and there were achievements and recognitions that demonstrate the strengthening of the System, including: those related to Business Ethics, Corporate Governance Practices, elements of the Integrated Human Management Model, the strengthening of the Risk Management and Business Continuity system, and monitoring activities by the Board of Directors, the Audit Committee and the Management Committee.

Organizational Audit continued to do their work under international standards and complied with the consolidated Annual Evaluation Plan for evaluations of the Corporate Control System; at December 31, 2014, compliance was 100%.

Organizational Audit continued to do their work under international standards and

complied with the consolidated Annual Evaluation Plan for evaluations of the Corporate Control System; at December 31, 2014, compliance was 97%.

With regard to the effectiveness of Improvement Plans, the effectiveness was verified of improvement actions that were implemented during the first and second half of 2014 and that addressed the comments made by Organizational Audit and External Control Bodies. The effectiveness rate was 94.82%.

6.2 INTEGRATED RISK MANAGEMENT The Corporate Governance Code states: “ISAGEN's Integrated Risk Management System makes it possible to plan, organize, direct and control the resources and activities necessary to prevent or mitigate the risks that may affect the achievement of business objectives”. The following activities stood out in 2014, and contributed to the strengthening of Integrated Risk Management in ISAGEN:

Definition and dissemination of the integral management of risk as a Regulatory Document, during training and meetings with executives.


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Updating and approval by the Audit Committee, in meeting No. 108, held in December 2014 on risk appetite and risk rating criteria:

o Analysis of historical data using different methodologies on figures considered catastrophic by ISAGEN when measuring risk impact and approval thereof in the Audit Committee.

o Review of probability and impact rating to calculate risk level.

Monthly monitoring of business risks enabling evidencing and decision making in accordance with the situations faced by the Company:

o Monthly monitoring by the Management and Audit Committee on the 16 risks that had been identified in 2014.

o Risk workshops were carried out in December with Management Committee to build the business risk inventory for the year 2015, in the light of the strategy and the Institutional Development Plan 2015-2019.

Biannual updating of risk matrices of work-related issues issued by Company teams.

Implementation of management of change for Risk Integral Management: o Development of focal groups with different public bodies, seeking to

identify the strengths and weaknesses of ISAGEN’s culture for implementing a Risk Integral Management to obtain greater support for planning activates to move the Organization on this matter.

o Training of over 350 employees and contractors on basic notions of Risk Integral Management through the RIM Day. The day included training, conferences, and teaching material to educate ISAGEN employees on the subject. This training strengthened awareness on fraud risk, and its characteristics and classification.

Integration of work improvement plans and risk treatment plans: o The work improvement process was formalized by integrating

improvement plans form management systems such as Quality, Environment and Safety and Health at Work with the improvement plans of the Risk Integral Management.

o Adjusting Risk Management technological tool for such purpose.

As regards business continuity, it is highlighted the Analysis of Business Impact, identifying critical activities and equipment for the Organization, for which strategies will be defined seeking to maintain and recover operations in the event of catastrophic impact.

Performance of tests and drills: o Drill of Disaster Recovery Plan (DFP) in Bogota facilities. o Drill of San Carlos Power Plant, which integrated Environmental

Emergency Plans, actions in case of public risk, and operations continuity plan.

o Desk exercise of Crisis and Communication Management Plan during Crisis with the Crisis Management Committee.

o Emergency Plan Drills at facilities in Medellín, Jaguas Power Plant, Calderas Power Plant, Termocentro Power Plant, Miel Power Plant and its Diverter Structure.


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6.3 EXTERNAL CONTROL 6.3.1 STATUTORY AUDIT The Corporate Governance Code states: “The Shareholders General Assembly is the body that has the power to elect and remove the Company's Statutory Auditor. Statutory Audit should be performed by a firm that meets the requirements established by law and, in addition, the following: Renowned international prestige, fulfillment of the criteria required by the International Standards on Auditing, and knowledge and experience in the energy industry or similar industries at the national and international level”. The Regular Shareholders General Assembly held on March 19, 2013 elected the

firm Deloitte as the Statutory Auditor for a period of two fiscal years, 2013 and 2014 The Assembly approved the proposal by a majority, with a vote of 98.32% in favor, 0.29% against and 1.39% abstention, of the shares represented at the meeting.

The Audit Committee reviewed the work plan of the Statutory Auditor and

monitored this, as well as their independence. An evaluation was conducted, yielding a favorable view.

The Statutory Auditor attended 64% of the Audit Committee's meetings during the

year, whose collegiate presence at meetings was 100%, in accordance with the provisions of Law 964 of 2005.

6.3.2 SUPERINTENDENCE OF PUBLIC UTILITIES The Corporate Governance Code states: “It is the entity responsible for conducting the inspection and supervision of public utilities providers, with an emphasis on management and results control and respect for the rights of users. This control is performed directly or through the External Auditor for Management and Results, which is hired by the Company and is responsible for reporting annually to the Superintendence of Public Utilities regarding situations that jeopardize the financial viability of the Company, failures that exist in internal control, and in general the comments they have on the management of the Company”. The firm that currently conducts External Audit for Management and Results is HLB

Fast & ABS Auditores y Consultores Ltda, appointed for the 2014 and 2015 period. The report corresponding to 2014 is in the process of being prepared. Once it becomes available, it will be submitted the Audit Committee in February for review and subsequent presentation to the Board of Directors.

6.3.3 COMPTROLLER GENERAL OF THE REPUBLIC The Corporate Governance Code states: “In accordance with the provisions of Law 142 of 1994 and 689 of 2001, it acts as a watchdog on state investment, exercising fiscal control, for which it annually performs the evaluations it considers relevant. As a result of this evaluation, it submits a report and agrees an improvement plan with the Company”.


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During 2014 the Comptroller General of the Republic conducted the audit corresponding to 2013. The rating obtained for the components in the evaluation of Management and Results was 98,101, a result that puts it in the FAVORABLE range. Additionally, the Comptroller closed the entity's account for the fiscal year 2013.

It made eleven (11) administrative findings, and it monitored de warning function of 2012, having concluded that it continues in force.

The resulting improvement plan was carried out, with progress at December 2014 of 89% and compliance is 100%.

6.3.4 FINANCIAL SUPERINTENDENCE The Corporate Governance Code states: “While the Company issues securities in the Colombian public securities market, it will be controlled by the Financial Superintendence under the terms established by law”. During the year there was compliance with Superfinanciera (Financial

Superintendence) and the requested requirements, thereby complying with current regulations.

6.3.5 CERTIFICATION BODY FOR MANAGEMENT SYSTEMS The Corporate Governance Code states: “They perform audits annually, verifying compliance with the requirements of the relevant standards for certified management systems”.

In December 2014, audits were performed on Quality Management Systems certified under standard ISO 9001 version 2008, Environmental Management under the standard ISO 14001 version 2004 and Occupational Health and Safety under standard OHSAS18001 version 2007, with the purpose of monitoring compliance with the requirements and certifications. As a result, the certifying body did not identify major non-conformities. Some minor non-conformities were identified for the Environmental and Occupational Health and Safety Management System, related mostly with operational control on management of chemical substances and improvement necessary for the preparation of cause analyses in some environmental areas.

6.3.6 OTHER ENTITIES The Corporate Governance Code states: “The General Accounting Office, certain Superintendences and Ministries, risk rating agencies and Regional Autonomous Corporations exercise occasional external control by requesting information in formats prescribed by them. These controls are related to the mission of these bodies”. During 20143 there was compliance with the regulations and reporting

requirements of other monitoring, regulation and control bodies.

In April Fitch ratifies AAA (col) the Long Term Rating of ISAGEN; F1+(col) the Short Term Rating; AAA(col) the Domestic Debt Bonds; maintains "AAA" rating for ISAGEN. The Outlook is Stable.


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Audit Conclusion – Control Mechanisms According to the review performed and the results obtained, it is concluded that ISAGEN has suitable practices in relation to Control Mechanisms. During the year, strengthening activities were conducted and applied. ISAGEN has a suitable Corporate Control System that facilitates the achievement of corporate objectives based on the opinions expressed by the different internal control and external control bodies.


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7. DISCLOSURE OF INFORMATION

7.1 GENERAL INFORMATION With regard to this section, the Corporate Governance Code states: “It is the information related to the Company's material issues, its governance, organization, plans, management and financial results, and securities issued. This is public information and was released by various media, such as newspapers, brochures and on the website www.isagen.com.co”. It was seen that the general information was available to the Stock Market and

Shareholders; it was released through different media, mainly the website.

7.2 DISCLOSURE OF INFORMATION With regard to this section, the Corporate Governance Code states: “ISAGEN discloses all information that, in accordance with current regulations, it must send to the market and the Financial Superintendence with the frequency required. Also, it must report acts or events, including decisions, which have the potential to affect ISAGEN and its business or influence the price determination and / or trading volume of its shares”.

ISAGEN maintains a market information policy aimed not only at applying regulations, but also at fulfilling its responsibility as issuer in the Securities Market.

The legal information supplied to the market is based on the guidelines of the Financial Superintendence and Good Governance practices, which are compiled in the Good Governance Code and meet the requirements of the Sole Circular from the Stock Exchange of Colombia, the Corporate Bylaws, the Shareholder Agreement subscribed to by the Nation as Majority Shareholder, and the good governance practices accepted by the Company.

The information disclosed corresponds to that, pursuant to ISAGEN's current internal and external regulations, it must send to the market and the Financial Superintendence, as well as information related to events, acts and relevant decisions (event-based information). During the year the following information was submitted in accordance with Current Regulations

Quarterly information required by the Financial Superintendence of Colombia o Debtors by age o Main shareholders by type of share o Breakdown of equity investments by receiving agent. Nonetheless, The

Company does not own more than 10% of the shares or quotas and equity stakes in other companies.

o Accounts payable by ages o Cash Flow Statement o General economic information on shares and shareholders o General economic information on Equity and other items o Short-term assets and liabilities

Quarterly information in accordance with the Code of Good Corporate Governance.


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o Financial Statements o Cash Flow o Portfolio by maturities o Breakdown of non-operating income o Exposure to foreign currency o Financial Debt Conditions o Accounts payable and receivable from affiliated

companies o EBITDA

Biannual information o There were no transactions by ISAGEN in its own

shares o Financial performance of affiliate companies (not

applicable) o Status of pension liabilities

o Information on regulatory changes in the sector that have significant impact

End of Period periodical information (at December 31, 2014)

o Information before the General Assembly o Information after the General Assembly o Basic Information

Event-based Information In order to strengthen ISAGEN's commitment to transparency and disclosure, ISAGEN has a procedure to determine the relevant events and information to be published. Event-based information was provided by each Process and validated by the Management Committee for proper and timely publication on the Financial Superintendence's website. Relevant information published during the year can be seen in the Annex to this report and in the following summary:


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During the year, one of the most significant events corresponds to the process of

sale of the Nation’s Shareholding in ISAGEN. To such end, the supply of adequate and timely information to the market was observed and the periodical monitoring of the Board of Directors related to ISAGEN’s sale process and the information to be disclosed.

In this process, the following published information is to be highlighted:

In February 2014, the Nation-Ministry of Finance and Public Credit –MHCP- reports on results of awards of shares offered in the first stage of the sale process through the Information Bulletin of the Stock Exchange of Colombia.

Similarly, the Nation-MHCP reports on the publishing of notice of the second stage of the Sale of the Nation’s Shareholding in ISAGEN.

In August, the Nation-MHCP announces its decision to postpone for one year the term of the process for divesture of the Nation’s shareholding in ISAGEN, thus suspending the sale schedule.

7.3 PROVISION OF INFORMATION With regard to this section, the Corporate Governance Code states: “In order for shareholders to have relevant information for monitoring and making decisions on their investment, ISAGEN provides them with information on corporate management, Corporate Governance and material matters concerning the Company, in accordance with this Code and it undertakes to clarify, to the extent possible, any concerns that they have, without prejudice to the duty to maintain confidential information as described herein”. The legal information provided to the market was based on the requirements of the

Sole Circular from the Stock Exchange of Colombia, the guidelines of the Financial Superintendence, the Corporate Bylaws, the Shareholders Agreement signed by the Nation as Majority Shareholder and the Corporate Governance practices, and it was disclosed to Shareholders and the market in general through the following mechanisms:


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ISAGEN WEB page Management Report Press releases, brochures and institutional magazines Meetings with brokerage firms and pension funds Direct communication to shareholders / investors email accounts Automated calls Publication of Relevant Information Web Casts for presenting quarterly earnings

During the year the initiative to achieve better positioning and visibility in

international markets continued, which includes participation in overseas conferences with investors, investor service at the main offices and meetings with market analysts to resolve their concerns, as well as personal meetings at the Medellín and Bogotá offices.

Compliance with practices related to information provided to the market, was overseen by the Audit Committee semiannually, in sessions No. 106 of August 28, 2014 and No. 111 of February 11, 2015.

7.4 CONFIDENTIAL INFORMATION With regard to this section, the Corporate Governance Code states: “To obtain this information, a written request must be submitted with the express statement on the purpose of the request, the reasons why the information is considered relevant to the shareholder or investor who requests it, and the commitment to the sole use of the information by requestor, in accordance with the objective sought”. As a result of the aforementioned sale process, and taking into account what was

stated in the minutes of Assembly No. 029 of 2010, which was passed by a majority, the Company has completed provision of all information, including ISAGEN's confidential information, which the Nation (Ministry of Finance and Public Credit) has required for the structuring, development and implementation of the sale process for the shares it holds in ISAGEN, under the terms established in current regulations and the Assembly's authorization.

7.5 MAIN SHAREHOLDERS With regard to this section, the Corporate Governance Code states: “In its year-end report or the periodic information it sends to the Financial Superintendence, the Company will submit a report that includes the shareholders that have decision-making capacity with a shareholding that is equal to or more than ten percent (10%) of ISAGEN's subscribed capital”.

During 2014 ISAGEN kept information posted on its website regarding the main shareholders and their percentage shareholding.

7.6 AGREEMENTS BETWEEN SHAREHOLDERS


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With regard to this section, the Corporate Governance Code states: “Agreements between shareholders concerning the Company should be disclosed to the market as soon as they are signed, through the National Registry of Securities and Issuers, under the terms of Article 43, Law 964 of 2005”. During 2014, a Shareholder Agreement was executed, whereby two pension and

severance pay funds and Empresa de Energía de Bogotá, agreed to nominate doctors Luis Ernesto Mejía Castro and Jorge Humberto Botero Angulo to continue representing minority shareholders in the Board of Directors of ISAGEN, as independent, for the remaining Board statutory term (2013-2015), in view of the Board election carried out in the Extraordinary General Assembly held on November 26, 2014.

Said Shareholder Agreement was publish and made available to the market through

its publishing in the website and was sent to the Financial Superintendence of Colombia.

7.7 RÉSUMÉS With regard to this section, the Corporate Governance Code states: “The résumés of the members of the Board of Directors, the Legal Representative and Organizational Auditor, will be available to shareholders and the market, and will be posted on the website, www.isagen.com.co, in the Information for Shareholders section”.

The résumés of the members of the Board of Directors, the Legal Representative and Organizational Auditor are available to shareholders and the market, and are posted on the website, www.isagen.com.co, in the Information for Shareholders section.

Audit Conclusion – Disclosure of Information As a result of the review conducted in relation to the information disclosure chapter, it can be concluded that:

The Company had suitable mechanisms to disseminate relevant information to the market, in accordance with applicable law and Corporate Governance practices adopted by the Company.

The shareholders and the market in general had complete and timely access to information in general, required by current internal and external regulations. Additionally, there was no evidence of relevant events that were not disclosed by the Company to Market.

It was noted that after the announcement of the Nation's intention to dispose of the shares, it was the task of the Audit Committee and the Board of Directors to verify the need to disclose the potential contingencies for the Company; to this end, they requested opinions from specialized external lawyers, all with the aim of providing transparency to the process.


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The information that has been provided to the Nation (Ministry of Finance and Public Credit) within the sale process, was authorized by the Shareholders General Assembly 2010.

Nevertheless, it is recommended:

Defining an information consistency mechanism (reconciliation) to guarantee that, regardless of the page consulted by the various stakeholders (shareholders, suppliers, employees or general public), the find the same information in both repositories.


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CONCLUSIONES GENERALES Pursuant to the evaluation performed, Good Governance Practices, their continued strengthening and application on decisions, actions and undertakings among all those involved in managing the company, have efficiently contributed to achieving the business goals. Corporate Governance is evidenced by the acknowledgements received from competent third parties, namely: Sustainalytics, world leader in research and analysis of sustainability ranks

ISAGEN among the 20 top companies in Colombia with highest commitment to sustainability.

For the second consecutive year and, upon evaluating 34 companies in emerging markets, ISAGEN was included in the Dow Jones sustainability index, the most stringent global indicator that determines the coherence level of sustainability management.

A score of 100/100 was obtained on business transparency practices granted by the Corporación Transparencia por Colombia. This is the first time in 7 years, which is the time the measurement has been in place, that a company reaches the highest possible score.

CINCEL acknowledges ISAGEN as the second company relative to Organizational Climate among 73 Latin American companies with more than 100 employees.

ISAGEN's Board of Directors and Employees complied with the defined Corporate Governance practices, and actions for the strengthening thereof were performed.

To maintain such level and continue strengthening Corporate Governance, it is

recommended:

Continue the constant promotion of ethical issues among all stakeholders and,

in particular, include them alongside Transparency Practices within the induction for new employees.

Strengthen organizational education on matters related to ISAGEN’s Manual on Self-Control and Risk Management of Money Laundering and Financing of Terrorism.

Continuous improvement and awareness on treatment of Conflicts of Interest of the Board of Directors and its Committees.

It is important to continue working with Executives on ownership of the conflict of interest process, in order to achieve the timely detection and treatment thereof.

Strengthen the training process, encouraging Corporate Governance e-learning, as it is a tool that contains all the necessary information on the duties of employees and Executives relative to Corporate Governance in ISAGEN.


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Validate the provisions of Agreement No. 112 of 2009, referring to Article 4 and, if necessary, define the corporate governance practice corresponding to the use of privileged information and stock-exchange trading of contractors in order to comply with said Agreement or reconsider that set forth in the Board’s Agreement. See: “ARTICLE FOUR: CONTRACTORS: IN ISAGEN’s contracts whose nature implies that the contractor must have Access to privileged information, provisions will be included whereby the contractor shall undertake, under penalty of contract termination, to: - Not using directly or through a third party, privileged information for its own or third party benefit, thus abstaining, among other things, from stock-exchange trading with shares and other securities of ISAGEN, from the time they become aware of a relevant trading or transaction that will be performed by the Company and the time in which these are known by the public”.

ISAGEN through the General Secretariat offered to all employees a Corporate Governance virtual course, which specifically deals with employee obligations relative to Conflicts of Interest, Trading of ISAGEN’s Securities, prevention of risks of engagement, trading with economic associates, disclosure of information, and management of confidential information.

Define an information consistency mechanism (reconciliation) to guarantee that regardless of the website consulted by the various stakeholders (shareholders, suppliers, employees or general public), find the same information in both repositories.

As regards management of the system to address requests, petitions, claims and complaints, it is recommended to define criteria relative to the recording and follow-up status of the requirements received in relation with “expired cases” , “resolved out of the time limit”, and “pending not due”, and design controls intended for a structured, monthly monitoring. Further, design the structure of the results report file, both for the monthly report and the half-yearly report, and establish the controls required to ensure the integrity and consistency of data contained therein.

Design and implement monitoring controls over the contract with Fiduciaria Bancolombia for service to the shareholders and, moreover, have Financial Management verify from time to time the reasonability of responses given to the shareholders.

Completion by all employees of Corporate Governance virtual course, which was designed by the Company as self-instruction on the responsibility of employees and executives relative to Corporate Governance, Conflicts of Interest, Trading of ISAGEN’s Securities, prevention of risks of engagement, trading with economic associates, disclosure of information, and management of confidential information.


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ANEXO

Month Item Summary

22/12/2014 Notices published by the company

ISAGEN DELIVERS TO COLOMBIA THE SOGAMOSO hydroelectric power plant: Since December 20, the Sogamoso Project reached its maxim 820 MW capacity, thus fulfilling its commitment with the Colombian electricity sector and generating development for Santander.

02/12/2014 Financial circumstances of the Issuer

ISAGEN receives favorable opinion from the National Planning Department for up to COP 250,000 million for credit operations aimed at financing the Sogamoso Project.


ISAGEN fulfills its commitment with Colombia: The Sogamoso Hydroelectric Project starts up its commercial operation with Unit No. 2.

26/11/2014 Change in Board of Directors

In Shareholders General Assembly held on November 26,22014, the Board of Directors was restructured for the remaining period April 2013 – March 2015

25/11/2014

Fines or penalties imposed by government bodies

The Territorial Division of Santander, Labor Ministry, imposed to ISAGEN a fine amounting to $ 12,320,000, for the fatal accident of a worker of the contractor CONALVIAS CONSTRUCCIONES SAS, in the Sogamoso Project. The same will be appealed opportunely.

14/11/2014 Shareholders Agreement

ISAGEN publishes Shareholders Agreement among ISAGEN minority shareholders, within the framework of the Declaration of the Nation as Majority Shareholder.

14/11/2014 Shareholders Agreement

ISAGEN reports Shareholders Agreement among ISAGEN minority shareholders, within the framework of the Declaration of the Nation as Majority Shareholder.


FINANCIAL REPORT FOR THE THIRD QUARTER OF 2013. ISAGEN reported operating revenues of $1,726,766 million. Net profit was $302,542 million.

04/11/2014 Decisions of the Board of Directors

The Board of Directors in its meeting held on October 31, 2014, decided to call FOR A Shareholder Extraordinary General Meeting on 26 November, 2014, in Medellin, for restructuring the Board of Directors for the remaining statutory period.


ISAGEN achieves rating of 100/100 on transparency practices among30 public utilities companies.

09/10/2014 Filing of judicial or administrative proceedings

Class Action filed against ISAGEN and ANLA before the Santander Administrative Court. The Company opportunely answered to the Complaint on October 8, 2014, using sound legal and factual arguments.


For the second consecutive year, upon evaluation of 34 companies in emerging markets, ISAGEN was included in the Dow Jones Sustainability Index-DJSI.

13/08/2014 Shareholder Communications

The Nation - Ministry of Finance and Public Credit announces the decision to postpone the date of the auction, within the process for sale of the Nation’s shareholding in ISAGEN.


The Nation - Ministry of Finance and Public Credit announces the decision to extend for one year the term for sale of the Nation’s shareholding in ISAGEN.


. FINANCIAL REPORT, FIRST HALF OF 2014. ISAGEN reported operating revenues of $1,138,609 million. The net profit was $230,749 million.


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Month Item Summary

24/07/2014

Fines or penalties imposed by government bodies

The Territorial Division of Santander, Labor Ministry, imposed to ISAGEN a fine amounting to $18,480,000, derived from f the fatal accident of a worker of the contractor Consorcio Saneamiento CR, in the Sogamoso Project. The same will be appealed opportunely.

23/07/2014 Notices published by the Company

The Nation - Ministry of Finance and Public Credit announces the publishing of the auction notice in the Disposal program of the Nation’s shareholding – MHCP in ISAGEN, second stage.


The Nation - Ministry of Finance and Public Credit reports the writ by which the Council of State resolves the appeal filed by the Ministry of Finance and Public Credit against the writ admitting the nullity claim (initially admitted by the First Section) and proceeds with its REJECTION.

02/07/2014 Change of Legal Representatives

Resignation of Alternate General Manager Dr. Sheilla Namén Chavarro. Appointment of Alternate General Manager Dr. Juan Carlos Rivera Salazar.


The Ministry of Finance and Public Credit authorizes ISAGEN to process internal debt with local Banks for up to TWO HUNDRED FORTY THOUSAND MILLION PESOS ($240,000,000.000) Colombian Legal Tender


ISAGEN reports progress in filling of dam in the Sogamoso Hydroelectric Project

29/05/2014 Bylaws Reform Bylaws Reform – Duties of the Board of Directors


The Nation - Ministry of Finance and Public Credit reported the decision to revoke the precautionary measure and rejection, within the framework of the nullity process against Decree 1609 of 2013 whereby the disposal process was approved.


Fitch Ratings ratifies "AAA" rating for ISAGEN

21/05/2014 Securities Rating Fitch ratifies AAA(col) for Domestic Debt Bonds in ISAGEN S.A.

21/05/2014 Issuer Rating Fitch ratifies F1+(col) for ISAGEN0s Short Term Rating

21/05/2014 Issuer Rating Fitch ratifies AAA(col) for ISAGEN’s Long Term Rating; the outlook is Stable.


The Nation - Ministry of Finance and Public Credit publishes diligence record of compliance pact signed on this date within the framework of the Class Action filed by Rodrigo Toro Escobar and others against the Ministry of Public Finance and others before the Cundinamarca Administrative Court.

30/04/2014 Securities Rating BRC Investor Services S. A. SCV discloses the validity expiration of the Long Term Debt rating for the First Issue of Domestic Public Debt for $850,000 million - ISAGEN S.A. E.S.P.

30/04/2014 Issuer Rating BRC Investor Services S. A. SCV discloses the validity expiration of Issuer Rating of ISAGEN S.A. E.S.P.


FINANCIAL REPORT FIRST QUARTER OF 2014. ISAGEN reported operating revenues for the quarter of $526,202 million. The net profit was

$147,073 million.


ISAGEN reports that it will submit results online and via teleconference for the first quarter in 2014 on Tuesday, April 29, at 10:00 am, Colombian time.


ISAGEN is recognized as Outstanding Brand for its acknowledgements and track record.


The Nation - Ministry of Finance and Public Credit issues press release with the appeal field with the First Section of the Council of State.

01/04/2014 End of Period Reports

Attached is ISAGEN’s End of Period 2013 Report in compliance with External Circular 004 of 2012.


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Month Item Summary


The Nation - Ministry of Finance and Public Credit reports on de Writ Admitting the Nullity Claim, within the framework of the process whereby the MIEL precautionary measure was decreed on Friday, March 28.


The Nation - Ministry of Finance and Public Credit publishes press release related to the provisional suspension of the Program for Disposal of the Nations’ Shares in ISAGEN.


The Nation - Ministry of Finance and Public Credit reports on the provisional suspension writ issued by the Council of State relative to the effects of Decree 1609 of 2013 that approved the disposal process.

28/03/2014 Legal circumstances of the issuer

ISAGEN reports on progress of the Action for the Protection of People’s Rights filed by ISAGEN, related to the construction of the Miel I Hydroelectric Power Plant.


Potential pre-qualified parties to purchase 57.61% of the Nations’ shareholding in ISAGEN submitted sealed envelopes to the prequalification process.

26/03/2014 Labor situations In view that the workers union SINTRAISAGEN did not question the Collective Bargaining Agreement that was in force for the term March 1, 2013 to February 28, 2014, it was automatically extended for six (6) months.

25/03/2014 Bylaws Reform The Shareholders General Assembly of ISAGEN, held on March 25, 2014, decided to reform one article of the Bylaws.

25/03/2014 Financial circumstances of the issuer

The Shareholders General Assembly of ISAGEN, held on March 25, 2014, decided to approve the Financial Statements as at December 31, 2013. Attached are the financial statements with their notes.

25/03/2014

Profit and Loss Project approved by the Shareholder General Assembly

Attached is the Project for profit distribution approved by the Shareholders General Assembly of ISAGEN, held on this date.


The Nation - Ministry of Finance and Public Credit reports on the writ whereby the First Section of the Council of State decided to send to the Third Section the nullity action against Decree 1609 of July 30, 2013, whereby the disposal program was approved.


The Nation - Ministry of Finance and Public Credit reports the publishing of the second addendum to the Regulations of the second stage of the Program for Disposal of the Nation’s Shares in ISAGEN.


The Nation - Ministry of Finance and Public Credit reports on the decision made within the framework of the Class Action filed by Álvaro Uribe whereby the writ that had denied the precautionary measures and the appeal arguments are rejected.

11/03/2014

Call for Shareholder General Assembly

Call for ISAGEN’s Shareholders Ordinary General Assembly 2014


ISAGEN was authorized by the Ministry of Finance and Public Credit to obtain treasury credit for up to TWO HUNDRED THIRTY FIVE THOUSAND SIX HUNDRED FIFTY FIVE MILLION NINE HUNDRES SEVENTY SEVEN THOUSAND PESOS ($235,655,977.000)


Proposal for Bylaws Reform to be submitted to the Shareholders General Assembly to be held on March 25, 2014


ISAGEN presents results of 2013 and fulfillment of expansion plan: At the close of 2013, ISAGEN reported operating revenues of $2,002,814 million, and the net profit was $433,966 million.


FINANCIAL REPORT AT THE CLOSE OF YEAR 2013. ISAGEN reported operating revenues of 2,002,814 million, and the net profit was $433,966 million.


The Nation - Ministry of Finance and Public Credit reports the publishing of the first addendum to the Regulations of the second stage of the Program for Disposal of the Nation’s Shares in ISAGEN.

03/03/2014

Profit and Loss Project for presentation to the Shareholder General Assembly

ISAGEN publishes the profit distribution Project to be submitted to the Shareholders General Assembly to be held on March 25, 2014


Agenda for Shareholders General Assembly of ISAGEN 2014.


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Month Item Summary

28/02/2014 Change of the Board of Directors

Resignation of doctors Gonzalo Restrepo López and Nicolás Echavarría Mesa to Board of Directors of ISAGEN S.A. E.S.P.


Resignation of doctors Gonzalo Restrepo López and Nicolás Echavarría Mesa to Board of Directors of ISAGEN S.A. E.S.P.


The Nation - Ministry of Finance and Public Credit reports the publishing of the initial notice of the second stage of the Program for Disposal of the Nation’s Shares in ISAGEN.


ISAGEN reports that it will present results online and via teleconference for the fourth quarter of 2013, on Wednesday, March 5, at 09:00 am, Colombian time.


The Nation - Ministry of Finance and Public Credit reports that by means of attached writ, the Cundinamarca Administrative Court confirms the write whereby precautionary measures were denied within the framework of the Class Action filed by Rodrigo Toro Escobar.


With respect to the process for Disposal of the Nation’s Shareholding in ISAGEN, the Nation - Ministry of Finance and Public Credit reports on the results of the award of shared offered during the first disposal stage. See attached BVC Information Bulletin.


ISAGEN Arbitration Courts de ISAGEN against Consorcio GS 2010, made up of CI GRODCO S EN CA and CONSTRUCCIONES SANCHEZ DOMINGUEZ – SANDO S.A.; and of said Consortium against GS2010 against ISAGEN.


The Colombian Government reports on the status to date of prosecutions known by means of procedural notice, related to the Program for Disposal of the Nation’ – Ministry of Finance and Public Credit Shares in ISAGEN.


ISAGEN signs Amendment to the local banking credit agreement.


On January 10, 2014 ISAGEN is notified of Ruling of October 17, 2013, with dissenting opinion, where the Council of State denies the Action for Protection of People’s Rights filed by ISAGEN thus setting aside the Ruling issued on the Miel I Power Plant construction arbitration process.


In relation with the process for Disposal of the Nation’s Shares in ISAGEN. The Nation-Ministry of Finance and Public Credit reports on the invitation to the presentation of ISAGEN’s General Management, intended for investors in the first stage of disposal.