Equity Ventures Shaping Tomorrow Todayaboitiz.net/AEV/uploads/file/2012/AEV_2007AR.pdfABOITIZ EQUITY VENTURES ANNUAL REPORT 2007 1 Shaping Tomorrow Today Financial Highlights 2 Report

2007 ANNUAL REPORT

Shaping TomorrowToday

2007 ANNUAL REPORT

Equity Ventures

Contents

Financial Highlights 2Report to Stockholders from your Chairman and President & CEO 4 Chief Operating Officer 12 Chief Financial Officer 22 Chief Compliance Officer 24

Features: Shaping Tomorrow Today ABOITIZ POWER CORPORATION 36Powering new frontiers

UNIONBANK OF THE PHILIPPINES 38Redefining ‘smart banking’

CITY SAVINGS BANK 40Branching out

PILMICO FOODS CORPORATION 42 Expanding capabilities

ABOITIZ TRANSPORT SYSTEM 44Transforming solutions

ABOITIZ GROUP FOUNDATION, INC. 46Sustaining public education

ABOITIZ FUTURE LEADERS BUSINESS SUMMIT 48Shaping the next generation of leaders

LOCATION OF OPERATIONS 50THE BOARD OF DIRECTORS 51CORPORATE OFFICERS 52FINANCIAL STATEMENTS 54

Aboitiz Transport System (ATS) is the largest, most progressive and efficient total transport and logistics solutions company in the Philippines. Its principal business units are engaged in the movement of people under the brand name ‘SuperFerry’ and the movement of cargo under the brand name ‘2GO’. ATS embodies a proud legacy of leadership and service, and today its unique work ethic remains unchanged. With a renewed promise but still holding true to the vision of its founders, ATS continues to strive for excellence by setting new standards in the local maritime industry.

Aboitiz Equity Ventures, Inc. (AEV) is a diversified conglomerate listed in the Philippine Stock Exchange that has interests in power generation and distribution, banking, transport and food manufacturing. Its mission is to create long-term value for all its stakeholders. The company has been recognized in international surveys as among the Philippines’ best managed companies. In 2007, it placed 9th overall as the Best Managed Company in Finance Asia’s Annual Best Companies in Asia poll. In the same poll, AEV ranked 8th as the Most Committed to Corporate Governance, and 7th in Best Investor Relations.

Aboitiz Group Foundation, Inc. (AGFI) is a non-stock and non-profit corporate foundation registered with the Securities and Exchange Commission in 1989. It is the concrete manifestation of the Aboitiz Group’s strong commitment to corporate social responsibility. Guided by its mission, “helping people help themselves”, AGFI addresses the social and economic development needs of less privileged communities in areas where Aboitiz companies operate. The Foundation has helped improve the quality of life of its chosen beneficiaries under its major program components, namely education, enterprise development, primary health and childcare.

Aboitiz Power Corporation (AP), a majority-owned subsidiary of Aboitiz Equity Ventures, is one of the leaders in the country’s renewable energy industry and the largest conventional hydropower operator in the country. It has a reputation of operating the most efficient electricity distribution utilities in the Philippines. The company provides its customers with quality service and reasonably-priced electricity. Since its incorporation in 1998, AP has accumulated interests in both hydroelectric power generation facilities and thermal plants, and expanded its distribution business. It is committed to expand its renewable energy capacity, driving innovation to power the Philippines.

UnionBank, a partnership among the Aboitiz Group, Insular Life and Social Security System, is recognized in the banking industry for its leadership in creating financial value, achieving operational excellence, building a customer franchise and demonstrating superior innovation. It has championed ‘Smart Banking’ as the philosophy behind engaging its customers in a unique UnionBank experience, boosting prospects for sustained long-term growth of the bank’s profitability. UnionBank is the sixth largest private domestic commercial bank in terms of assets with a total of 166 branches and 187 operational ATMs nationwide.

ABOITIZ EQUITY VENTURES ANNUAL REPORT 2007 1

Shaping Tomorrow Today

Financial Highlights 2Report to Stockholders from your Chairman and President & CEO 4 Chief Operating Officer 12 Chief Financial Officer 22 Chief Compliance Officer 24

Features: Shaping Tomorrow Today ABOITIZ POWER CORPORATION 36Powering new frontiers

UNIONBANK OF THE PHILIPPINES 38Redefining ‘smart banking’

CITY SAVINGS BANK 40Branching out

PILMICO FOODS CORPORATION 42 Expanding capabilities

ABOITIZ TRANSPORT SYSTEM 44Transforming solutions

ABOITIZ GROUP FOUNDATION, INC. 46Sustaining public education

ABOITIZ FUTURE LEADERS BUSINESS SUMMIT 48Shaping the next generation of leaders

LOCATION OF OPERATIONS 50THE BOARD OF DIRECTORS 51CORPORATE OFFICERS 52FINANCIAL STATEMENTS 54

ABOITIZ EQUITY VENTURES ANNUAL REPORT 20072

JAN 2005 APR 2005 JUL 2005 OCT 2005 JAN 2006 APR 2006 JUL 2006

AEV PSE

OCT 2006 JAN 2007 APR 2007 JUL 2007 OCT 2007 JAN 2008 MAR 2008

AEV Stock Price vs PSE IndexFrom January 3, 2005 to March 26, 2008

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

FINANCIAL HIGHLIGHTS (In Million Pesos)

Stockholders’ Equity

38,127

23,078

20,161

07

06

05

Earnings per share (IN PESOS)

1.02

0.76

0.65

07

06

05

Net Income to Common

5,797

3,754

3,159

07

06

05

EBITDA

9,318

6,602

6,527

07

06

05

Cash Dividend to Common

1,139

736

597

07

06

05

Market Capitalization

39,293

34,665

23,792

07

06

05

Total Assets

65,504

40,844

38,276

07

06

05

18,568

Cash and Cash Equivalents

8,010

4,623

07

06

05

07

06

05

31,205

26,711

26,923

Revenues

AEV Stock Price High Low

2005 5.30 3.20

2006 7.00 4.75

2007 9.60 5.80

Outstanding Shares as of March 31, 2008 5,688,903,621

Source: Technistock


Income Breakdown

For the Year (In Million Pesos)

FINANCIAL SUMMARY

FOOD10%530

TRANSPORT6%318

BANKING23%1,243

POWER61%3,338

2005 2006 2007 % change(‘07 vs ’06)

REVENUES 26,923 26,711 31,205 16.8%

OPERATING PROFIT

Operating profit from ordinary activities 2,142 2,328 2,861 22.9%

Equity in Net Earnings of Associates 2,155 2,115 3,976 88.0%

Other Income (Charges) (611) (135) 1,196 (987.8%)

Income before income tax 3,686 4,308 8,033 86.5%

Provision for income tax (469) (494) (1,212) 145.3%

Income before minority interest 3,217 3,814 6,822 78.9%

Minority interest (58) (60) (1,024)

Net Income to Common 3,159 3,754 5,797 54.4%

At Year End (in million pesos)

Total Assets 38,276 40,844 65,504 60.4%

Total Liabilities 16,936 16,561 18,516 11.8%

Minority Interest 1,178 1,205 8,861 635.3%

Equity Attributable to Equity Holders of the Parent 20,161 23,078 38,127 65.2%

EBITDA 6,527 6,602 9,318 41.1%

Per Share (in pesos)

Earnings 0.65 0.76 1.02 33.7%

Book Value 4.11 4.66 6.70 43.7%

Cash Dividends (Common) 0.12 0.15 0.20 33.3%

Financial Ratios

Current Ratio 1.29 2.06 2.48 20.5%

Debt-to-Equity Ratio 0.79 0.68 0.39 -42.2%

Net Debt-to-Equity Ratio 0.30 0.11 (0.15) -238.2%

Per Business Segment(In Million Pesos)

2,024

05

2,264

06

3,338

07POWER

1,243

07

1,118

06

1,048

05

BANKING

34

05

142

06

318

07TRANSPORTFOOD

510

0605

382

530

07

Percentage ContributionPer Business Segment for 2007

(Figures in million pesos)


F R O M Y O U R C H A I R M A N A N D P R E S I D E N T & C E O

Dear Shareholders and Friends,

We are very pleased to report to you that 2007 was again another record year for Aboitiz Equity Ventures, Inc. (AEV), as it posted a profit of 5.8 billion, a 54% increase over 2006 earnings of 3.8 billion. Return on equity was 20% as all companies turned in strong performances.

We continued to enhance and maximize the value of all our existing businesses, entering into strategic business partnerships and acquiring new major investments. We likewise continued to provide shareholders with attractive dividend yields.

We had begun the year 2007 with the successful placement of our entire treasury shareholdings representing 742,511,938 shares at a price of 8.20. The transaction raised approximately 6 billion, equivalent to US$121 million.

International investors in the United States, Europe and Asia took up 89% of the offering with domestic investors taking 11%. This increased by 15% the company’s free float and further strengthened AEV’s shareholder base.

POWER

The company’s main event of the year, the listing of Aboitiz Power Corporation (AP) at the Philippine Stock Exchange in July, raised US$230 million to fund future capital investments in the power sector.

We have begun to deploy the funds raised in our initial public offering (IPO) wisely and profitably. The company is now well positioned to expand as the Philippine power sector is deregulated and government continues to sell off power assets. The demand for new power investments is also increasing due to economic growth and supply limitations.

AP, which is 73% owned by AEV, continues to be the major contributor to AEV’s profits accounting for 61% of its earnings.

Roberto E. Aboitiz CHAIRMAN

We are very pleased to report that 2007 was a banner year for AEV as it posted a record profit of 5.8 billion, an increase of 54% over its 2006 earnings. Return on equity was 20% as all companies turned in strong performances.

Generation

A series of exciting developments happened in our generation business in 2007.

In February, we entered into a partnership with Taiwan Cogeneration International Corporation to build and operate an independent coal-fired 300-MW plant in the Subic Bay Freeport Zone. We expect to finalize the plans for this investment in 2008.

Together with our partners SN Power of Norway, we began operating the 360-MW Magat plant in Isabela in April. In October, SN Aboitiz Power-Magat, Inc. (SNAP-Magat) achieved full ownership of the facility after a successful refinancing, which involved a club of banks with the International Finance Corporation acting as anchor lender. The project financing, which won four international awards, has been referred to as the landmark power deal of the year.

The Magat plant’s operations results for eight months in 2007 were exceptional. The team not only excelled in maximizing plant efficiencies but also set up a formidable power trading operation that maximized electricity trading in the Wholesale Electricity Spot Market (WESM).

In April, we also acquired major stakes in East Asia Utilities Corporation (EAUC) and Cebu Private Power Corporation (CPPC), two diesel plants in Cebu with a combined capacity of 120 MW. These plants sell power to Visayan Electric Company, Inc. (VECO), and the Mactan Economic Zone 1.

In November, we won the bid for a 34% stake in STEAG State Power Inc., a company that owns and operates a 232-MW coal plant in Mindanao. The company has a 25-year build-operate-transfer contract with the National Power Corporation.


R E P O R T T O O U R S T O C K H O L D E R S

Our distribution business recorded

strong sales growth in 2007

with the increased economic activity in all our utilities’

franchise areas.

In 2007, generating capacity attributable to AP grew by 200%, from 164 MW to 490 MW. The increase was due to our acquisition of the Magat, EAUC, CPPC and STEAG facilities.

The consortium of SN Power and Aboitiz Power successfully won the bid in November 2007 for the 175-MW Ambuklao Binga hydro facilities in Benguet privatized by the Power Sector Assets and Liabilities Management Corp. (PSALM). With the acquisition of these facilities, Aboitiz Power is now the largest conventional hydro power plant operator in the Philippines. Turnover of the plant will be in 2008.

Hedcor, Inc. is in the process of building two hydropower plants in Davao province with a combined total capacity of 76 MW. These plants will supply power to Davao Light starting in 2009 and in 2010.

We are also participating in a joint venture for a 246-MW coal plant project in Cebu, which we expect to be operational by the first quarter of 2010. The plant will address the looming power shortage in Cebu and supply part of the needs of VECO.

Distribution

Our distribution business recorded strong sales growth in 2007 with the increased economic activity in all our utilities’ franchise areas. Growth was strong in all sectors - residential, commercial and industrial - that is in sharp contrast to the previous year’s low growth.

Based on the new service requirements of these three customer types, we can expect this solid growth to continue.

In June, we acquired the Mactan EnerZone Corporation (MEZ) and Balamban EnerZone Corporation (BEZ). These two distribution utilities serve the needs of MEPZ II, a PEZA zone in Mactan, Cebu and the 250-hectare Balamban Economic Zone, also in Cebu, which has two

shipyards as main customers. We also increased our ownership in Subic EnerZone Corporation (SEZ) to 100%, after buying out our different partners.

VECO and Davao Light continue to upgrade their distribution systems to cope with the growing power requirements of their franchise area.

VECO experienced particularly high growth in 2007 due to the rapid growth in tourism, call centers, hotels and residential subdivisions in Cebu City.

Operating margins and service delivery improved in all our distribution utilities. Systems losses have improved and are well within the 9.5% mandated cap set by law, with the exception of Cotabato Light.

Expanding its services, SEZ signed a Memorandum of Agreement to provide electric power to Hanjin Heavy Industries Corporation, a large Korean shipbuilding company located at the Redondo Peninsula in Subic. The energization of the Redondo Peninsula will attract more investors to the area.

BEZ also expects solid growth as the Tsuneishi shipyard expands its shipbuilding operations to construct ships up to 200,000 DWT.

BANKING

UnionBank

AEV’s banking group ended the year 2007 with solid financial results. In May, UnionBank concluded its offering of 90 million new shares to domestic and international investors raising over

5.1 billion of new capital. The offering was oversubscribed and strengthened the bank’s capital base as well as increased the free float of its shares.

Jon Ramon Aboitiz PRESIDENT

& CHIEF EXECUTIVE OFFICER



In 2007, Aboitiz Transport celebrated its 100th year anniversary. The group moved forward in its transformation to provide better and diverse solutions to customers’ changing logistics needs.

UnionBank continued with the integration of iBank, which was acquired in 2006, and this has resulted in cost savings and better operational efficiencies. It pursued its branch rationalization program and completed the IT systems integration of both banks.

The bank also sold 2 billlion worth of assets to a special purpose asset vehicle (SPAV) and non-performing loans (NPL) ratio was down to 3.6%. Net interest income grew by 16% and total loans by 12%.

City Savings Bank

It was a standout year for City Savings Bank (CSB) in 2007, with total resources growing by 65% and deposits jumping by 61%. Return on equity was 47.4%.

CSB currently has 17 branches and extension offices in the Visayas and Mindanao. The bank continues to experience strong growth in its consumer lending activities for its identified market niche.

TRANSPORT

In 2007, Aboitiz Transport System Corp. (ATS) celebrated its 100th year anniversary. The group moved forward in its transformation to provide better and diverse solutions to customers’ changing logistics needs.

ATS right-sized its fleet selling three SuperFerries as well as other excess assets such as containers, chassis and land.

Excess passage capacity onboard ATS vessels were converted to cargo and RoRo spaces to accommodate increasing volumes. 2GO’s RoRo business grew by over 60% in both revenue and volume in 2007 compared to its 2006 performance.

Reduced cargo capacity due to ship sales was replaced with modern, efficient, state-of-the-art container services through our partnership with the AP Moller Maersk Group. The joint-venture

company, MCC Transport Philippines, Inc. (MCCP), is currently operating a 600-TEU capacity freight service.

Faced with increasing fuel prices and fierce competition from the airline business, ATS transformed its passage vessels into the lowest cost carriers with price, safety, schedule and cleanliness as major drivers of the business.

The ATS group maintained its focus on expanding its supply chain management services. It also successfully expanded its ship management and crewing businesses both domestically and internationally.

FOOD

2007 was another solid year for Pilmico Foods Corporation (Pilmico) despite the rising cost of wheat that reached record levels. Sales in flour products continued to show growth. We focused on market penetration in Luzon while maintaining our strong presence in the VisMin area.

We showed solid growth numbers in both our feed and swine business. Managing the high cost of ingredients was a challenge throughout the year. Construction began midyear of the new feed milling complex in Iligan to efficiently and cost effectively service growing VisMin markets. We also have begun constructing breeder farms in Tarlac.



Aboitiz Power will pursue

expansion through acquisitions

participating in the government’s

power assets privatization

program and in greenfield projects.

OUTLOOK 2008

We look forward to 2008 as another challenging and exciting year of sustained growth and expansion.

Power

AP will pursue expansion through acquisitions participating in the government’s power assets privatization program and in greenfield projects. We foresee that in the near future our largest growth will come from power generation.

We expect the turnover of the 175-MW Ambuklao and Binga hydro complex in mid-year 2008. We will immediately begin operating and rehabilitating these facilities to improve its capabilities and efficiencies.

We intend to finalize with our partners Taiwan Cogeneration International Corporation the plans for our 300-MW coal project in Subic. We are also studying the further expansion of our 232-MW STEAG State Power facility in Mindanao as the power supply situation tightens in this grid.

In distribution, we again expect a strong year of energy sales as the economy expands. Our utilities continue to focus on improving service delivery and operational excellence.

The Energy Regulatory Commission is moving towards a Performance-based ratemaking approach (PBR) with Cotabato Light currently going through the rate reset procedure to prepare for its entry into a four-year regulatory period under PBR by April 2009. The reset procedure for Davao Light and VECO will start at the end of 2008, for new rates to take effect by July 2010.

We are preparing ahead to maximize the potential benefits over the long term for our distribution companies, whose efficiency should be rewarded under this regulatory approach. It also provides an

opportunity for immediate gains upon entry as rates are re-based from the 2000 test years in our current unbundled rates to updated pricing parameters.

Banking

For UnionBank, 2008 will be an exciting year as it recently launched and brought to life its new brand and brand essence. “Smart banking” is the bank’s new brand positioning statement, promising to serve customers in a more innovative and responsive way by developing smarter solutions for their diverse needs.

The bank will pursue expanding its loan portfolio and fee-based income. It will further maximize deployment of its branch network strategically.



City Savings Bank is moving ahead in its branch expansion and will open its first branch in Luzon in 2008.

UnionBank will also search for means to increase revenue by expanding resources and undertaking cost management initiatives. It will also increasingly capitalize on its clear leadership in technology-based banking solutions.

City Savings Bank will continue to focus on its expanding customer base and service reach. The bank is moving ahead in its branch expansion and will open its first branch in Luzon in 2008.

Food

The food group faces another engaging year as we see the continued sharp price increases of all commodities primarily caused by higher worldwide demand and diversion to ethanol. We are, however, optimistic of its sustainable growth and profitability.

We expect to complete the feed mill in Iligan by mid 2008 and the commercial operation of our finisher swine and nucleus breeder farms in Tarlac by 2009 and 2010, respectively.

Transport

2008 will continue to be a challenging year for ATS with increasing fuel prices. It is, however, in a strong financial position to weather the storm. With a sound balance sheet consisting of almost no debt and with substantial cash reserves, it can afford to be flexible and focus on its new business model of being a low-cost producer.

Plans for 2008 are focused mostly on its freight business. Containerization services, through its joint venture with the AP Moller Maersk Group, are expected to expand with the addition of a new 600-TEU container ship to serve Southern Philippines.

ATS’ integrated logistics will continue to support value-added services like supply chain management. Internationally, the company will continue to grow its presence by continuing to offer crewing and ship management services globally.

UNIONBANK IMAGE


AEV declared a0.31 regular

cash dividend and a 0.30 special

cash dividend on February 7, 2008.

Cash dividends

Following its dividend policy of paying out approximately one-third of its consolidated net income from the preceding year, AEV declared a 0.31 regular cash dividend on February 7, 2008 and also a 0.30 special cash dividend that was declared on the same date.

These dividends were paid on March 3, 2008 to all stockholders of record as of February 21, 2008. A total of 3.47 billion in cash dividends were paid out, representing a 205% increase over last year.

Corporate Social Responsibility

The Aboitiz Group of Companies remains steadfast in its commitment to assist communities where they operate by

implementing carefully planned programs and projects to help people help themselves. With the coordination and leadership of the group’s corporate foundation, the Aboitiz Group Foundation, Inc. (AGFI), member-companies implement projects in the area of education through building schools, scholarships and computerization programs. They also initiate projects under enterprise development, and primary health and childcare.

In 2007, the AGFI allocated 49 million for projects conceptualized by its member-companies. These companies also undertook various projects worth 81 million that they themselves directly funded. Together with personal and restricted donations of 23 million, the Aboitiz Group’s total funding for CSR projects amounted to

153 million.

AEV companies are consistent and active members of the Philippine Business for Social Progress (PBSP).

Brand

It has been three years since AEV embarked on a re-branding journey. In 2005, it took the bold step of refreshing the Aboitiz brand. Its objectives were clear, and it went on a campaign to make everyone in the company understand that to be a strong brand, delivery of excellent products and services are of utmost importance.

Our ultimate goal is to achieve brand excellence, as we are fully aware that this has a significant impact on the financial value of a company. To prepare ourselves for this, we have taken steps to define, align and integrate our brand strategies with all our subsidiaries in order to ensure a powerful and sustainable impact in all our undertakings, and to have a common sense of purpose across the group.

We have inspired everyone in the group to live out our brand promise of “passion for better ways” by engaging them in meaningful brand-building activities.

0.20

07

0.61

08

0.15

06

0.12

05

Dividends Per Share(In Pesos)



We will remain committed to our proven strategy to focus on our core investments, our people, our customers and our systems.

We have all taken to heart our being driven, driven to lead, driven to excel, and driven to serve.

Focused strategy

As always, we confront our future with much optimism, fully committed to help shape the industries we are involved in, to ensure a better future for all our stakeholders.

We will remain committed to our proven strategy to focus on our core investments, our people, our customers and our systems. We will continue to be low-cost producers, maintain a balanced investment portfolio, and aim to become world-class, thereby enhancing shareholder value.

We thank you, our shareholders, for your continued support and confidence over the years. We too are grateful to our customers, business partners, and other stakeholders for their trust. And to all AEV teams, we thank you for your untiring efforts and for your valuable contributions to the company. Let us continue to work together to pursue shaping tomorrow today.

Thank you.

Roberto E. AboitizCHAIRMAN

Jon Ramon AboitizPRESIDENT & CHIEF EXECUTIVE OFFICER



R E S U L T S O F

OPERATIONS


Aboitiz Power ended the year with investments in generation assets that have a total capacity of more than 1,000 MW. This resulted to an increase in its attributable capacity by 200%, from 164 MW in 2006 to 490 MW in 2007.

Dear Shareholders,

We are very pleased to report that Aboitiz Equity Ventures, Inc. (AEV) experienced very healthy growth in the year 2007.

Your company ended 2007 with record earnings of 5.8 billion, a 54% increase from 2006. This translates to an earnings per share (EPS) of 1.02. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 41% reaching 9.3 billion.

Strong operating results of the power and banking groups drove AEV’s robust performance, accounting for 61% and 23% of total income contribution from our business groups, respectively. The food group continued to be a stable source of earnings contributing 10%; while the transport group accounted for 6% of AEV’s income in 2007.

POWER

The power group continued to account for the lion’s share of AEV’s earnings contributions despite the company’s ownership dilution following the listing of Aboitiz Power Corporation (AP) in July 2007. Favorable economic conditions led to strong electricity sales for AP’s distribution group; while the increase in generating capacity of the generation group led to a higher contribution from power revenues. The power group contributed a total of 3.3 billion, up 47% from the previous year.

Generation Business

In 2007, the earnings performance of the power generation group showed significant improvement as it shored in 2 billion, up by 88% from the previous year. This represented 61% of the power group’s total income contribution in 2007 and for the first time accounting for a larger share of the power groups earnings versus 48% in 2006.

With its participation in the government’s privatization program and its acquisition of other projects in 2007, AP ended the year with investments in generation assets that have a total capacity of more than 1,000 MW. This resulted to an increase in its attributable capacity by 200%, from 164 MW in 2006 to 490 MW in 2007. Consequently, the power sales of the generation group grew by 176% year-on-year, from 369 GwH to 1,018 GwH.

We are also pleased to report that the debut year for the Magat hydro plant and our involvement in the Wholesale Electricity Spot Market (WESM) resulted in very encouraging results. Following our strategy of concentrating the generation of power during peak hours resulted in our attaining premium prices for our power resulting to an average price of 5.28 per kilowatt-hour (kwh) for sales to the WESM for the eight months of operations in 2007.

In December 2006, SN Aboitiz Power-Magat, Inc. (SNAP-Magat), the 50:50 joint venture between AP and Norway’s SN Power, won the bid for the 360-MW Magat hydroelectric plant after submitting the highest bid of US$530 million. The plant was turned over to SNAP on April 26, 2007.

On April 20, 2007, AP acquired for 131 million a 50% stake in East Asia Utilities Corporation (EAUC), the owner and operator of a 50-MW bunker-fired power plant in Mactan, Cebu. EAUC is the sole provider of electricity at the Mactan Export Processing Zone I (MEPZ I).

Also on April 20, 2007, AP acquired for 178 million from EAUC a 60% stake in Cebu Private Power Corporation (CPPC), the owner of a 70-MW bunker-fired plant embedded in VECO’s franchise area.

F R O M Y O U R C H I E F O P E R A T I N G O F F I C E R

Erramon I. AboitizEXECUTIVE VICE PRESIDENT& CHIEF OPERATING OFFICER

enerzone images


R E S U L T S O F O P E R A T I O N S

On August 10, 2007, AP won the competitive bid for a 34% stake in STEAG State Power Inc. (SPI), the owner and operator of a 232-MW coal-fired power plant located in the PHIVIDEC Industrial Estate in Misamis Oriental, Northern Mindanao. AP’s bid was US$92 million and the sale and purchase transaction was closed on November 15, 2007.

On November 28, 2007, SN Aboitiz Power-Benguet (SNAP-Benguet), a joint venture between AP and Norway’s SN Power, won the bid for the Ambuklao-Binga hydroelectric power complex. The facility consists of the 75-MW Ambuklao plant in Bokod, Benguet

and the 100-MW Binga plant in Itogon, Benguet. The price offer amounted to US$325 million. Upon turnover by the Power Sector Assets and Liabilities Management Corporation (PSALM), the hydro complex would further increase the group’s attributable capacity by 18% to 578 MW.

Greenfield projects

With demand for electricity accelerating with the country’s economic growth, we see reserve margins in the power industry tightening and a need for additional power supply.

POWER GENERATION

In 2007, the earnings

performance of the power

generation group showed

significant improvement as it shored in

2 billion, up by 88% from the previous year.



To fill this need, AP has lined up several greenfield projects that are expected to come on stream within the next three years. On February 17, 2007, AP entered into a Memorandum of Agreement with Taiwan Cogeneration International Corporation, a Taipei-based generation company, to collaborate in the building and operation of a coal-fired power plant in the Subic Bay Freeport Zone. We are expecting to break ground for the construction of the power plant by the third quarter of 2008 and expect completion 36 months after.

On June 26, 2007, AP’s 100%-owned subsidiary Hedcor, Inc. began construction work on the 42-MW Sibulan hydropower plant in Davao. This is a run-of-river facility estimated to cost 5 billion.

Hedcor is also currently in the detailed design stage for another 34-MW run-of-river hydro plant that is expected to start construction in August 2008 and be operational by August 2010. Both plants will supply Davao Light with approximately 400 million kWh of energy annually.

On December 19, 2007, AP’s 60%-owned subsidiary, Abovant Holdings, Inc., entered into a joint venture agreement with the Global Business Power Corporation, a member of the Metrobank Group of Companies, and Formosa Plastic of Taiwan for the construction and operation of a 246-MW coal-fired power plant in Toledo, Cebu. The consortium’s total investment in this project is expected to reach US$450 million. The plant is targeted to be completed by early 2010 and will provide part of its power output to VECO and BEZ. AP’s beneficial ownership of the project is 26%.

Hedcor began construction work on the 42-MW Sibulan run-of-river hydro plant in Davao estimated to cost 5 billion. It is currently in the detailed design stage for a 34-MW Tamugan plant that is expected to be operational by August 2010.

When the above projects are completed, we expect AP’s attributable capacity to increase further by another 50% to 868 MW.

Distribution Business

Income generated by the power distribution group grew by 11.3%, from 1.2 billion to 1.3 billion, accounting for 39% of the power group’s total income contribution to AEV.

Riding on strong economic growth in 2007, the distribution business recorded strong kilowatt hour (kwh) sales growth in its franchise areas. On an organic basis, the group’s electricity sales improved



by 7%, from 2,507 gigawatt hours (GwH) to 2,673 GwH. Growth further improved to 11% from the sales contribution of newly acquired Mactan EnerZone Corporation and Balamban EnerZone Corporation, as well as the increased ownership in Subic EnerZone Corporation. Higher group wide margins per kwh increased by 6% to 1.32 per kwh. This was a result of improved efficiencies, reduced system losses and controlled costs.

As disclosed during its Initial Public Offering, AP acquired stakes in three utilities via a share swap on June 8, 2007. The company acquired 100% of Mactan EnerZone Corporation (MEZ) and 60% of Balamban EnerZone Corporation (BEZ) from AboitizLand, Inc. for 610 million and 267 million, respectively. On March 7, 2008, AP acquired the 40% balance of BEZ from Tsuneishi Holdings (Cebu), Inc. for approximately 178 million.

MEZ, the owner and operator of the power distribution system at the Mactan Export Processing Zone II in Mactan, Cebu, delivers power to semiconductor firms, electronics manufacturers and other exporters operating within the zone. BEZ owns and operates the power distribution system at the West Cebu Industrial Park (WCIP), a special economic zone for light and heavy industry. It is home to shipbuilding and ship repair facilities, steel fabrication yards and supporting suppliers such as industrial gas plants and other subcontractors.

Also through a share swap, AP acquired an additional 25% stake in Subic EnerZone Corporation (SEZ) from AEV, San Fernando Electric, Okeelanta and Pasudeco for 115 million. This increased its ownership in the company to 80%. On December 17, 2007, AP acquired the remaining 20% stake in the company for 92 million in cash from Team Philippines Industrial Power II Corporation, thereby bringing its ownership in SEZ to 100%.

As of year-end 2007, the group provided electricity to 637,000 customers across the country, 3% more than in 2006. With the increased economic activity in the group’s franchise areas, peak demand grew by 15%, from 678 megawatts (MW) in 2006 to 780 MW in 2007.

Operating efficiencies improved across the board. Systems losses of AP’s distribution companies remained well within the 9.5% mandated cap set by law, except for Cotabato Light, which is experiencing pilferage problems. Efforts are being exerted to bring the losses down to the mandated cap.

POWER DISTRIBUTION

As of year-end 2007, the

group provided electricity

to 637,000 customers across the country. Peak

demand grew by 15%, from

678 MW in 2006 to 780 MW

in 2007.



Despite soft conditions prevailing in the financial markets, AEV’s banking group ended the year 2007 with solid financial results. The group contributed 1.24 billion, 11 % higher than in 2006, and accounts for 23% of AEV’s total income.

UnionBank of the Philippines (UnionBank) contributed 1.18 billion in 2007, 10% higher than last year’s

contribution, notwithstanding lower interest rates prevailing in the market squeezing interest spreads.

Net revenues surged by 17% to 8.7 billion driven primarily by the 16% growth in net interest income, as average earning assets increased by 31% with the increase in total loans (net of bills purchased) to 40.3 billion and the reduction of non-performing loans to

4.2 billion. Non-interest income jumped 18% with the 16% growth in service charges, fees and commissions and higher gains on asset foreclosures and sale of selected non-performing loans in March 2007.

UnionBank’s return on average equity of 12.2% and return on average assets of 1.6% in 2007 compared favorably with the industry average of 11.6% and 1.4%, respectively. Non-performing loans (NPL) ratio declined to 3.6% in 2007 from 4.9% in 2006.

Total assets expanded to 188 billion in 2007 from 183 billion in 2006, making UnionBank the sixth largest private domestic universal bank in the country. Deposit growth slowed down to 107 billion at the end of 2007 as the peso appreciated and trust entities’ were able to access BSP’s special deposit account. Capital base increased 37% to 27 billion with the Bank’s follow-on equity offering in May 2007.

AEV’s banking group ended the year 2007 with solid financial results, contributing

1.24 billion, 11% higher than in 2006.


offering superior, relevant and technology-advanced products and delightful services. On March 28, 2008, the bank launched its new brand as it positions itself to challenge conventions for smarter solution for its customers.

UnionBank received awards for its achievements in 2007, including a recognition from Visa as the bank with the “highest retail transaction growth in 2006” for Visa Debit Cards. In February 2008, the bank received the “Financial Insights Innovation Award” from Financial Insights for its Business-to-Government (B2G) Payments.

City Savings Bank’s (CSB) strong performance continued in 2007 contributing 63 million to AEV’s income in 2007, up by 32%. The bank recorded a 44% year-on-year growth in loans totaling 2.5 billion, while total deposits grew by 61% hitting 3.2 billion.

At year-end, the bank’s total resources grew by 65% to 4 billion. Non-performing loans ratio remained flat at 2.45%, well below industry standards. CSB’s return on equity was 47% while return on assets was at 6%.

CSB continued to experience strong growth in its lending activities for public school teachers, its identified market niche. The bank currently has 17 branches and extension offices in the Visayas and Mindanao and has over 70,000 depositors and 60,000 borrowers. One new branch was opened in 2007 and 9 new branches and extension offices are being planned, with target completion in 2008.

B A N K I N G

On July 23, 2007, the Bank completed its full system integration allowing UnionBank and iBank customers to access a broader range of products and services, a total network of 166 branches and 187 ATMs, more distribution channels, and more technology-based solutions. The bank also completed its branch rationalization program in 2007 and will expand its branch network coverage in 2008 as it opens more branches in the coming months.

The year 2007 saw UnionBank embarking on a branding exercise in an effort to bring it closer to its customers by


change photo csb

City Savings Bank recorded a 44%

year-on-year growth in loans

totaling 2.5 billion, while total deposits

grew by 61% hitting 3.2 billion.

City Savings Bank promotes the value of savings to young children.



The Aboitiz Transport System Corporation (ATS) led the strong performance by the transport group in 2007. The group ended the year with a net income contribution of

318 million, a 124% increase over its 2006 contribution. Improvement of its profit performance was primarily due to ATS’ gains from the sale of assets that resulted in lower financing costs, and the reconfiguration to higher freight capacity that led to higher asset utilization and earnings.

The company continued to rationalize its assets to improve fleet productivity and enhance earnings performance. ATS purchased one kumano vessel to add to the Cebu Ferries fleet and three fast crafts to add to the SuperCat fleet. The company sold three ships, SuperFerries 15, 16 and 17, which generated 2.4 billion. This was used to pay down 1.8 billion of debt. It also converted three vessels, giving up some spare passenger capacity to generate an additional 191 TEUs of freight capacity.

In 2007, ATS declared a cash dividend of 0.30 per share for all common and preferred

shareholders, paying out a total of 735 million. Over the past five years, the company has returned 3 billion to its shareholders.

In a strategic move to lower its cost structure and make up for lost freight capacity, ATS entered into a joint venture with the A.P. Moller-Maersk Group to form MCC Transport Philippines Inc.

It currently operates a 600-TEU container ship that offers regular weekly sailings, servicing the ports of Manila, Cebu, Cagayan de Oro and Bacolod.

In 2007, the transport group began operating with a new business model that would enable them to be more competitive, flexible and profitable. The direction is to re-create the freight business model that would focus on increasing freight capacity and RoRo movement.

The directionof ATS is to recreate the freight business model that would focus on increasing freight capacity and RoRo movement.


T R A N S P O R T

ATS launched its 2GO Supply Chain

Management service, which offers

integrated supply chain solutions as

a distributor and warehouse provider

for fast-moving consumer goods.


as a distributor and warehouse provider for fast-moving consumer goods leveraging on the synergies brought on by an integrated transport group.

The company acquired Reefer Van Specialist, Inc. and Refrigerated Transport Services, Inc. marking its entry in the cold chain service for the movement of perishable commodities.

Aside from its infrastructure, 2GO’s biggest competitive advantage is having total control of its network. ATS believes much of its future will be focused on growing its supply chain business.

ATS’ ship management services, through its long-time partnership with the Jebsens Group of Norway, achieved a milestone after securing full contracts of third party international vessels for the first time.

In 2007, Aboitiz Jebsens (Abojeb) took over the technical management of container and dry cargo vessels from its Japanese owners. By year-end, Abojeb’s managed fleet was composed of passenger, Ro-Ro, container and dry cargo vessels.

In crewing operations, Jebsens Maritime continued to expand its market share by acquiring new principals. The company currently has 46 principals and 312 ships under its crew management. As of year-end 2007, the company had 4,862 Filipino crew onboard and 7,293 in its pool.

2GO’s RoRo service is a simple, self-driven cargo system that is given priority loading and unloading to ensure faster delivery lead-time. It also allows better control over the movement of goods. The RoRo service posted 859 million in revenues in 2007, up by 68%. This represents 25% of total freight revenue for the year.

ATS also launched its 2GO Supply Chain Management service to reduce overall cost by streamlining processes and eliminating the need for middlemen. It offers integrated supply chain solutions



The food group has been a consistent profit and dividend contributor with favorable prospects on the back of national economic and population growth.

The food group has been a consistent profit and dividend contributor with favorable prospects on the back of national economic and population growth.

The profit contribution of Pilmico Foods Corporation (Pilmico) to AEV’s income grew by 4% to 530 million, despite an increase in inputs costs. Higher selling prices for flour and its efficient milling operations afforded the company a 15% year-on-year expansion in operating income.

The company’s feeds business and swine operations recorded a 19% year-on-year growth in combined revenues, from

2.8 billion to 3.3 billion.

In June 2007, Pilmico began the construction of a new feedmill at its Iligan Milling Complex. Utilizing the latest in Dutch manufacturing technology, this new state-of-the-art feedmill will be operated by subsidiary Fil-Am Foods, Inc. and will serve the animal nutrition needs of the Visayas-Mindanao market. The feedmill is scheduled to be operational in 2008.

The construction of additional grain silos is also planned for this year. This will give Pilmico the largest flourmill storage capacity in the Philippines.

The construction of additional grain silos will give Pilmico the largest flourmill storage capacity in the Philippines.


F O O D

The expansions of Fil-Am Foods’ swine finishing and breeding capacities are ongoing and are expected to become commercially operational by 2009 and 2010, respectively.

We are very pleased with the overall performance of our various investments and look with optimism at the company’s future prospects and continued growth. We believe the company and its businesses are well positioned with both financial and managerial resources to capitalize on opportunities available to us allowing us to shape tomorrow today. We remain committed to always seek ways to enhance shareholder value whenever and wherever possible.

We would like to thank the team members who make up AEV for their contributions and unwavering commitment to the group’s goals. To our shareholders, partners and other stakeholders, thank you too for your continued trust and confidence.

We are very pleased with

the overall performance

of our various investments and

look with optimism at your company’s

prospects.

Erramon I. AboitizEXECUTIVE VICE PRESIDENT & CHIEF OPERATING OFFICER



F R O M Y O U R C H I E F F I N A N C I A L O F F I C E R

With the favorable conditions in both the domestic and foreign equity markets, particularly in the first semester of the year, AEV tapped the markets for additional capital to fund its growth.

Stephen G. ParadiesSENIOR VICE PRESIDENT CHIEF FINANCIAL OFFICER

Dear Shareholders,

The year 2007 was an eventful one for Aboitiz Equity Ventures, Inc. (AEV). With the favorable conditions in both the domestic and foreign equity markets, particularly in the first semester of the year, AEV tapped the markets for additional capital to fund its growth.

In January, the parent company raised approximately 6 billion, selling its entire treasury shareholdings primarily to foreign institutional investors. The bulk of the proceeds were used to increase the capitalization of its wholly owned subsidiary Aboitiz Power Corp. (AP). This was in preparation for AP’s acquisition of the 360-megawatt (MW) Magat hydroelectric complex, together with joint venture partner SN Power of Norway.

In May, UnionBank of the Philippines (UnionBank), of which AEV is the largest stockholder, went to the equity markets and successfully launched a follow-on offering that raised over

5.1 billion. UnionBank had acquired the International Exchange Bank (iBank) in 2006, and this, together with the implementation of the Basel 2 standards, impacted on UnionBank’s capital adequacy ratio (CAR). Although the bank’s CAR was still above the minimum set by the Basel 2 convention, its shareholders felt it prudent to raise capital to bring this ratio to a higher level that would allow it more flexibility for growth. As a result of the offering, AEV’s ownership in the bank was diluted from 42% to 36%.

In July, AEV listed AP in an initial public offering that raised over10 billion in proceeds. This new capital has been partially deployed

as of year-end 2007, to finance AP’s purchase of a stake in STEAG State Power Inc., and to partially fund the construction of its wholly-owned Hedcor Sibulan hydro project.

Equity was also infused into a new coal-fired power plant project in Cebu. Funds have been earmarked for the downpayment on the Ambuklao-Binga hydroelectric complex in Luzon, which we expect to be turned over in the middle of 2008, and for the purchase of the remaining 40% stake in Balamban EnerZone and 20% stake in Subic EnerZone. After the offering, AEV’s ownership in AP was diluted from 100% to 73%.

The credit markets in 2007 were favorable as well, and the group was able to tap these markets to help finance several acquisitions and expansion projects. Our food group availed of 750 million in fixed-rate term financing for its new feed mill and swine farms, with tenors of up to 7 years, and at attractive interest rates.

Our associate company, SN Aboitiz Power-Magat, Inc., closed a landmark project finance transaction worth US$380 million with a consortium of foreign and local banks, including the International Finance Corporation and Nordic Investment Bank together with seven domestic banks. This was the first limited recourse project finance granted to a merchant power plant in the Philippines, with loan repayment over 15 years and 10 years for the dollar and peso tranches, respectively. We expect to finance the Ambuklao-Binga acquisition in 2008 under a similar arrangement.

In the latter part of the year, we initiated discussions with a group of domestic banks for long-term project financing for our Hedcor Sibulan hydropower project in Davao province amounting to

3.5 billion. Financial closing for Sibulan is expected in the first half of 2008, with project completion scheduled for middle of 2009. We are encouraged by the keen interest shown by domestic lenders in our various power project initiatives.


Aboitiz Transport System Corp. (ATS) also had its share of activity in 2007, with the sale of three of its newer generation Superferries. We seized on the opportunity to sell these vessels at prices significantly above their book values. It was also in line with our direction to rightsize the fleet, as we see more of the passage market moving toward air travel. The sale of these vessels generated an extraordinary gain of 623 million, and allowed ATS to pay down

1.8 billion in debt. ATS ended the year with 570 million in interest-bearing debt, while its cash reserves stood at a healthy 821 million.

AEV’s financial performance in 2007 was well above that of the previous year, as all its four core businesses posted better operating results. Revenues grew by 17% to 31 billion, generating Earnings before Interest Taxes Depreciation and Amortization (EBITDA) of

9.3 billion, a 41% improvement over 2006. Likewise, Net Income Attributable to Common Shareholders increased by 54% to 5.8 billion. This translated to earnings per common share of 1.02, compared to 0.76 in 2006. The company posted a Return on Equity of 20% for the year.

into equity, there were also the treasury share sale at the parent company level that raised 6 billion, as well as a Gain on Dilution of 5 billion from AP’s public offering and the UnionBank follow-on offering. Both these items added to the value of Stockholders’ Equity.

On a consolidated basis, Cash and Cash Equivalents increased from 8 billion at year-end 2006 to 18.6 billion at year-end 2007. Your

company registered a current ratio of 2.5x and a debt-to-equity ratio of 0.39x at year-end 2007, compared to 2.1x and 0.68x, respectively, at the end of 2006.

Your company’s balance sheet strengthened considerably, with total assets increasing by 60% to 65.5 billion, while Equity Attributable to Equity Holders of the Parent grew by 65% to 38.1 billion. Aside from the significant Net Income earned during the year that went

In summary, your company has taken various steps to position its businesses for further growth in 2008 and onwards. With the total commitment of the Aboitiz team, your board of directors and management are optimistic about AEV’s future.

Stephen G. ParadiesSENIOR VICE PRESIDENT /CHIEF FINANCIAL OFFICER

Your company has taken various steps to position

its businesses for further growth

in 2008 and onwards.

2000 2000 2002 2003 2004 2005 2006 2007

1,1321,582

2,155 1,9732,452

3,1593,754

5,797CAGR 24.15%

(from 2001-2007)

Net Income(in millions)

Ratios

(0.50)

-

0.50

1.00

1.50

2.00

2.50

3.00

2000 2001 2002 2003 2004 2005 2006 2007

Current Ratio Debt-to-Equity Net Debt-to-Equity


Dear Shareholders,

Aboitiz Equity Ventures, Inc. (AEV) believes that corporate governance is a necessary component of what constitutes sound strategic business management. Thus, it is fully committed to upholding a governance regime that ensures that the Aboitiz time-honored values of fairness, integrity, trust and social responsibility permeate every level of the organization, from the Board of Directors down to the employees.

This section describes the governance structure of AEV as it continuously strives to achieve its mission of maximizing shareholder value.

BOARD OF DIRECTORS

The Board of Directors is responsible for ensuring that AEV’s corporate strategies are always aligned with the creation and maximization of shareholder value. Towards this end, the Board provides strategic guidance to the whole organization, with particular focus on developing AEV’s core competencies, people, financial strength and systems. It also monitors and evaluates management performance; identifies, assesses and manages risks inherent to AEV’s businesses; and ensures compliance with existing laws and regulations.

As the corporate body primarily responsible for setting the tone of governance in the whole organization, the Board regularly reviews AEV’s governance policies to ensure that such policies remain relevant and appropriate to AEV’s governance conditions. In 2007, the Board approved the amendment of

AEV’s Manual on Corporate Governance to include information security management as an important component of corporate governance.

In the Board are seven directors carefully chosen for their ability to bring about practical but strategic and progressive changes to AEV through a dynamic mix of their business, legal and finance competencies as well as for their ability to render independent judgment, particularly in the formulation of corporate policies.

All the directors have attended corporate governance seminars.

Composition

The Board of Directors is chaired by Roberto E. Aboitiz. The other directors are Jon Ramon Aboitiz, President and Chief Executive Officer; Erramon I. Aboitiz, Executive Vice President and Chief Operating Officer; Enrique M. Aboitiz Jr., Justo A. Ortiz, and Independent Directors Roberto R. Romulo and Justice Jose C. Vitug (ret.).

Except for the independent directors, all the aforementioned directors have been with AEV since it went public in 1994. The directors have extensive experience in and intimate knowledge of the different industries that AEV is engaged in. Their collective experience and expertise make them very qualified to steer AEV through the many growth opportunities and risks brought about by the ongoing deregulation and privatization of the Philippine electric power industry and consolidation of the banking and transport industries.

F R O M Y O U R C H I E F C O M P L I A N C E O F F I C E R

M. Jasmine S. OportoFIRST VICE PRESIDENT - LEGAL CORPORATE SECRETARYCHIEF COMPLIANCE OFFICER

AEV is fully committed to upholding a governance regime that ensures that the Aboitiz time-honored values of fairness, integrity, trust and social responsibility permeate every level of the organization.


CORPORATE G O V E R N A N C E

The independent directors represent 20% of the total number of directors in compliance with the requirements of the Securities Regulation Code for public companies. As independent directors, they are independent of management and free of any business or other relationship with AEV that could materially interfere with their exercise of unfettered judgment as members of the Board.

To emphasize the oversight function of the Board over management, the respective roles and responsibilities of the Board and of management are clearly delineated. In particular, the role of the Chairman is separated from that of the President and Chief Executive Officer. This separation of responsibilities serves to underscore the accountability of management to the Board and ultimately to AEV’s shareholders that the Board represents.

Each member of the Board holds office for one year until his successor is elected at the next annual stockholders’ meeting.

Board Performance

A total of seven regular and special meetings were held in 2007. Among the significant transactions approved by the Board in 2007 were the sale of AEV’s treasury shares, the reorganization and consolidation of AEV’s power assets into its subsidiary Aboitiz Power Corporation (AP) and the initial public offering of the common shares of AP in the Philippine Stock Exchange (PSE).

DirectorsRegular and Special Board Meetings for 2007

Jan. 11 Jan. 16 Feb. 8 Apr. 12 May 21 Aug. 29 Nov. 13

Roberto E. Aboitiz P P P P P A P

Jon Ramon Aboitiz P P P P P P P

Enrique M. Aboitiz, Jr. P P P P P P A

Erramon I. Aboitiz P P P P P P P

Justo A. Ortiz P P P P A P P

Roberto R. Romulo (Independent Director)

A P P P PA

A

Jose C. Vitug (Independent Director)

P P P P P P P

Total No. of Directors Present 6 7 7 7 6 5 5

Legend:

P- Present

A- Absent

To emphasize the oversight

function of the Board over

management,the role of the

Chairman is separate from

that of the President and

Chief Executive Officer.


Board Committees

To ensure that the Board is independently and fully informed of the strategic issues and major risks facing AEV, four committees - Nomination, Compensation and Remuneration, Audit and Investor Relations - support the Board to ensure good governance.

Nominations Committee.

The Nomination Committee pre-screens and shortlists all nominees for Board membership in accordance with the provisions of AEV’s Manual on Corporate Governance and Bylaws as well as the statutory requirements under the Corporation Code of the Philippines and the Securities Regulations Code. In consultation with AEV’s Executive Committee, the Nomination Committee is also tasked to re-define the role, duties and responsibilities of the Chief Executive Officer, primarily by integrating the dynamic requirements of the business as a going concern, and the future expansionary prospects within the tenets of good corporate governance.

The Nomination Committee is composed of at least three voting members, one of whom is an independent director, and one non-voting member in the person of the Senior Vice President for Human Resources. To date, the voting members of the Nomination Committee are Jon Ramon Aboitiz as Chairman, Erramon I. Aboitiz and Independent Director Roberto R. Romulo.

To ensure that the Board is independently and fully informed of the strategic issues and major risks facing AEV, four committees - Nomination, Compensation and Remuneration, Audit and Investor Relations - support the Board to ensure good governance.

The Nomination Committee held two meetings in 2007: the first one was to approve the nomination of Roberto R. Romulo and Justice Jose C. Vitug as Independent Directors, and the second meeting was to approve the nomination of Jon Ramon Aboitiz, Roberto E. Aboitiz, Enrique M. Aboitiz Jr., Erramon I. Aboitiz and Justo A. Ortiz.

Compensation and Remuneration Committee

The Compensation and Remuneration Committee reinforces AEV’s pay-for-performance philosophy. It is tasked to establish a formal and transparent policy on directors and executive remuneration to ensure that compensation is consistent with AEV’s culture, strategy and control environment and in a level sufficient to attract and retain directors and officers who are needed to run AEV successfully. It is also responsible for reviewing existing personnel policies on conflicts of interest, salaries and benefits, promotion and career advancement directives.

The Committee has at least three members, one of whom is an Independent Director. Its current members are Jon Ramon Aboitiz as Chairman, Roberto E. Aboitiz and Independent Director Justice Jose C. Vitug.

The Committee held three meetings during which it reviewed and approved the enhancements to the benefits packages of AEV’s employees, the 2006 Human Resources (HR) year-end report, the 2007 HR agenda, the salary adjustment rates and salary rates for entry-level positions for 2007 and the winners of the 2007 Passion for Better Ways Team Awards.


CORPORATE

The Audit Committee held two meetings in 2007. Among the items discussed were the results of the audit performed by Sycip, Gorres, Velayo & Company (SGV) on the 2006 financial statements of AEV, the audit and accounting issues and the resolutions of each issue, endorsement to the Board of Directors of the reappointment of SGV as the external auditor for taxable year 2007, the 2007 audit plan and scope, including outstanding accounting and auditing issues, and the audit fees of SGV. The Committee also reviewed the internal audit activities of AEV as well as its amended internal audit charter.

Investor Relations Committee

The Investor Relations Committee ensures that shareholders and investors receive timely, high quality, relevant, balanced and understandable information about AEV. It is also responsible for ensuring that shareholders and investors have easy and direct access to officially designated spokespersons for clarifying information, issues and for conveying concerns.

G O V E R N A N C E

It also reviewed the nominees for the 2007 Don Ramon Aboitiz Awards of Excellence and agreed that none of the nominees qualified for the award. The results of the 360° survey as well as the Aboitiz Talent Management Program (ATMP) Dashboards for all identified key players in AEV’s middle management were also presented and discussed. The Committee also approved a new formula for computing retirement transfers for employee movements within the AEV group.

Audit Committee

One of the key roles of the Audit Committee is to advise and assist the Board in safeguarding the integrity of financial reporting in AEV. This responsibility embraces adopting, maintaining and applying appropriate accounting and reporting processes and procedures. It also involves ensuring that financial reports are compliant with internal processes and procedures as well as with pertinent accounting standards and regulatory requirements.

The Committee has oversight over the Corporate Audit Team, which performs the internal audit function within AEV. It likewise performs direct interface functions with the internal and external auditors, facilitates the independence of the external audit process and addresses issues arising from this process.

The Audit Committee also performs oversight financial management functions and crisis management.

The Audit Committee is chaired by Independent Director Roberto R. Romulo, with Roberto E. Aboitiz and Justo A. Ortiz as members.


The Committee also performs oversight functions over the Investor Relations and Corporate Communications teams of AEV, regularly monitoring and evaluating the programs and activities of the teams against expectations of disseminating accurate and timely information to shareholders, investors and other stakeholders.

Composed of Jon Ramon Aboitiz as Chairman, with Erramon I. Aboitiz, CFO and Chief Information Officer Stephen G. Paradies and AVP for Corporate Communications Caroline G. Ballesteros as members, the Committee held three meetings in 2007. Matters discussed during the meetings were the results of meetings and briefings with institutional investors and financial analysts, updates on the current features in the corporate website, stockholders concerns, preparations for the AEV annual stockholders’ meeting and annual report and results of the customer satisfaction survey on the daily newswire service of the Corporate Communications Group.

Director and Senior Executive Compensation

AEV rewards its individual directors and officers based on ability to execute his duties and responsibilities. It is the company’s philosophy to reward based on individual performance. Performance is evaluated and compensation is reviewed on an annual basis. AEV ensures that it pays its directors and officers competitively by comparing rates with other Philippine-based companies through a market salary survey. Changes in Board compensation, if any, comes at the

suggestion of the Compensation and Remuneration Committee but with full discussion and concurrence by the Board.

In 2007, all of AEV’s directors received a monthly allowance of50,000 per month. In addition, each director received a

per diem for every Board or Committee meeting attended as follows:

Type of Meeting Per Diem Board Meeting

Independent Directors and Mr. Justo Ortiz

25,000

Other Directors 15,000Committee Meeting 20,000

To date, AEV has not granted any stock option to its directors or officers.

RISK MANAGEMENT

Risk Management Framework

AEV’s risk management framework provides the manner and approach by which risks (including compliance risks) are defined, managed, assessed and monitored. Risk management is a continuous improvement process whereby everyone in the AEV organization, from the Board of Directors to the employees, is actively integrating and embedding risk management in all business activities.

AEV’s risk management framework provides the manner and approach by which risks are defined, managed, assessed and monitored.


The framework provides the infrastructure for risk management and is comprised of AEV’s Board of Directors, the Audit Committee and other Board committees, executive and divisional committees, management and other relevant parties in the AEV organization. Together, the different components of the risk management framework set the risk culture in AEV and develop appropriate policies, procedures and methodologies.

Policies and Procedures and Reporting Responsibilities

There are existing policies and procedures articulating AEV’s position and expectations on identifying risks and the manner of communicating these to the Board and staff. There are established issue identification, escalation and reporting mechanisms across AEV. Risks issues are reported independently to the Board, Executive Committee, Audit Committee and other relevant Board committees at designated periods.

AUDIT AND ACCOUNTABILITY

External Audit

An external auditor enables an environment of good corporate governance as reflected in the financial records and reports of AEV. An external auditor is selected and appointed by the shareholders upon recommendation of the Audit Committee.

As a policy, the Audit Committee pre–approves audit plans, scope and frequency before an audit is conducted. Audit services of external auditors for 2007 were pre–approved by the Audit Committee. The Audit Committee also reviewed the extent and nature of these services to ensure that the independence of the external auditors is preserved.

The auditing firm of Sycip, Gorres, Velayo & Company (SGV) is AEV’s external auditor. The current audit partner is Mr. Ladislao Z. Avila, Jr. SGV is being nominated for re-election at the scheduled annual meeting of shareholders.

The external audit and consultancy fees for the years 2007 and 2006 were as follows:

Year endedDecember 31,

2007

Year endedDecember 31,

2006Audit Fees (Incurred by Registrant)

336,000 286,000

Audit-Related Fees - -Tax Fees - -Consultancy Fees (Incurred by Group)

- -

Total 336,000 286,000

An external auditor enables an environment

of good corporate governance as

reflected in the financial records

and reports of AEV.



Internal Audit

It is the policy of AEV to maintain an internal audit function as a primary resource of the Board of Directors, Audit Committee and management in the effective discharge of their respective duties and responsibilities of reviewing, evaluating, managing and controlling AEV’s operations, including that of its subsidiaries and affiliates.

Internal audit is an independent and objective assurance and consulting function designed to add value and improve AEV’s operations through a systematic, disciplined approach in evaluating and improving the effectiveness of AEV’s risk management, control and governance processes. It is undertaken by the Corporate Audit Team, a staff organization that functions in an advisory capacity. To maintain its objectivity, it exercises no direct responsibility or authority on operating activities or functions it reviews.

The Corporate Audit Team reports to the Audit Committee and has direct access to the Chairman of the Board. The Board of Directors and senior management support the Corporate Audit Team to ensure that audits are performed without interference.

The Corporate Audit Team has full, free and unrestricted access to all operating and financial records, information, systems and applications, physical properties, activities and personnel under review.

Its scope of work encompasses evaluating and improving the adequacy and effectiveness of AEV’s risk management, control and governance processes through risk profiling and evaluation of risk exposures, evaluation of existing internal control structure, participation in the planning, design and implementation of major information systems as a consultant to ensure that systems are properly tested, secured, documented and implemented, and undertaking of special reviews as determined by the Audit Committee.

The Corporate Audit Team adheres to established professional standards and abides by the Institute of Internal Auditors’ Code of Ethics.

The Corporate Audit Team has full, free and unrestricted access to all operating and financial records, information, systems and applications, physical properties, activities and personnel under review.


Compliance Officer

To safeguard adherence to corporate principles and best practices, a Chief Compliance Officer is designated who reports directly to the Chairman of the Board. Principal responsibilities include monitoring compliance with the Manual on Corporate Governance, and identifying, monitoring and controlling compliance risks. Presently, the Corporate Secretary holds the position in concurrent capacity.

The Office of the Chief Compliance Officer monitors compliance with all reportorial requirements of the Securities and Exchange Commission and the Philippine Stock Exchange and reports to management every two months the status of such compliance as well as other material legal issues confronting AEV.

DISCLOSURE AND TRANSPARENCY

Ownership Structure

AEV discloses its ownership structure in the reports it files with the Securities and Exchange Commission (SEC) and the Philippine Stock Exchange (PSE). It submits to the PSE a list of its top 100 shareholders every quarter. It likewise submits periodically to the PSE a public ownership report which details the ownership of controlling shareholders, including the shareholdings of their subsidiaries and affiliates, and of directors and management. It also discloses its top 20 shareholders, including the record and beneficial owners owning more than 5% of AEV’s outstanding capital stock, as well as the shareholdings of directors and officers in the Definitive Information Statement sent out to shareholders annually.

As of December 31, 2007, Aboitiz & Company, Inc. owns 2.48 billion common shares of AEV, representing 43% of the outstanding capital stock of AEV. Other record holders holding more than 5% of AEV’s outstanding capital stock are PCD Nominee Corporation (Foreign) which holds a total of 860.49 million common shares, and Ramon Aboitiz Foundation, Inc. which holds a total of 417.90 million common shares, representing 15% and 7%, respectively of the total outstanding capital stock of AEV.

Disclosures

AEV discloses to the public its financial and operating results every quarter through its filings with the SEC and the PSE. It also discloses its full year financial and operating results in SEC Form 17-A filed with the SEC and the PSE. Its shareholders are furnished a report of its full year financial and operating results through the Definitive Information Statement sent out to the shareholders every year.

In addition to the periodic reports submitted to the SEC and the PSE, AEV immediately updates the investing public with any material fact or event related to AEV and its business operations which may affect investors’ decision in relation to the trading of AEV’s securities.

In 2007, unstructured disclosures filed with the SEC and the PSE contained information related to the initial public offering of its subsidiary Aboitiz Power Corporation, significant asset acquisitions such as the STEAG and the Ambuklao-Binga power plants, the Magat refinancing, joint venture projects and status of ongoing projects. These unstructured disclosures are also uploaded to AEV’s website.


AEV updates the investing

public with any material

fact or event related to AEV

and its business operations which may

affect investors’ decision in

relation to the trading of AEV’s

securities.


Dealings in Securities

In compliance with disclosure rules of the SEC and the PSE, the members of the Board of Directors and management disclose within five trading days any acquisition, disposal or change in their beneficial shareholdings in AEV.

STAKEHOLDER RELATIONS

Shareholder Meeting and Voting Procedures

Annual and special meetings of shareholders are held in Cebu City where the principal office of AEV is located. Annual meetings of the shareholders are held every third Monday of May of each year. In addition, a separate shareholders’ briefing is conducted in Makati City for shareholders who are unable to attend the annual shareholders’ meeting in Cebu City.

Notices and agenda of any shareholders’ meeting are sent to shareholders of record at least 15 business days from the date of the meeting.

Each common share of stock entitles the holder under whose name it is registered to one vote in all matters that may be submitted for the consideration of the shareholders during the meeting. Shareholders may vote either in person or by proxy duly given in writing and presented to the Corporate Secretary for inspection, validation and record at least seven (7) days prior to the opening of the meeting.

Shareholder and Investor Relations

AEV continues to strive to work on improving its relationship with its shareholders and investors. An Investor Relations Unit was created to ensure the effective and transparent communication of relevant information about AEV to its investing public, particularly minority stakeholders. This is to foster better understanding of AEV and its plans and strategies, which open communications redound to enhancing shareholder value.

The Investor Relations Unit is responsible for addressing the various information requirements of the investing public, particularly the minority shareholders. Timely disclosures to the PSE and the SEC, regular quarterly briefings, one-on-one meetings, conference calls, roadshows and investor conferences, website updates, emails and telephone calls are the means by which AEV, through its Investor Relations Unit, conveyed its messages to the investing public.

In 2007, AEV held three briefings on its financial and operating results. The first was on the full year 2006 and first quarter of 2007 results; the second was on the results for the first half of 2007; and the third was on the results for the first nine months of 2007. Mostly in attendance were institutional investors and sell side analysts. Apart from venues like these, access to senior management was provided via one-on-one meetings upon request.

AEV had a roadshow in January 2007, which was in relation to the placement of its treasury shares. Senior management met with financial analysts and fund managers, both local and international.

An Investor Relations Unitwas created to ensure the effective and transparent communication of relevant information about AEV to its investing public, particularly minority stockholders.


AEV regularly updates the Investor Relations section of its website. Filings with and disclosures to regulatory agencies, press releases and presentations made during briefings are immediately made available on this section. The regular release of the Online Newsletter is also another way of updating the investing public of the current developments in AEV.

Employee Relations

In AEV, people are treated not just as employees but as business partners as well.

AEV offers fair and competitive compensation commensurate to employee qualification and performance on the job. It aims to provide healthy balance between financial and non-financial

rewards, and continually measures its employees’ satisfaction and morale level through annual surveys. A healthy work-life balance is promoted throughout the organization. It is likewise committed to providing a safe and healthy work environment for its employees. AEV places a high regard for its employees’ professional and personal growth, and finds opportunities to develop each team member. It cultivates life-long learning through high impact, quality training programs designed to support employee career development path and personal growth. Exemplary performers are developed through a talent management program, which is designed for the next generation of corporate leaders. AEV encourages an open-door policy, which allows employees to talk and interact with top executives in the organization who serve as leaders and mentors. This allows a free exchange of ideas and experiences, promoting teamwork, collaboration, cooperation and diversity within the organization.

CODE OF ETHICS AND BUSINESS CONDUCT

AEV’s Code of Ethics and Business Conduct sets forth the basic principles that guide the day-to-day activities of its employees, officers and directors. It is to be read together with other existing policies and procedures of AEV.

Under the Code, everyone within the AEV organization is expected to comply with the spirit and letter of applicable laws and regulations to promote the avoidance not only of actual misconduct but even the appearance of impropriety.


AEV encourages an open-door policy, which

allows employees to talk and

interact with top executives in the organization who

serve as leaders and mentors.


AEV seeks to outperform its competition fairly and honestly through superior performance and every employee, officer and director is expected to keep the best interests of customers paramount and to deal fairly with suppliers, competitors and the public. Moreover, every employee, officer and director is exhorted to act in the best interest of AEV and avoid any situation in which a conflict of interest may arise.

Employees and officers are required to promptly report to the Human Resources Department any potential relationship, action or transaction that may give rise to a conflict of interest. Directors are under obligation to disclose any actual or potential conflicts of interest to the Chairman of the Board and the Compliance Officer. All directors are also required to recuse themselves from any Board discussion or decision affecting their personal, business or professional interests.

The Code further prohibits the use of one’s position in AEV or of corporate property or information for personal gain. Protection of proprietary and confidential information generated and gathered in the conduct of business is considered the obligation of every member of the AEV organization. Conversely, everyone is also expected to respect the property rights of other companies.

Insider trading is strictly prohibited under the Code and every member of the AEV organization is obligated to prevent the misuse of inside information.

The Code affirms AEV’s commitment to provide fair and truthful disclosures to the public. In particular, AEV’s senior financial officers, executive officers and directors are tasked to promote full, fair, accurate, timely and understandable disclosure in AEV’s public communications and in all disclosures filed with the SEC and other regulators. Furthermore, it is considered the obligation of every member of the AEV organization to report to the proper officer or committee any materially inaccurate or misleading statement in a public communication.

The Code further affirms AEV’s obligation to maintain accurate and complete books and records. In particular, senior financial officers are tasked to ensure that financial information included in AEV’s books and records is correct and complete in all material respects.

The Code also promotes a safe and healthy working environment, an environment that provides equal employment opportunities and prohibits discriminatory practices and where all individuals are treated with dignity and respect.

WEBSITE

Additional information on corporate governance principles and practices of the AEV is available at www.aboitizequityventures.com

All directors are required to recuse themselves from any Board discussion or decision affecting their personal, business or professional interests.



Shaping Tomorrow Today

F E A T U R E S


Aboitiz Power was incorporated in 1998 and is the fourth publicly listed company in the Aboitiz Group after Aboitiz Equity Ventures, Aboitiz Transport System and UnionBank.

ABOITIZ POWER CORPORATIONPowering an industry

President Gloria Macapagal-Arroyo rings the bell at the Philippine Stock Exchange to signal the start of trading of AP stocks.


July 16, 2007 marked a significant milestone for the Aboitiz Group with the listing of Aboitiz Power Corporation (AP) at the Philippine Stock Exchange (PSE).

President Gloria Macapagal-Arroyo rang the ceremonial bell to officially signal the start of trading of AP shares at the stock exchange in a ceremony held at PSE Ayala.

A total of 1,787,664,000 shares were issued and sold at an initial public offering (IPO) price of 5.80 per share.

Proceeds amounted to over 10 billion which will be used to further expand and develop the Aboitiz power business.

The company’s strategy moving forward is to continue to grow its distribution business organically and through acquisitions, powering new frontiers in the Philippine power industry.

“We will also continue to bid for plants being privatized by the government through PSALM, develop greenfield projects and grow our renewable energy business. Being in both generation and distribution allows us to build synergies between the supply and demand needs of the power business,” said AP Chairman Jon Ramon Aboitiz in his opening remarks.

“We are confident that we will be able to deploy the funds raised in our IPO wisely and profitably. We believe Aboitiz Power is well positioned to succeed as the Philippine power sector is deregulated and subjected to more competitive forces,” he said.

UBS Investment Bank was sole global coordinator and bookrunner for the IPO. BDO Capital and Investment Corporation and PCI Capital Corporation were the domestic lead underwriters with ATR King Eng Capital Partners, BPI Capital Corporation and First Metro Investment Corporation as domestic co-lead underwriters.

Aboitiz Power Corporation was incorporated in 1998 and is the fourth publicly listed company in the Aboitiz Group after Aboitiz Equity Ventures, Aboitiz Transport System and UnionBank.

We believeAboitiz Power

is well positioned to succeed as the Philippine

power sector is deregulated and

subjected to more competitive

forces.


UNIONBANK OF THE PHILIPPINESRedefining ‘smart banking’

UnionBank has unveiled its new brand positioning: smart banking, its action plan to challenge conventions for smarter solutions for customers.

UnionBank knows that its customers expect and deserve nothing less, so it continuously strives to seek leadership in service, innovation and value for money. It recently unveiled its new brand positioning: smart banking, its action plan to challenge conventions for smarter solutions for customers.

The bank is now identifiable with its new colors of tangerine orange complemented by royal blue. Tangerine orange reflects a bright warm attitude that is not afraid to be different, to challenge convention. Royal blue signifies stability and intelligence that are vital to become innovators in behalf of its customers.

The year 2007 was largely spent on developing and implementing initiatives that would bring the brand to life. The pilot project in the area of brand-aligned customer service quality was successfully conducted, resulting in an enhanced quality of service to customers. UnionBank has began the rollout of its branding throughout the bank’s entire system.


In 2008, UnionBank’s new visual identity is being applied on its signages, branch interiors, corporate and product posters, brochures and collaterals, office stationeries and employee uniforms.

UnionBank continues to make improvements in its processes that would result in faster turnaround time, making banking more convenient for customers. Its frontliners have started to equip themselves with customer relationship management competencies.

These efforts will enable the bank to gain a deeper understanding of its customers’ needs and wants, thus giving them the opportunity to nurture deeper connections and to respond with relevant products and services.

As Chairman & CEO Justo A. Ortiz said, “We have been known for our use of technology and superior innovation. In fact, we have the slogan ‘high-tech, high-touch’. These are the O and S in the bank’s FOCUS 2010. And it’s still the same vision. But we now recognize the need to put emphasis on the U, which is the UnionBank customer brand experience.”

really know our customers!

1 relevant

expert

challenging

2

3

really know what we’re talking about!

don’t think like a traditional bank!


CITY SAVINGS BANKBranching out

When it was established over 42 years ago, City Savings Bank (CSB) was envisioned to provide financial services to people of moderate means. Today, it continues with this vision with a dedicated focus to provide more convenience and better service to its customers amid the advancement of technologies and changing customer expectations.

Branching is CSB’s key business strategy moving forward. This entails establishing more branches and service centers in provincial locations, redesigning its branch look and enhance customer experience to make them more convenient, attractive and pleasant.

The bank currently has 17 branches and extension offices in the Visayas and Mindanao, and will soon open its first branch in Luzon.

The newly-renovated CSB Colon branch, one of the landmarks in Cebu CIty’s oldest street.


In 2007, CSB Colon, one of the bank’s pioneer branches, underwent a total overhaul and reopened with a new look guided by branding guidelines. CSB’s corporate colors of sunflower yellow, gray and red are liberally used in the new offices. The Colon branch is one of the landmarks in Cebu CIty’s oldest street.

While it will offer the option of ATM banking, CSB believes that customers prefer to bank in person. Through person-to-person visits, meaningful long-term relationships can be built.

With its client base changing, business process reengineering, technological initiatives, and marketing focus continue to be the bank’s major ongoing initiatives.

As its future undergoes significant changes, trusted customer relationships will offer the biggest source of competitive advantage. In addition to enhancing its physical environment, nurturing the culture of superior service is everyone’s job.

While more and more banks are realizing that the personal touch with the customer is of primary importance, the passion to serve has been CSB’s main preoccupation for the past four decades and continues to be so.

Branching is CSB’s key

business strategy moving forward,

establishing more branches and

service centers in provincial

locations.

CSB offers a special savings account for children, making them learn the value of saving at a young age.


In 2007, the Food Group focused its energies on implementing the growth plans formulated in the previous year. The Iligan Milling Complex at Kiwalan Cove has grown considerably larger and now covers 9.4 hectares of industrial space. It has added new facilities and expanded its capabilities.

Eight stainless steel silos are currently being added to Pilmico Foods’ existing silo farm, making its

The Iligan Milling Complex at Kiwalan Cove has grown considerably larger. It now has the largest grain storage area of any milling operation in the country.

PILMICO FOODS CORPORATIONExpanding capabilities

Iligan facility the largest grain storage area of any milling operation in the country. This storage capacity allows the company to bring larger vessels into its private deep-water port as well as take advantage of opportunities in purchasing wheat from different sources in a very volatile commodity price environment. When completed, the new silos will add 27,000 metric tons of new capacity.

In June 2007, Pilmico began the construction of a feed mill in its

Iligan plant that is targeted to be operational by July 2008.


Pilmico’s flour blending facility has been installed and will be operational by the second quarter of 2008. This new facility creates savings from blending flours of different grades to produce flour that is of a particular quality and efficiently serve up small-batch runs of specialty flours according to the specifications of industrial customers.

In June 2007, Pilmico began the construction of a feed mill in its Iligan plant that is targeted to be operational by July 2008. The mill will produce high-quality animal rations to serve the needs of animal raisers throughout the Visayas and Mindanao regions, thereby lowering operating freight and input costs.

Fil-Am Foods, Inc. (FFI) will provide the technical expertise to run the new facility and market the feeds. Registered with the Board of Investments (BOI), the project will enjoy a six-year tax holiday on the income derived from its operations. The feed mill is capable of producing 108,000 metric tons per year.

FFI is expanding its swine business, with a grower-finisher farm currently under construction in Tarlac. When it begins operations in 2009, the farm will be able to increase production by 4,800 heads. Also under construction is a nucleus breeder farm that is expected to increase piglet production by over 35,000 heads when it becomes operational in 2010. These projects are also BOI-registered.

Fil-Am Foods swine production

operation has expanded its

capabilities and is prepared for

the future.

pig photo


The year 2007 marked a significant milestone in the history of the Aboitiz Group as it commemorated 100 years in the transport business.

Since the purchase of its first vessel, the MV Picket, in 1907, the Aboitiz transport business has built a track record of being an innovator and always seeking groundbreaking solutions. Aboitiz Transport System Corporation (ATS) was the first in domestic containerization, door-to-door service and the SuperFerry model of passenger transport, among others. These innovative activities have set the standards of the local shipping industry.

The year 2007 marked a significant milestone in the history of the Aboitiz Group as it commemorated 100 years in the transport business.

ABOITIZ TRANSPORT SYSTEM CORPORATIONTransforming solutions


Since the purchase of its

first vessel, the MV Picket in

1907, Aboitiz Transport has

built a track record of being

an innovator and always seeking

groundbreaking solutions.

In 1907, MV Picket I, the first vessel that started the Aboitiz transport business.

Much like its beginnings, the company’s strong pioneering spirit continues to live on with the development of its RoRo service in support of the government’s Strong Republic Nautical Highway program. ATS was the first to launch a time-defined and time-priced cargo service known as 136. In 2007, supply chain management, including the development of cold chain for the movement of perishable commodities, was comprehensively offered to help customers thrive in today’s globally competitive world.

The time-honored tradition of trust, honor, respect, and social responsibility inherited from its founders and forefathers are values and principles that propel ATS to strive for better ways as it transforms beyond being a shipping company to a total transport solutions enterprise.

Today, ATS offers passenger transport through its conventional ferry and fast craft vessels under the brand names SuperFerry, Cebu Ferries and SuperCat. Together with the Jebsen Group of Norway, ATS provides sea-based and land-based manpower solutions as well as ship management and ship chartering services. In addition, ATS offers complete supply chain management services under the brand name 2GO. Technologically driven and with an extensive network, ATS believes it is more able to satisfy customers in the nascent supply chain industry.

As it moves to the next chapter of its corporate history, ATS is focused on building a value-added service organization, capitalizing on the synergies brought by an integrated transport group. It is likewise steadfast in growing its presence internationally, profiting from global opportunities with its manpower and ship management solutions.

ATS looks forward to serving the young of today until they get to be 100 like it served the young of 100 years ago.


The Foundation and its member-companies further strengthened their partnership with Department of Education by formally enrolling

15 million worth of projects under DepEd’sAdopt-a-School Program.

ABOITIZ GROUP FOUNDATION, INC.Sustaining public education

A handshake between AGFI Chairman Jon Ramon Aboitiz and DepEd Secretary Jesli Lapus seals the partnership for the Foundation’s support of the department’s Adopt-a-School Program.


The commitment of the Aboitiz Group of companies for its corporate social responsibility was never more evident than in 2007. The group allocated a total of 153 million for various social development programs and projects for its host communities.

Of the total amount allocated, 72 million was for social initiatives coursed through its corporate foundation, the Aboitiz Group Foundation, Inc. (AGFI), while 81 million was for projects initiated by the companies themselves. Projects were conceptualized and implemented based on the specific needs of communities within their areas of operations.

The Foundation’s programs and projects focused on education, enterprise development, and primary health and childcare. Education continued to be the priority thrust, with AGFI allocating 34 million or 47% of its budget for education-related initiatives

The Foundation and its member-companies further strengthened their partnership with the Department of Education by formally enrolling 15 million worth of projects under the department’s Adopt-a-School Program.

The Group’s scholarship program has now also gone full cycle. The support for scholars continues even after their college graduation as they are given the opportunity to work for Aboitiz companies.

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CORPORATESOCIAL RESPONSIBILITY

AGFI’s support for scholars extends

even after college graduation, when

they are given the opportunity

to work for Aboitiz companies.


Inspired by the success of the 1st Aboitiz Future Leaders Business Summit (AFLBS) in 2006, the Aboitiz Group once again rose to the challenge of gathering, recognizing and inspiring top students in the Visayas and Mindanao regions to become the next generation of our country’s leaders.

Eighty-four students from 12 colleges and universities taking up different courses participated in the 2nd AFLBS, which was held at the Waterfront Cebu City Hotel on August 10 and 11, 2007. Participating schools in the Visayas were Cebu Institute of Technology, St. Theresa’s College, University of Cebu, University of San Jose-Recoletos, University of the Philippines, and

ABOITIZ FUTURE LEADERS BUSINESS SUMMITShaping the next generation of leaders

The AFLBS aims to instill in delegates the appreciation for both their Filipino identity and their role in helping build the Filipino nation.


University of the Visayas. The Mindanao-based schools were Ateneo de Cagayan-Xavier University, Liceo de Cagayan, Ateneo de Davao, Mindanao State University and Notre Dame University.

A manifestation of the Aboitiz Group’s passion for better ways, the two-day AFLBS is designed to prepare young students for the challenges in the corporate world. More importantly, the summit aims to instill in delegates the appreciation of both their Filipino identity and their role in helping build the Filipino nation.

Through the Summit, the Aboitiz Group hopes to ignite among the participants faith, hope and trust in their fellow Filipinos and their country. It also aims to strengthen their conviction to strive for excellence in any career they wish to pursue.

Centered on the theme, “Developing the Entrepreneurial Spirit Among the Youth”, the 2nd AFLBS had Aboitiz Group executives led by AEV President and CEO Jon Ramon Aboitiz discuss and share experiences in business financing, branding, becoming a world-class and a customer-centered company, and technology. More than being a miniature graduate business course, the summit also tackled integrity and leadership, service to the community, vision and values, and building, earning, and maintaining trust and reputation.

One of the summit highlights was the dinner with the Aboitiz executives, who exchanged ideas, experiences, and questions with the young delegates. A group case study presentation, which introduced a more realistic picture of the corporate world, was the summit’s culminating activity.

Team activities conducted by Ramon Aboitiz Foundation, Inc. (RAFI) facilitators tested the critical thinking, initiative and teamwork

of the delegates while keeping them in a fun-filled environment. Winners of the Best Essay, Best Interview, and Best in Case Study Presentation were also awarded.

This annual event is a product of the concerted efforts of Aboitiz Group team members, managers, top-level officers, and executives. For the 2nd AFLBS, delegates of the first summit in 2006 signed up as volunteers.

Delegates unanimously described the summit as a great learning experience for it had inspired them to take on the challenge to prove that the country’s future is in their good hands, the next generation of leaders.

The summit strengthens

the delegates’ conviction to

strive for excellence in

any career they wish to

pursue.


LOCATION OF OPERATIONSABOITIZ EQUITY VENTURES

CORPORATE STRUCTURE POWER %

DAVAO

CEBU

MANILA

MINDANAO

VISAYAS

LUZON

STEAG State Power Inc.

Pilmico Foods CorporationCotabato Light & Power Company

Davao Light & Power Company, Inc.Hedcor Tamugan, Inc.

Hedcor Sibulan, Inc.

Southern Philippines Power CorporationWestern Mindanao Power Corporation

Balamban EnerZone Corporation

ABOITIZ EQUITY VENTURES, INC.Aboitiz Power CorporationVisayan Electric Company, Inc.Cebu Private Power CorporationCity Savings BankSupercat Fast Ferry CorporationAboitiz Energy Solutions, Inc.

Mactan EnerZone CorporationEast Asia Utilities Corporation

SN Aboitiz Power-Magat, Inc.Luzon Hydro Corporation

Subic EnerZone Corporation

SN Aboitiz Power-Benguet, Inc.Hedcor, Inc.Fil-Am Foods, Inc.

San Fernando Electric & Power Company, Inc.

Aboitiz Transport System CorporationUnionBank of the Philippines

Aboitiz Power Corporation 73 Generation Companies: SN Aboitiz Power-Magat, Inc. 50 SN Aboitiz Power-Benguet, Inc. 50 Hedcor, Inc. 100 Hedcor Sibulan, Inc. 100 Hedcor Tamugan, Inc. 100 Luzon Hydro Corporation 50 Cebu Private Power Corporation 60 East Asia Utilities Corporation 50 STEAG State Power Inc. 34 Southern Philippines Power Corporation 20 Western Mindanao Power Corpration 20

Distribution Companies: Davao Light & Power Company, Inc. 100 Visayan Electric Company, Inc. 55 Subic EnerZone Corporation 100 Cotabato Light & Power Company 100 Mactan EnerZone Corporation 100 Balamban EnerZone Corporation 60 San Fernando Electric Light & Power Company, Inc. 44

Services: Aboitiz Energy Solutions, Inc. 100

BANKING UnionBank of the Philppines 36 City Savings Bank 34 TRANSPORT Aboitiz Transport System Corporation 77 Aboitiz One, Inc. & Subsidiaries 100 Aboitiz Jebsen Bulk Transport Corporation & Subsidiaries 62 Aboitiz Jebsen Manpower Solutions, Inc. 62 Jebsen Maritime, Inc. 62 JEMA BVI Ltd. 50 Supercat Fast Ferry Corporation 100 Zoom In Packages, Inc. 100 MCC Transport Philippines, Inc. 33

FOOD Pilmico Foods Corporation 100 Fil-Am Foods, Inc. 100

PORTFOLIO INVESTMENTS Cebu Praedia Dev. Corporation 100 AEV Aviation, inc. 100


Roberto E. AboitizCHAIRMAN

Jon Ramon M. AboitizDIRECTOR

Erramon I. AboitizDIRECTOR

Justo A. OrtizDIRECTOR

Roberto R. RomuloINDEPENDENT DIRECTORAUDIT COMMITTEE CHAIRMANNOMINATION COMMITTEE MEMBER

Enrique M. Aboitiz , Jr. DIRECTOR

Jose C. VitugINDEPENDENT DIRECTORCOMPENSATION COMMITTEE MEMBER

Directors BOARD OF


Stephen G. ParadiesSENIOR VICE PRESIDENT CHIEF FINANCIAL OFFICER CORPORATE INFORMATION OFFICER

Juan Antonio E. BernadSENIOR VICE PRESIDENT

Mikel A. AboitizSENIOR VICE PRESIDENT CHIEF INFORMATION OFFICER

Xavier J. AboitizSENIOR VICE PRESIDENT HUMAN RESOURCES

Gabriel T. MañalacFIRST VICE PRESIDENT TREASURY SERVICES

Luis Miguel O. AboitizFIRST VICE PRESIDENT

Corporate Officers

Jon Ramon M. AboitizPRESIDENT & CHIEF EXECUTIVE OFFICER

Erramon I. AboitizEXECUTIVE VICE PRESIDENT & CHIEF OPERATING OFFICER



Melinda Rivera-BathanVICE PRESIDENT COMPTROLLER

Leah GeraldezASSISTANT CORPORATE SECRETARY

Delia Y. MaderazoASSISTANT VICE PRESIDENT iCSD

Stella Olive SucalitASSISTANT VICE PRESIDENT CORPORATE FINANCE

Carmela I. NaranjillaASSISTANT VICE PRESIDENT INVESTOR RELATIONS

Narcisa S. LimASSISTANT VICE PRESIDENT HUMAN RESOURCES

Caroline G. BallesterosASSISTANT VICE PRESIDENT BRANDING & CORPORATE COMMUNICATIONS

Corporate Officers

Documents

Equity Ventures Shaping Tomorrow Todayaboitiz.net/AEV/uploads/file/2012/AEV_2007AR.pdfABOITIZ EQUITY VENTURES ANNUAL REPORT 2007 1 Shaping Tomorrow Today Financial Highlights 2 Report