results of operations - Aboitiz

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REPORT TO OUR STOCKHOLDERS FROM YOUR PRESIDENT AND CHIEF EXECUTIVE OFFICER Growth POWERED FOR We are very pleased to report that 2006 was again another record year for your company as it posted a profit of π3.7 billion, an increase of 19% over 2005 earnings. Return on equity was 19.2% as all companies were profitable. Dear Shareholders and Friends, We are very pleased to report that 2006 was again another record year for your company as it posted a profit of π3.7 billion, an increase of 19% over 2005 earnings. Return on equity was 19.2% as all companies were profitable. Your company remained focused on enhancing and maximizing the value of all our existing businesses and new investments while continuing to provide shareholders with attractive dividend yields. POWER In 2006, AEV’s power group remained the largest contributor to the company’s profit, up 12% from the previous year. The electricity generation and distribution businesses turned in almost equal contributions to AEV’s income. Our power distribution utilities generally experienced little growth in energy sales volume due to a very slow first half 2006. But sales volume picked up in the second half, making us optimistic about future growth. Increased efficiency and productivity across all our utilities and strong contributions from Visayan Electric Company (VECO) and Davao Light and Power Company (DLPC) were responsible for the 21% increase in contribution over 2005. The distribution group also spent 2006 consolidating its gains and preparing for the future. In March, San Fernando Electric finally received approval for its rate unbundling. VECO and DLPC completed the process of obtaining regulatory approvals for existing power supply, and both successfully searched for new sources of power for their future requirements, given the limits of National Power Corporation's (Napocor) available capacity. Our distribution utilities also concluded agreements with National Transmission Corporation (TransCo) for the acquisition of all subtransmission assets within their franchise areas, including the creation of several consortia with neighboring cooperatives for shared assets. In generation, our hydro plants in Luzon and Davao performed well exceeding their budgets for the year in kilowatt-hour (kwh) sales and profits. All plants had very high availability factors thereby maximizing production during the rainy season. 4 ABOITIZ EQUITY VENTURES ANNUAL REPORT 2006
The winning bid by SN Power Aboitiz, a joint venture between Aboitiz Power Corporation and SN Power of Norway, for the 360-megawatt (MW) Magat power plant was the major highlight in 2006. To date, the plant located in Isabela is the largest hydroelectric facility to be privatized by government. BANKING UnionBank, in continuing to take steps towards its Focus 2010 goals, acquired the International Exchange Bank (iBank) in June. At yearend 2006, it was No. 7 among private domestic universal banks in terms of size with close to π183 billion in total resources. It is the eigth largest in branch network with 186 branches. Its organic expansion pushed asset base equivalent to a growth rate of 71.3%. Deposits almost doubled. UnionBank has maintained its rank as among the best banks in the country on key performance ratios of liquidity and return on assets. 2006 was a record year for City Savings Bank (CSB) with resources up by 77% over the previous year. Total deposits grew by 82%, allowing the bank to expand its loan portfolio by 98% and still maintain a strong capital adequacy ratio. With the lifting by the Bangko Sentral of the moratorium on branch expansions, CSB bought all the assets of CSB Finance branches and opened new branches in Cagayan de Oro City and in Roxas City. These bring to 16 the total number of branches in the Visayas and Mindanao. TRANSPORT Although the transport group experienced another challenging year, it ended 2006 with a profit. We continued to deal with high fuel prices coupled with stiff competition in passage from low airline fares, short Roll On-Roll Off (RoRo) ferries and buses. The group continued to make substantial gains in our pure RoRo and logistic services, which have been widely accepted by the market for being very efficient and cost effective. We began to focus our operating model more towards the freight part of the business and chartered the container ship 2GO1 to serve Southern Mindanao. In December, we concluded the sale of two SuperFerries resulting in booking a gain on the sale of the first vessel delivered that same month. The second ship will be delivered in the second quarter of 2007. In re-aligning our investments, we also divested of DIPPSCOR, the port service company we own in Davao, also realizing a gain on the sale. Proceeds from the sales allowed Aboitiz Transport to reduce its interest-bearing debt by π1.2 billion, strengthening the company’s balance sheet and reducing interest expenses. UnionBank, in continuing to take steps towards its Focus 2010 goals, acquired the International Exchange Bank (iBank) in June. At yearend 2006, it was No. 7 among private domestic universal banks in terms of size with π183 billion in total resources. It is the 8th largest in branch network with 186 branches. ABOITIZ EQUITY VENTURES ANNUAL REPORT 2006 5
Page 2 and 3: CONTENTS Financial Highlights 2 Rep
Page 4 and 5: FINANCIAL HIGHLIGHTS 06 05 04 Reven
Page 8 and 9: We intend to list Aboitiz Power Cor
Page 10 and 11: Market Capitalization (in billion p
Page 12 and 13: RESULTS OF OPERATIONS FROM YOUR CHI
Page 14 and 15: RESULTS OF OPERATIONS VECO extended
Page 16 and 17: RESULTS OF OPERATIONS Subic EnerZon
Page 18 and 19: RESULTS OF OPERATIONS Hedcor, Inc.
Page 20 and 21: RESULTS OF OPERATIONS Luzon Hydro a
Page 22 and 23: RESULTS OF OPERATIONS UnionBank’s
Page 24 and 25: RESULTS OF OPERATIONS City Savings
Page 26 and 27: RESULTS OF OPERATIONS ATS has conve
Page 28 and 29: RESULTS OF OPERATIONS The increase
Page 30 and 31: REPORT TO OUR STOCKHOLDERS FROM YOU
Page 32 and 33: REPORT TO OUR STOCKHOLDERS Growth P
Page 34 and 35: SN ABOITIZ POWER, INC. With four ge
Page 36 and 37: HEDCOR, INC. A Hedcor engineer uses
Page 38 and 39: DAVAO LIGHT AND POWER COMPANY Davao
Page 40 and 41: VISAYAN ELECTRIC COMPANY VECO linem
Page 42 and 43: UNIONBANK OF THE PHILIPPINES UnionB
Page 44 and 45: CITY SAVINGS BANK Moving forward, C
Page 46 and 47: PILMICO FOODS CORPORATION Living up
Page 48 and 49: ABOITIZ TRANSPORT SYSTEM The entry
Page 50 and 51: ABOITIZ GROUP FOUNDATION, INC. In 2
Page 52 and 53: CHRISTMAS OUTREACH PROJECT Expressi
Page 54 and 55: ABOITIZ FUTURE LEADERS’ BUSINESS
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ABOITIZ EQUITY VENTURES LOCATION OF
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CORPORATE OFFICERS Stephen G. Parad
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Independent Auditors’ Report The
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ABOITIZ EQUITY VENTURES, INC. AND S
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Investor Information Head Office: A
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results of operations - Aboitiz

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