COVER SHEET

4

4

0

9

SEC Registration Number

A B O I T I Z

T R A N S P O R T

S Y S T E M

(

A T S C )

C O R P O R A T I O N

(Company’s Full Name)
1

2 T H

F L O O R
U. N.

T I M E S

A V E.

P L A Z A

C O R N E R

E R M I T A

B U I L D I N G

T A F T

M A N I

A V E.

L A

(Business Address: No. Street City/Town/Province)
ISMAEL R. CABONSE
(Contract Person)
1

2

3

1

Month
Day
(Fiscal Year)

02-5287516 / 02-5287630
(Company Telephone Number)
1

7

-

A

0

(Form Type)

5

2

4

Month
Day
(Annual Meeting)

DECEMBER 31, 2006
(Secondary License Type, If Applicable)
Corporation Finance Department
Dept. Requiring this Doc.

Amended Articles Number/Section
Total Amount of Borrowings

2,219
Total No. of Stockholders

Domestic

Foreign

To be accomplished by SEC Personnel concerned

File Number

LCU

Document ID

Cashier

STAMPS
Remarks: Please use BLACK ink for scanning purposes.

SECURITIES AND EXCHANGE COMMISSION
SEC FORM 17-A
ANNUAL REPORT PURSUANT TO SECTION 17
OF THE SECURITIES REGULATION CODE AND SECTION 141
OF THE CORPORATION CODE OF THE PHILIPPINES
1.

For the fiscal year ended December 31, 2006

2.

SEC Identification Number 4409

4.

Exact name of issuer as specified in its charter Aboitiz Transport System (ATSC) Corporation

3. BIR Tax Identification No. 000-313-401

5. Philippines
Province, Country or other jurisdiction of
incorporation or organization

6.

(SEC Use Only)
Industry Classification Code:

7. 12th Floor Times Plaza Building United Nations Avenue corner Taft Avenue Ermita, Manila
__________
of principal office

1000
Postal Code

Address

8. (02) 528-7516 and (02) 528-7630
.
Issuer's telephone number, including area code
9. William Gothong and Aboitiz Inc. Serging Osmeña Blvd., North Reclamation Area, Cebu City
Former name, former address, and former fiscal year, if changed since last report.
10. Securities registered pursuant to Sections 8 and 12 of the SRC, or Sec. 4 and 8 of the RSA
Title of Each Class

Number of Shares of Common Stock Outstanding
and Amount of Debt Outstanding

Common stock, P 1 par value
Redeemable preferred stock, P 1 par value

2,446,136,400
4,560,417

11. Are any or all of these securities listed on a Stock Exchange.
Yes [X]

No [ ]

Philippine Stock Exchange - Common Stock and Redeemable Preferred Stock
12. Check whether the issuer:
(a) has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17.1 thereunder or Section
11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections 26 and 141 of The Corporation Code of the
Philippines during the preceding twelve (12) months (or for such shorter period that the registrant was
required to file such reports);
Yes [X]
No [ ]
(b) has been subject to such filing requirements for the past ninety (90) days.
Yes [X]

No [ ]

13. Aggregate market value of the voting stock held by non-affiliates as of April 04, 2007:
P 225,921,214.50

TABLE OF CONTENTS

PAGE NO.
PART I – BUSINESS AND GENERAL INFORMATION
Item 1
Item 2
Item 3
Item 4

Business
Properties
Legal Proceedings
Submission of Matters to a Vote of Security Holders

4
24
27
27

PART II – OPERATIONAL AND FINANCIAL INNFOMRATION
Item 5
Item 6
Item 7
Item 8

Market for Registrant’s Common Equity and
Related Stockholder Matters
Management’s Discussion and Analysis of Financial Condition
& Results of Operations
Financial Statements
Information on Independent Accountant and Other Related
Matters

28
30
41
42

PART III – CONTROL AND COMPENSATION INFORMATION
Item 9
Item 10
Item 11
Item 12

Directors and Executive Officers of the Registrant
Executive Compensation
Security Ownership of Certain Beneficial Owners and
Management
Certain Relationships and Related Transactions

PART IV – CORPORATE GOVERNANCE

43
53
54
56
57

PART V – EXHIBITS AND SCHEDULES
Item 13

a. Exhibits
b. Reports on SEC Form 17-C

SIGNATURES
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES
INDEX TO EXHIBITS

58
59

PART I – BUSINESS AND GENERAL INFORMATION

Item 1. Business
ABOITIZ TRANSPORT SYSTEM (ATSC) CORPORATION (“ATS”)
Business Development
The Company’s history dates back to May 26, 1949 with the establishment of William Lines,
Inc., a passenger and cargo shipping company headquartered in Cebu. Driven by the vision
of providing the nation with the best shipping services, the company consolidated its
resources and expertise with two other Cebu based companies namely Carlos A. Gothong
Lines, Inc. and Aboitiz Shipping Corporation last December 21, 1995. This marked the birth
of William, Gothong & Aboitiz, Inc. (WG&A).
In 2002, Aboitiz Equity Ventures, Inc. (AEV) acquired the combined holdings of the Chiongbian
and Gothong Group. The buyout by AEV of the shareholdings of C&G Group was executed
through an Escrow Agreement dated July 31, 2002. In compliance with the agreement, the
Company amended its Article of Incorporation to change its registered corporate name from
William, Gothong & Aboitiz, Inc. (WG&A) to Aboitiz Transport System (ATSC) Corporation
which the Securities and Exchange Commission (SEC) approved last February 4, 2004.
Last October 24, 2005, the SEC authorized the issuance of 414,121,123 common shares in
exchange for the 100% of the outstanding capital stock of Aboitiz One Inc. (AONE), 50% of the
outstanding capital stock of Jebsen Management (BVI) Limited (JMBVI) and 62.5% of the
outstanding capital stock of each of Aboitiz Jebsen Bulk Transport Corporation (ABOJEB),
Aboitiz Jebsen Manpower Solutions, Inc. (AJMan) and Jebsen Maritime Inc (JMI). The major
shareholders of Aone, Abojeb, AJMSI, JMI and JMBVI are Aboitiz & Company, Inc. (ACO) and
certain affiliates of ACO. The ownership percentage of ACO increased from .02% to 16.50%
while AEV, although it remained the controlling stockholder of ATS, decreased its percentage
of ownership from 92.69% to 76.11%. The said share swap transaction consolidated the
transport and logistics businesses of the Aboitiz Group and is envisioned to maximize the
synergy and efficiencies and streamline operations and backroom processes.
ATS has six operating subsidiaries, Aboitiz One, Inc. (“A-One”), Aboitiz Jebsen Bulk Transport
Corp. (“Abojeb”), Aboitiz Jebsen Manpower Solutions, Inc. (“AJMan”), Jebsen Maritime Inc.
(“JMI”), Jebsen Management (BVI) Limited (“JMBVI”), Zoom In Packages, Inc. (“ZIP”).
Business of ATS
The Company is principally engaged in providing inter-island passenger transport and
cargo liner services in containers or break bulk through a route network comprising 20
ports of call in the Philippines. Today, ATS is the largest provider of domestic ferry
transportation services in the Philippines. Its branches maintain warehouses and

container yards in all of key locations of operations. It also has extensive passage sales
network nationwide.
Full branch operations are maintained in Manila, Cebu, Iloilo, Cagayan de Oro, Davao, General
Santos, Bacolod, Zamboanga, Dumaguete, Puerto Princesa, Iligan, Tagbilaran, Dipolog,
Cotabato, Nasipit and Surigao. An extensive agency network covering Ormoc, Coron, Ozamiz,
and Jagna strategically supports these branches.
Currently, ATS’ fleet includes 12 Company owned and 1 chartered operating vessels. This
vessel fleet has a combined Gross Registered Tonnage (GRT) of approximately 104,387
metric tons (MTs), total passenger capacity of approximately 21,857 passengers and
aggregate cargo capacity of approximately 1,810 twenty-foot equivalent units (TEUs).
With an estimated market share of 68% of the domestic passenger ferry service and an
estimated 34% of the domestic cargo service for the year ended December 31, 2006, ATS is
the market leader for domestic ferry transportation services. Consistent on-time delivery,
quality of service and high standardof safety make ATS an excellent business partner in the
Philippines.
Product Lines and Markets
Briefly, the Company’s product lines or services are described as follows:
1. Passage - ATS offers domestic inter-island sea travel to eighteen (18) major destinations
in the Philippines. Its carrier brand – SuperFerry – is known for providing the best interisland sea travel within the Philippines through its continuous effort to upgrade levels of
Safety and Security, Cleanliness and Customer Service.
In 2006, the increasing number of alternatives in the transport industry and the resulting
lowering of fares by Airlines have made the competitive landscape an exciting one for
SuperFerry.
Year after year, SuperFerry does a survey to see what the customers expect from the
company. The top five customer expectations have always been better promos and
discounts, schedules and routes, customer service, cleanliness, and safety and security.
Multiple initiatives were carried out by Superferry to meet these expectations – always
making sure that solutions were simple, enjoyable, always available as an option, and

reflective of our passion to serve.
SuperFerry launched the TRIPID FARES, a by word of “Trip na Tipid” given to its lower
fares which customers can avail of anytime. This is a year-round promo that offered
discounts of up to 50% on selected ports of call. There were also special promos with
attractive rates: The Birthday Discount was an innovative year-round scheme that was
very easy for customers to understand: "Ang edad mo ang discount mo at ng pamilya
mo!". The Fiesta Fare promo packaged buy-one-take-one, or free return trips, for

selected ports that had ongoing fiestas. The Sail Sale promo was a monthly promo that
encouraged passengers to buy tickets in advance to avail of lower rates and offered a
pioneering one rate each for Central Visayas, Western Visayas, Northern Mindanao, and
Southern Mindanao. Lastly, Turistang Pinoy was a promo designed to stimulate travel
during the September Travel Month, and took the Sail Sale pricing approach a step
further by offering one rate for Visayas and one rate for Mindanao.
The SuperFerry call center renewed its ISO certification for the second year, ensuring
that quality systems are in full force to service customer needs. The E-ticket facility and
the entire SuperFerry website were redesigned to make it more customer friendly,
providing our customers with easier access to information.
SuperFerry pioneered the free shuttle service in Western Visayas and the SuperConnect
service in Northern Mindanao. Both initiatives were launched in partnership with top
local bus operators, ensuring the smooth entry of the service into the market. It also
expanded our service delivery to customers, allowed us convenient access to various
towns and cities, and provided a convenient pick-up and drop off point for SuperFerry
passengers. In addition, the SuperConnect partnership with one of Mindanao's largest
bus companies, Rural Transit Mindanao Inc., increased the frequency of our regular
Davao to Manila routes from 3x weekly to 8x weekly, and cut travel time from the regular
54 hours to 36 hours.
The traffic flow at the Eva Macapagal Super Terminal was rerouted to lessen the vehicle
congestion in the area and speed up the loading and unloading of passengers.
Boarding procedure was rationalized to address the different boarding needs of our
passengers. Passengers with plenty of baggage are directed to the newly completed
Baggage Terminal Area, which has the security, baggage handling, and porterage system
necessary to process large volumes of baggage, efficiently.
This successfully
decongested an express boarding lane used by light travelers, senior citizens, minors,
and persons with disabilities.
We instituted more measures to strengthen our safety and security system and
significantly cut-down inspection time. Highlights include the installation of a scan and
shoot system, enabling us to have a digital image of every ticketed passenger; and the
deployment of x-ray machines in the outports, as it was previously initially only available
in the Manila port.
Additional measures were instituted to strengthen our safety and security system and to
significantly cut-down inspection time. These include the installation of a scan and shoot
system, enabling us to have a digital image of every ticketed passenger; and the
deployment of x-ray machines in the outports, as it was previously initially only available
in the Manila port.
The pricing of on-board food and beverage items was rationalized, while at the same time
expanding the variety of choices. As a result of the successful sourcing of cheaper and

better raw materials, for example, a Chicken BBQ that used to sell for P99 is now
available at P55 for the same quality. Affordable impulse products are also available on
sari-sari store prices of between P2 to P5.
As a way of thanking customer patronage in Bacolod City, SuperFerry organized a Mega
Papremyo Raffle Promo, which awarded up to P1.5 million worth of prizes. This
successful project model will be replicated in other ports next year.
Customized apprenticeship programs are continuously being offered onboard the
SuperFerries for hotel, tourism and maritime students nationwide. The Maritime
Experience program (MarEx) provides on the job training for maritime students, while
Apprenticeship by Experience program (ApEx) provides hands on training for tourism,
hotel & restaurant management students. Both programs are TESDA-approved and are
fully integrated into the educational curriculum of schools. New training programs on
criminology, culinary, and cruise-line management are being developed.
Even as SuperFerry decreased its ports of call from 20 to 18, as part of its rationalization
efforts, it remains the leading passenger shipping line in the country.
True to the vision of its founders, SuperFerry continues to set new standards in the local
maritime industry.
2. Freight – ATS offers various services under its 2GO Brand. These services are classified
under 4 main business divisions: freight, express, logistics and solutions.
2GO Express – offers services that are “Less Container Load or LCL” including parcels
and documents. The LCLs can be divided into Day 1, Day 3 or Day 6 service. These refer
to the number of days the package or cargo is expected to arrive in the destination port.
2GO Logistics - offers services that require international connection to and from the
Philippine port. ATS has partnered with several agencies globally.
2GO Solutions – offers service solutions for companies that require more than just freight
services.
2GO Freight – offers services for Full Container Load. This caters to most kinds of
products except those identified as Dangerous Cargoes. In general, these cargoes come
from various segments such as Agriculture (including livestock), Manufacturing,
Construction, FSL (Foreign Shipping Lines), Mining, Retail and Wholesale, and 3PL such
as Forwarders and Truckers. It also accepts rolling cargoes such as cars, trucks and
equipment.
ATS believes in being able to provide for the specific needs of its market. 2GO Freight
further provides various container types depending on the need of the customers. These
containers come in three (3) sizes: 10-footer, 20-footer and 40-footer. They also come in

different forms: close container, special containers like flat racks (use to carry lumber),
fruit vans, hog vans, cattle vans and reefer vans.
2GO Freight also offers varied options designed to meet the customers’ needs and
requirements. Customers can choose among different delivery options -door-to-door,
door-to-pier, pier-to-door, or pier-pier. ).
ATS also boasts of having the only Customer Interaction Center in the industry that is
open for 24 hours. They are the frontliners who receive the bookings and confirmations
from customers as well as answering any queries on status of customers’ cargo.
The Company’s net revenue mix (in millions of pesos) is as follows;
2006
Freight
Passage
Others
Total

P
=

P
=

6,530
3,020
1,021
10,571

2005
62%
28%
10%
100%

P
=

P
=

6,842
3,672
1,142
11,656

59%
32%
9%
100%

Competition
1. Passage
The passenger ferry service sector is considered as one of the primary means of inter-island
transport in the Philippines, being more cost effective compared with the other means of
transportation. At present, the domestic shipping industry provides a less expensive
alternative to air transport over long distances within the country.
On average, about 80% of the Company’s passengers board the economy accommodation
with the remaining 20% split among the higher classes of accommodation – tourist, business
class and Suite/Stateroom.
SuperFerry covers Central & Western Visayas and some parts of Northern & Southern
Mindanao.
SuperFerry competes with airlines as well as other domestic inter-island ferries. In order to
attract passengers to travel by sea, the shipping industry sees to it that a suitable gap
between the price of ferry tickets and airline fares is maintained.
For the past year, within the travel industry, the rise of consumer preference for RORO or
land transfer was evident. Specifically in Panay and Bacolod areas, there is a growing
passenger market that is shifting to another alternative means of transportation, using the
buses going to Manila and vice versa.

The company’s strategy to combat this new transport alternative is to introduce new rate
promos and launched shuttle service to various points in Panay and Bacolod areas.
The type of market in which the company competes in has no barriers to entry.
Cut throat competition is an effect of ‘fare diving’ to compensate for rising costs especially
fuel. There is no limit to competition in terms of pricing which can also be readily copied by
any player.
In terms of service, the players compete by providing reliable service to passengers in the
form of safety and on-time departures and arrivals. Convenient Ticket purchase –
accessibility and booking process, frequency of schedules, improved facilities on-board and
entertainment also contribute to building Customer Satisfaction.
The following are the principal competitors of ATS in the passage services and the
corresponding geographic areas of competition:
1.

Negros Navigation – for Bacolod, Iloilo, Puerto Princesa, Cagayan de Oro, Iligan,
Ozamis

2.

Sulpicio Lines – for Iloilo, Iligan, Ozamis, Cebu, Cotabato, Davao, General Santos,
Dipolog, Dumaguete, Surigao, Tagbilaran, Zamboanga

3.

Cebu Pacific – Bacolod, Butuan, Cotabato, Cebu, Cagayan de Oro, Dumaguete, Davao,
Iloilo, Puerto Princesa, Roxas, Tagbilaran, Zamboanga, Dipolog

4.

Philippine Airlines – Bacolod, Butuan, Cagayan de Oro, Cebu, Cotabato, Davao,
Dipolog, General Santos, Iloilo, Puerto Princesa, Roxas, Tagbilaran, Zamboanga

5.

Bus lines – Panay area

In 2006, it is estimated that at least 8.8 million passengers, representing 11% of the total
population, were carried by domestic inter-island ships and airlines.
PAL is the largest player in the transport industry.
In the shipping industry, SuperFerry is the market leader.
Aggressive marketing and promotional activities play a key role in attracting passengers and
preserving the Company’s market share.
Our passenger terminal in South Harbor, Manila is more efficient and hassle free compared
with the other shipping and bus lines. We installed x-ray machines to extensively check on
passenger baggage so they will feel more at ease with their journey. We installed digital
cameras in terminal counters to ensure all passengers are properly identified and accounted
for.

We also implemented simple promotional offers that makes riding the SuperFerry affordable
and easy to do. With our Tipid Trips promos, we simply required passengers to buy tickets in
advance to get discounted rates and they can be booked for their travel immediately.
Compared with the other players in the transport industry, numerous on-board activities
were conducted to entertain passengers. We also held various terminal activities to make
the waiting time for departure more pleasant such as product samplings, cooking demos,
and mascot shows.
2. Freight
Based on NSO Reports, the flow of commodities in the country or domestic trade is primarily
through water, air and rail transport system. Amongst the three, water transport is the most
utilized. It is deemed as the most cost efficient means of transporting goods and services,
mainly in the Visayas and Mindanao areas. The bulk of commodities transported via water
consists of food and live animals; mineral fuels, lubricants and related materials; and
manufactured goods.
2GO freight deals with containerized shipments and rolling cargoes. The market covers
most of the segments in both goods and services namely: agriculture, construction, mining,
manufacturing, retail, FSL and 3PL. Bulk of the shipments are from the Goods Sector which
are mostly manufacturing products, followed by agriculture products.
2GO currently enjoys market leadership in the domestic shipping area. It covers Central and
Western Visayas, and Northern and Southern Mindanao. In year 2006 total shipment carried
by 2GO was at 32% for Central Visayas, followed by Northern Mindanao at 25%, then
Southern Mindanao and Western Visayas.
The company covers 20 ports utilizing 13 vessels for its Southbound, Northbound and
Interport operations.
As early as 2004, increase in the price of oil has greatly affected both 2GO and its market.
The company had to increase freight rates to cover the growing expense of oil and the
growing demand for increased cargo safety. Simultaneously, the market is looking more and
more for cost efficient means of transporting their goods.
The past year showed a behavioral shift in the market – customers became more and more
cost conscious, continuously looking for the cheapest rate for shipping goods while expecting
a high standard of customer service.
To address this, 2GO started offering TVR (Time, Volume, Rate Contracts) as a value
proposition to its key customers. Furthermore, the company has introduced a lot of
operational changes that are aimed to increase efficiency and response time.

In the past 2 years, there has been a growth in the number of players in the domestic
shipping industry. Pricing is no longer regulated, thus allowing new entrants to compete via
this means. Barge operators and chartered vessels are increasing in volume shipments as
companies – both small and large – continue to look for alternative shipping lines.
The following are the major competitors of 2GO in the domestic shipping industry:
a. Sulpicio Lines – Bacolod, Leyte, Butuan, Cagayan, Cebu, Cotabato, Davao,
Dipolog, Dumaguete, Gen San, Iligan, Iloilo, Masbate, Ormoc, Ozamis, Puerto
Princesa, Surigao, Tacloban, Tagbilaran, Zamboanga
b. Lorenzo Shipping – Bacolod, Cagayan, Cebu, Cotabato, Davao, Dumaguete,
General Santos, Iloilo, Zamboanga
c. Negros Navigation – Bacolod, Cagayan, Cebu, Dipolog, Iligan, Iloilo, Ozamis,
Coron, Puerto Princesa, Roxas
d. National Marine – Cagayan, Cebu, Davao, General Santos
e. CAGLI (Gothong Lines) – Butuan, Cagayan, Cebu, Ozamis
f.

Gothong Southern - Cebu, Cagayan, Dumaguit, Palompon, Roxas

g. OCEANIC – Davao, General Santos
h. Solid – Cagayan, Davao, General Santos
2GO has been pioneering technological advances in the shipping industry. It is the only
company with a full time Customer Interaction Center and a container tracking system. It
also uses a freight-on-line system, which allows easy booking and tracking of transactions.
In 2005, 2GO moved its shipping operations from North Harbor to South Harbor or the
Macapagal terminal. It is the only domestic shipping line that currently docks in the South
Harbor, which is operated by the Asian Terminals Inc – which also operates one of the
country’s international harbors.
The company believes in providing the best in technology, service and people. By investing
heavily in modern systems, equipment, vessels and putting these in the hands of highly
trained, competent and efficient workforce, ATS Freight continues to elevate the standard of
shipping in the country.
Safety and Quality Standards
ATS, in partnership with its subsidiary, Aboitiz Jebsen Bulk Transport Corporation, an
international ship management company with ISO 9001:2000 accreditation and certified as
compliant to the International Safety Management Code (ISM), maintains its fleet to
international standards of safety and seaworthiness. The Company ensures each ship is

manned with qualified, medically fit and suitably experienced seafarers and qualified and
competent shore-based staff to support the safe and efficient operation of vessels. Various
in-house and external training programs are instituted for all the staff to upgrade their
skills and to keep them abreast with developments in international shipping.
The Company and its entire fleet has to undergo a periodic ISM external audit conducted by
American Bureau of Shipping to ensure continuous improvement of safety and quality on
board. The ISM code is an IMO initiated mandatory requirement for all companies that
operate ships. The ISM’s objectives are to ensure safety at sea, prevent human injury and
the loss of life and avoid damage to the marine environment and property. The Philippine
Maritime Industry (MARINA) has issued a memorandum circular requiring all domestic
passenger vessels to comply with the ISM code.
In the strive to continually improve its Safety and Quality Standards, the company in 2006,
implemented new procedures such as the amendment and categorization of safety
inspection reports, standardized the drill evaluation format and servicing procedures of fire
extinguishers, provided cages for LPG tanks during the loading and unloading of cargoes,
designated specific areas as “smoking areas” on board the vessel.
Customers
The Company has a wide customer base that includes manufacturers of consumer goods and
finished products, traders of commercial, industrial and agricultural goods as well as the
general public. The Company monitors its top 50 customers. No single customer accounts for
20% or more of the Company’s freight revenue.
Purchases of Materials, Parts and Supplies
Materials, parts and supplies are obtained mostly from local suppliers at competitive rates.
Fuel and lubes, the biggest operating expense of the Company is purchased from a major fuel
provider.
Selected Major Suppliers of the Registrant:
Items/Services Supplied

Major Supplier

Fuel, diesel and lubricants

1. Pilipinas Shell Corp.
2. Petron Corp.
3. Chevron Phils., Inc.

Vessel repair and drydocking

1. Keppel Cebu Shipyard

Vessel spare parts

1. Technomarine Co. Ltd.
2. Vertec Marine Pte.
3. Taiyo Enterprise

4. Propmech Corporation
5. Wartsila NSD Phils.

Container van repair

1. COX Trucking Corp.
2. Gothong Southern Luzon

Container van rental

1. Interpool

Stevedoring and Arrastre

1. Asian Terminal Inc.

Trucking services

1.
2.
3.
4.
5.

Insurance

1. Pioneer Insurance and Surety Corp
2. BPI MS Insurance Corporation
3. Federal Phoenix Assurance Co. Inc.
4. The Steamship Mutual Underwriting

Security services

1. CATENA Security Inc.

Communication

1. PLDT

Cargo Handling Equipment Repair

1. Kalmar Asia Pacific Ltd. (supply of
spare parts only)

COX Trucking
EUG Trucking
RS Master Trucking
Quicktrans
St. Pio Transport

Contract for Distribution and Repair and General Services
ATS also contracts with more than 20 major trucking, forwarding and container repair
companies in the Philippines, including affiliated companies, to provide door to door, door to
pier, pier to door distribution services required by its customers, as well as stevedoring and
arrastre services. These contracts are conducted on an arms-length basis.
The Company’s passenger ticketing and cargo booking are principally conducted through its
network of branches and sales agents, most of which are situated at ports served by the
Company. In addition, independent agencies/outlets are also maintained in urbanized areas
such as Manila and Cebu.
These Agencies and Outlets are covered by Agency Contracts renewable annually, subject to
certain conditions. Contracts with affiliated companies for agency and general services are
conducted on an arms-length basis.
General service contracts include contracts with engineering, repair and service companies,
independent concessionaires, and janitorial service providers.

Patents, Trademarks, Copyrights, Licenses, Franchises, Concessions and Royalty Agreement
held
ATS’ vessels are duly registered with MARINA and subjected to regular survey and ISM audit
to ascertain its adherence to vessel and manning safety standards. The company is the
holder of several Certificates of Public Convenience (CPC), Provisional Authority (PA) and
Special Permit (SP) issued by MARINA to service domestic ports of call.
Related Party Transactions
Related party transactions with both customers and suppliers are discussed in the Note 20 to
Consolidated Financial Statements.
Employees
ATS has a complement of 1,102 employees as of December 31, 2006, of which, 1,003 are
regular, 90 are probationary, and 9 are contractual.
The Company is not unionized. It has a Labor Management Council (LMC) that is a member of
the Philippine Association of Labor Management Council, wherein the labor and the
management work hand in hand to accomplish certain goals using mutually acceptable
means. With this council, labor and management representatives discuss and decide on
issues of equal concern to both parties. They are social partners sharing a common interest
in the success and growth of the enterprise and the economy. LMC aims to promote harmony
among all the ATS employees, the officers, staff and other employees of the Company and to
establish an equally beneficial relationship.
ATS’ LMC holds a regular yearly convention to bring all chairmen and representatives to a
forum with the principals and officers of the Company. The convention seeks to promulgate
resolutions most of which are economic demands from the Labor sector and management;
address all other concerns and issues; amend the charter; and to hold elections for the
officers of the national LMC.
The establishment of the LMC in September 23, 1986 has given rise to more benefits and
privileges to the employees. More significantly the merging of three of the most prominent
and well respected shipping lines in the country has seen a dramatic improvement in terms of
employee benefits and privileges far better than any other company in the industry offers.
This includes among others, medical allowances, group hospitalization plan, educational
assistance for qualified dependents, mortuary assistance and privilege pass for employees
and their immediate family members.
Government Regulations
The Maritime Industry Authority (MARINA) through Memorandum Circular No. 79 requires all
owners/operators of inter-island vessels engaged in Public Transport Service to secure a

certificate of accreditation of domestic shipping enterprise / entities from the Authority before
they can provide a water transport service.
The Circular is intended to foster standards for domestic shipping operations in order to
protect public interest and to generate vital information that will enable MARINA to effectively
supervise, regulate and rationalize the organizational movement, ownership and operation of
all inter-island water transport utilities, and consequently, to prevent the proliferation of
incompetent, inefficient, unreliable and fly-by-night operators.
Accreditation serves as a prerequisite to the granting of franchises for individual vessel
operations. ATS vessels have been issued Certificates of Public Convenience/Provisional
Authorities to operate in specified routes.
Research and Development Activities
The Company spent on the development and acquisition of several application software
related to integrated financial accounting, revenue management system and freight and
passage operating system. The amount of such development and its percentage to revenues
during each of the last three fiscal years are as follows:

Year

Year End Balance
(In 000)

% to
Revenue

2006
2005
2004

372,991
548,077
456,396

4%
5%
5%

Costs and Effects of Compliance with Environmental Laws
With regard to environmental laws, ATS follows the regulations embodied in the International
Convention for the Prevention of Pollution from Ships, 1973, as modified by the protocol of
1978 (MARPOL 73/78). The said convention has various technical measures intended to
control oil and other forms of marine pollution. The direct cost to comply with this
environmental law includes housekeeping services, water and cleaning materials amounting
to P93.5 million or .88% of the total net revenues.
The existing government regulations are intended to achieve the goal of the government to
develop the country’s water transport system. The goal is to provide adequate, safe, efficient,
economical and shipping services which are at par with the world’s best that will cater to the
transport requirements of a growing national economy and for regional development.
Major Risks Involved in the Business of ATS and its Subsidiaries
ATS and its subsidiaries, in partnership with the Aon Risk Consulting of Singapore, have
completed its Enterprise Wide Risk Management (EWRM) program in August 2006. The

company now has its own EWRM framework tailor fitted to the structure and culture of the
company. It has helped the company to identify, assess, manage and mitigate business
risks. Among the major aspects of the business where risk is perceived are vessel, cargo
and passenger safety, information technology, foreign exchange, and general business
environment.
At present, ATS is on the second phase of the EWRM program. This stage re-assesses all
the already ascertained risks and continues to identify new risks related to the business.
On the part of one of ATS’ subsidiaries – A-One – the major risk involved in the business is
basically damage to cargoes. Following the EWRM framework of ATS, A-ONE assesses the
business process to identify the major risks involved in cargo handling. In addition, to
minimize financial impact, the company entered into contracts with insurance companies to
cover the risks of the business.
ABOITIZ ONE, INC. (“A-ONE”)
A. Business Development
A-One, which was incorporated last January 28, 1988, is a leading one-stop shop logistics
solutions and transportation services provider in the Philippines. It is engaged in the
business of air, land and sea transportation such as but not limited to carrying and
transporting of any and all kinds of goods and cargo, chartering and to act as courier of
mails, letters and pouches of all kinds. Through A-One’s various subsidiaries [i.e., Aboitiz
Logistics, Inc. (ALI), Hapag-Llyod Philippines, Inc. (HLP) and Cox Trucking Corporation] and
affiliates, it provides seamless total logistics solutions to its customers via air, land and sea
A-One offers various transportation and logistics services ranging from transportation
management to logistics and distribution to customs brokerage and international trade
services. In accordance with customers’ needs, it offers supply chain management and
logistics services to major importers into the Philippines requiring national distribution as
well as major exporters in the Philippines requiring global distribution.
Through its fleet of aircrafts, trucks, vans, motorbikes, trikes as well as ATS’ fleet of vessels,
A-One is able to offer complete air, land and sea transportation of any and all kinds of goods
and cargo and act as courier for smaller items such as mails, letters and cash in the
Philippines.
To date, A-One through its subsidiaries and affiliates, is among the leading air cargo and
forwarding business in the Philippines.
B. Business
A-One, together with its subsidiaries and associates, has two main areas of business, namely
logistics and express courier delivery services.

A-One’s operations are supported by a logistical backbone which comprise 3 YS-11 aircraft
(with a capacity of 6 tons each), 159 delivery vans, 250 motorcycles, 56 refrigerated trucks
and 108 vans, 121 prime movers and trailers as well as ATS’ vessels ships.
(1) Logistics Operations

Products
A-One’s key logistics services are primarily provided through the following subsidiaries and
associated companies:

Subsidiaries

Aboitiz Logistics, Inc. (“ALI”)

ALI provides various supply chain management and logistics services such as, inter alia,
freight forwarding, container yard management, warehousing and distribution as well as
trucking. Operating as part of an integrated, unified A-ONE group, ALI is focused on providing
seamless total logistics solutions to major importers into the Philippines requiring national
distribution as well as major exporters from the Philippines requiring global distribution
Through ALI, A-One also offers container leasing, container yard services, container repair,
tank container cleaning, testing and other tank-related services, both domestically in the
Philippines and internationally. It maintains a container yard with a size of approximately
6,000 square meters as well as various equipment such as tower cranes and top loaders.

Hapag-Lloyd Philippines, Inc. (“HLP”)

HLP acts as an agent of Hapag-Lloyd Container Line AG, a global shipping container line and
is engaged in global door-to-door container transport. Hapag-Lloyd Container Line AG
provides global shipping services to major trade lanes such as Europe, Asia, North America,
Canada, the Middle East and the South American East Coast.

Cox Trucking Corporation (“Cox”)

Cox Trucking Corporation fulfils the land transport requirements of the Group’s customers.
Cox engages in the transportation, hauling and forwarding of cargo freight, merchandise and
various types of goods. Currently, Cox owns approximately 108 trucks equipped with mobile
radios and approximately 124 trailers for its hauling services.

Affiliated Companies

Aboitiz Projects T.S. Corporation (“APTSC”)

APTSC was established in August 1996 as a joint venture between A-ONE and Hansameyer
Freight Forwarders Pte. Ltd., a transportation company headquartered in Germany
specializing in project transport logistics and engineering project management consultancy.
APTSC is engaged in project cargo transportation and management, which involves the
haulage and transportation of heavy and bulk-sized equipment such as those used in power
plants and telecommunication infrastructure.
APTSC’s services in various industries such as ship building, power generation &
distribution, mining, cement, oil & gas telecommunications include global project
coordination of heavy cargo movement, project feasibility studies and transportation surveys,
budget calculations, communication, deliveries, packaging consultancy, transhipments,
barge transports, roll-offs and landing of heavylifts, heavy cargo haulage, consultancy in
transportation support techniques, rigging jobs on heavy machineries, deliveries into very
remote areas with no road access as well as the design and construction of jetties, beach
heads, bridge reinforcements and by-passes.

Refrigerated Transport Services, Inc. (RTSI) and Reefer Van Specialist, Inc. (RVSI)

Through RTSI and RVSI, A-One offers refrigerated transportation services under the ‘CRYO’
brand name for perishables food products such as processed meat, poultry, fruits,
vegetables, and non-food industries like electronics, flowers, and chemicals. Currently, RVSI
and RTSI offer, among others, reefer container forwarding, refrigerated land transportation,
reefer storage service, equipment leasing, technical services & reefer consultant, contract
warehousing, hauling services. The companies have the country's newest and largest fleet of
over 150 reefer containers & refrigerated trucks and the most diverse operations servicing
the cities of Metro Manila, Cebu, Cagayan de Oro, Iloilo, Davao, Bacolod, Zamboanga,
Palawan, and General Santos.

Service Offerings
A-One markets all its services under the “2GO” brand. 2GO Distribution is a just-in-time
operation geared at providing total distribution of high-value and high-turnaround cargoes
such as medicines and health care products, electronic spare parts and consumer items
nationwide. It provides fast and accurate delivery of products and cargoes to any point in the
Philippines. Through 2GO Distribution, manufacturers, suppliers, wholesalers and retailers
can have a better inventory management system, more effective production planning and
faster order fulfillment process.
Some of 2GO Distribution’s customers include major pharmaceutical and healthcare
products companies such as Diethelm Phils., Inc., Johnson & Johnson Phils., Inc., Mercury

Drug, Mead Johnson Nutritionals, GlaxoSmithKline as well as electronic companies such as
RS Components and Hewlett Packard Philippines.
A-One’s warehousing and distribution services can assist customers in managing their dayto-day warehousing operations. Such services include the preparation of invoices, stock
control records, consolidation and distribution of products to end customers or to
distributors.
(2) Express Courier Delivery Services

Products
A-One acts as courier of mails, letters and pouches, delivery and transfer of money
remittances and its equivalent.

Service Offerings
A-One has the following express courier services, all marketed under the 2GO brand:

‘Quikpac’ caters to documents and pouches below 3 kilograms in weight;

‘Quikbox’ hosts boxed cargo anywhere from 5 to 20 kilograms;

‘Quikcash’ is for money to be sent within the country;

‘Quiksave’ offers prepaid services to corporate clients;

C. Participation in Bankruptcy, Receivership or Similar Proceedings
Neither A-One nor any of its subsidiaries has ever been the subject of any bankruptcy,
receivership or similar proceedings.
D. Merger or Purchase of Significant Amount of Assets Not in the Ordinary Course of
Business
In December 2004, A-One acquired additional 12.59%, 15.55% and 9.50% ownership interest
in shares of stock of Aboitiz Logistics, Inc. (ALI), Hapag-Llyod Philippines, Inc. (HLP) and
Aboitiz Projects T.S. Corp (APTSC). Also, in October 2006, A-One acquired additional 809,782
common shares or 5.71% from Edelino Medina in ALI, thus resulting to a 100% ownership of
A-One.
Moreover, last March 2007, the respective Boards of A-One and ALI approved the merging of
the two entities with A-One being the surviving entity. The said corporate act will be
submitted to the Securities and Exchange Commission for approval.

E. Retail Network/Distribution Methods
The company has more than 250 retail outlets and agents under the 2GO and Aboitiz Express
brand name at various strategic locations nationwide. This retail arm of A-ONE provides
customers easy access and convenience to A-One’s express courier delivery services.
F. New Products/Services
A-One started its new services in Supply Chain management in Jan 15, 2007 under a new
legal entity Aboitiz One Distribution, Inc. (AODI). Major clients include Nestle Waters,
Wrigley's Phils. Inc., Novartis Health Care, Johnson & Johnson. AODI is the sole distributor
of Wrigley's products and Novartis’ gerber product in all Mercury Drug Stores nationwide.
G. Competition
Major competitors of A-One in terms of cargo forwarding include LBC, Air21, DHL & JRS
Express.
H. Principal Suppliers
A-One loads with SuperFerry vessels of ATS and with Cebu Pacific Air to transport cargoes
by sea and air respectively. Some of its major truckers include Northern Luzon Trucking &
Sungold Forwarders. Other suppliers include Shell, Petron, & Zenshin.
I. Customer
Major customers include Diethelm Phils., Colgate Palmolive Phils. Inc., Kraft, United
Laboratories. Total revenues from these clients constitute about 30% of the total annual
gross revenues.
J. Transactions With and/or Dependence on Related Parties
Services to and from related parties consist mostly of cargo freight, handling and hauling,
and management services which are made at normal market price.
K. Franchise/Government Approval
By virtue of Republic Act (RA) No. 7583, A-One was granted a franchise “to establish, operate
and maintain transport services for the carriage of goods, mail and other property by air,
both domestic and international ”. The franchise effectively covers only the air transport
operations of A-One. Furthermore, said franchise has a term of forty (40) years from the date
of effectivity (i.e., June 19, 1992) of the charter, unless sooner revoked or cancelled. As to
date, said Charter has not been revoked, cancelled, repealed or amended.
Section 12 of the above RA 7583, states that the controlling interest in the grantee shall not
be transferred, whether as a whole or in parts and whether simultaneously or

contemporaneously, to any such private person, firm, company, corporation or entity without
the prior approval of the Congress.
L. Effect of Existing or Probable Governmental Regulations
The passage of Republic Act 9337 last May 24, 2005 has abolished the franchise tax of Aboitiz
One, Inc. It is now subject to the corporate income tax.
M. Number of Employees
Present average number of employees for the group is 798.
JEBSEN MANAGEMENT (BVI) LIMITED (“JMBVI”)
A. Business Development
JMBVI (formerly JM Crewing Limited) was incorporated in the British Virgin Islands on
August 27, 1999 under the International Business Companies Ordinance with Certification of
Incorporation Number 340674.
Propelled by the unique synergy of its worldwide network of offices and a solid commitment
to excellence, JMBVI’s business activities has continuously expanded over the years and is
moving to become a leading international provider of supply chain services.
The following are the subsidiaries of JMBVI:
1. Jebsens Orient Shipping Services AS, founded on December 6, 1989 in Norway
2. Jebsens International (Australia) PTY Ltd., founded on March 31, 1989 in Australia
3. Jebsens International (Singapore) PTE Ltd., founded on September 15, 1989 in
Singapore
4. International Marketing & Logistics (IML), founded on August 14, 2000 in Australia
Ship Chartering and Vessel Operations are handled under the Pool Management of Jebsen
Orient Shipping Services A/S (JOSS). JOSS operates a fleet of modern, sel-sustaining, and
geared vessels ranging from 7,000 to 30,000 tons dwat. The ships trade dry bulk
commodities mainly in the Australasian region, but also spans within the Far East and across
the Pacific Ocean.
Our key customers include, inter alia, PT Freeport Indonesia, PT Newmont Nusa Tenggura,
Phosphate Resources Limited, San Miguel Corporation, Hunter Grain Pty Ltd, and Alcan
Trading Ltd.
JMBVI, through its subsidiaries, also provides complete third-party logistical services
specializing in road, rail and sea-based transport solutions. Its logistics operations are
primarily active in Australia with various customers being serviced in inter-modal transport,

bagging, distribution, and warehousing inclusive of support services. By 2007, all logistical
services will be merged under one entity – Jebsens Logistics Services.
Some of our key logistics customers include Interfert Pty Ltd, Impact Fertilizers, Industrial
Energy Pty. Ltd, Hi Fert Pty Ltd, and Incitec Fertilizer Limited.
B. Competition
In shipping, competitors generally maintain single offices within the trading area; only few
owners have grab-fitted tonnage. Competitors also possess contracts with the same
customers.
In logistics, at the moment, competitors are the individual manufacturing companies
themselves. The major transport companies offer a total package (warehouse, trucking, etc.)
and there is a strong local presence required to develop business.
JMBVI believes it has the following strengths to effectively compete with other companies:












Possesses strategic Contracts of Affreightment
Grabbed tonnage (on period chartered vessels)
Open hatched tonnage
Maintains self-sustained, fairly modern tonnage
Flexible and efficient shipping operations
Increased focus on customer relationship
Deep-rooted presence in the Australasian trade (strong broker network)
Period-vessels – limited tonnage exposure, low cost structure
Expertise for diverse transport solutions (e.g., trucking, tug-barge, coal handling,
etc.)
Strong relationship with specific customers across other areas of operations
(shipping – domestic and international)
Able to deliver a good low cost operation (i.e., variable labor costs)
Ability to grow through fertilizer industry rationalization
Employment of fertilizer industry people in key roles
Great flexibility in operating plants to handle a range of products for bagging and
blendingding

C. Major Risks and the Procedures or Strategies to Address the Risks –
Chartering/Operations/Logistics

Quality of Fleet
To expand activities by increasing and balancing our tonnage trading
capacities against our cargo commitments.

Business Integration
To vertically integrate and develop services across the supply chain through
leveraging on the existing client base in shipping & logistics, strengthening
customer service, and utilizing a variable labor component for cost efficiency.

Adverse commodity price fluctuations (cargo commodity, bunkers)
Strengthen our research and business development systems.

D. Participation in Bankruptcy, Receivership or Similar Proceedings
None of ABOJEB, JMI, AJMan or JMBVI, or their subsidiaries has ever been the subject of any
bankruptcy, receivership or similar proceedings. Neither did any of them undergo material
reclassification, merger, or consolidation.
E. Networks (Sales/Distribution)
JMBVI is being propelled by a network of offices strategically located in various places in the
world (i.e., Manila, Bergen, Tokyo, Singapore, Melbourne, Hong Kong, London, New Zealand
and New Jersey). Marketing trips and attendance in international maritime conventions are
vehicles to sell the business.
F. New Products/Services
JMBVI does not have any publicly announced new product or service to date.
G. Patents, Copyrights, Franchises
JMBVI does not own or possess patents, copyrights, franchises or other similar rights.
H. Research and Developmental Activities
JMBVI does not allocate specific amounts or fixed percentages for research and
development.
I. Headcount
The company’s manpower complement as of December 31, 2006 is 23.
There is no collective bargaining agreement (CBA) covering the employees of the above
companies.

Item 2. Properties
ABOITIZ TRANSPORT SYSTEM (ATSC) CORPORATION
Vessels
The ATS Fleet is Philippine-flagged and registered in the name of the Company.
The Company’s operates 13 vessels consisting of 8 SuperFerries, 1 ATSC Ferry, 3 Cebu
Ferries, and 1 Freighter.
During the year, two (2) Cebu Ferries were sold, Our Lady of Guadalupe and Our Lady of
Fatima. In July 2006, ATS chartered in MV 2GO1, a freighter vessel, from Wallock
Enterprises to partially replace lost capacity from vessels sold. On the other hand,
SuperFerry 19 was chartered out to Peninsula Shipping Lines (PNG) Limited in Papua New
Guinea last September 2006.
On the latter part of the year, the company has entered into a memorandum of agreement
with Pacific Asia Shipping Co. Ltd., a Marshall Islands registered company, for the sale of
the two (2) SuperFerries, SuperFerry 17 and SuperFerry 18. SuperFerry 18 was delivered
last December 2006. Meanwhile, SuperFerry 17 is scheduled for delivery in the second
quarter of this year.
To ensure ATS’ commitment to service excellence and continuity of operations, the
Company has brought back its SuperFerry 19 vessel that was chartered out earlier.
Land, Buildings and Warehouses
The Company owns several pieces of land and a number of buildings and warehouses. These
are used in the normal course of business. For details of their location, please refer to
Schedule E.1 and E.2.
Insurance Coverage
ATS takes out insurance for all its vessels. Marine Hull and Machinery insurance which
covers physical damage to the ship or vessel insured (i.e. Hull, Machineries, Equipment,
Gears, and all appurtenances connected therewith) is placed with Pioneer Insurance and
Surety Corporation. Insurance policies covering War and Strikes are issued by BPI/MS
Insurance Corporation. In addition, for the other smaller vessels, Marine Hull, Machinery,
War and Strikes are placed with UCPB General Insurance Corporation.
Protection and Indemnity (P&I) insurance covering principally legal liabilities of shipowners
are placed with British Marine Luxemburg Limited and The Steamship Mutual Management.
Marine Cargo insurance covering claims arising from cargo loss or damage is placed with
UCPB General Insurance Corporation.

Importantly, all passengers and crew of all the Company's vessels are sufficiently insured
against death and permanent disability arising from accidents and are placed with Philam
Insurance Corporation.
The rest of the properties nationwide, including containers & handling equipments are
likewise fully covered with insurance policies issued by reputable insurance companies.
Container Yard and Warehousing Facilities
The Company has one of the most extensive networks of container yards and warehousing
facilities nationwide.
Most of the Company’s container yards have been cemented, whether in whole or in part, to
achieve greater efficiency in terminal operations, allow for shorter turnaround time in port,
greater utilization in stacking of containers and lower repair and maintenance costs for the
operating equipment used at the container yards.
The Company also has sufficient warehouse space. Warehouse are either owned or leased by
the Company. The Company’s warehouse network consists of warehouses at Bacolod,
Butuan, Cebu, Davao, Dumaguete, General Santos, Iligan, Iloilo, Ozamis, Zamboanga and
Manila.
Containers and Other Equipment
ATS owns and leases a variety of containers and other equipment of various types and sizes
for use in its cargo operations including forklift, top loaders, yard tractors and trailers or
chassis. Master lease agreements entitle the Company to use the containers in exchange for
a per diem rate for the duration of the lease. Lease purchase agreements allow the Company
to use the containers for a specified number of years while it continues to pay the lessor a
fixed per diem rate and gives the Company the option to acquire the containers at the end of
the lease. Installment purchase agreements allow the Company to pay the full purchase
price of the containers by installments in accordance to a fixed schedule.
Containers under capital leases as of December 31, 2006 are shown under the “Property and
Equipment” account in the consolidated balance sheets with details as follows (amounts in
P’000):
Cost
Less accumulated depreciation
Net book value

P
= 1,032,033
799,276
P
= 237,757

Details of Container Lease as of December 31, 2006 are as follows:

Units

Van Size

600
850
550
850
550
600
1047
1320
282
351
150
1000
1000
2952

20
20
20
20
20
20
20
20
20
20
40
10
10
10

In US ($)
Purchase Option
Per Unit
250
250
250
250
250
250
250
250
250
250
250
200
200
200

In US ($)
Rate/Day
0.80
0.80
0.79
0.80
0.81
0.81
0.89
0.88
0.89
0.89
1.32
0.60
0.56
0.60

Period of
Lease

Lease
End date

7 yrs
7 yrs
7 yrs
7 yrs
7 yrs
7 yrs
7 yrs
7 yrs
7 yrs
7 yrs
7 yrs
7 yrs
7 yrs
7 yrs

Jan 2007
Mar 2007
May 2007
Aug 2007
Dec 2007
Jul 2007
Dec 2007
Jan 2008
Mar 2008
Jun 2008
Aug 2008
Sept 2008
Feb 2009
Dec 2009

Liens and Encumbrances
Long-term debts and bank loans are collateralized by some of the Company’s vessels and
land. The list of properties that were used as collateral are as follows:

Vessel
SuperFerry 1, SuperFerry 2, SuperFerry 9, SuperFerry 15, SuperFerry 16, SuperFerry 19, OLO
Medjugorje, OLO Good Voyage, OLO Mt. Carmel, and OLO Rule.

Real Estate
Cebu TC# T-13864, 13865, 13866, Bacolod TCT # T-264558, 264548, 264559, Zamboanga TCT#
T-94204, Butuan TCT# T-15911, Iligan TCT# T-59710, 59709, 18018, 18019, 22713, 22712,
23111, 22714, Pulupandan TCT# T-82859, Tagbilaran TCT# T-30173, 30172, 30171, 30170,
30131, Davao TCT# T-89506, Ozamis TCT# T-8805, 8804, 8934, Gensan TCT# T-90846, 90847,
90848, 90849, 90850, 90851, and 91172.

ABOITIZ ONE, INC.
Property and Equipment: (Figures in P‘000)

Aircraft & Flight Equipments
Building & Improvements
Furniture, Fixtures & Equipments
Transportation & Delivery Equipments
Land & Improvements
TOTAL

COST

ACC DEP

NBV

156,332
90,663
133,913
141,187
15,461
537,556

110,231
75,716
109,555
118,038
1,710
415,250

46,101
14,947
24,358
23,149
13,751
122,306

Over 90% of the total assets are located in Manila being the head office of A-One and
subsidiaries. All of these assets are free of any of mortgage or lien or encumbrance. The
following are the major capital expenditures to be acquired in 2007 which will be serviced by
the normal operating profits of A-One: (Amounts in ‘000s of pesos)
Systems Related/Computer Equipment
Transportation & Delivery Equipment
Others
Total

P 18,516
18,111
9,941
P 46,568

Major leases of A-ONE include rental offices, outlets and warehouses nationwide.
The lease contracts for its outlets nationwide are renewable every year.
JMBVI
The company has no significant hard assets.
Item 3. Legal Proceedings
There are certain legal cases filed against ATS, A-One, JMBVI and other subsidiaries in the
normal course of business. Management and its legal counsel believe that ATSC and its
subsidiaries have substantial legal and factual bases for their position and are of the opinion
that losses arising from these cases, if any, will not have a material adverse impact on the
consolidated financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
Nothing was submitted during the fourth quarter of the fiscal year covered by this report to a
vote of security holders, through the solicitation of proxies or otherwise.

PART II - OPERATIONAL AND FINANCIAL INFORMATION

Item 5.

A.

Market Price of and Dividends on Registrant’s Common Equity and Related
Stockholder Matter.
Market Information

The Common Stock of the Corporation is listed at the Philippine Stock Exchange. As of
latest market date, April 04, 2007, the market price of the Company’s common stock is P1.50
per share.
Below is the range of high and low bid information for the Company’s common equity for
each quarter within the last two fiscal years and any subsequent interim period:

B.

High

Low

2007
First Quarter

P
= 1.88

P
= 1.24

2006
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

P
= 1.70
1.70
1.36
1.48

P
= 1.50
1.46
0.00
1.14

2005
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

P
= 1.82
1.80
1.72
1.72

P
= 1.70
1.24
1.54
1.50

Stockholders

The number of common shareholders of record as of February 28, 2007 was 2,231. The top
20 common stockholders as of February 28, 2007, are as follows:
Name
1.
2.
3.
4.
5.
6.
7.

Aboitiz Equity Ventures Inc.
Aboitiz and Company, Inc.
PCD Nominee Corporation (Filipino)
Klaus Schroeder
China Banking Corporation
Danel C. Aboitiz
Francisco Benedicto

No. of Shares Held
1,889,482,107
384,448,390
89,588,038
19,471,201
4,882,130
2,845,967
1,679,125

% to total
77.24
15.72
3.66
0.80
0.20
0.12
0.07

8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
C.

Miguel G. De Asis
Union Properties, Inc.
Josephine Te
Abacus Securities Corporation
Enrique M. Aboitiz Jr.
Bauhinia Management, Inc.
Santiago Tanchan III
Constantine Tanchan
Lekeitio & Company, Inc.
PCD Nominee Corporation (Non-Filipino)
Xavier Jose Aboitiz
Lilian P. Cariaso
Montavo Management & Dev. Corp.

1,655,153
1,578,125
1,561,425
1,530,000
1,524,330
1,418,951
1,262,500
1,262,500
1,238,604
1,137,515
1,039,727
1,030,060
946,875

0.07
0.06
0.06
0.06
0.06
0.06
0.05
0.05
0.04
0.05
0.04
0.04
0.04

Cash Dividends Declaration

For the two most recent fiscal years 2005 and 2006 and subsequent interim period of 1st
quarter 2007, there was no cash dividend declared.
The Company’s retained earnings include undistributed earnings amounting to P
= 284,533 in
2006 and P
= 227,207 in 2005 representing accumulated equity in net earnings of subsidiaries
and associates, which are not available for dividend declaration until received in the form of
dividends from such subsidiaries and associates. Retained earnings are further restricted
for the payment of dividends to the extent of the cost of the shares held in treasury.
D.

Recent Issuance of Securities Constituting an Exempt Transaction

Last May 10, 2005 and June 17, 2005, the Company’s Board of Directors and Stockholders
approved, respectively, the issuance of 414,121,123 million common shares from the
increase in authorized capital stock applied by the Company with the Securities and
Exchange Commission (SEC). Said common shares were issued at a price of P1.76 per
share or a total of P728,853,176.48 to Aboitiz and Company, Inc. (ACO), Aboitiz Equity
Ventures (AEV), certain affiliates of ACO and individual Filipino investors (the “transferors”)
in exchange for the transferors’ 100% shares in A-One, 62.5% in Abojeb, 62.5% in AJMSI,
62.5% in JMI and 50% in JMBVI.
Last August 3, 2005, the Company submitted an application for Commission’s confirmation
of availability of exemption from registration of the above issuance citing SRC Section 10.2
“The Commission may exempt other transactions, if it finds that the requirements of
registration under this Code is not necessary in the public interest of for the protection of
the investors such as by reason of the small amount involved or the limited character of the
offering” as the basis. The Company believed that said issuance is exempt from
registration for the reason that the buyers involved in the transaction are considered to be
“qualified buyers” because they have sufficient knowledge about the issuer.

On December 20, 2005, ATSC received a written confirmation from the SEC that such
issuance is an exempt transaction under Section 10.2 of the Securities Regulation Code
citing that it is limited in character therefore registration is not necessary in the public
interest or for the protection of the investors.
Item 6.

Management’s Discussion and Analysis of Financial Condition and Results of
Operations.

Revenues
2006
Aboitiz Transport System Corporation (‘ATS’ or the ‘Company’) posted total consolidated
Revenues of P10.6 billion in 2006. Its freight business constitutes the bulk of the Company’s
revenues at 62% or P6.5 billion. It reflected a slight 5% drop versus 2005 largely because of
the decline in the international charter business from its subsidiary company, Jebsen
Management (BVI) Ltd. (JMBVI) due to unfavorable market conditions and the shipping
business’ reduction in fleet capacity. Likewise, ATS’ passage business reflected an 18%
decline against last year to register at P3.0 billion in 2006. Aggressive promotions from the
airlines have contributed to lower passage volumes and rates.
2005
The Company posted higher consolidated revenues in 2005 as compared to the previous year.
At the end of 2005, total revenues reached P11.7 billion, registering an increase of about 20%
or about P2.0 billion over the P9.7 billion 2004 revenues. The jump in revenues is largely
attributable to the 37% increase in freight revenues, which is mainly due to the consolidation
of about P1.9 billion of freight revenues of JMBVI and subsidiaries in 2005. This group is not
included in the restated consolidated 2004 financial statements as they were only acquired
by the Company in 2005. Average freight rate per TEU of the parent company increased 7%
over 2004. Likewise, average rate per passenger rose 12% as compared to the previous
year. Other accounts contributing to the increase in revenues include passage meals,
logistics and other income coming from JMBVI.
2004
The Company, on consolidated basis, posted revenues totaling P9.7 billion. Passage revenue
reached P3.7 billion brought about by strong marketing efforts of promoting higher value
passenger accommodations and higher number of passengers carried during the year. The
Company’s freight business likewise posted revenues of P5.0 billion brought about by its
focus on higher paying and higher yielding cargoes.

Cost and Expenses
2006
As early as 2 years ago, the Company had established various cost cutting initiatives. As
such, total Costs and Expenses decreased by approximately P779 million to P10.7 billion
from P11.5 billion in 2005. The reduction in expenses came largely from 7% lower Operating
Costs due to lower charter hire expenses pertaining to JMBVI and subsidiaries. The
Company’s fuel and lubricants expenses, its single largest expense, remained almost
unchanged from P3.3 billion in 2005 to P3.4 billion in 2006, despite a 14% rise in fuel prices.
The Company’s Terminal and Overhead Expenses also reduced by 12% and 4%, respectively,
versus last year. Among the major contributors to the decrease in these expenses, are the
30% decline in the cost of outside services and 12% decline in personnel costs.
ATS’ overall lower costs resulted in increased operating efficiencies across the organization.
2005
Total costs and expenses reached P11.5 billion, 25% higher over the same period last year.
The increase is largely attributable to the 32% surge in operating expenses. The Company’s
fuel and lubricants expenses, its single largest expense, increased 23% from P2.7 billion in
2004 to P3.3 billion in 2005, directly driven by the rise in average fuel and diesel prices of
34% – from P13.6 to P18.3 per liter. ATS also incurred in 2005 P1.9 billion in charter hire
expenses from its subsidiaries having outstanding Charter Party Agreements with vessels’
owners for the use of the vessels or for sublease to third parties.
Other factors contributing to the rise in costs and expenses include an 11% increase in
terminal expenses. Transportation and delivery costs surged by 58% to P173.1 million as the
Company added in its line of service the Road Ro-Ro Trucking System in support of the
government’s initiative of a strong nautical highway. Fuel and lubricants under terminal
operations also increased by P19.2 million due to high fuel rates. In addition, personnel
costs at terminal areas, consisting mostly of salaries and wages, rose to P61.1 million from
P36.4 million in 2004, largely due to absorption of key terminal operations positions formerly
held by outside providers.
The Company’s overhead expenses reached P1.5 billion, about 8% over the same period last
year, mainly due to the rise in other overhead expenses such as administrative expenses
pertaining to JMBVI which was not consolidated with the Company in 2004. Depreciation and
amortization also escalated 34% or P44.3 million.
To help counter rising costs, the Company has been working on several initiatives to
continuously bring costs down. These resulted to P445.6 million overall savings in
insurance, communication, light and water, outside services, advertising and entertainment,
amusement and recreation, among other accounts. Overall repairs and maintenance also

reduced by P211.8 million. This is a result of the Company’s increased efficiencies and its
utmost priority in the constant maintenance of assets over the years.
2004
With 21 vessels operating at the end of the year 2004, the Company’s total costs and
expenses amounted to P9.2 billion. Operating expenses contribute the bulk of its costs and
expenses, with total contribution amounting to P6.6 billion. Major costs included under these
operating expenses include fuel and lubricants of P2.7 billion.
In consonance with the Company’s safety standards, repairs and maintenance costs relating
to both operations and terminal expenses registered P693.3 million as the Company
continuously upgrades its fleet and operational assets/equipment.
The Company’s total depreciation & amortization expense totaled P891.8 million as operating
vessels were added and investments in software was made as part of its investments in new
technology.
Other Income (Charges)
2006
The Company continues to focus on enhancing shareholder value and is committed to having
positive cash flows and strengthening its financial position. During the period under review,
the Company sold various assets including three vessels (Our Lady of Fatima, Our Lady of
Guadalupe, and SuperFerry 18) which generated gains of P226.4 million. Also, in line with its
strategy of focusing on its core business, the Company also sold its entire shareholdings in
Davao Integrated Port and Stevedoring Services Corporation (DIPPSCOR), generating gains
of P262.3 million.
Proceeds of these sales were utilized to pay down debt, thus resulting in a 10% lower
Finance Costs from P375.7 million in 2005 to P337.8 million in 2006.
2005
The Company’s other charges amount to P147.6 million. With a total interest bearing debt
(inclusive of finance lease and redeemable preferred shares) of P3.6 billion, ATS incurred net
financing costs of P375.7 million.
The Company recognized P98.4 million gain on disposal of property and equipment through
the sale of two vessels, Our Lady of Rosary and Super Roro 500. In 2004, the gains arose
from the sale of three vessels, M/V Brinknes, Our Lady of Lipa and Our Lady of Sacred Heart.
In addition, ATS, in 2004, reflected P208.7 million insurance recovery on its SuperFerry 14
vessel which burned down while on voyage.

The Company recognized higher gains on foreign exchange for its obligations under finance
lease (up to P29.2 million) due to a lower average dollar rate in 2005.
Rental income for the period under review increased to P22.9 million versus P8.2 million
during the same period the previous year. Rental income is composed mainly of space
rentals of vessel subcontractors doing business on board the Company’s vessels.
2004
The Company registered Other Income totaling P123.1 million. This is mainly because it
recognized gains from the sale of three vessels, M/V Brinknes, Our Lady of Lipa and Our
Lady of Sacred Heart, containers and other non-performing assets, together amounting to
P211.3 million. It also recognized gains on insurance recovery, (P208.7 million) on
SuperFerry 14, which burned down while on voyage and P35.7 million from sale of containers
and other fixed assets.
ATS total financial cost for the year was at P384.6 million.
Net Income
2006
The Company registered P191.9 million in Net Income in 2006. Income Before Income Tax of
P96.8 million is 227% higher compared to 2005, mainly from overall lower costs and
expenses and higher other income. ATS also recognized a benefit from income tax of P95.1
million due to the recognition of net operating loss carryover.
Net Income directly attributable to the equity holders of the parent company registered
P197.3 million. This is 370% higher versus P42.0 million in 2005. Similarly, the Company
registered a net loss attributable to minority interests of P5.4million particularly because of
losses generated by JMBVI, its ship chartering company, due to unfavorable market
conditions.
2005
The Company registered P65.7 million in net income in 2005. This reflected a drop versus
P512.5 million in 2004, as the company’s expenses escalated higher than its rise in revenues.
Despite registering an income before tax of P29.6M, ATS recognized a benefit from income
tax of P36.1 million, due mainly to the recognition of net operating loss carryover (NOLCO)
during the year amounting to P90.7 million. The NOLCO was a result of a larger net taxable
loss position, after exempting income from the vessels enjoying income tax holidays.

Basic Earnings Per Share
Basic Earnings Per Share of the Company is computed by dividing Net Income Attributable to
Equity Holders of the Parent over weighted average number of common shares outstanding
for the year. For the full year 2006, basic earnings per share is P0.08/share. Despite the
increase in the weighted average number of common shares outstanding for the year
because of the additional issuance of common shares covering the preferred share
conversion (see also ‘Consolidated Balance Sheet—2006’), the basic earnings per share is
still higher than 2005 of P0.02/share because of higher Net Income directly Attributable to
the Equity Holders of the Parent.
Consolidated Balance Sheet
2006
Consolidated assets of the Company reached P10.3 billion, a 9% decrease from its asset
level in 2005 of P11.3 billion.
Total current assets reflected a 26% increase, from P3.6 billion in 2005 to P4.6 billion in
2006. One of the major contributors to the rise in current assets is the Company’s non-trade
receivables of P186.0 million from Abbotsford Holdings, Inc. in relation to the sale of
DIPPSCOR.
ATS registered P659.5 million in Noncurrent Asset Classified as Held For Sale. This
represents the Company’s SuperFerry 17 vessel which the Company sold as per
Memorandum of Agreement (MOA) dated November 13, 2006. The expected delivery date to
the buyers is in the second quarter of 2007.
The Company’s net Property and Equipment reduced by P2.1 billion largely due to the sale of
its vessels Our Lady of Fatima, Our Lady of Guadalupe, SuperFerry 18 and SuperFerry 17.
The Company reduced its total liabilities by P1.4 billion from P6.9 billion in 2005 to P5.5
billion in 2006. Total interest bearing debt stood at P2.3 billion, a P1.2 billion or 34%
reduction over last year. This reduction enabled the Company to lower interest expense by
9% versus last year.
Accounts payable & other current liabilities slightly decreased by 4% primarily due to the
decrease in trade payables.
Liabilities directly associated with the asset classified as held for sale of P455.0 million
pertains to the bank loans directly related to SuperFerry17 asset classified as held for sale
until its delivery to its buyers in the second quarter of 2007.
The Company also reduced its Redeemable Preferred Shares (RPS) from P200.3 million to
P13.8 million. In July 27, 2006, the Board of Directors of the Company approved the call to all
preferred shareholders to convert at their option preferred shares into common shares at a

conversion price of 2 common shares for every 1 RPS held. Consequently 70,343,670 million
RPS or 94% of the outstanding RPS of the Parent Company were converted to common
shares.
As a result of the conversion, the capital stock of the company increased P140.7 million
representing the issuance of new common shares. The excess between the carrying value of
the preferred shares converted over the par value of the common stock issued was credited
to “Capital in excess of par value’ amounting to P67.2 million.
Total Stockholders Equity stood at P4.8 billion, a 9% increase from last year of P4.4 billion.
Similarly, retained earnings also registered a 16% increase due to higher net income of the
company.
2005
Consolidated assets of the Company reached P11.4 billion, a slight increase from its asset
level in 2004 of P11.2 billion.
Total current assets reflected a 9% increase, from P3.3 billion in 2004 to P3.6 billion in 2005.
Major increases came from cash and cash equivalents, inventories and prepaid expenses.
Net receivables however decreased 12% to P1.9 billion largely due to the collection of non
trade receivables and advances to a contractor upon completion of a chassis fabrication
contract.
Total inventories of P318.9 million include fuel and lubricants, various materials, spare parts
and supplies mostly on board vessels.
Prepaid expenses and other current assets registered a 31% rise to P529.9 million as
creditable withholding taxes withheld by customers and creditable senior citizen discount
accumulated during the period. These will be credited against tax due as the company
comes into a taxable position in the next years.
Investments in associates of P46.9 million are the Company’s investments in about five
companies where it exercises significant influence, but which ATS considers neither as
subsidiaries nor joint ventures. These companies include, among others, New Zealand
Lumber Shippers Ltd. (a transatlantic lumber shipping company), Refrigerated Transport
Services, Inc. and Reefer Van Specialist, Inc (both companies are engaged in providing
refrigerated transport solutions), and Aboitiz Project TS Corporation (a project transport
solution and consultant firm).
Net deferred income tax increased by 67% to P242.3 million, mainly due to the increase in
net operating loss carryover brought about by a taxable loss position of the parent company
in 2005. Likewise, deferred income tax pertaining to allowances for doubtful accounts and
probable losses also increased as additional provisions were booked during the year.

Total liabilities amounted to P6.9 billion. Total bank debt for the year ending December 31,
2005 is P3.0 billion, down by 4% compared to December 31, 2004 balance as a result of the
Company’s efforts to pay its obligations. Short term loans payable decreased 51% as the
company continues to pay down short term debt. Similarly, total obligations under finance
lease have dropped 31% to P350.9 million.
Accounts payable & other current liabilities increased by over 10% primarily due to the
increase in trade payables. Of the P375.3 million increases in trade payables, P300.7 million
pertains to the total of JMBVI and subsidiaries which were consolidated only starting 2005.
Parent Company’s outstanding redeemable preferred shares were reclassified to liability, in
line with the adoption of a new financial reporting standard which qualifies these shares as
liability rather than equity. The adoption resulted to an increase in the shares’ carrying value
to P200.3 million. A portion of the increase was charged as a reduction from the beginning
retained earnings, and the remainder was charged to the current year’s total interest
expense.
Total Stockholders Equity stood at P4.4 billion, barely a decrease from last year of P4.5
billion.
2004
Consolidated assets of the Company reached P11.2 billion. Total receivables amounting to
P2.2 billion are largely from trade receivables, receivables from affiliates and insurance
claims receivables.
Prepaid expenses and other non-current assets stood at P405.4 million, mainly due to
investments in developing various software applications, geared towards further improving
the Company’s efficiency and reliability.
Total Inventories of the Company in 2004 amount to P197.9 million. This includes fuel and
lubricants and vessel spare parts.
Total liabilities amounted to P6.7 billion. Total bank debt for the year ending December 31,
2004 is P3.2 billion,. In line with the Company’s thrust to reduce debt, payments on its
obligation under capital lease on containers were made during the year.
Total Stockholders Equity as of December 2004 stood at P4.5 billion. The Securities and
Exchange Commission approved in September 2004 the increase of authorized common
shares by P750.0 million and authorized the issuance of stock dividend by P393.2 million
from the Company’s additional paid in capital. Furthermore on November 2004, the
Company retired P499.6 million redeemable preferred shares (about 74.9 million shares).

Consolidated Cash Flow
2006
Total net cash generated from operations amounted to P854.7 million. The Company
internally funded all of its capital expenditures totaling P538.5 million. The Company also
received proceeds from the disposal of assets and from the sale of DIPPSCOR of P1.2 billion.
The proceeds were mostly utilized to liquidate debt. For the year end December 31, 2006,
total loan payments (inclusive of financial leases) amounted to P1.5 billion. Likewise,
interest amounting to P335.2 million was also paid out.
Cash and Cash equivalents at fiscal year ending December 31, 2006 stood at P992.6 million.
2005
Total cash generated from operations amounted to P1.7 billion. The Company internally
funded all of its capital expenditures totaling P1.0 billion. Net loans and obligation under
finance leases totaling P1.4 billion was paid during the period. Interest expense amounting
to P388.5 million was likewise paid out.
Cash and Cash equivalents at fiscal year ending December 31, 2005 stood at P872.8 million.
2004
For the year 2004, the Company’s operating funds, proceeds from sale of assets and loan
availment were mainly used to finance the Company’s capital expenditures of P2.4 billion.
These capital expenditures include the purchase cost of MV Brinknes (this vessel was
subsequently sold), vessel improvements/ refurbishments for SuperFerry 17, SuperFerry
18 and other vessels, investments in handling equipment and facilities upgrades to improve
Company’s operating efficiency.
Cash was also used to pay loans and obligation under finance lease and corresponding
interests amounting to P1.5 billion and P384.6 million respectively.
The Company also invested some P140.1 million in developing various software applications
to provide better service to its customers as well as to provide its employees high quality
standard of work environment.
Key Performance Indicators (KPI’s)
ATS’ management and its subsidiaries use the following KPI’s to evaluate its performance:
a) Revenues - is mainly composed of freight and passage revenues and are recognized
when the related services are rendered, net of percentage taxes. Please see
discussion under “Consolidated Income Statement—2006--Revenues” section.

b) Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) - is
calculated by adding back interest expense and amortization and depreciation into
income before income tax. It provides management and investors with a tool for
determining the ability to generate cash from operations to cover financial charges
and income taxes. It is also a measure to evaluate the company’s ability to service
its debts. The Company’s EBITDA for 2006 remained unchanged at P1.7 billion.
c) Income before income tax (IBT) – is the earnings of the company before income tax
expense. The Income Before Income Tax of P96.8 million is 227% higher compared
to 2005, mainly from overall lower costs and expenses and higher other income.
d) Debt-to-equity ratio - gives an indication of how leveraged the company is. It
compares assets provided by creditors to assets provided by shareholders. It is
determined by dividing total liabilities over stockholders’ equity. ATS’ debt-to-equity
ratio is 1.14:1.
e) Current ratio – is a measurement of liquidity calculated by dividing total current
assets by the total current liabilities. It is an indicator of the company’s short-term
debt paying ability. The higher the ratio, the more liquid the company. The
Company’s current ratio in 2006 showed an improvement over 2005 levels. This is
largely attributable to higher current assets. Please see also current ratio
discussion on “Other Information---1.” section below.
Comparative figures of the Top Five key performance indicators (KPI) of the Company for
the years ended December 31, 2006 and December 31, 2005 (amounts in thousands except
for the financial ratios):
ATS
1. Revenues
2. EBITDA
3. NIBT
4. Debt-to-equity ratio
5. Current ratio

Dec 31, 2006

Dec 31, 2005

10,571,185
1,725,105
96,767
1.14:1
0.99:1

11,679,618
1,707,433
29,608
1.56:1
0.82:1

Dec 31, 2006

Dec 31, 2005

AONE and Subsidiaries

1. Revenues
2. EBITDA
3. NIBT
4. Debt-to-equity ratio
5. Current ratio

1,201,204
77,679
669
1.86:1.00
1.11:1.00

1,254,488
170,639
96,819
1.74:1.00
1.12:1.00

ABOJEB and Subsidiaries
Dec 31, 2006
1. Revenues
2. EBITDA
3. NIBT
4. Debt-to-equity ratio
5. Current ratio

179,190
45,776
35,836
2.91:1.00
1.27:1.00

Dec 31, 2005
235,762
82,937
71,417
1.31:1.00
1.62:1.00

JMI
Dec 31, 2006
1. Revenues
2. EBITDA
3. NIBT
4. Debt-to-equity ratio
5. Current ratio

102,920
17,585
6,049
53.35:1.00
0.91:1.00

Dec 31, 2005
119,465
42,805
34,824
(1,176.58):1.00
0.83:1.00

AJMSI
Dec 31, 2006
1. Revenues
2. EBITDA
3. NIBT
4. Debt-to-equity ratio
5. Current ratio

5,742
2,010
1,973
2.53:1.00
1.02:1.00

Dec 31, 2005
1,024
(1,088)
(1,108)
14.29:1.00
0.68:1.00

JMBVI and Subsidiaries
Dec 31, 2006
1. Revenues
2. EBITDA
3. NIBT
4. Debt-to-equity ratio
5. Current ratio

1,547,496
(32,662)
(32,662)
106.6:1.00
0.98:1.00

Dec 31, 2005
2,092,966
1,363
(13,521)
12.75:1.00
1.02:1.00

Outlook
For the coming years, ATS will continue the various initiatives it has embarked on in the past.
It intends to remain focused on becoming the lowest cost operator in the country with
positive cash flows and very strong balance sheet. Efforts will be directed at liquidating debt,
removing interest costs, rationalizing cost structures, and increasing earning capacity of all
assets. It intends to capitalize on its integrated transport businesses to achieve higher
operating efficiencies and provide complete solutions to customers.
2GO, the Company’s integrated logistics solutions provider, is still at the forefront in
providing containerized shipping services as well as simplified solutions to its customers by
offering 136, a time-defined, time-priced cargo service; and RoRo, a self-driven cargo
service concept which is given priority loading to ensure faster delivery lead-time. The
Company sees the 2GO freight business evolving further towards increasing freight capacity
and Roll-on Roll-Off (RoRo) movements. This was marked by the entry of 2GO1 freighter in
the 3rd quarter of 2006 with capacity of over 444 TEUs. In addition, unused passenger
capacity in existing vessels is being converted to make room for the heightened demand of
our RoRo service.
SuperFerry, the Company’s passenger business, which has been operating on a very
competitive landscape in 2006, will continue implementing the initiatives it had started,
including offering year round promotional rates and improving the experience of every
traveler within the Philippines.
ATS is continuously realigning its efforts to be able to capitalize on economic upturn and
sustain profitability in the long term. The company believes much of the growth in the
coming years will be in supply chain management, offering more and more sophisticated
customers with complete logistics solutions. There are plans to launch its Supply Chain
Division as well as Cold Chain Division in 2007. The cold chain service will be focused on
serving the Loose Cargo Load market, linking farmers, fishermen and the consumers
directly to help bring down distribution costs.
Other Information
Other material events and uncertainties known to management that would address the past
and would have an impact on the Company’s future operations are discussed below.
1. The Parent Company is required to meet certain loan covenants with creditor banks,
including financial ratios. During the year, ATS obtained approvals from the majority
of the bank creditors for the adjustment in the financial ratios covenants, including
the adjustment in current ratio from 1.00:1.00 to 0.50:1.00 and debt service coverage
ratio of from 1.50:1.00 to 0.85:100.
As of December 31, 2006, the Company’s current ratio is 0.99:1.00 and its debt service
coverage ratio is 0.91:1.00.

2. Total fuel/lubes expense is a major component of the Company's total cost and
expenses. Given this, the Company is constantly looking for ways to reduce fuel
consumption to lessen the impact of the increasing fuel prices on the bottom line.
3. The Company has not made any material commitments for capital expenditures.
4. Except as disclosed in the management discussion and notes to the financial
statements, there are no other known events that will trigger direct or contingent
financial obligation that is material to the company, including any default or
acceleration of an obligation despite the company’s low current ratio.
5. Except as disclosed in the management discussion and notes to the financial
statements, there are no other known trends, events or uncertainties that have had
or that are reasonably expected to have a material favorable or unfavorable impact on
revenues or income from operations.
6. All significant elements of income or loss from continuing operations are already
discussed in the management discussion and notes to financial statements.
Likewise any significant elements of income or loss that did not arise from the
registrant’s continuing operations are disclosed either in the management discussion
or notes to financial statements.
7. There is no material off-balance sheet transaction, arrangement, obligation, and
other relationships of the company with unconsolidated entities or other persons
created during the reporting period.
8. Seasonal aspects of the business are considered in the Company’s financial forecast.
9. The company does not expect any liquidity or cash problem within the next twelve
months.
Item 7. Financial Statements
The consolidated financial statements and schedules listed in the accompanying Index to
Financial Statements and Supplementary Schedules are filed as part of this Form 17-A.
The management is not aware of any significant or material events or transactions not
included nor disclosed in the consolidated financial statements in compliance with the SRC
Rule 68.

Item 8. Information on Independent Accountant and other Related Matters
(1) External Audit Fees and Services

Audit Fees
Audit-Related Fees
Tax Fees
All Other Fees
TOTAL

Year ended
December 31, 2006
P 1,240,000
300,000
50,000

Year ended
December 31, 2005
P 1,240,000
300,000
450,000

P 1,590,000

P 1,990,000

Audit Fees
This represents professional fees for financial assurance services rendered for the
Company’s Annual Financial Statements, review and opinion for SEC Annual Report.
Audit-Related Fees
This represents professional fees for technology and security risk services rendered by the
external auditor in connection with the Audit on Company’s Annual Financial Statements.
Tax Fees
This represents professional fees for rendering assistance to the computation of income tax
holiday and the tax compliance review for selected internal tax liabilities.
All Other Fees
This represents fees for services rendered for training the Company’s finance and
accounting personnel on the new accounting guidance on IFRS and assisting the adoption of
such guidance to the financial statement of the Company as of December 31, 2004 and 2005.
Audit services provided to the Company by external auditor, SGV & Co. have been preapproved by the Audit Committee. The Audit Committee has reviewed the magnitude and
nature of these services to ensure that they are compatible with maintaining the
independence of the external auditor.
(2) Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure.
There was no event in the past years where SGV and the Company had any disagreements
with regard to any matter relating to accounting principles or practices, financial statement
disclosure or auditing scope or procedure.

PART III - CONTROL AND COMPENSATION INFORMATION
Item 9. Directors and Executive Officers of the Registrant
The names, ages, citizenship, position and offices held or will hold, and brief description of
business experience during the past 5 years (except those years stated otherwise) and
other directorships held in reporting companies, including name of each company, of all
directors and executive officers are as follows:
Mr. Jon Ramon M. Aboitiz

Age: 58

Citizenship: Filipino

Position in the Company:
Chairman of the Board (September 2002 – Present)
Director (1996 – July 2002)
Business Experience and Current Directorship:
He is the President and Chief Executive Officer of Aboitiz Equity Ventures, Inc. and Aboitiz and
Company Inc. He is the Chairman and Chief Executive Officer of Davao Light and Power Co.,
Inc. He is a Director and Chairman of the Board of Aboitiz Power Corp., Phil. Hydro Power
Corp., Pilmico Foods Corp., Aboitiz Group Foundation, Inc., Aboitiz Jebsen Bulk Transport
Corp., Filscan Shipping, Inc., General Charterer, Inc., Jebsen Maritime, Inc., Aboitiz Power
Solutions, Inc. and AEV Properties. He is a Director and Vice Chairman of Visayan Electric
Company and Union Bank of the Philippines and Chairman of its Executive Committee,
Compensation Remuneration Committee, Risk Management Committee, Corporate
Governance Committee and Nomination Committee. He is a Director of San Fernando
Electric Light & Power Co., Southern Philippines Power Corp., Hijos de F. Escaño, Aboitiz One,
Inc., Hapag-Lloyd Phils., Cotabato Light & Power Co., Cotabato Ice Plant, Inc., Bukidnon
Hydropower Corp., and Aboitiz Land.
Mr. Bob D. Gothong

Age: 51

Citizenship: Filipino

Position in the Company:
Vice Chairman of the Board (1997 – July 2002; September 2002 - Present)
Chairman of the Management Committee (May 1999 – July 2005)
Business Experience and Current Directorship:
He is a Director and Chief Executive Officer of One Wilson Place Holdings, Inc., 6355 Ross
Street and Gothong Southern Shipping, Inc. He is currently a Director of the following
companies: Philippine National Oil Company (PNOC), Ramon Aboitiz Foundation, Inc. (RAFI),
and Carlos A. Gothong Holdings, Inc. (CAGHI).

Mr. Enrique M. Aboitiz, Jr.

Age: 54

Citizenship: Filipino

Position in the Company:
President and Chief Executive Officer (May 1999 – Present)
Director (1997 – Present)
Business Experience and Current Directorship:
He is the President and a Director of Aboitiz Jebsen Bulk Transport Corporation. He sits on
the board of the following companies: Aboitiz & Company, Inc., Aboitiz Equity Ventures, Inc.,
Aboitiz One, Inc., and Seven Seas and Leisure Inc. He also is a Director and Audit Committee
Chairman of MacroAsia.
Mr. Erramon I. Aboitiz

Age: 50

Citizenship: Filipino

Position in the Company:
Director (1996; 1999 – July 2002; September 2002 – Present)
Business Experience and Current Directorship:
He is the Executive Vice-President and Chief Operating Officer of Aboitiz Equity Ventures
Inc., and Senior Vice President-Chief Financial Officer of Aboitiz & Company Inc. Moreover,
he is a Director of Aboitiz One, Inc., Aboitiz Land Inc., Pilmico Foods Corp., Union Bank of
the Philippines, and Visayan Electric Company. He is a Director, President and Chief
Executive Officer of AEV Properties Inc., Hydro Electric Development Corp. and Philippine
HydroPower Corp.; Director and Executive Vice President of Davao Light & Power Corp.;
Chairman of Cotabato Light & Power Corp., San Fernando Electric Light & Power Co., Subic
Enerzone Corp., Luzon Hydro Corp., Fil-Am Foods Inc. and City Savings Bank. He is also
the President of Aboitiz Power Corp. and Aboitiz Group Foundation.
Mr. Roberto E. Aboitiz

Age: 57

Citizenship: Filipino

Position in the Company:
Director (September 2002 – Present)
Business Experience and Current Directorship:
He is the Senior Vice-President of Aboitiz & Company Inc. He is also the Chairman of the
Board and Chief Executive Officer of Aboitiz Land Inc., Aboitiz Construction Group Inc., Cebu
Industrial Park Development, Inc., and FBMA Marine, Inc. He also holds the position as the
Chairman and President of AEV Aviation, Inc., and CSB Land, Inc. as well as the Chairman
of Aboitiz Equity Ventures, Inc. and President of Ramon Aboitiz Foundation, Inc. He further
sits as a Director of the following companies: City Savings Bank, Cotabato Light and Power
Company, Davao Light & Power Company, Inc., K&A Metal Industries Inc., Tsuneishi
Holdings Inc., Tsuneishi Heavy Industries (Cebu) Inc., Visayan Electric Company, Inc.,
Aboitiz Group Foundation, Inc. and a member of the Board of Trustees of Philippine
Business for Social Progress and Sacred Heart School of the Society of Jesus, Inc.

Mr. Justo A. Ortiz

Age: 49

Citizenship:

Filipino

Position in the Company:
Director (September 2002 - Present)
Business Experience and Current Directorship:
He is the Chairman of the Board and Chief Executive Officer of Union Bank of the Philippines
from July 1993 to present. He is also the Chairman of the Board of Union Properties Inc. He
also holds the position of a Director on the following companies: Aboitiz Equity Ventures, Inc.,
Megalink, Bankers Association of the Philippines and ECR Philippines.
Mr. Sabin M. Aboitiz

Age: 42

Citizenship: Filipino

Position in the Company:
Director (September 2002 – Present)
Business Experience and Current Directorship:
He is the President and Chief Executive Officer of Aboitiz One, Inc. He has been with the
Aboitiz One, Inc. since its inception as Aboitiz Air Transport Corporation in December 1998
and has held various positions including Marketing Manager, Assistant Vice President for
Marketing, Vice President and Executive Vice President for TS Express, Senior Vice President
and Chief Operating Officer. He currently sits on the Board of the following companies:
Aboitiz and Company, Inc., Aboitiz Jebsen Bulk Transport Corp., and Cryo-Reefer Van
Specialist, Inc.
Mr. Washington Z. Sycip

Age: 85

Citizenship: American

Position in the Company:
Independent Director (1996 to Present)
Business Experience and Current Directorship:
He is the founder of the Sycip, Gorres and Velayo Group, auditors and management
consultants, with operations throughout East Asia, and served as Chairman of the group for
fifty years. He is the Chairman of the Board of Trustees and the Board of Governors of the
Asian Institute of Management. He is also sits as the Chairman of the Board on the following
companies: Cityland Development Corp., Lufthansa Technik Philippines Inc., MacroAsia
Corp., State Investment Trust Inc. and Steag State Power Inc. He is presently a Director of
Belle Corp., Benpres Holdings Corp., Commonwealth Foods, Inc., First Philippine Holdings
Inc., Global Business Holdings, Inc., Highlands Prime Inc., Manila Electric Co. (Meralco),
Philippine Airlines Inc., Philippine Hotelier Inc., Philippine National Bank, Philamlife Inc., The
PHINMA Group, and State Land Group.

Mr. Aloysius B. Colayco

Age: 57

Citizenship: Filipino

Position in the Company:
Independent Director (September 2002 – Present)
Business Experience and Current Directorship:
Since November 1994, he is the Country Chairman, Philippines of the Jardine Matheson
Group, and is a member of the Jardine Matheson Asia Pacific Regional Board. He is also the
managing director of Argosy Partners Inc. (since May 1998), and a member of the advisory
board of J G Summit Inc. (since August 2001). Internationally, He is a director of the Genesis
Emerging Markets Fund in London (since June 1989) and UIC (since January 2003). In
addition, he also sits as a Chairman of the Board of Davies Energy Systems, Inc. since 2000
and a Director on the following companies: Gammon Civil Contractors & Bldg., Construction
Co., Inc., Gammon Philippines, Inc., Pasig Land Corp., Jardine Lloyd Thompson Insurance
Brokers, Jardine Distribution, Inc., Jardine Shipping Services Phils., Inc., JTH Davies
Holdings, Inc., Jardine Direct Co., Inc., NorthPine Properties, Inc., Jardine Pacific Finance,
Inc., Manila Mandarin Hotel, Inc., MG Construction Ventures Holdings, Inc., Republic Cement
Corp., Level Up Inc., Davies technical Solutions, Argosy Advisers, Colliers Philippines, and
Exeter Berkely Corporation.
Ms. Lilian P. Cariaso

Age: 47

Citizenship: Filipino

Position in the Company:
Treasurer, Senior Vice President - Chief Finance Officer and Corporate Information Officer
(June 2004 - Present)
Business Experience and Current Directorship:
She was the Senior Vice President and Chief Finance Officer of the Aboitiz One Group from
2001 to June 2004. She is also a Director of Supercat Fast Ferry Corporation.
Atty. Helen G. Tiu

Age: 46

Citizenship: Filipino

Position in the Company:
Corporate Secretary (September 2002 – Present)
Business Experience and Current Directorship:
She is director, treasurer and corporate secretary of Lazaro, Bernardo, Tiu & Associates, Inc.
a consultancy firm with which she has been connected since 1996. Since 1997, she has also
been practicing law under H.G. Tiu Law Offices and this connection, serves as a director
and/or Corporate Secretary of various clients. She is a certified public accountant (since
1982) and a member of the Philippine Bar (since 1988).

Atty. Cynthia Marissa M. Reyes

Age: 44

Citizenship: Filipino

Position in the Company:
Assistant Corporate Secretary (October 2002 – Present)
Business Experience and Current Directorship:
She joined Aboitiz & Co. Inc. as Associate General Counsel last September 2002. She also
acts as the Corporate Secretary of various corporations of the Aboitiz group. Prior thereto,
she was the assistant legal counsel of PNB Capital and Investment Corporation from 1998 to
2002. Currently, she also sits as a Director of Kingswood Makati Condominium Association,
Inc.
Ms. Susan V. Valdez

Age: 46

Citizenship: Filipino

Position in the Company:
Executive Vice President – Chief Executive Officer of Freight Division (June 2004 – Present)
Treasurer, Executive Vice President - Chief Finance Officer and Corporate Information
Officer (May 1999 – June 2004)
Business Experience and Current Directorship:
Prior to joining ATSC, she was the Senior Vice President – Chief Finance Officer of Aboitiz
Transport & Consumer Group of Companies.
Ms. Evelyn L. Engel

Age: 54

Citizenship: Filipino

Position in the Company:
Executive Vice President – Chief Resource Officer (May 1999 – Present)
- Chief Executive Officer-Passage Division (June 2004 – Present)
Business Experience and Current Directorship:
She currently handles the passage business, human resource, information technology and
public relations. Prior to joining ATS, she handled various aspects of the business including
sales & marketing of freight, business, passage, branch operations, human resource,
information technology, public relations and retail network. She also sits as a Director of
Interferry and Catena Services, Inc.

Mr. Miguel A. Camahort

Age: 44

Citizenship: Filipino

Position in the Company:
Senior Vice President and Chief Operating Officer – 2GO Solutions (October 2004 – Present)
Senior Vice President and Chief Operating Officer - Supply Chain Management (June 2004 –
October 2004)
Senior Vice President and Chief Operating Officer – Freight Division (May 1999 – May 2004)
Business Experience and Current Directorship:
He is also the SVP-Operations of Aboitiz One, Inc. since November 2005.
Mr. Rafael L. Sanvictores

Age: 49

Citizenship: Filipino

Position in the Company:
Senior Vice President – Vessel and Hotel Operations – (May 2006 – Present)
Senior Vice President and Chief Operating Officer - Superferry Group (June 2004 – May 2006)
Senior Vice President and Chief Operating Officer - Passage Division (May 1999 - June 2004)
Business Experience and Current Directorship:
He was Senior Vice President of the Company for the period 1999-2004 handling passage
operations.
Mr. Ramon G. Villordon, Jr.

Age: 54

Citizenship: Filipino

Position in the Company:
Senior Vice President – Cebu Ferries Corporation (February 2003 - Present)
Business Experience and Current Directorship:
He has been the President of Supercat Fast Ferry Corporation since March 2002. Prior to
this, he was the Senior Vice President of Philippine Fast Ferry Corporation from 2000 to
March 2002.

Mr. Wilmer Jose A. Alfonso

Age: 54

Citizenship: Filipino

Position in the Company:
Vice President – Ports Services (May 2006 – Present)
Vice President and Chief Operating Officer – Passage Services Group (June 2004 – May 2006)
Vice President and Chief Operating Officer – Supercommerce Group (January 1998 – June
2004)
Business Experience and Current Directorship:
He was the President and Chief Operating Officer of WG&A Supercommerce from August
2000 to September 2005. He is the Chairman of the Board of Catena Services, Inc. and also
holds the position of COO of the North Harbor Tugs Corporation (since September 2005).
Ms. Magdalena A. Anoos

Age: 50

Citizenship: Filipino

Position in the Company:
Vice President - Materials Management Division (January 2003 - Present)
Business Experience and Current Directorship:
She was the Finance Vice-President of Strategic Support Center from January 2001 to
December 2002. She was also the Finance Vice-President of Aboitiz One, Inc. from May 1998
to March 2002.
Ms. Maribeth L. Marasigan

Age: 44

Citizenship: Filipino

Position in the Company:
Vice President – Business Support and 2GO Brand Management (October 2005 – Present)
Vice President – Projects & Brand Management of 2GO (June 2005 – October 2005)
Vice President - Revenue Management (January 2003 – June 2005)
Business Experience and Current Directorship
She was the Vice-President of Aboitiz Express handling the management of retail marketing
from 2001 to December 2002. Also, she was the VP for Passage Revenue Management in
charged of the implementation of revenue management system for passage. She is also the
VP for business support who handles the management and administration of support units
such as the human resources, information technology, materials management division, end
user support, business process and quality management system.

Ms. Charity Joyce S.D. Marohombsar

Age: 40

Citizenship: Filipino

Position in the Company:
Vice President - Customer Contact Center (May 2003 – Present)
- Freight Sales and Marketing (August 2005 – Present)
Business Experience and Current Directorship:
She was the General Manager of Source One Asia (International Call Center) from
September 2001 to April 2003.
Ms. Norissa L. Ridgewell

Age: 52

Citizenship: Filipino

Position in the Company:
Vice President – Freight Operations (October 2005 – Present)
Vice President and Human Resource Director (June 2004 – August 2005)
Business Experience and Current Directorship:
Prior to joining ATS, she was the Chief Operating Officer of Hapag Lloyd Philippines before
becoming the Vice President for Sales and Marketing of the Company from August 1999 to
June 2002. Also she was the head of the pioneering business of Aboitiz Jebsen in the Liner
Service, JOSS Asian Feeders, a feeder service between the Philippines and Kaohsiung,
Taiwan.
Ms. Shelley U. Rapes

Age: 48

Citizenship: Filipino

Position in the Company:
Vice President – Information Technology (June 2005 - Present)
Assistant Vice President – Information Technology (2003 to 2005)
Business Experience and Current Directorship:
She was the Chief Information Officer of 2GO Express and Supercat Fast Ferry Corporation.
She also handled the management of several IT teams and became the Project Manager for
the Oracle 11i Project (handling the HR Modules and Technical) and for the Outsourcing of
ATSC data center & set-up of Disaster Recovery Site.
Ms. Annacel A. Natividad

Age: 37

Citizenship: Filipino

Position in the Company:
Vice President and Chief Finance Officer – Passage Travel & Leisure (June 2005 – Present)
Business Experience and Current Directorship:
She was the Assistant Vice President for Investor Relations and at the same time the AVP for
Corporate Finance from 2001 to 2003. Also, she was the AVP for Passage Travel and Leisure
– Finance from 2004 to 2005.

Mr. Oscar Y. Go

Age: 56

Citizenship: Filipino

Position in the Company:
Vice President – Sales-Special Accounts (May 2002 – Present)
Business Experience and Current Directorship:
Prior to joining the company, he was the Vice President of Lorenzo Shipping Corporation
from September 1973 to May 2002.
Mr. Joel Jesus M. Supan

Age: 49

Citizenship: Filipino

Position in the Company:
Vice President – Security, Safety and Compliance Office (June 2005 – Present)
Business Experience and Current Directorship:
He was the Vice President and General Manager of Security Solutions of Solutions and
Innovations Incorporated. He also became the Head of the Estates Management Division of
the Moldex Group. Moreover, he was concurrently the Vice President for Training and
Education of the Independent Insights Incorporated, a security consultancy. He is the
founder and proprietor of Stonewall Security Concepts and a director and President of Ethics
Call System Inc.
Nomination Committee and Nominees for Election as Members of the Board of Directors
The incumbent directors will be nominated as members of the Board of Directors for the
ensuing year (2007-2008).
In compliance with SEC Guidelines on the Nomination and Election of Independent
Directors under SRC Rule 38, the Company Board created on February 26, 2003 a
Nomination Committee composed of the following directors: (1) Mr. Jon Ramon M. Aboitiz
as chairman, (2) Mr. Enrique M. Aboitiz, Jr. as member and (3) Mr. Aloysius B. Colayco, an
independent director, as member.
The Nomination Committee had promulgated the
guidelines which govern the conduct of the nomination of the members of the Company
Board. It had pre-screened and short listed all candidates and came up with the following
individuals as nominees for independent directors for the ensuing year (2007-2008):
(1) Mr. Washington Z. Sycip as nominated by Erramon I. Aboitiz
(2) Mr. Aloysius B. Colayco as nominated by Sabin M. Aboitiz
The nominating persons are not related to the nominees within the fourth degree of
consanguinity.

Period in Which Directors and Executive Officers Should Serve
The directors and executive officers should serve for a period of one (1) year.
Terms of Office of a Director
The nine (9) directors shall be stockholders and shall be elected annually by the stockholders
owning a majority of the outstanding common shares of the Registrant for a term of one (1)
year and shall serve until the election and qualification of their successors.
Any vacancy in the board of directors other than removal or expiration of term may be filled by
a majority vote of the remaining members thereof at a meeting called for that purpose if they
still constitute a quorum, and the director or directors so chosen shall serve for the unexpired
term.
Significant Employees
The Corporation considers the contribution of every employee important to the fulfillment of
its goals.
Family Relationships
Messrs. Jon Ramon Aboitiz and Roberto E. Aboitiz are brothers and are, thus, related to each
other within the fourth degree of consanguinity.
Messrs. Erramon Aboitiz, Enrique M. Aboitiz, Jr. and Sabin M. Aboitiz are brothers and are,
thus, also related to each other within the fourth degree of consanguinity. They are cousins
to Messrs. Jon Ramon Aboitiz and Roberto E. Aboitiz and are therefore related within the
fourth degree of consanguinity.
Involvement in Certain Legal Proceedings
To the knowledge and/or information of ATS, none of its nominees for election as directors,
the present members of its Board of Directors or its executive officers, is presently or during
the last five (5) years been involved in any legal proceeding in any court or government agency
on the Philippines or elsewhere which would put to question their ability and integrity to serve
ATS and its stockholders.
With respect to its nominees for election as directors, the present members of its Board of
Directors and its executive officers, the Company is not aware that during the past five (5)
years up to even date of: (a) any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at the time of the bankruptcy or
within two years prior to that time; (b) any conviction by final judgment of such person in a
criminal proceeding, excluding traffic violations and other minor offenses; (c) such person
being subject to any order, judgment, or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, domestic or foreign, permanently or
temporarily enjoining, barring, suspending or otherwise limiting such person’s involvement in

any type of business, securities, commodities or banking activities; and (d) such person being
found by a domestic or foreign court of competent jurisdiction (in a civil action), the
Commission or comparable foreign body, or a domestic or foreign Exchange or other
organized trading market or self regulatory organization, to have violated a securities or
commodities law or regulation and the judgment has not been reversed, suspended, or
vacated.
Resignation or Refusal to Stand for Re-election by Members of the Board of Directors
No Director has resigned or declined to stand for re-election to the board of directors since
the date of the last annual meeting of the Company because of a disagreement with the
Company on matters relating to the Company’s operations, policies and practices.
Item 10. Executive Compensation
The following table summarizes certain information regarding compensation paid or
accrued during the last three fiscal years and to be paid in the ensuing fiscal year to the
Company’s Chief Executive Officer and each of the Company’s four other most highly
compensated executive officers:
SUMMARY OF COMPENSATION TABLE
Amounts in Thousands of Pesos (‘000s)

SALARY

BONUS
(13th and 14th Months Pay)

OTHER
COMPENSATION

TOP FIVE HIGHLY COMPENSATED EXECUTIVES:
ENRIQUE M. ABOITIZ JR. – CHIEF EXECUTIVE OFFICER
BOB D. GOTHONG – VICE CHAIRMAN OF THE BOARD *
EVELYN L. ENGEL – CHIEF EXECUTIVE OFFICER –
PASSAGE AND CHIEF RESOURCE
OFFICER
SUSAN V. VALDEZ – CHIEF EXECUTIVE OFFICER –
FREIGHT
LILIAN P. CARIASO – CHIEF FINANCE OFFICER AND
CORPORATE INFORMATION OFFICER
MIGUEL A. CAMAHORT – SVP–COO-2GO SOLUTIONS **

All above named officers as a group

All officers and directors as group unnamed

2005
2006
Projected
2007
2005
2006
Projected
2007

18,877
16,997
17,935

3,146
2,833
2,989

-

13,265
15,044

2,211
2,507

-

16,175

2,696

-

* For 2005 only
** For 2006 and 2007 only

The Company has no significant or special arrangements of any kind as regard to the
compensation of all officers and directors other than the funded, noncontributory taxqualified retirement plans covering all regular employees. Each Board Member receives a
per diem allowance of P15,000 for every board meeting attended.

Except for the regular company retirement plan, which by its very nature will be received by
the officers concerned only upon retirement from the Company, the above-mentioned
directors and officers do not receive any profit sharing nor any other compensation in the
form of warrants, options, bonuses, etc.
Likewise, there are no standard arrangements that compensate directors directly or
indirectly, for any services provided to the Company either as director or as committee
member or both or for any other special assignments.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Security ownership of certain record (“r”) and beneficial (“b”) owners of five per centum (5%)
or more of the outstanding capital stock of the Registrant as of February 28, 2007:

Title of
Class
Common

Name and Address of Record
Owner and Relationship with ATS
1. Aboitiz Equity Ventures Inc.
Aboitiz Corporate Center
Gov. Manuel A. Cuenco Avenue
Kasambagan, Cebu City 6000
(PARENT COMPANY)

Name of Beneficial Owner and
Relationship with Record Owner
Aboitiz Equity Ventures Inc.

Citizenship

No. of Shares
Held

Percent of
Class

Filipino

1,889,482,107

77.24%

Filipino

384,448,390

15.72%

PROXY:

Authorized to vote on
behalf of AEV are any of the
following:

Jon Ramon Aboitiz
President & CEO

Roberto E. Aboitiz
Director

Erramon I. Aboitiz
EVP & COO

Enrique M. Aboitiz Jr.
Director

Juan Antonio E. Bernad
SVP

Luis Miguel Aboitiz
First Vice President

Common

3. Aboitiz and Company, Inc.
Gov. Manuel A. Cuenco Avenue,
Kasambagan, Cebu City 6000
(PRINCIPAL STOCKHOLDER)

Aboitiz and Company, Inc.
PROXY:

Authorized to vote on
behalf of ACO are any of the
following:

Jon Ramon Aboitiz
President & CEO

Erramon I. Aboitiz
SVP & CFO

Roberto E. Aboitiz
SVP

Enrique M. Aboitiz, Jr.
SVP

Preferred

4. PCD Nominee Corporation
(Filipino)

PCD Nominee Corporation
(Filipino)

Filipino

2,747,731

60.25%

37/f Enterprise Building
Ayala Avenue, Makati City
(STOCKHOLDER)

Aboitiz Equity Ventures, Inc. (“AEV”) is a publicly listed company and as of February 28, 2007,
Aboitiz and Company, Inc. (“ACO”) owns 43.48% of AEV. ACO is a corporation wholly owned
by the Aboitiz family. No single stockholder, natural or juridical, owns five per centum (5%)
or more of the shareholdings of ACO.
Security Ownership of Management – Record “r” and Beneficial “b” (direct/indirect) owners
as of February 28, 2007:
Title of
Class
Common

Name of Beneficial Owner and
Position
Jon Ramon Aboitiz

Citizenship
Filipino

Chairman of the Board

Amount and nature of ownership
(Indicate record and/or beneficial)
246,336 – “r”
1,238,604 – “b”

Percent
of Class
0.06%

Record Owner: Lekeitio & Company. Inc.

Common

Bob D. Gothong

Filipino

Vice Chairman of the Board

148 – “r”
328,750 – “b”
Record Owner: One Wilson Place Holdings

0.08%

1,561,425 – “b”
Record Owner: Josephine Te, wife

Common

Enrique M. Aboitiz, Jr.

Filipino

President and CEO

1,524,330 – “r/b”
2,845,967 – “b”

0.18%

Record Owner: Danel Aboitiz, son

Common

Erramon I. Aboitiz

Filipino

Director

188,287– “r/b”
1,418,951 – “b”

0.07%

Record Owner: Bauhinia Management, Inc.

Common

Roberto E. Aboitiz

Filipino

170,281 – “r/b”

Filipino

1,250 – “r/b”

Filipino

910,372 – “r/b”
449,000 – “b”

Director

Common

Justo A. Ortiz
Director

Common

Sabin M. Aboitiz
Director

0.01%
0.00%
0.06%

Record Owner: Bettina Aboitiz, wife

Common

Washington Z. SyCip

American

12 – “r/b”

Independent Director

Common

Aloysius B. Colayco

Filipino

1,250 – “r/b”

Filipino

1,030,060 – “r/b”

0.04%

Filipino

250,687 – “r/b”

0.01%

Filipino

250,513 – “r/b”

0.01%

Filipino

167,124 – “r/b”

0.01%

Filipino

62,758 – “r/b”

0.00%

Filipino

166,951 – “r/b”

0.01%

Filipino

83,562– “r/b”

0.00%

Independent Director

Common

Lilian P. Cariaso

0.00%
0.00%

Treasurer, SVP-CFO and CIO

Common

Susan V. Valdez
EVP-CEO Freight

Common

Evelyn L. Engel
EVP-CEO Passage and CRO

Common

Miguel A. Camahort
SVP-COO 2GO Solutions

Common

Shelley U. Rapes
VP-Information Technology

Common

Magdalena A. Anoos
VP-Materials Management Division

Common

Maribeth L. Marasigan
VP-Business Support & 2GO Brand
Management

Common

Norissa L. Ridgwell

Filipino

TOTAL
Preferred

Sabin M. Aboitiz

24,517 – “b”

0.00%

Record Owner: PCD Nominee Corporation
(Filipino)

VP-Freight Operations

5,053,921”r/b”; 7,867,214“b”
Filipino

2,650 – “r/b”

Director

TOTAL

0.00%

2,650 “b”

Security Ownership of the Directors and Officers in the Company as a Group: Common is
12,921,1345 shares; Preferred – 2,650 shares.
Voting trust holders of 5% or More
No person holds more than five per centum (5%) of a class under a voting trust agreement or
similar arrangement.
Changes in Control
There is no existing arrangement which may result in a change in control of the registrant.
Item 12. Certain Relationships and Related Transactions
In the ordinary course of business, the Company has transactions with fellow subsidiaries,
associates, and other related companies consisting of shipmanagement services, charter
hire, management services, purchases of steward supplies, availment of stevedoring,
arrastre, trucking, rental and repair services. The Company needs these services to
complement its services to the freight and passage customers.
The identification of the related parties transacting business with the Company and how the
transaction prices were determined by the parties are discussed in the Note 20 of the
consolidated financial statements. The Company will continue to engage the services of
these related parties as long as it is economically beneficial to both parties.
Last October 24, 2005, SEC approved issuance of 414,121,123 new common shares of the
Corporation in exchange for the 100% outstanding capital stock of Aboitiz One, Inc. (AONE),
50% of the outstanding capital stock of Jebsen Management (BVI) Limited (JMBVI) and 62.5%
of the outstanding capital stock of each of Aboitiz Jebsen Bulk Transport Corporation
(ABOJEB), Aboitiz Jebsen Manpower Solutions, Inc. (AJMSI) and Jebsen Maritime, Inc. (JMI).
The said common shares were issued to the transferors/subscribers who are the
shareholders of Aone, Abojeb, AJMSI, JMI and JMBVI. These shareholders include Aboitiz
& Company, Inc. (ACO), certain affiliates of ACO and certain directors and officers of ATS.
Below is the list of subscribers of the transactions who are existing security holders owning
more than 5%, directors and executive officers, including their immediate family, of ATS.

Name

Relationship with ATS

Aboitiz Equity Ventures, Inc.
Aboitiz & Company, Inc.
Sabin M. Aboitiz
Enrique M. Aboitiz Jr. (EMAJ)
Erramon I. Aboitiz (EIA)
Jon Ramon Aboitiz (JRA)
Roberto E. Aboitiz
Susan Valdez
Lilian Cariaso
Evelyn Engel
Miguel Angel Camahort
Magdalena Anoos
Norissa Ridgewell
Maribeth Marasigan
Shelley Rapes
Xavier Jose Aboitiz
Brother of EMAJ
Iker Aboitiz
Brother of EMAJ
Mikel Aboitiz
Brother of JRA
Danel Aboitiz
Son of EMAJ
Bauhinia Management, Inc.
30% owned by EIA
Lekeitio & Co., Inc.
Owned by JRA

Parent Company
Principal Stockholder
Director
Director/Officer
Director
Director/Officer
Director
Officer
Officer
Officer
Officer
Officer
Officer
Officer
Officer
Stockholder

ATS Shares
Subscribed
1,529,569
379,948,390
842,210
186,541
188,275
196,250
169,031
250,687
250,513
250,513
167,124
166,951
125,517
83,562
62,758
890,752

Price
2,692,041
668,709,166
1,482,290
328,312
331,364
345,400
297,495
441,209
440,903
440,903
294,138
293,834
220,910
147,069
110,454
1,567,724

None

372,389

655,405

None

101,939

179,413

Stockholder

979,342

1,723,642

Stockholder

1,010,201

1,777,954

Stockholder

682,367

1,200,966

Except as discussed above, the Corporation has no other transaction during the last two
years or proposed transaction to which it was or is to be a party in which any of its directors,
officers, or nominees for election as directors or any member of the immediate family of any
of the said persons had or is to have a direct or indirect material interest.
Moreover, ATS and its subsidiaries do not have existing or proposed transactions with parties
that are considered outside of the definition of "related parties" but have the influence of
negotiating the terms of material transactions that may not be available to other, more
clearly independent parties on an arm's length basis.

PART IV – CORPORATE GOVERNANCE
The Board of Directors of ATS at its meeting last November 21, 2002 approved and adopted
the Corporation’s Corporate Governance Manual, a copy of which was submitted to the
Securities and Exchange Commission (SEC) and Philippine Stock Exchange (PSE) on the
same date. Last February 26, 2004, the Corporation amended its Manual to comply with the
PSE new disclosure rules on material non-public information.

In compliance with the Manual, the Board and Executive Officers of the Corporation attended
a corporate governance seminar. The Manual was also cascaded to all leaders and was
posted at the Corporation’s intranet for wider dissemination to its team members.
ATS and its directors, officers and employees have, in all material respects, complied with its
Code of Corporate Governance.
To measure the extent of compliance with the Manual, the Corporation conducted selfassessment and submitted its first Governance Self Rating to SEC and PSE last January 20,
2005, which reported no significant deviation.
To further strengthen its corporate governance, the Corporation started during the first
quarter of 2004, an Enterprise Wide Risk Management Program (EWRM) to identify, assess
and manage its business risks. In August 2006, ATS and its subsidiaries have completed its
EWRM program. The program is tailor fitted to the structure and culture of the company. It
re-assesses the risks already identified and will continue to identify new risks. Further, the
company is now on its second phase of the EWRM program.
ATS continues to do an annual self-assessment and for 2006, no material deviation from the
manual was found.
Also, ATS is committed to raising the standards of corporate governance by aligning with
global best practices, whenever it is applicable to our own local business setting. As part of
this direction, an assessment of our current practices as against the global best practices
was conducted in 2006 and the results were presented to management.

PART V - EXHIBITS AND SCHEDULES
Item 13. Exhibits and Reports on SEC Form 17-C

a) Exhibits - See accompanying Index to Exhibits
The exhibits, as indicated in the Index to Exhibits are either not applicable to the
Company or require no answer.

b)

Reports on SEC Form 17-C

During the last six months of CY 2006, the Company filed the SEC 17-C Report, the list of the
reports submitted to the Commission is as follows:
Date of
Report

Title of Report

Item
No.

Item Title

July 27

ATS Board Calls for Conversion

6

Changes in
Securities

Aug 01

Results of Operation as of the Quarter Ended June 30,
2006

9

Other events

Aug 30

Conversion Notice

6

Changes in
Securities

9

Other events

9

Other Events

Oct 02
Nov 03

Chartering out of SuperFerry 19 to Peninsula Shipping
Lines
Results of Operation for the Quarter Ended September
30, 2006

Dec 27

Sale of Vessels – SuperFerry 17 and 18

2

Dec 29

Sale of DIPSSCOR

2

Acquisition or
Disposition of Assets
Acquisition or
Disposition of Assets

ABOITIZ TRANSPORT SYSTEM (ATSC) CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES
FORM 17 - A, Item 7
Page No.
Consolidated Financial Statements
Statement of Management’s Responsibility for Financial Statements
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 2006 and 2005
Consolidated Statements of Income for the years ended December
31, 2006, 2005 and 2004
Consolidated Statements of Changes in Stockholders’ Equity for the
years ended December 31, 2006, 2005 and 2004
Consolidated Statements of Cash Flows for the years ended
December 31, 2006, 2005 and 2004
Notes to Consolidated Financial Statements
Supplementary Schedules
Report of Independent Public Accountants on Supplementary
Schedules
A. Marketable Securities - (Current Marketable Equity Securities
and Other Short-Term Cash Investments)
B. Amounts Receivable from Directors, Officers, Employees, Related
Parties and Principal Stockholders (Other than Affiliates)
C. Non-Current Marketable Equity Securities, Other Long-Term
Investments, and Other Investments
D. Indebtedness to Unconsolidated Subsidiaries and Affiliates
E. Property, Plant and Equipment – at cost
E.1. Land
E.2. Buildings & Warehouses
F. Accumulated Depreciation – at cost
G. Other Noncurrent Assets
H. Long - Term Debt
I. Indebtedness to Affiliates and Related Parties (Long - Term
Loans from Related Companies)
J. Guarantees of Securities of Other Issuers
K. Capital Stock
_______

*

*
*

These schedules, which are required by Part IV(e) of SRC Rule 68, have been omitted because
they are either not required, not applicable or the information required to be presented is
included in the Company’s consolidated financial statements or the notes to consolidated
financial statements.

1

1

SGV & CO

SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines

Phone: (632) 891-0307
Fax:
(632) 819-0872
www.sgv.com.ph
BOA/PRC Reg. No. 0001
SEC Accreditation No. 0012-F

INDEPENDENT AUDITORS’ REPORT

The Stockholders and the Board of Directors
Aboitiz Transport System (ATSC) Corporation
12th Floor, Times Plaza Building
United Nations Avenue corner Taft Avenue
Ermita, Manila

We have audited the accompanying consolidated financial statements of Aboitiz Transport System
(ATSC) Corporation and Subsidiaries, which comprise the consolidated balance sheets as at
December 31, 2006 and 2005, and the consolidated statements of income, consolidated statements of
changes in stockholders’ equity and consolidated statements of cash flows for each of the three years
in the period ended December 31, 2006, and a summary of significant accounting policies and other
explanatory notes. We did not audit the consolidated financial statements of Jebsen Management
(BVI) Limited and Subsidiaries, which the financial statements reflect total assets and total revenues
of 5% and 15% in 2006, and 4% and 18% in 2005, respectively, of the related consolidated totals.
Those statements were audited by other auditors whose reports thereon have been furnished to us, and
our opinion, insofar as it relates to the amounts included for those entities, is based solely on the
reports of the other auditors.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with Philippine Financial Reporting Standards. This responsibility includes: designing,
implementing and maintaining internal control relevant to the preparation and fair presentation of
financial statements that are free from material misstatement, whether due to fraud or error; selecting
and applying appropriate accounting policies; and making accounting estimates that are reasonable
in the circumstances.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits and the
reports of the other auditors. We conducted our audits in accordance with Philippine Standards on
Auditing. Those standards require that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
SGV & Co is a member practice of Ernst & Young Global

1

-2We believe that the audit evidence we have obtained and the reports of the other auditors are sufficient
and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, based on our audits and the reports of the other auditors, the consolidated financial
statements present fairly, in all material respects, the financial position of Aboitiz Transport System
(ATSC) Corporation and Subsidiaries as of December 31, 2006 and 2005, and their financial
performance and their cash flows for each of the three years in the period ended December 31, 2006 in
accordance with Philippine Financial Reporting Standards.
SYCIP GORRES VELAYO & CO.

Ladislao Z. Avila, Jr.
Partner
CPA Certificate No. 69099
SEC Accreditation No. 0111-AR-1
Tax Identification No. 109-247-891
PTR No. 0266523, January 2, 2007, Makati City
February 22, 2007

1

ABOITIZ TRANSPORT SYSTEM (ATSC) CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
December 31
2005
2006
ASSETS
Current Assets
Cash and cash equivalents (Notes 5 and 33)
Receivables - net (Notes 6, 20 and 33)
Inventories - net (Note 7)
Prepaid expenses and other current assets - net (Note 8)
Noncurrent asset classified as held for sale (Note 12)
Total Current Assets

P
=992,600
2,104,832
255,599
555,708
3,908,739
659,510
4,568,249

=
P872,848
1,900,477
318,915
529,899
3,622,139

3,622,139

Noncurrent Assets
Investments in associates (Notes 9 and 19)
Available-for-sale investments (Notes 10 and 33)
Property and equipment - net (Notes 11, 16 and 17)
Deferred income tax - net (Note 28)
Other noncurrent assets - net (Note 13)
Total Noncurrent Assets

37,355
59,431
4,839,693
372,622
424,616
5,733,717

46,915
41,648
6,909,131
242,318
491,460
7,731,472

P
=10,301,966

=
P11,353,611

P
=364,720
3,170,094

=
P477,053
3,311,069

486,441
113,823
2,801
4,137,879

461,164
140,393
4,468
4,394,147

455,037
4,592,916


4,394,147

TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Loans payable (Notes 14 and 33)
Accounts payable and other current liabilities (Notes 15 and 20)
Current portion of:
Long-term debt (Notes 11, 16 and 33)
Obligations under finance lease (Notes 11 and 17)
Income tax payable
Liabilities directly associated with noncurrent asset classified as
held for sale (Notes 12 and 16)
Total Current Liabilities
(Forward)

1

December 31
2005
2006
Noncurrent Liabilities
Long-term debt - net of current portion (Notes 11, 16 and 33)
Obligations under finance lease - net of
current portion (Notes 11 and 17)
Pension liability (Note 27)
Redeemable preferred shares (Notes 18, 19 and 33)
Total Noncurrent Liabilities
Equity Attributable to Equity Holders of the Parent
Common shares (Note 19)
Capital in excess of par value (Note 18)
Unrealized mark-to-market gain on available-for-sale
investments (Note 10)
Cumulative translation adjustments
Acquired minority interest of a subsidiary
Retained earnings (Note 19)
Treasury shares (Note 19)
Minority Interests
Total Stockholders’ Equity
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
See accompanying Notes to Consolidated Financial Statements.

P
=788,596

=
P2,105,694

81,080
9,890
13,832
893,398

210,490
11,360
200,317
2,527,861

2,484,653
910,901

2,343,966
843,698

19,600
(5,423)
5,000
1,435,847
(58,715)
4,791,863
23,789
4,815,652

2,776
(2,756)

1,238,546
(58,715)
4,367,515
64,088
4,431,603

P
=10,301,966

=
P11,353,611

ABOITIZ TRANSPORT SYSTEM (ATSC) CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except Earnings Per Share Amounts)
Years Ended December 31
2005
2004
2006
REVENUES
Freight - net (Note 20)
Passage - net
Service fees (Notes 20 and 32)
Others
COSTS AND EXPENSES
Operating (Note 21)
Terminal (Note 22)
Overhead (Note 23)
OTHER INCOME (CHARGES)
Gains on disposals of:
Investment (Note 32)
Property and equipment (Note 11)
Foreign exchange gain - net
Equity in net earnings (losses) of associates (Note 9)
Gain on insurance proceeds (Note 11)
Finance costs - net (Note 26)
Others – net
INCOME BEFORE INCOME TAX
PROVISION FOR (BENEFIT FROM)
INCOME TAX (Notes 28 and 31)
Current
Deferred
NET INCOME (Note 4)
ATTRIBUTABLE TO:
Equity holders of the parent (Note 30)
Minority interests

Earnings Per Common Share (Note 30)
Basic, for income for the year attributable to ordinary
equity holders of the parent
Diluted, for income for the year attributable to
ordinary equity holders of the parent

P
=6,530,199
3,020,013
456,722
564,251
10,571,185

=6,842,248
P
3,672,155
597,309
567,906
11,679,618

=
P4,977,171
3,721,917
789,199
201,730
9,690,017

(8,139,846)
(1,078,672)
(1,482,368)
(10,700,886)

(8,707,737)
(1,225,752)
(1,546,014)
(11,479,503)

(6,614,971)
(1,108,354)
(1,436,009)
(9,159,334)

262,264
226,436
41,171
5,308

(337,763)
29,052
226,468


98,416
29,176
22,527

(375,669)
55,043
(170,507)


211,316
811
(454)
208,659
(362,281)
56,902
114,953

96,767

29,608

645,636

38,033
(133,142)
(95,109)

70,801
(106,883)
(36,082)

92,022
41,101
133,123

P
=191,876

=65,690
P

=
P512,513

P
=197,301
(5,425)
P
=191,876

=41,969
P
23,721
=65,690
P

=
P484,449
28,064
=
P512,513

P
=0.08

=0.02
P

=
P0.22

P
=0.08

=0.02
P

=
P0.22

See accompanying Notes to Consolidated Financial Statements.

1

1

ABOITIZ TRANSPORT SYSTEM (ATSC) CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(Amounts in Thousands)

Attributable to Equity Holders of the Parent
Unrealized
Mark-toMarket Gain
Acquired
Capital in on AvailableMinority
Retained
Common
Excess
for-Sale Cumulative
Earnings
Shares
of Par Investments Translation Interest of a
(Note 10) Adjustments Subsidiary (Note 19)
(Note 19)
Value
Balance at January 1, 2006
=
P2,343,966 =
P843,698
Unrealized gains on available-for–

sale investments for the year
Changes in cumulative translation
adjustments


Total recognized income (expense)
directly in equity


Net income for the year


Total recognized income (expense)


for the year
Dividends of subsidiaries


Conversion of redeemable
preferred shares (Note 18)
140,687
67,203
Acquisition of minority interest
(Note 32)


Net decrease in minority interest


Balance at December 31, 2006
=
P2,484,653 =
P910,901
(Forward)

Treasury
Shares
(Note 19)

Total

=
P2,776

(P
=2,756)

16,824

16,824

(2,667)

(2,667)

16,824

(2,667)



197,301


16,824

(2,667) –

197,301



=
P19,600



(P
=5,423)

=
P– P
=1,238,546

Total
Minority Stockholders’
Interests
Equity

5,000



=
P5,000 =
P1,435,847

(P
=58,715) =
P4,367,515

=
P64,088

=
P4,431,603

146

16,970

(3,484)

(6,151)

14,157
197,301

(3,338)
(5,425)

10,819
191,876


211,458

(8,763)
(26,026)

202,695
(26,026)

207,890

207,890


5,000


(P
=58,715) =
P4,791,863

(5,000)
(510)
=
P23,789


(510)
=
P4,815,652

Total
Minority Stockholders’
Equity
Interests

Attributable to Equity Holders of the Parent

Balance at January 1, 2005
Effect of changes in accounting
for financial instruments
Total
Unrealized gains on available-forsale investments for the year
Net income for the year
Total recognized income for the
year
Effect of reorganization
Net increase in minority interests
Balance at December 31, 2005
Balance at January 1, 2004
Net income for the year
Retirement of preferred shares
(Note 18)
Stock dividends declared (Note 18)
Effect of reorganization (Note 2)
Net increase in minority interests
Balance at December 31, 2004

Redeemable
Preferred
Shares
=
P74,904
(74,904)

Capital in
Excess
Common
of Par
Shares
Value
(Note 19)
=
P2,231,488 =
P843,698

Unrealized
Mark-toMarket Gain
on AvailableRetained
for-Sale Cumulative
Earnings
Investments Translation
(Note 19)
(Note 10) Adjustments
(P
=1,346)
P
=– P
=1,402,753


2,231,488


843,698






4,122





=
P–


112,478

P
=2,343,966




=
P843,698

4,122


=
P2,776

1,536,599

1,661,650

(74,904)


393,246

301,643


=
P74,904 =
P2,231,488

(424,706)
(393,246)


=
P843,698

149,808

See accompanying Notes to Consolidated Financial Statements.

(113,938)
1,288,815

41,969


(2,756)

(P
=2,756)

41,969
(92,238)

P
=1,238,546


1,089,796
484,449



(1,346)

(P
=1,346)





=
P–



(171,492)

P
=1,402,753

Treasury
Shares
(Note 19)
Total
(P
=58,715) =
P4,492,782

(58,715)

(188,842)
4,303,940
4,122
41,969

=
P37,343 =
P4,530,125
(6,350)
30,993

23,721

(195,192)
4,334,933
4,122
65,690


46,091

17,484


(P
=58,715) =
P4,367,515

23,721
69,812

17,484
9,374
9,374
=
P64,088 =
P4,431,603

(558,325)

(278)
28,064

3,879,528
484,449

499,610




128,805


(P
=58,715) =
P4,492,782

3,879,250
512,513





9,232
138,037
325
325
=
P37,343 =
P4,530,125

ABOITIZ TRANSPORT SYSTEM (ATSC) CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
Years Ended December 31
2005
2004
2006
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax
Adjustments for:
Depreciation and amortization (Note 24)
Interest expense (Note 26)
Loss on impairment of assets
Provisions for:
Probable losses
Inventory losses
Impairment loss on available-for-sale investments
Equity in net losses (earnings) of associates
Recovery of provision for probable losses
Unrealized foreign exchange loss (gain)
Interest income (Note 26)
Dividend income
Gains on disposals of:
Property and equipment
Investment
Gain on insurance proceeds
Operating income before working capital changes
Decrease (increase) in:
Receivables
Inventories
Prepaid expenses and other current assets
Increase (decrease) in accounts payable and other current
liabilities
Net cash generated from operations
Interest received
Income taxes paid
Net cash flows from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment
Cash of JMBVI
Proceeds from:
Disposal of property and equipment
Sale of investment
Disposal of investments in associates
Insurance claims
Decrease (increase) in:
Other noncurrent assets
Investments in associates
Available-for-sale investments
Dividends received
Net cash flows from (used in) investing activities
(Forward)

P
=96,767

=29,608
P

=
P645,636

1,275,290
353,049
13,590

1,294,419
383,406

1,258,353
382,043

76,927
1,594
268
(5,308)
(7,862)
(17,362)
(18,298)
(33,594)

71,796

6,600
(22,527)

(27,474)
(26,166)
(3,100)

112,928


454

9,506
(33,865)
(1,170)

(226,436)
(262,264)

1,246,361

(98,416)


1,608,146

(128,984)

(208,659)
2,036,242

(130,716)
53,047
(28,679)

279,782
(65,189)
(116,961)

(149,795)
(46,090)
(89,347)

(267,982)
872,031
19,924
(37,263)
854,692

44,001
1,749,779
25,742
(76,440)
1,699,081

159,282
1,910,292
33,979
(50,731)
1,893,540

(538,475)

(937,566)
308,750

(2,392,522)

935,003
303,374
14,868

174,175


636,871

153
618,845

(19,309)

(42,336)
33,594
686,719

(107,991)
(2,150)
(1,065)
7,437
(558,410)

(171,094)
(1,954)

7,980
(1,301,721)

-2-

Years Ended December 31
2005
2004
2006
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from:
Availments of loans payable
Availments of long-term debt
Subscriptions of capital stock
Payments of:
Interest
Loans payable
Long-term debt and obligations under finance
lease
Decrease (increase) in minority interests
Net cash flows used in financing activities

P
=437,115

=279,490
P
700,000

=
P483,255
557,985
11,087

(335,183)
(549,448)

(388,491)
(912,262)

(384,588)
(241,961)

(992,764)
18,621
(1,421,659)

(499,500)
(8,674)
(829,437)

(1,267,172)
(325)
(841,719)

NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS

119,752

311,234

(249,900)

CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR

872,848

561,614

811,514

P
=992,600

=872,848
P

=
P561,614

CASH AND CASH EQUIVALENTS AT END OF
YEAR (Note 5)
See accompanying Notes to Consolidated Financial Statements.

1

ABOITIZ TRANSPORT SYSTEM (ATSC) CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Thousands, Except Share and Exchange Rate Data and When Otherwise Indicated)

1. Corporate Information
Aboitiz Transport System (ATSC) Corporation (Parent Company) and its subsidiaries
(collectively referred to as “the Group”) are primarily engaged in the business of operating
steamships, motorboats and other kinds of watercrafts; operating flight equipment and trucks; and
acting as agent for domestic and foreign shipping companies for purposes of transportation of
cargoes and passengers by air, land and sea within the waters and territorial jurisdiction of the
Philippines. The Parent Company’s registered office address is 12th Floor, Times Plaza Building,
United Nations Avenue corner Taft Avenue, Ermita, Manila.
The Group’s parent is Aboitiz Equity Ventures, Inc., a publicly-listed company incorporated in the
Philippines, and the ultimate holding company is Aboitiz & Company, Inc. (ACO), also
incorporated in the Philippines.
The accompanying consolidated financial statements were authorized for issue by the Board of
Directors (BOD) on February 22, 2007.

2. Summary of Significant Accounting Policies
Basis of Preparation
The consolidated financial statements have been prepared on a historical cost basis, except for
available-for-sale investments that have been measured at fair value. The financial statements are
presented in Philippine pesos, and all values are rounded to the nearest thousand (P
=000), except
when otherwise indicated.
Statement of Compliance
The consolidated financial statements of the Group have been prepared in compliance with
Philippine Financial Reporting Standards (PFRS).

Basis of Consolidation
The consolidated financial statements include the financial statements of the Parent Company and
the following subsidiaries:
Country of
Incorporation
Subsidiaries
Cebu Ferries Corporation
Philippines
(CFC)*
W G & A Supercommerce, Inc. Philippines
(WSI)**
Zoom In Packages, Inc.
(ZIP)***
Philippines
Aboitiz One, Inc. (AOI) and Philippines
Subsidiaries
Aboitiz Jebsen Bulk Transport Philippines
Corporation (AJBTC) and
Subsidiaries
Aboitiz Jebsen Manpower
Philippines
Solutions, Inc. (AJMSI)
Jebsen Maritime, Inc. (JMI)
Philippines
Jebsen Management (JMBVI)
Limited and
British Virgin Islands
Subsidiaries****
**
***
****
****

Nature of Business
Shipping
Ships’ hotel
management
Transportation/logistic
s
Transportation/logistic
s

Percentage of
Ownership
100.00
100.00
100.00
100.00

Ship management

62.50

Manpower services
Manpower services

62.50
62.50

Shipping

50.00

Parent Company has taken over CFC’s shipping operations since 2003.
Ceased operations in February 2006.
Started commercial operations on January 1, 2006.
Parent Company exercises power to govern the financial and operating policies.

Subsidiaries are consolidated from the date on which control is transferred to the Group and cease
to be consolidated from the date on which control is transferred out of the Group. Consolidated
financial statements are prepared using uniform accounting policies for like transactions and other
events in similar circumstances. All significant intra-group balances, transactions, income and
expenses, and profits and losses resulting from intra-group transactions are eliminated in the
consolidation.
The consolidated financial statements are presented in Philippine peso, which is the Parent
Company’s functional and presentation currency. Items included in the financial statements of
each entity are measured using the currency that best reflects the economic substance of the
underlying events and circumstances relevant to that entity.
Minority interests represent the portion of profit or loss and net assets in the subsidiaries not held
by the Group and are presented separately in the consolidated statement of income and within
stockholders’ equity in the consolidated balance sheet, separately from the equity attributable to
equity holders of the parent. Acquisitions of minority interests are accounted for using the entity
concept method, whereby, the difference between the consideration and the book value of the
share of the net assets is reflected as an equity transaction.

Changes in Accounting Policies
The accounting policies adopted are consistent with those of the previous year except as follows:
The Group has adopted the following new and amended PFRS and International Financial
Reporting Interpretations Committee (IFRIC) interpretations during the period. Adoption of these
revised standards and interpretations did not have any effect on the Group except for the additional
disclosures on the financial statements.
Philippine Accounting Standards (PAS) 19, Amendment - Employee Benefits
PAS 21, Amendment - The Effects of Changes in Foreign Exchange Rates
PAS 39, Amendments - Financial Instruments: Recognition and Measurement
Philippine Interpretation IFRIC 4, Determining whether an Arrangement Contains a Lease
Philippine Interpretation IFRIC 5, Rights to Interests Arising from Decommissioning
Restoration and Environmental Rehabilitation Funds
Philippine Interpretation IFRIC 6, Liabilities arising from Participating in a Specific Market Waste Electrical and Electronic Equipment
The Group has also early adopted the following Philippine Accounting Standards (PAS) and
Philippine IFRIC interpretations. Adoption of these standards and interpretations did not have any
effect on the financial position of the Group. These, however, require additional disclosures on
the consolidated financial statements.
Philippine Interpretation IFRIC 8, Scope of IFRS 2
Philippine Interpretation IFRIC 9, Reassessment of Embedded Derivatives
Philippine Interpretation IFRIC 10, Interim Financial Reporting and Impairment
The principal effects of these changes, if any, are as follows:
PAS 19, Employee Benefits
Additional disclosures on the financial statements are made to provide information about trends in
the assets and liabilities in the defined benefit plans and the assumptions underlying the
components of the defined benefit cost. This change has no recognition nor measurement impact,
as the Group chose not to apply the new option offered to recognize actuarial gains and losses
outside of the consolidated statement of income.
PAS 21, The Effects of Changes in Foreign Exchange Rates
All exchange differences arising from a monetary item that forms part of the Group’s net
investment in a foreign operation are recognized in a separate component of stockholders’ equity
in the consolidated financial statements regardless of the currency in which the monetary item is
denominated. This change has no significant impact on the consolidated financial statements.
PAS 39, Financial Instruments: Recognition and Measurement
Amendment for financial guarantee contracts (issued August 2005) - amended the scope of PAS
39 to require financial guarantee contracts that are not considered to be insurance contracts to be
recognized initially at fair value and to be remeasured at the higher of the amount determined in
accordance with PAS 37, Provisions, Contingent Liabilities and Contingent Assets, and the
amount initially recognized less, when appropriate, cumulative amortization recognized in
accordance with PAS 18, Revenue. This amendment did not have an effect on the consolidated
financial statements.

Amendment for hedges of forecast intra-group transactions (issued April 2005) - amended
PAS 39 to permit the foreign currency risk of a highly probable intra-group forecast transaction to
qualify as the hedged item in a cash flow hedge, provided that the transaction is denominated in a
currency other than the functional currency of the entity entering into that transaction and that the
foreign currency risk will affect the consolidated income statement. As the Group currently has no
such transactions, the amendment did not have an effect on the consolidated financial statements.
Amendment for the fair value option (issued June 2005) – amendments to PAS 39 prescribe the
conditions under which the fair value option on classification of financial instruments at fair value
through profit or loss (FVPL) may be used. As the Group currently has no financial instruments
classified as FVPL, the amendment did not have an effect on the consolidated financial statements.
Philippine Interpretation IFRIC 4, Determining Whether an Arrangement contains a Lease
This interpretation provides guidance in determining whether arrangements contain a lease to
which lease accounting must be applied. This change in accounting policy has no significant
impact on the consolidated financial statements.
Philippine Interpretation IFRIC 5, Rights to Interests Arising from Decommissioning, Restoration
and Environmental Rehabilitation Funds
This interpretation establishes the accounting treatment for funds established to help finance
decommissioning for companies assets. As the Group does not currently operate in a country
where such funds exist, this interpretation has no impact on the consolidated financial statements.
Philippine Interpretation IFRIC 6, Liabilities Arising from Participating in a Specific Market Waste Electrical and Electronic Equipment
This interpretation establishes the recognition date for liabilities arising from the EU Directive
relating to the disposal of Waste Electrical and Electronic Equipment. This Interpretation is not
applicable to the Group as it has no operations in countries covered by the EU Directive.
Philippine Interpretation IFRIC 8, Scope of PFRS 2
This interpretation requires IFRS 2 to be applied to any arrangements where equity instruments
are issued for consideration which appears to be less than fair value. The interpretation has no
impact on the financial position of the Group.
Philippine Interpretation IFRIC 9, Reassessment of Embedded Derivatives
This interpretation was issued in March 2006 and becomes effective for financial years beginning
on or after June 1, 2006. This interpretation establishes that the date to assess the existence of an
embedded derivative is the date an entity first becomes a party to the contract, with reassessment
only if there is a change to the contract that significantly modifies the cash flows. The Group
assessed that adoption of this interpretation has no impact on the consolidated financial
statements.
Philippine Interpretation IFRIC 10, Interim Financial Reporting and Impairment
The Group early adopted Philippine IFRIC Interpretation 10 as of January 1, 2006 which provides
that the frequency of financial reporting does affect the amount of impairment charge to be
recognized in the annual financial reporting with respect to goodwill and available-for-sale (AFS)
equity investments. It prohibits the reversal of impairment losses on goodwill and AFS equity
investments recognized in the interim financial reports even if impairment is no longer present at
the annual balance sheet date. This interpretation has no significant impact to the consolidated
financial statements of the Group.

Future Changes in Accounting Policies
The Group has not yet adopted the following standards, amendments or interpretations that have
been approved but are not yet effective:
PFRS 7, Financial Instruments: Disclosures
PFRS 7 introduces new disclosures to improve the information about financial instruments. It
requires the disclosure of qualitative and quantitative information about exposure to risks arising
from financial instruments, including specified minimum disclosures about credit risk, liquidity
risk and market risk, as well as sensitivity analysis to market risk. It replaces PAS 30, Disclosures
in the Financial Statements of Banks and Similar Financial Institutions, and the disclosure
requirements in PAS 32, Financial Instruments: Disclosure and Presentation. It is applicable to
all entities that report under PFRS.
PFRS 8, Operating Segments
This new standard replaces PAS 14, Segment Reporting, and adopts the management approach to
segment reporting. The information reported would be that which management uses internally for
evaluating the performance of operating segments and allocating resources to those segments.
This information may be different from that reported in the consolidated balance sheet and
consolidated statement of income and entities will need to provide explanations and
reconciliations of the differences.
Complementary amendment to PAS 1, Presentation of Financial Statements
The amendment to PAS 1 introduces disclosures about the level of an entity’s capital and how it
manages capital. The Group is currently assessing the impact of PFRS 7 and the amendment to
PAS 1 and expects that the main additional disclosures will be the sensitivity analysis to market
risk and the capital disclosures required by PFRS 7 and the amendment to PAS 1.
Philippine Interpretation IFRIC 11, PFRS 2 - Group and Treasury Share Transactions
This interpretation requires arrangements whereby an employee is granted rights to an entity’s
equity instruments to be accounted for as an equity-settled scheme by an entity if the entity
chooses or is required to buy those equity instruments (e.g., treasury shares) from another party, or
the shareholders of the entity provide the equity instruments needed. IFRIC 11 also extends the
way in which subsidiaries, in their separate financial statements, account for schemes when their
employees receive rights to equity instrument of the parent.
Philippine Interpretation IFRIC 12, Service Concession Arrangements
This interpretation outlines the approach to account for contractual arrangements arising from
entities providing public services. It provides that the operator should not account for the
infrastructure as property, plant and equipment, but recognize a financial asset and/or an intangible
asset. A financial asset is recognized to the extent that the operator has a contractual right to
receive cash from the grantor or has a guarantee from the grantor. An intangible asset is
recognized to the extent that the entity has a right to charge the public for use of the asset.
The Group will apply PFRS 7 and the amendments to PAS 1 in 2007, Philippine Interpretation
IFRIC 11 and 12 in 2008 and PFRS 8 in 2009. Except for PFRS 7, PFRS 8 and the amendments
to PAS 1, the Group does not expect any significant changes in its accounting policies when it
adopts the above standards, amendments and interpretations.

Cash and Cash Equivalents
Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash, with original maturities of
three months or less, and are subject to an insignificant risk of change in value.
Inventories
Inventories are valued at the lower of cost or net realizable value. Cost is determined using the
moving average method for materials, parts and supplies, flight equipment expendable parts and
supplies and the first-in, first-out method for truck and trailer expendable parts, fuel, lubricants
and spare parts. Net realizable value is the current replacement cost.
Business Combinations and Goodwill
Business combinations are accounted for using the acquisition accounting method. This involves
recognizing identifiable assets (including previously unrecognized intangible assets) and liabilities
(including contingent liabilities and excluding future restructuring) of the acquired business at fair
value.
Goodwill acquired in a business combination is initially measured at cost being the excess of the
cost of the business combination over the Group’s interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities. For the purpose of impairment testing, goodwill
acquired in a business combination is, from the acquisition date, allocated to each of the Group’s
cash-generating units, or groups of cash-generating units, that are expected to benefit from the
synergies of the combination, irrespective of whether other assets or liabilities of the Group are
assigned to those units or groups of units. Each unit or group of units to which the goodwill is
allocated:
• represents the lowest level within the Group at which the goodwill is monitored for internal
management purposes; and
• is not larger than a segment based on either the Group’s primary or the Group’s secondary
reporting format determined in accordance with PAS 14, Segment Reporting.
Where goodwill forms part of a cash-generating unit (group of cash-generating units) and part of
the operation within that unit is disposed of, the goodwill associated with the operation disposed of
is included in the carrying amount of the operation when determining the gain or loss on disposal
of the operation. Goodwill disposed of in this circumstance is measured based on the relative
values of the operation disposed of and the portion of the cash-generating unit retained.
When subsidiaries are sold, the difference between the selling and the net assets plus cumulative
translation differences and unamortized goodwill is recognized in the consolidated statement of
income.
Investments in Associates
Investments in associates in which the Group exercises significant influence and which are neither
a subsidiary nor a joint venture of the Group are accounted for under the equity method of
accounting. Under the equity method, the cost of investments in associates is carried in the
consolidated balance sheet at cost and is increased or decreased by the Group’s share in net
earnings or losses of the associates since dates of acquisition and reduced by dividends received.
Unrealized gains on transactions between the Group and its associates are eliminated to the extent
of the Group’s interest in the associates. Unrealized losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. The associates’

accounting policies have been changed where necessary to ensure consistency with the policies
adopted by the Group.
Property and Equipment
Property and equipment is stated at cost, excluding the costs of day-to-day servicing, less
accumulated depreciation and accumulated impairment in value except land. Such cost includes
the cost of replacing part of the property and equipment when that cost is incurred, if the
recognition criteria are met. Land is carried at cost.
Depreciation is calculated on a straight-line basis over the useful lives of the property and
equipment, or the terms of the lease in case of leasehold improvements, whichever is shorter.
Ships in operation, excluding drydocking costs and
vessel equipment and improvements
Containers
Handling equipment
Furniture and equipment
Land improvements
Buildings and warehouses
Leasehold improvements
Transportation equipment

15-30 years
5-7 years
5-7 years
3-5 years
5-10 years
5-20 years
5-12 years
5-10 years

Flight equipment is depreciated based on the estimated number of flying hours.
Drydocking costs, consisting mainly of steel plate replacement of the ships’ hull and related
expenditures, are capitalized as a component of “Ships in operation” under “Property and
equipment” account in the consolidated balance sheet and depreciated over 30 months or
2 1/2 years. When significant drydocking expenditures occur prior to the expiry of this period, the
remaining unamortized balance of the original drydocking cost is expensed in the month of
subsequent drydocking.
Vessel equipment and improvements, which are significant components of “Ships in operation”
account, are depreciated separately over a useful life of 3-5 years.
Ships under refurbishment include the acquisition cost of the ships, the cost of on-going
refurbishments and other direct costs. Construction in progress represents structures under
construction and is stated at cost. This includes cost of construction and other direct costs.
Borrowing costs that are directly attributable to the refurbishment of ships and construction of
other property and equipment are capitalized during the refurbishment and construction period.
Ships under refurbishment and construction in progress are not depreciated until such time the
relevant assets are completed and available for use.
An item of property and equipment is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the
asset (calculated as the difference between the net disposal proceeds and the carrying amount of
the asset) is included in the consolidated statement of income in the year the asset is derecognized.
The asset’s residual values, useful lives and depreciation methods are reviewed, and adjusted if
appropriate, at each financial year end.

Noncurrent Assets Classified as Held for Sale
Noncurrent assets are classified as held for sale if their carrying amount will be recovered
principally through a sale transaction expected to be completed within one year from the date of
classification, rather than through continuing use. Noncurrent assets held for sale are stated at the
lower of carrying amount and fair value less costs to sell and depreciation of such assets ceases.
Liabilities associated with these assets are presented separately in the consolidated balance sheet.
Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of
intangible assets acquired in a business combination is fair value as at the date of the acquisition.
Following initial recognition, intangible assets are carried at cost less any accumulated
amortization and any accumulated impairment losses. Internally generated intangible assets,
excluding capitalized development costs, are not capitalized and expenditure is reflected in the
consolidated statement of income in the year in which the expenditure is incurred.
The useful lives of intangible assets are assessed to be either finite or indefinite.
Software development costs
Software development costs are initially recognized at cost. Following initial recognition, the
software development costs are carried at cost less accumulated amortization and any accumulated
impairment in value.
The software development costs is amortized on a straight-line basis over its estimated useful
economic life and assessed for impairment whenever there is an indication that the intangible asset
may be impaired. The amortization commences when the software development costs is available
for use. The amortization period and the amortization method for the software development costs
are reviewed at each financial year end. Changes in the estimated useful life is accounted for by
changing the amortization period or method, as appropriate, and treated as changes in accounting
estimates. The amortization expense is recognized in the consolidated statement of income in the
expense category consistent with the function of the software development costs.
Impairment of Non-Financial Assets
The Group assesses at each reporting date whether there is an indication that an asset may be
impaired. If any such indication exists, or when annual impairment testing for an asset is required,
the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is
the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use
and is determined for an individual asset, unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets. Where the carrying amount of
an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. In determining fair value less costs to sell,
an appropriate valuation model is used. These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded subsidiaries or other available fair value
indicators.
Impairment losses of continuing operations are recognized in the consolidated statement of income
in those expense categories consistent with the function of the impaired asset. An assessment is
made at each reporting date as to whether there is any indication that previously recognized
impairment losses may no longer exist or may have decreased. If such indication exists, the
Group makes an estimate of the recoverable amount. A previously recognized impairment loss is

reversed only if there has been a change in the estimates used to determine the asset’s recoverable
amount since the last impairment loss was recognized. If that is the case, the carrying amount of
the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying
amount that would have been determined, net of depreciation, had no impairment loss been
recognized for the asset in prior years. Such reversal is recognized in the consolidated statement
of income unless the asset is carried at revalued amount, in which case the reversal is treated as a
revaluation increase.
Intangible assets with indefinite useful lives are tested for impairment annually at each balance
sheet date either individually or at the cash generating unit level, as appropriate.
Treasury Shares
The Company’s own equity instruments which are reacquired (treasury shares) are deducted from
equity. No gain or loss is recognized in the consolidated statement of income on the purchase,
sale, issue or cancellation of the Company’s own equity instruments.
Financial Assets
Financial assets are classified as either financial assets at fair value through profit or loss, loans
and receivables, held-to-maturity investments, and available-for-sale financial assets, as
appropriate. When financial assets are recognized initially, they are measured at fair value, plus,
in the case of investments not at fair value through profit or loss, directly attributable transaction
costs. The Group considers whether a contract contains an embedded derivative when the entity
first becomes a party to it. The embedded derivatives are separated from the host contract which
is not measured at fair value through profit or loss when the analysis shows that the economic
characteristics and risks of embedded derivatives are not closely related to those of the host
contract.
The Group determines the classification of its financial assets after initial recognition and, where
allowed and appropriate, re-evaluates this designation at each financial year-end.
All regular way purchases and sales of financial assets are recognized on trade date, which is the
date that the Group commits to purchase the asset. Regular way purchases or sales of financial
assets that require delivery of assets within the period generally established by regulation or
convention in the marketplace.
Financial Assets at Fair Value through Profit or Loss (FVPL)
Financial assets at fair value through profit or loss includes financial assets held for trading and
financial assets designated upon initial recognition as fair value through profit or loss.
Financial assets are classified as held for trading if they are acquired for the purpose of selling in
the near term. Derivatives, including separated embedded derivatives, are also classified as held
for trading unless they are designated as effective hedging instruments or a financial guarantee
contract. Gains or losses on investments held for trading are recognized in the consolidated
statement of income.
When a contract contains one or more embedded derivatives, the entire hybrid contract may be
designated as a financial asset at fair value through profit or loss, except when the embedded
derivative does not significantly modify the cash flows or it is clear that separation of the
embedded derivative is prohibited.

Financial assets may be designated at initial recognition as at fair value through profit or loss if the
following criteria are met: (i) the designation eliminates or significantly reduces the inconsistent
treatment that would otherwise arise from measuring the assets or recognizing the gains or losses
on them on a different basis; or (ii) the assets are part of a group of financial assets which are
managed and their performance evaluated on fair value basis, in accordance with a documented
risk management strategy; or (iii) the financial asset contains an embedded derivative that would
need to be separately recorded.
As of December 31, 2006 and 2005, the Group has no financial assets at FVPL.
Held-to-Maturity (HTM) Investments
Held-to-maturity investments are non-derivative financial assets which carry fixed or determinable
payments and fixed maturities and which the Group has the positive intention and ability to hold
to maturity. After the initial measurement, held to maturity investments are measured at amortized
cost. This cost is computed as the amount initially recognized less principal repayments, plus or
minus the cumulative amortization using the effective interest method of any difference between
the initially recognized amount and the maturity amount, less allowance for impairment. This
calculation includes all fees and points paid or received between the parties to the contract that are
integral part of the effective interest rate, transaction costs and all other premiums and discounts.
Gains and losses are recognized in the consolidated statement of income when the investments are
derecognized or impaired, as well as through the amortization process. As of December 31, 2006
and 2005, the Group has no HTM investments.
Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. After initial measurement, loans and receivables are
subsequently carried at amortized cost using the effective interest method less any allowance for
impairment. Amortized cost is calculated taking into account any discount or premium on
acquisition and includes fees that are an integral part of the effective interest rate and transaction
costs. Gains and losses are recognized in the consolidated statement of income when the loans
and receivables are derecognized or impaired, as well as through the amortization process.
Available-for-Sale (AFS) Investments
Available-for-sale investments are those non-derivative financial assets that are designated as
available-for-sale or are not classified in any of the three preceding categories. After initial
recognition, available-for-sale financial assets are measured at fair value with unrealized gains or
losses being recognized directly in stockholders’ equity in the net unrealized gains reserve. When
the investment is disposed of, the cumulative gains or loss previously recorded in stockholders’
equity is recognized in the consolidated statement of income. Interest earned or paid on the
investments is reported as interest income or expense using the effective interest rate.
Determination of Fair Value
The fair value of investments that are actively traded in organized financial markets is determined
by reference to quoted market bid prices at the close of business on the balance sheet date. For
investments where there is no active market, fair value is determined using valuation techniques.
Such techniques include using recent arm’s length market transactions; reference to the current
market value of another instrument, which is substantially the same; discounted cash flow analysis
and other valuation models.
Impairment of Financial Assets

The Group assesses at each balance sheet date whether a financial asset or group of financial
assets is impaired.
Assets Carried at Amortized Cost
If there is objective evidence that an impairment loss on loans and receivables carried at amortized
cost has been incurred, the amount of the loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows (excluding future credit
losses that have not been incurred) discounted at the financial asset’s original effective interest rate
(i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset
shall be reduced either directly or through use of an allowance account. The amount of the loss
shall be recognized in consolidated statement of income.
The Group first assesses whether objective evidence of impairment exists individually for
financial assets that are individually significant, and individually or collectively for financial
assets that are not individually significant. If it is determined that no objective evidence of
impairment exists for an individually assessed financial asset, whether significant or not, the asset
is included in a group of financial assets with similar credit risk characteristics and that group of
financial assets is collectively assessed for impairment. Assets that are individually assessed for
impairment and for which an impairment loss is or continues to be recognized are not included in
a collective assessment of impairment.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is
recognized in the consolidated statement of income, to the extent that the carrying value of the
asset does not exceed its amortized cost at the reversal date.
In relation to trade receivables, a provision for impairment loss is made when there is objective
evidence (such as the probability of insolvency or significant financial difficulties of the debtor)
that the Company will not be able to collect all the amounts due under the original terms of the
invoice. The carrying amount of the receivables is reduced through use of an allowance account.
Impaired debts are derecognized when they are assessed as uncollectible.
Assets Carried at Cost
If there is objective evidence that an impairment loss on an unquoted equity instrument that is not
carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that
is linked to and must be settled by delivery of such an unquoted equity instrument has been
incurred, the amount of the loss is measured as the difference between the asset’s carrying amount
and the present value of estimated future cash flows discounted at the current market rate of return
for a similar financial asset.
AFS Investments
If an AFS investment is impaired, an amount comprising the difference between its cost (net of
any principal payment and amortization) and its current fair value, less any impairment loss
previously recognized in the consolidated statement of income, is transferred from stockholders’
equity to the consolidated statement of income. Reversals in respect of equity instruments
classified as available-for-sale are not recognized in the consolidated statement of income.
Reversals of impairment losses on debt instruments are reversed through the consolidated
statement of income, if the increase in fair value of the instrument can be objectively related to an
event occurring after the impairment loss was recognized in consolidated statement of income.

In case of equity investments classified as AFS, objective evidence of impairment would include a
significant or prolonged decline in the fair value of the investments below its cost. Where there is
evidence of impairment, the cumulative loss (measured as the difference between the acquisition
cost and the current fair value, less any impairment loss on that financial asset previously
recognized in the consolidated statement of income) is removed from equity and recognized in the
consolidated statement of income. Impairment losses on equity investments are not reversed
through the consolidated statement of income. Increases in fair value after impairment are
recognized directly in stockholders’ equity.
Financial Liabilities
Financial liabilities consist of financial liabilities at fair value through profit or loss and other
financial liabilities. Financial liabilities at fair value through profit or loss include financial
liabilities held for trading and financial liabilities designated upon initial recognition as at fair
value through profit and loss. Financial liabilities are classified as held for trading if they are
acquired for the purpose of selling in the near term. Derivatives, including separated embedded
derivatives are also classified as held for trading unless they are designated as effective hedging
instruments. Gains or losses on liabilities held for trading are recognized in the consolidated
statement of income.
Where a contract contains one or more embedded derivatives, the entire hybrid contract may be
designated as a financial liability at fair value through profit or loss, except where the embedded
derivatives do not significantly modify the cash flows or it is clear that separation of the embedded
derivative is prohibited.
Financial liabilities may be designated at initial recognition as at fair value through profit or loss if
the following criteria are met: (i) the designation eliminates or significantly reduces the
inconsistent treatment that would otherwise arise from measuring the liabilities or recognizing
gains or losses on them on a different basis; (ii) or the liabilities are part of a group of financial
liabilities which are managed and their performance evaluated on a fair value basis, in accordance
with a documented risk management strategy; (iii) or the financial liability contains an embedded
derivative that would need to be separately recorded.
As of December 31, 2006 and 2005, the Company has no financial liabilities at FVPL.
Other Financial Liabilities
Other financial liabilities are initially recorded art fair value, less directly attributable transaction
costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured
at amortized cost using the effective interest method. Amortized cost is calculated by taking into
account any issue costs, and any discount or premium on settlement. Gains and losses are
recognized in the consolidated statement of income when the liabilities are derecognized as well as
through the amortization process.
Included in other financial liabilities are Company’s debt and other borrowings (loans payable and
long term debt), accounts payable, obligation under finance lease, and redeemable preferred
shares.
Redeemable Preferred Shares (RPS)
The component of the RPS that exhibits characteristics of a liability is recognized as a liability in
the consolidated balance sheet, net of transaction costs. The corresponding dividends on those
shares are charged as interest expense in the consolidated statement of income. On issuance of
the redeemable preference shares, the fair value of the liability component is determined using a

market rate for an equivalent non-convertible bond; and this amount is carried as a long term
liability on the amortized cost basis until extinguished on conversion or redemption.
The remainder of the proceeds is allocated to the conversion option that is recognized and
included in consolidated statement of changes in stockholders’ equity, net of transaction costs.
The carrying amount of the conversion option is not remeasured in subsequent years.
Transaction costs are apportioned between the liability and equity components of the convertible
preference shares based on the allocation of proceeds to the liability and equity components when
the instruments are first recognized.
Derecognition of Financial Assets and Liabilities
Financial Assets
A financial asset (or, where applicable a part of a financial asset or part of a group of similar
financial assets) is derecognized when:

the rights to receive cash flows from the asset have expired;

the Group retains the right to receive cash flows from the asset, but has assumed an obligation
to pay them in full without material delay to a third party under a “pass-through” arrangement;
or

the Group has transferred its rights to receive cash flows from the asset and either (a) has
transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor
retained substantially all the risks and rewards of the asset, but has transferred control of the
asset.

Where the Group has transferred its rights to receive cash flows from an asset and has neither
transferred nor retained substantially all the risks and rewards of the asset nor transferred control
of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the
asset.
Financial Liabilities
A financial liability is derecognized when the obligation under the liability is discharged or
cancelled or has expired.
Where an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original liability and the recognition of a new
liability, and the difference in the respective carrying amounts is recognized in consolidated
statement of income.
Revenue
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Group and the revenue can be reliably measured. The following specific recognition criteria must
also be met before revenue is recognized:
Freight and passage services
Freight and passage revenues are recognized when the related services are rendered. Customer
payments for services which have not yet been rendered are classified as unearned revenue under
“Accounts payable and other current liabilities” in the consolidated balance sheet.

Manning and crewing services
Revenue is recognized upon embarkation of qualified ship crew based on agreed rates and when
the corresponding training courses have been conducted.
Management services
Management fee is recognized when the related services are rendered.
Rental income
Rental income is recognized on a straight-line basis over the lease term.
Interest
Revenue is recognized as the interest accrues.
Dividends
Dividend income is recognized when the shareholders’ right to receive the payment is established.
Borrowing Costs
Borrowing costs are generally expensed as incurred. Borrowing costs are capitalized if they are
directly attributable to the acquisition or construction of a qualifying asset. Capitalization of
borrowing costs commences when the activities to prepare the asset are in progress and
expenditures and borrowing costs are being incurred. Borrowing costs are capitalized until the
assets are substantially ready for their intended use. If the carrying amount of the asset exceeds its
recoverable amount, an impairment loss is recorded.
Pension Benefits
The cost of providing benefits under the defined benefit plan is determined using the projected
unit credit actuarial valuation method. Actuarial gains and losses are recognized as income or
expense when the net cumulative unrecognized actuarial gains and losses for each individual plan
at the end of the previous reporting year exceeded 10% of the higher of the defined benefit
obligation and the fair value of plan assets at that date. These gains or losses are recognized over
the expected average remaining working lives of the employees participating in the plan.
The past service cost is recognized as an expense on a straight-line basis over the average period
until the benefits become vested. If the benefits are already vested immediately following the
introduction of, or changes to, a pension plan, past service cost is recognized immediately.
The defined benefit liability is the aggregate of the present value of the defined benefit obligation
and actuarial gains and losses not recognized reduced by past service cost not yet recognized and
the fair value of plan assets out of which the obligations are to be settled directly. If such
aggregate is negative, the asset is measured at the lower of such aggregate or the aggregate of
cumulative unrecognized net actuarial losses and past service cost and the present value of any
economic benefits available in the form of refunds from the plan or reductions in the future
contributions to the plan.
If the asset is measured at the aggregate of cumulative unrecognized net actuarial losses and past
service cost and the present value of any economic benefits available in the form of refunds from
the plan or reductions in the future contributions to the plan, net actuarial losses of the current
period and past service cost of the current period are recognized immediately to the extent that
they exceed any reduction in the present value of those economic benefits. If there is no change or
there is an increase in the present value of the economic benefits, the entire net actuarial losses of

the current period and past service cost of the current period are recognized immediately.
Similarly, net actuarial gains of the current period after the deduction of past service cost of the
current period exceeding any increase in the present value of the economic benefits stated above
are recognized immediately if the asset is measured at the aggregate of cumulative unrecognized
net actuarial losses and past service cost and the present value of any economic benefits available
in the form of refunds from the plan or reductions in the future contributions to the plan. If there
is no change or there is a decrease in the present value of the economic benefits, the entire net
actuarial gains of the current period after the deduction of past service cost of the current period
are recognized immediately.
Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of
the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a
right to use the asset. A reassessment is made after the inception of the lease only if one of the
following applies:
(a) There is a change in contractual terms, other than a renewal or extension of the arrangement;
(b) A renewal option is exercised and extension granted, unless the term of the renewal or
extension was initially included in the lease term;
(c) There is a change in the determination of whether fulfillment is dependent on a specified asset;
or
(d) There is a substantial change to the asset.
When a reassessment is made, lease accounting shall commence or cease from the date when the
change in circumstances give rise to the reassessment for scenarios (a), (c) or (d) and at the date of
renewal or extension period for scenario (b).
For arrangements entered into prior to January 1, 2005, the date of inception is deemed to be
January 1, 2005 in accordance with the transitional requirements of Philippine Interpretation
IFRIC 4.
Group as a lessee
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to
ownership of the leased item, are capitalized at the inception of the lease at the fair value of the
leased property or, if lower, at the present value of the minimum lease payments. Lease payments
are apportioned between the finance charges and reduction of the lease liability so as to achieve a
constant rate of interest on the remaining balance of the liability. Finance charges are reflected in
the consolidated statement of income.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are
classified as operating leases. Operating lease payments are recognized as expense in the
statement of income on a straight-line basis over the lease term.
Group as a lessor
Leases where the Group does not transfer substantially all the risks and benefits of ownership of
the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating
lease are added to the carrying amount of the leased asset and recognized over the lease term on
the same bases as rental income. Contingent rents are recognized as revenue in the period in
which they are earned.

Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a
result of a past event, it is probable that an outflow of resources embodying economic benefits will
be required to settle the obligation and a reliable estimate can be made of the amount of the
obligation. Where the Company expects some or all of a provision to be reimbursed, for example
under an insurance contract, the reimbursement is recognized as a separate asset but only when the
reimbursement is virtually certain. The expense relating to any provision is presented in the
statements of income net of any reimbursement. If the effect of the time value of money is
material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the
risks specific to the liability. Where discounting is used, the increase in the provision due to the
passage of time is recognized as a finance cost.
Foreign Currency Transactions
Transactions in foreign currencies are initially recorded in the functional currency rate ruling at the
date of the transaction. Monetary assets and liabilities denominated in foreign currencies are
retranslated at the functional currency rate of exchange ruling on the balance sheet date. All
differences are taken to the consolidated statement of income, except for foreign exchange
differences arising from the translation of assets and liabilities and profit and loss accounts of
JMBVI and subsidiaries which are taken directly to a separate component of stockholders’ equity.
The functional currency of JMBVI and Subsidiaries is US dollars.
At the reporting date, the assets and liabilities of JMBVI and Subsidiaries are translated into the
presentation currency of the Parent Company using the Philippine Dealing System (PDS) closing
rate on the balance sheet date and their statements of income are translated at the PDS weighted
average exchange rates for the year. The exchange differences arising from the translation are
taken directly to a separate component of stockholders’ equity, under the “Cumulative translation
adjustments” account. On disposal of a foreign entity, the deferred cumulative amount recognized
in stockholders’ equity relating to that particular foreign operation is recognized in the
consolidated statement of income.
Income Taxes
Current Income Tax
Current income tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the tax authority. The tax rates and tax laws used
to compute the amount are those that are enacted or substantively enacted at the balance sheet
date.
Deferred Income Tax
Deferred income tax is provided using the balance sheet liability method on temporary differences
on the balance sheet date between the tax bases of assets and liabilities and their carrying amounts
for financial reporting purposes. Deferred income tax liabilities are recognized for all taxable
temporary differences, except:

where the deferred income tax liability arises from the initial recognition of goodwill or of an
asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; and

in respect of taxable temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, where the timing of the reversal of the temporary

differences can be controlled and it is probable that the temporary differences will not reverse
in the foreseeable future.
Deferred income tax assets are recognized for all deductible temporary differences, carryforward
of unused tax credits and unused tax losses, to the extent that it is probable that future taxable
profit will be available against which the deductible temporary differences and the carryforward of
unused tax credits and unused tax losses can be utilized except:

where the deferred income tax asset relating to the deductible temporary difference arises from
the initial recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting profit nor taxable profit or
loss; and

in respect of deductible temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, deferred tax assets are recognized only to the extent
that it is probable that the temporary differences will reverse in the foreseeable future and
taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient future taxable profit will be
available to allow all or part of the deferred income tax asset to be utilized. Unrecognized
deferred income tax assets are reassessed at each balance sheet date and are recognized to the
extent that it has become probable that future taxable profit will allow the deferred income tax
asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply
in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted on the balance sheet date.
Income tax relating to items recognized directly in equity is recognized in consolidated statement
of changes in stockholders’ equity and not in the consolidated statement of income.
Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable
right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to
the same taxable entity and the same taxation authority.
Contingencies
Contingent liabilities are not recognized in the consolidated financial statements. They are
disclosed unless the possibility of an outflow of resources embodying economic benefits is
remote. Contingent assets are not recognized in the consolidated financial statements but are
disclosed in the notes to consolidated financial statements when an inflow of economic benefits is
probable.
Business Segments
The Group’s operating business are organized and managed separately according to the nature of
the products and services provided, with each segment representing a strategic business unit that
offers different products.
Segment Assets and Liabilities. Segment assets include all operating assets used by a segment and
consist principally of operating cash, receivables, inventories and property and equipment, net of
allowances and provisions. Segment liabilities include all operating liabilities and consist

principally of accounts payable and other current liabilities. Segment assets and liabilities do not
include deferred income taxes.
Inter-segment Transactions. Segment revenue, segment expenses and segment performance
include transfers among business segments. The transfers are accounted for at competitive market
prices charged to unaffiliated customers for similar products. Such transfers are eliminated in
consolidation.
Events After Balance Sheet Date
Post year events that provide evidence of conditions that existed on the balance sheet date are
reflected in the consolidated financial statements. Subsequent events that are indicative of
conditions that arose after balance sheet date are disclosed in the notes to consolidated financial
statements when material.
Earnings Per Common Share
Basic earnings per common share are determined by dividing net income by the weighted average
number of common shares outstanding, after retroactive adjustment for any stock dividends and
stock splits declared during the year.
Diluted earnings per common share amounts are calculated by dividing the net income for the year
attributable to the ordinary equity holders of the parent by the weighted average number of
common shares outstanding during the year plus the weighted average number of ordinary shares
that would be issued for outstanding common stock equivalents.

3. Significant Accounting Judgments and Estimates
Judgments
In the process of applying the Group’s accounting policies, management has made the following
judgments, apart from those involving estimations, which have the most significant effect on the
amounts recognized in the financial statements:
Operating lease commitments - Group as lessee
The Group has entered into commercial property leases on its sales outlets, trucking facilities and
administrative office locations. The Group has determined that it does not acquire all the
significant risks and rewards of ownership of these properties which are leased on operating
leases.
Determining functional currency
Based on the economic substance of the underlying circumstances relevant to the Group, the
functional currency of the companies in the Group has been determined to be generally the
Philippine peso, except for a subsidiary whose functional currency is the United States (US)
dollar. The Philippine peso is the currency of the primary economic environment in which the
Group generally operates. It is the currency that mainly influences the sale of goods and services
and the costs of manufacturing and selling the goods and the rendering of services.
Estimation Uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the
balance sheet date that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.

Allowance for probable losses
The Group maintains allowances for probable losses on receivables at a level considered adequate
to provide for potential uncollectible receivables. The level of this allowance is evaluated by the
Group on the basis of factors that affect the collectibility of the accounts. These factors include,
but are not limited to, the length of the Group’s relationship with debtors, their payment behavior
and known market factors. The Group reviews the age and status of the receivables, and identifies
accounts that are to be provided with allowance on a continuous basis. The amount and timing of
recorded expenses for any period would differ if the Group made different judgment or utilized
different estimates. An increase in the Group’s allowance for probable losses would increase the
Group’s recorded expenses and decrease current assets.
As of December 31, 2006 and 2005 allowance for probable losses on receivables amounted to
=321,283 and =
P
P277,965, respectively (see Note 6).
Inventory losses
The Group provides an allowance for inventories whenever the value of inventories becomes
lower than its cost due to damage, physical deterioration, obsolescence, changes in price levels or
other causes. The allowance account is reviewed on a annual basis. Inventory items identified to
be obsolete and unusable are written off and charged as expense for the period. As of December
31, 2006 and 2005, the carrying value of inventories amounted to P
=255,599 and =
P318,915,
respectively (see Note 7).
Estimated lives of property and equipment
The estimated useful lives used as basis for depreciating property and equipment items were
determined on the basis of management’s assessment of the period within which the benefits of
these asset items are expected to be realized taking into account actual historical information on
the use of such assets as well as industry standards and averages applicable to the Group’s assets.
The Group’s property and equipment balance amounted to =
P4,839,693 and =
P6,909,131 as of
December 31, 2006 and 2005, respectively (see Note 11).
Estimated residual value
The residual value of the Group’s property and equipment asset is estimated based on the amount
that would be obtained from disposal of the asset, after deducting estimated costs of disposal, if
the assets are already of the age and in the condition expected at the end of its useful life. Such
estimation is based on the prevailing price of scrap steel. The estimated residual value of each
asset is reviewed periodically and updated if expectations differ from previous estimates due to
changes in the prevailing price of scrap steel.
Estimated useful life of software development costs
The estimated useful life used as a basis for amortizing software development costs was
determined on the basis of management’s assessment of the period within which the benefits of
these costs are expected to be realized by the Group. Amortization on software development cost
recognized by the Group amounted to =
P61,127 and =
P47,867 in 2006 and 2005, respectively (see
Note 13).
Deferred income tax assets
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient future taxable profit will be
available to allow all or part of the deferred income tax assets to be utilized. Management expects

future operations will generate sufficient taxable profit that will allow all or part of the deferred
income tax assets to be utilized. The Group’s net deferred income tax assets amounted to
=372,622 and =
P
P242,318 as of December 31, 2006 and 2005, respectively (see Note 28).
Impairment of available-for-sale financial assets
The Group follows the guidance of PAS 39 in determining when an investment is other-thantemporarily impaired. This determination requires significant judgment. In making this judgment,
the Group evaluates, among other factors, the duration and extent to which the fair value of an
investment is less than its cost; and the financial health and near-term business outlook of the
investee, including factors such as industry and sector performance, changes in technology and
operational and financing cash flow.
The carrying value of available-for-sale investments amounted to =
P59,431 and =
P41,648 as of
December 31, 2006 and 2005, respectively (see Note 10).
Financial assets and liabilities
PFRS requires certain financial assets and liabilities to be carried at fair value, which requires the
use of accounting estimates and judgments. While significant components of fair value
measurement were determined using verifiable objective evidence (i.e., foreign exchange rates,
interest rates, volatility rates), the amount of changes in fair value would differ if the Company
utilized a different valuation methodology. Any changes in fair value of these financial assets and
liabilities (including derivative instruments) would directly affect the consolidated statement of
income and consolidated statement of changes in stockholders’ equity.
Total carrying value of financial assets and liabilities as of December 31, 2006 amounted to
=3,156,863 and =
P
P5,473,623, respectively (see Note 33).
Asset Impairment
PFRS requires that an impairment review be performed when certain impairment indicators are
present. Determining the value of property and equipment, investments in associates and software
development costs and other noncurrent assets, which require the determination of future cash
flows expected to be generated from the continued use and ultimate disposition of such assets,
requires the Group to make estimates and assumptions that can materially affect its consolidated
financial statements. Future events could cause the Group to conclude that the property and
equipment, investments in associates, software development costs and other noncurrent assets are
impaired. Any resulting impairment loss could have a material adverse impact on the Group’s
financial condition and results of operations.
The carrying value of property and equipment, investments in associates, software development
costs and other noncurrent assets amounted to =
P5,301,664 and =
P7,447,506 as of December 31,
2006 and 2005, respectively (see Notes 9, 11 and 13).
Pension Cost
The determination of the obligation and cost for pension and other retirement benefits is dependent
on the selection of certain assumptions used by actuaries in calculating such amounts. Those
assumptions were described in Note 27 and include among others, discount rate, expected return
on plan assets and rate of compensation increase. In accordance with PFRS, actual results that
differ from the Group’s assumptions are accumulated and amortized over future periods and
therefore, generally affect the recognized expense and recorded obligation in such future periods.
While it is believed that the Group’s assumptions are reasonable and appropriate, significant

differences in actual experience or significant changes in assumptions may materially affect the
Group’s pension and other retirement obligations.
The Group’s pension liability and pension asset as of December 31, 2006 amounted to =
P9,890 and
=37,855, respectively (see Note 27).
P
Contingencies
The Group is currently involved in legal and administrative proceedings. The Group’s estimate of
the probable costs for the resolution of these claims has been developed in consultation with
outside counsels handling defense in these matters and is based upon an analysis of potential
results. The Group and its legal counsels currently do not believe these proceedings will have a
material adverse effect on its financial position and results of operations. It is possible, however,
that future results of operations could be materially affected by changes in the estimates or in the
effectiveness of strategies relating to these proceedings (see Note 29).

4. Segment Information
The segment reporting format is determined to be business segments as the Group’s risks and rates
of return are affected predominantly by differences in the products and services produced. The
operating businesses are organized and managed separately according to the nature of the products
and services provided, with each segment representing a strategic business unit that offers
different products and serves different markets.
The Group is in the business of transporting of cargoes and passengers and providing manpower
services to foreign shipping principals, among others.
Subsidiaries under the shipping and transportation segment render passage transportation and
cargo freight services.
Subsidiaries under the manpower services render manning and personnel, particularly crew
management services.
Financial information about business segments follow:

Net revenue
Segment results/net income
Other information
Segment assets
Segment liabilities
Other information:
Capital expenditures
Depreciation and
amortization

Shipping and
Transportation
P
=10,968,662
248,729

2006
Manpower
Services Elimination Consolidated
P
=287,852
(P
=685,329) P
=10,571,185
29,996
(86,849)
191,876

10,492,357
5,299,351

494,736
428,041

(685,127)
(241,078)

10,301,966
5,486,314

580,493

4,676

585,169

1,263,564

11,726

1,275,290

Net revenue
Segment results/net income
Other information
Segment assets
Segment liabilities
Other information:
Capital expenditures
Depreciation and
amortization

Net revenue
Segment results/net income
Other information
Segment assets
Segment liabilities
Other information:
Capital expenditures
Depreciation and
amortization

Shipping and
Transportation
=
P11,599,386
100,811
11,249,420
6,713,314
(884,371)
1,283,162

Shipping and
Transportation
=
P9,528,629
630,719

2005
Manpower
Elimination Consolidated
Services
=
P356,250
(P
=276,018) =
P11,679,618
70,757
(105,878)
65,690
410,270
316,278

(306,079)
(107,584)

(11,704)

11,257

11,353,611
6,922,008
(896,075)
1,294,419

2004
Manpower
Elimination Consolidated
Services
=
P359,132
(P
=197,744)
=
P9,690,017
62,955
(181,161)
512,513

10,967,430
6,291,944

551,969
502,286

(426,184)
(85,705)

11,093,215
6,708,525

(2,381,660)

(10,862)

(2,392,522)

1,247,617

10,736

1,258,353

5. Cash and Cash Equivalents
Cash on hand and in banks
Cash equivalents

2006
P
=638,701
353,899
P
=992,600

2005
=572,416
P
300,432
=872,848
P

Cash in banks earns interest at the respective bank deposit rates. Cash equivalents are made for
varying periods of up to three months depending on the immediate cash requirements of the
Group, and earn interest at the respective short-term investment rates.

6. Receivables
Trade (see Note 20)
Nontrade (see Note 20)
Advances to officers and employees
Insurance and other claims
Less allowance for probable losses

2006
P
=1,652,717
712,968
36,718
23,712
2,426,115
321,283
P
=2,104,832

2005
=1,672,869
P
417,784
52,768
35,021
2,178,442
277,965
=1,900,477
P

Insurance claims pertain to the Group’s claims for reimbursement of losses against insurance
coverage for hull and machinery, cargo, and personal accidents.

7. Inventories

Fuel and lubricants (at cost)
Materials, parts and supplies:
At net realizable value
At cost
Total inventories at lower of cost and
net realizable value

2006
P
=78,238

2005
=165,808
P

177,361
203,847

153,107
269,034

P
=255,599

=318,915
P

2006
P
=509,141
71,631
4,874
585,646
29,938
P
=555,708

2005
=477,918
P
61,093
20,826
559,837
29,938
=529,899
P

2006

2005

P
=18,486

18,486

=16,336
P
2,150
18,486

28,429
5,308
(14,868)
18,869
P
=37,355

5,902
22,527

28,429
=46,915
P

8. Prepaid Expenses and Other Current Assets
Prepaid expenses
Input value-added tax
Others
Less allowance for probable losses

9. Investments in Associates
Acquisition cost:
Balances at beginning of year
Additions during the year
Balances at end of year
Accumulated
(Forward) equity in net earnings:
Balances at beginning of year
Equity in net earnings during the year
Disposal during the year
Balances at end of year

The details of investments of the Group’s associates which are accounted for under the equity
method follow:
Associates
Refrigerated Transport
Services, Inc. (RTSI)
Reefer Van Specialist, Inc.
(RVSI)
Aboitiz Project/T.S.
Corporation (APTSC)
WG & A Jebsen Ship
Management, Inc.

Country of
Incorporation
Philippines
Philippines
Philippines
Philippines

Nature of Business
Refrigerated transport
services
Refrigerated transport
services
Project logistics and
consultancy
Ship management

Percentage of
Ownership
50%
50%
50%
40%

Summarized financial information of the associates is as follows:
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Revenue
Net income

2006
P
=155,327
28,715
123,963
4,712
199,956
5,647

2005
=139,216
P
33,332
110,436
2,866
1,127,333
38,295

2006
P
=33,401
23,430
2,600
P
=59,431

2005
=19,409
P
20,039
2,200
=41,648
P

10. Available-for-Sale Investments
Listed shares of stock
Unlisted shares of stock - at cost
Club shares

Listed shares of stock and club shares are carried at market value. Unrealized gains on availablefor-sale investments are included in the “Stockholders’ Equity” section of the consolidated balance
sheets. Impairment loss arising from permanent decline in market value of certain available-forsale investments amounting to P
=6,600 was charged to 2005 consolidated statement of income (see
Note 3).
Unlisted shares of stock that do not have market values and there are no other reliable sources of
their fair values are stated at cost.

11. Property and Equipment
The details of this account are presented on page 26.
The Parent Company’s ships in operation, land and improvements, and buildings and warehouses,
were appraised to determine their market values. Based on the latest appraisal made by various
independent and professionally qualified firms of appraisers, the related property and equipment
have an aggregate market value of =
P7,644,000 against a net book value of =
P4,584,679 as of
December 31, 2006.
Containers include units acquired under finance lease arrangements (see Note 17). The related
depreciation of the leased containers amounting to =
P136,346 in 2006 and =
P113,690 in 2005 were
computed on the basis of the Group’s depreciation policy for owned assets.
To ensure the maintenance of the vessels in accordance with international standards, the Parent
Company has availed of the services of its subsidiary and ship management company, AJBTC, to
oversee the regular upgrading and maintenance of the vessels.
In 2006, the Group disposed one of the ships in operation resulting in a gain of P
=191,357. Another
ship in operation has been reclassified to noncurrent asset classified as held for sale in the 2006
consolidated balance sheet (see Note 12).

As of December 31, 2006
2006

Ships in
Operation
Cost
At January 1
Additions
Disposals
Reclassifications (Note 12)
At December 31
Accumulated
Depreciation,
Amortization and
Impairment Loss
At January 1
Depreciation and
amortization for
the year
Disposals
Reclassifications (Note 12)
At December 31
Net Book Value

Containers

Handling
Equipment
P
=1,301,341
12,800
(70,488)
(2,698)
1,240,955

Flight
Equipment

Furniture and
Equipment

=165,482
P
6,146
(15,296)

156,332

=583,443
P
60,991
(22,314)
181
622,301

P
=8,972,271
249,581
(1,132,526)
(2,783,953)
5,305,373

=
P1,976,604
16,363
(74,251)
(151,231)
1,767,485

3,518,105

1,601,102

973,773

100,693

434,926

765,678
(422,504)
(2,122,153)
1,739,126
P
=3,566,247

139,978
(74,045)
(151,251)
1,515,784
P
=251,701

106,542
(68,047)
(2,642)
1,009,626
P
=231,329

11,244
(1,706)

110,231
P
=46,101

73,798
(15,771)
772
493,725
P
=128,576

Land and
Improvements
=241,809
P
113,835

17,506
373,150

48,181
9,448

(1)
57,628
P
=315,522

Buildings and
Warehouses

Leasehold
Improvements

Transportation
Equipment

=230,187
P
9,356

(701)
238,842

P
=291,502
40,300
(26,172)
709
306,339

P
=247,449
28,917
(18,760)

257,606

147,851

134,721

161,020

19,475

(583)
166,743
P
=72,099

26,638
(4,547)
1,228
158,040
P
=148,299

31,625
(13,594)
805
179,856
P
=77,750

Ships Under
Refurbishment
and
Construction
in Progress
P
=19,415
186

(17,532)
2,069






P
=2,069

Total
P
=14,029,503
538,475
(1,359,807)
(2,937,719)
10,270,452

7,120,372
1,184,426
(600,214)
(2,273,825)
5,430,759
P
=4,839,693

As of December 31, 2005
2005

Cost
At January 1
Additions
Disposals
Reclassifications
At December 31
Accumulated
Depreciation,
Amortization and
Impairment Loss
At January 1
Depreciation and
amortization for
the year
Disposals
At December 31
Net Book Value

Ships in
Operation

Containers

Handling
Equipment

Flight
Equipment

P
=8,791,429
425,430
(244,588)

8,972,271

=
P1,991,900
843
(16,139)

1,976,604

P
=1,149,957
177,732
(26,348)

1,301,341

2,918,850

1,475,053

895,346

92,187

365,195

824,070
(224,815)
3,518,105
=5,454,166
P

140,823
(14,774)
1,601,102
=
P375,502

103,458
(25,031)
973,773
P
=327,568

8,552
(46)
100,693
P
=64,789

88,695
(18,964)
434,926
P
=148,517

=138,547
P
26,981
(46)

165,482

Furniture and
Equipment
=455,135
P
156,940
(28,632)

583,443

Land and
Improvements
=240,147
P
10,322
(8,660)

241,809

45,274
11,567
(8,660)
48,181
=193,628
P

Buildings and
Warehouses

Leasehold
Improvements

Transportation
Equipment

=220,387
P
11,148
(4,536)
3,188
230,187

P
=206,214
47,541
(4)
37,751
291,502

P
=231,803
33,190
(17,544)

247,449

133,867

117,798

135,484

18,520
(4,536)
147,851
=82,336
P

16,927
(4)
134,721
P
=156,781

33,940
(8,404)
161,020
P
=86,429

Ships Under
Refurbishment
and
Construction
in Progress
P
=12,915
47,439

(40,939)
19,415





P
=19,415

Total
P
=13,438,434
937,566
(346,497)

14,029,503

6,179,054
1,246,552
(305,234)
7,120,372
P
=6,909,131

12. Noncurrent Asset Classified as Held for Sale
Noncurrent asset classified as held for sale represents the carrying amount of a ship in operation,
which is expected to be recovered principally through a sale transaction. The ship in operation
classified as held for sale is covered by a Memorandum of Agreement (MOA) dated November 13,
2006 between the Group and a third party, wherein the Group is committed to sell and the third
party committed to buy the asset. The MOA provides that the expected time of delivery to the buyer
is between February 1 and April 30, 2007.
Liabilities directly associated with the noncurrent asset classified as held for sale consist of
long-term debt from various local banks (see Note 16).

13. Other Noncurrent Assets
2006

2005

P
=191,909
119,955
37,855
74,897
P
=424,616

=148,359
P
258,420
24,726
59,955
=491,460
P

Under
Development

Total

Software development costs
In use - net
Under development
Pension assets (see Note 27)
Refundable deposits and others

Movement of the Group’s software development costs follows:
As of December 31, 2006
In Use
Cost:
Balances at beginning of year
Additions
Reclassifications
Write-offs
Balances at end of year

P
=289,657
25,772
78,905

394,334

P
=258,420
19,285
(78,905)
(78,845)
119,955

P
=548,077
45,057

(78,845)
514,289

Accumulated amortization:
Balances at beginning of year
Amortization for the year
Balances at end of year
Net book values

141,298
61,127
202,425
P
=191,909




P
=119,955

141,298
61,127
202,425
P
=311,864

As of December 31, 2005
In Use

Under
Development

Total

Cost:
Balances at beginning of year
Additions
Balances at end of year

=
P197,976
91,681
289,657

=
P231,060
27,360
258,420

=
P429,036
119,041
548,077

Accumulated amortization:
Balances at beginning of year
Amortization for the year
Balances at end of year
Net book values

93,431
47,867
141,298
=148,359
P




=
P258,420

93,431
47,867
141,298
=
P406,779

2006
P
=114,400
144,639
105,681
P
=364,720

2005
=338,950
P
76,981
61,122
=477,053
P

14. Loans Payable
Peso loans
US dollar loans
US dollar overdraft facility

The peso loans pertain to unsecured short-term notes payable obtained by the Parent Company and
AOI from local banks with annual interest rates ranging from 7.08% to 10.25% in 2006 and 7.22%
to 10.60% in 2005.
The US dollar loans pertain to unsecured short-term notes payable obtained by AJBTC and JMI
from foreign and local banks and have outstanding balances amounting to US$2.95 million and
US$2.55 million as of December 31, 2006 and 2005, respectively. These loans bear interest rates of
6.00% in 2006 and 6.07% to 5.00% in 2005.
The US dollar overdraft facility pertains to a loan obtained from a foreign bank by Jebsens Orient
Shipping AS, a wholly owned subsidiary of JMBVI based in Norway, with interest at the aggregate
of London Inter-bank Offered Rate (LIBOR) plus a margin of 1.50% per year. This loan is secured
by an assignment of borrower’s earnings and a guarantee of JMBVI shareholder.

15. Accounts Payable and Other Current Liabilities
Trade (see Note 20)
Accrued expenses
Nontrade (see Note 20)
Unearned revenue - net of deferred discounts

2006
P
=1,130,651
1,474,362
460,733
104,348
P
=3,170,094

2005
=1,587,070
P
1,042,120
566,536
115,343
=3,311,069
P

16. Long-term Debt
Effective
Interest Rate
Bank loans:
Peso loans due until 2010
Australian (AU) dollar loan
due until 2009
Less current portion
Less liabilities directly associated
with asset classified as held
for sale

2006

2005

7.73% to 10.70%

P
=1,711,859

P
=2,529,231

LIBOR + 1.75%

18,215
1,730,074
486,441
1,243,633

37,627
2,566,858
461,164
2,105,694

455,037
P
=788,596


P
=2,105,694

Repayments of long-term debt outstanding as of December 31, 2006 are scheduled as follows:
2007
2008
2009
2010

P
=486,441
489,466
358,333
395,834
=1,730,074
P

Bank loans denominated in Philippine peso were obtained by the Parent Company and are
collateralized by certain parcels of land and vessels of the Parent Company with carrying value of =
P
3,609,606 in 2006 and =
P4,937,342 in 2005. The pledged assets have an aggregate appraised value
of P
=5,870,480 and =
P7,566,513 as of December 31, 2006 and 2005, respectively.
Some agreements covering bank loans provide for certain restrictions and requirements that include,
among others, maintenance of favorable financial ratios such as current ratio, debt to tangible net
worth ratio and debt service coverage ratio. As of December 31, 2006 and 2005, the Parent
Company was not able to meet the required current ratio of 1:1 and debt service coverage ratio of
1.5:1. However, the Parent Company has obtained waivers from the creditor banks which are valid
for one year from December 31, 2005 and 2006.
The AU dollar-denominated loan pertains to unsecured 5-year term loan obtained by International
Marketing and Logistics PTY Ltd (IML), a subsidiary of JMBVI based in Australia. This loan
requires IML to ensure that during the term of the loan, dividend payments will be restricted to
ensure that cash and cash equivalents reduced by the dividend payments exceed the debt service of
the following half year.

17. Finance Lease
The Parent Company acquired certain containers under finance lease arrangements denominated in
US dollars. Containers as of December 31, 2006 and 2005, shown under “Property and equipment”
account in the consolidated balance sheets, include the following amounts:
Cost
Less accumulated depreciation
Net book value

2006
P
=1,032,033
799,276
P
=237,757

2005
=1,113,424
P
743,709
=369,715
P

Future minimum lease payments under finance lease, together with the present value of minimum
lease payments, are as follows:
2006
2007
2008 to 2009
Total minimum lease obligation
Less amount representing interest
Present value of minimum lease payments
Less current portion

2006
P
=–
129,623
90,135
219,758
24,855
194,903
113,823
P
=81,080

2005
=165,636
P
139,992
97,344
402,972
52,089
350,883
140,393
=210,490
P

The outstanding balance of the US dollar-denominated finance lease obligation of US$3,967 as of
December 31, 2006 and US$6,613 as of December 31, 2005 has been restated at the rate prevailing
as of those dates of P
=49.132 to US$1 and =
P53.062 to US$1, respectively.

18. Redeemable Preferred Shares (RPS)
On January 7, 2003, the Parent Company issued 374,520,487 RPS in the form of stock dividends out
of capital in excess of par value at the rate of one share for every four common shares held by the
stockholders.
The RPS has the following features:

non-voting;

preference on dividends at the same rate as common shares;

redeemable at any time, in whole or in part, as may be determined by the BOD within a period
not exceeding 10 years from the date of issuance at a price of not lower than =
P6 per share as
may be determined by the BOD. The shares must be redeemed in the amount of at least
=250,000 per calendar year;
P

if not redeemed in accordance with the foregoing, the RPS may be converted to a bond bearing
interest at 4% over prevailing treasury bill rate to be issued by the Parent Company; and,

preference over assets in the event of liquidation.

As required by PAS 39, the excess of mandatory redemption price over the remaining issue price of
unredeemed preferred shares as of January 1, 2005 amounting to P
=374,520 was discounted up to
January 1, 2005 to determine its present value. The present value was determined using an effective
interest rate of 13.4% which is comparable to the interest rate of a 10-year Philippine peso bond at
the date of issuance. Present value of redemption price amounted to =
P176,630 as of January 1,
2005. The difference between the present value at January 1, 2005 and issue price amounted to =
P
101,725. This was charged against retained earnings as of January 1, 2005. Accretion of premium
amounted to P
=21,404 and =
P23,688 in 2006 and 2005, respectively, and was charged to interest
expense in the consolidated statement of income. The carrying value of the RPS is shown under
“Noncurrent Liabilities” account in the consolidated balance sheets.
On May 25, 2006, the Parent Company’s stockholders approved the Amendment of Article 7 of the
Articles of Incorporation to add a convertibility feature to the RPS so as to allow holders of
redeemable preferred shares, at their option, to convert every RPS into two (2) common shares of
the Company, which conversion must be exercised on or before December 29, 2006 or within 120
days from the approval by the SEC of such amendment, whichever occurs earlier.
On June 15, 2006, the SEC approved the Parent Company’s application for the amendment of its
Articles of Incorporation for the addition of this convertibility feature on the redeemable preferred
shares.
On July 27, 2006, the BOD approved the call to all preferred shareholders to convert at their option
preferred shares into common shares at the stipulated conversion price of P3.20 for one (1) preferred
share or two common shares for every one (1) RPS held. During the Conversion Period from
September 1 to October 13, 2006, a total of 70,343,670 preferred shares or 93.91% were converted
to common shares. Consequently, the Parent Company issued a total of 140,687,340 new common
shares to those RPS holders who opted to convert their preferred shares.
As a result of the conversion, the carrying value of the RPS as shown under “Noncurrent Liabilities”
section of the balance sheet was decreased from =
P200,317 in 2005 to P
=13,832 in 2006. Likewise,
the capital stock was increased by =
P140,687 representing the issuance of new common shares. The
excess between the carrying value of the preferred shares converted over the par value of the
common stock issued was credited to “Capital in excess of par value” amounting to
=67,203.
P

19. Stockholders’ Equity
a. Capital stock
2006
Common shares, =
P1 par value:
Balance at beginning of year
Increase during the year
Balance at end of year

Number of Shares
2005

4,000,000,000

4,000,000,000

2,375,000,000
1,625,000,000
4,000,000,000

Movements in the outstanding capital stock are as follows:
Number of Shares
2005
2006
Common shares issued:
Balance at beginning of year
Conversion from redeemable preferred shares
Issuance of shares during the year
Balance at end of year
Less treasury shares

2,343,965,560
140,687,340

2,484,652,900
38,516,500
2,446,136,400

1,929,844,437

414,121,123
2,343,965,560
38,516,500
2,305,449,060

b. Retained earnings
Retained earnings include undistributed earnings amounting to =
P284,533 in 2006 and
=227,207 in 2005 representing accumulated equity in net earnings of subsidiaries and associates,
P
which are not available for dividend declaration until received in the form of dividends from
such subsidiaries and associates. Retained earnings are further restricted for the payment of
dividends to the extent of the cost of the shares held in treasury.

20. Related Party Transactions
Transaction with associates and related parties
In the normal course of business, transactions with associates and other related companies consist of
shipping services, charter hire, management services, ship management services, purchases of
steward supplies, availment of stevedoring, arrastre, trucking, and repair services and rental. Those
transactions were entered into at terms no less favorable than could have been obtained if the
transactions were entered into with unrelated parties. The amounts included in the consolidated
financial statements with respect to these transactions are as follows:

2005

2006
RVSI
Pilmico Foods Corporation (PFC)
Fil-am Foods, Inc, (FFI)
APTSC
Abotrans Brokerage Corporation
(ABC)
Aboitiz Construction Group, Inc.
(ACGI)
Pilmico-Mauri Foods Corporation
(PMFC)
Aboitiz Equity Ventures (AEV)
RTSI
Aboitiz & Co. (ACO)
J&A Services
Total Distribution
Logistics Systems, Inc. (TDLSI)
Others

Revenue
P
=150,806
90,138
63,347
8,298

Purchases/
Expenses
P
=263

13
553

Revenue
=140,286
P
41,726
45,053
6,804

Purchases/
Expenses
=
P427

225
412

8,282

2,594

28

4,915

298,382

1,075
421
418
51

27,551
13,628
5,222
33,770

1,107



447


8,994
41,336


77,721
P
=403,151

75,426
45,949
P
=202,403


50,047
=289,938
P

77,147
24,833
=
P452,203

The consolidated balance sheets include the following amounts with respect to the transactions with
the above related parties:
2006

RVSI
Supercat Fast Ferry Corporation
PFC
FFI
APTSC
PMFC
TDLSI
RTSI
ACO
Others

Receivables/
Advances
P
=41,705
35,613
21,012
13,114
5,226
567
375
207

17,262
P
=135,081

Accounts
Payable and
Other Current
Liabilities
P
=2,444

17,112

85
567
2,475
3,309
2,222
45,010
P
=73,224

2005
Receivables/
Advances
=33,771
P
1,218


2,902

20,563
26,005
4,313
34,041
=122,814
P

Accounts
Payable and
Other Current
Liabilities
=
P2,302



217
96
6,357
1,810
10,359
76,505
=
P97,646

Compensation of the Group’s key management personnel
Compensation of the Group’s key management personnel comprised of short-term employee
benefits amounting to =
P57,703 in 2006, =
P56,358 in 2005 and =
P45,995 in 2004 and post-employment
benefits amounting to =
P4,604 in 2006, P
=1,613 in 2005 and =
P1,591 in 2004.

21. Operating Expenses
Fuel and lubricants
Charter hire (see Note 32)
Depreciation and amortization
(see Note 24)
Outside services
Personnel (see Notes 25 and 27)
Repairs and maintenance
Insurance
Food and subsistence
Commissions
Steward supplies
Others

2006
P
=3,367,745
1,331,950

2005
=3,254,582
P
1,890,139

2004
=
P2,651,604

863,766
604,343
526,585
375,671
239,566
229,222
134,381
94,003
372,614
P
=8,139,846

865,746
641,499
531,048
368,917
295,649
273,987
204,634
123,584
257,952
=8,707,737
P

891,828
586,980
559,908
569,315
359,673
316,308
199,191
138,674
341,490
=
P6,614,971

2006
P
=320,974
256,191
170,527
97,014
89,654
42,402
41,097
60,813
P
=1,078,672

2005
=460,654
P
254,994
173,067
61,098
112,667
48,957
47,112
67,203
=1,225,752
P

2004
=
P462,746
237,144
109,801
36,356
124,028
34,217
27,866
76,196
=
P1,108,354

22. Terminal Expenses
Outside services (see Notes 20 and 32)
Depreciation (see Note 24)
Transportation and delivery
Personnel (see Notes 25 and 27)
Repairs and maintenance
Rent
Fuel and lubricants
Others

23. Overhead Expenses
Personnel (see Notes 25 and 27)
Depreciation and amortization
(see Note 24)
Outside services
Advertising
Rent
Communication, light and water
Provision for probable losses
(see Note 6)
Entertainment, amusement and recreation
Others

2006
P
=442,567

2005
=504,509
P

2004
=
P516,060

155,333
133,365
91,952
77,667
76,074

173,679
120,339
111,396
83,874
100,874

129,381
150,683
119,117
65,780
120,029

56,042
22,473
426,895
P
=1,482,368

71,796
29,296
350,251
=1,546,014
P

112,928
33,637
188,394
=
P1,436,009

24. Depreciation and Amortization Expenses
This account consists of depreciation and amortization expenses on the following:
Ships in operation and improvements
(see Note 11)
Other property and equipment
(see Note 11)
Software development costs
(see Note 13)

2006

2005

2004

P
=813,280

=824,070
P

=
P860,053

400,883

422,482

370,747

61,127
P
=1,275,290

47,867
=1,294,419
P

27,553
=
P1,258,353

2006
P
=706,874
243,094
10,779
105,419
P
=1,066,166

2005
=666,868
P
237,455
19,832
172,500
=1,096,655
P

2004
=
P600,960
288,386
22,064
200,914
=
P1,112,324

2006

2005

2004

25. Personnel Expenses
Salaries and wages
Crewing cost
Retirement benefits (see Note 27)
Other employee benefits

26. Finance Costs

Interest expense
(see Notes 14, 16 and 17)
Other financing costs
Interest income

P
=353,049
3,012
356,061
(18,298)
P
=337,763

=383,406
P
18,429
401,835
(26,166)
=375,669
P

=
P382,043
14,103
396,146
(33,865)
=
P362,281

27. Pension Benefits
The Group has funded defined benefit pension plans covering all regular and permanent employees.
The benefits are based on employees’ projected salaries and number of years of service.
The following tables summarize the components of benefit expense recognized in the consolidated
statements of income and the funded status and amounts recognized in the consolidated balance
sheets for the plan.
Certain subsidiaries have defined benefit liability as of December 31, 2006 and 2005. The following
tables summarize the components of net benefit expense recognized by JMI, AJBTC and WSI as

included in the consolidated statements of income and the funded status and amounts as included in
the consolidated balance sheets.
Net Benefit Expense (recognized in costs and expenses)
Current service cost
Interest cost on benefit obligation
Expected return on plan assets
Net actuarial loss
Net benefit expense

2006
P
=5,025
5,743
(2,686)
165
P
=8,247

2005
=2,876
P
4,538
(2,049)
1,785
=7,150
P

2004
=
P3,045
3,456
(1,775)

=
P4,726

Benefit Liability
Defined benefit obligation
Fair value of plan assets
Unrecognized net actuarial losses

2006
P
=97,909
(38,904)
59,005
(49,115)
P
=9,890

2005
=47,826
P
(28,060)
19,766
(8,406)
=11,360
P

Changes in the present value of the defined benefit obligation are as follows:
Defined benefit obligation at beginning
of year
Interest cost
Current service cost
Actuarial loss on obligations
Benefits paid
Defined benefit obligation at end of year

2006

2005

P
=47,826
5,743
5,025
46,509
(7,194)
P
=97,909

=36,872
P
4,538
2,876
3,540

=47,826
P

2006

2005

P
=28,060
2,686
9,717
(7,194)
5,635
P
=38,904

=20,788
P
2,049
2,455

2,768
=28,060
P

Change in the fair value of plan assets are as follows:
Fair value of plan assets at beginning
of year
Expected return
Actual contributions
Benefits paid
Actuarial gain on plan assets
Fair value of plan assets at end of year

Unrecognized actuarial loss are as follows:
Net cumulative unrecognized actuarial
loss at beginning of the year
Actuarial loss (gain) on plan assets
Actuarial loss on obligations
Actuarial loss recognized
Net cumulative unrecognized actuarial
loss at end of the year

2006

2005

2004

P
=8,406
(5,635)
46,509
(165)

=9,419
P
(2,768)
3,540
(1,785)

=
P6,766
(163)
2,816

P
=49,115

=8,406
P

=
P9,419

The Parent Company and AOI have defined benefit asset as of December 31, 2006 and 2005. The
following tables summarize the components of net benefit expense recognized by them as included
in the consolidated statements of income and the funded status and amounts as included in the
consolidated balance sheets.
Net Benefit Expense (recognized in costs and expenses)
Current service cost
Interest cost on benefit obligation
Expected return on plan assets
Recognized actuarial loss (gain)
Net benefit expense

2006
P
=8,936
9,539
(18,219)
2,276
P
=2,532

2005
=13,713
P
11,356
(11,703)
(684)
=12,682
P

2004
=
P15,049
11,446
(9,157)

=
P17,338

Pension Asset

Fair value of plan assets
Defined benefit obligation
Unrecognized net actuarial gain
Pension asset at year end

2006
P
=154,299
(103,684)
50,615
(12,760)
P
=37,855

2005
=146,463
P
(81,939)
64,524
(39,798)
=24,726
P

Changes in the present value of the defined benefit obligation are as follows:
2006
Defined benefit obligation at beginning
of year
Interest cost
Current service cost
Actuarial loss (gain) on obligations
Benefits paid
Defined benefit obligation at end of year

P
=81,939
9,539
8,936
32,894
(29,624)
P
=103,684

2005
=81,113
P
11,356
13,713
(18,783)
(5,460)
=81,939
P

Change in the fair value of plan assets are as follows:
2005

2006
Fair value of plan assets at beginning
of year
Expected return
Actual contributions
Benefits paid
Actuarial loss (gain) on plan assets
Fair value of plan assets at end of year

P
=146,463
18,219
15,661
(29,624)
3,580
P
=154,299

=130,028
P
11,703
25,535
(5,460)
(15,343)
=146,463
P

Unrecognized actuarial gain are as follows:
2006
Net cumulative unrecognized actuarial
gain at beginning of the year
Actuarial (loss) gain on obligations
Actuarial (loss) gain on plan assets
Actuarial loss (gain) recognized
Net cumulative unrecognized actuarial
gain at end of the year

2005

2004

P
=39,798
(32,894)
3,580
2,276

=37,042
P
18,783
(15,343)
(684)

=
P–
29,970
7,072

P
=12,760

=39,798
P

=
P37,042

The principal assumptions used in determining pension benefit obligations for the Group’s plans are
shown below:
Discount rate
Expected rate of return on assets
Future salary increases

2006
8%
15%
5%

2005
14%
9%
8%

2004
=12%
P
9%
8%

The major categories of plan assets as a percentage of the fair value of total plan assets are as
follows:
2006
Investments in:
Common trust fund
Notes receivable
Shares of stock
Government securities and other
debt securities
Others

2005

2004

3%
1
19

1%
14
17

1%
13
15

74
3
100%

66
2
100%

63
8
100%

Experience adjustments on plan liabilities as of December 31, 2006 and 2005 amounted to
=
P7.4 million and =
P0.5 million, respectively. While experience adjustments on plan assets as of
December 31, 2006 and 2005 amounted to =
P2.7 million and (P
=1.0) million, respectively.

28. Income Tax
The components of deferred income tax assets (liability) are as follows:
2005
=92,626
P

2006
P
=212,165

NOLCO
Allowances for:
Probable losses
Inventory obsolescence
MCIT
Unrealized foreign exchange gain
Accrued pension benefits and others

65,579
40,211
40,215
(1,156)
4,843

102,619
41,132
20,294
(1,479)
(2,109)
P
=372,622

=242,318
P

In computing deferred income tax assets and liability in 2006, the rate used was 35% which is the
rate expected to apply to taxable income in the years in which the deferred income tax assets and
liability are expected to be recovered or settled.
The reconciliation of provision for income tax computed at the statutory tax rate to provision for
income tax as shown in the consolidated statements of income is summarized as follows:

Provision for income tax at statutory tax
rate
Income tax effects of:
Gain on sale of investment already
subjected to final tax
Income tax holiday incentive on
registered activities
(see Note 30)
Interest income already subjected to
a lower final tax and dividend
income exempt from tax
Expired MCIT
Nondeductible interest expense
and others

2006

2005

2004

P
=75,845

=8,823
P

=
P205,836

(91,793)
(62,482)

(52,256)

(43,584)

(45,032)
30,109

(4,233)

(6,116)

(1,756)
(P
=95,109)

11,584
(P
=36,082)

(23,013)
=
P133,123

Deferred tax assets on NOLCO amounting to =
P52, =
P423 and =
P9,650 were not recognized in 2006,
2005 and 2004, respectively, since management believes that the benefit will not be realized in the
future.

As of December 31, 2006, details of the Group’s NOLCO and MCIT which can be carried forward
and claimed as deduction from regular taxable income and tax credit against regular income tax due,
respectively, are as follows:
NOLCO
Year
Incurred
2006
2005
2004
2003

Availment
Period
2007-2009
2006-2008
2005-2007
2004-2006

MCIT
Year
Incurred
2006
2005
2004
2003

Availment
Period
2007-2009
2006-2008
2005-2007
2004-2006

Amount
P
=346,757
259,027
438
2,000
=618,348
P

Applied
=
P–



=
P–

Expired
=–
P


(2,000)
(P
=2,000)

Balance
=
P346,757
259,027
438

P
=606,222

Amount
P
=10,188
10,094
12
30,109
=50,403
P

Applied
=
P–



=
P–

Expired
=–
P


(30,109)
(P
=30,109)

Balance
P10,188
=
10,094
12

=
P20,294

29. Contingencies
There are certain legal cases filed against the Group in the normal course of business. Management
and its legal counsel believe that the Group has substantial legal and factual bases for its position
and are of the opinion that losses arising from these cases, if any, will not have a material adverse
impact on the consolidated financial statements.
30. Earnings Per Common Share
Earnings per common share were computed as follows:

Net income attributable to equity holders
of the parent (a)
Weighted average number of common
shares outstanding for the year (b):
Earnings per common share (a/b)

2006

2005

2004

P
=197,301

=41,969
P

=
P484,449

2,340,626,847 1,967,344,691 1,891,327,937
P
=0.08

=0.02
P

=
P0.22

31. Registration with the BOI
The Parent Company is registered with the BOI under the Omnibus Investment Code of 1987 as a
new operator of inter-island shipping on a pioneer status through the following:
Ships in Operations

BOI Registration

MV SuperFerry 15, 16, 17 and 18

Entitled to income tax holiday starting
February 13, 2003 up to January 7, 2007.

MV SuperFerry 19

Entitled to income tax holiday starting
December 29, 2004 up to October 18,
2006.

MV SuperFerry 12

Entitled to income tax holiday for a period of
three years starting May 4, 2005.

AOI is also registered with the BOI as an Expanding Operator of Air Transport Facility (Passenger
and Cargo) on a non-pioneer status with a capacity of 2 aircrafts, subject to specific and general
terms and conditions set forth in the registration. As a BOI registered enterprise, AOI is entitled to
certain tax and nontax incentives such as income tax holiday for 3 years (starting from November
1998 or from the actual start of commercial operations whichever is earlier but in no case earlier
than the date of registration), unrestricted use of consigned equipment, employment of foreign
nationals, and others. All the fiscal and non-fiscal incentives set forth in the registration which do
not contain a specific period for enjoyment shall terminate after a period of not more than ten years
from the date of registration or actual start of commercial operations.
Income tax holiday incentive availed by the Group amounted to =
P62,482 in 2006 and =
P52,256 in
2005.
32. Commitments and Other Matters
a.

In 2002, the Parent Company entered into a Memorandum of Agreement (Agreement) with
Asian Terminals, Inc. (ATI) for the use of the latter’s facilities and services at the South Harbor
for the embarkation and disembarkation of the Parent Company’s domestic passengers, as well
as loading, unloading and storage of cargoes. The Agreement shall be for a period of five years,
which shall commence from the first scheduled service of the Parent Company at the South
Harbor. The Agreement is renewable for another five years under such terms as may be agreed
by the parties in writing. If the total term of the Agreement is less than ten years, then the
Parent Company shall pay the penalty equivalent to unamortized reimbursement of capital
expenditures and other related costs incurred by ATI in the development of South Harbor. The
Agreement became effective on January 14, 2003.
Under the terms and conditions of the Agreement, the Parent Company shall avail of the
terminal services of ATI, which include, among others, stevedoring, arrastre, storage,
warehousing and passenger terminal. Domestic tariff for such services (at various rates per type
of service as enumerated in the Agreement) shall be subject to an escalation of 5% every year.

Total service fees charged to operations amounted to =
P247,234 in 2006, P
=279,808 in 2005 and =
P
222,230 in 2004.
b.

AJBTC, JMI and AJMSI (Agents) have outstanding agreements with foreign shipping
principals, wherein the Agents render manning and crew management services consisting
primarily of the employment of crew for the principals’ vessels. As such, the principals have
authorized the Agents to act on their behalf with respect to all matters relating to the manning of
the vessels. Total service fees recognized in the consolidated statements of income amounted to
=274,518 in 2006, P
P
=342,839 in 2005 and =
P321,858 in 2004.

c.

JMBVI and Subsidiaries have outstanding Charter Party Agreements with vessels’ owners for
the use of the vessels or for sublease to third parties within the specified periods of 1 to 3 years
under the terms and conditions covered in the agreements. In consideration thereof, JMBVI
recognized charter hire expense amounted to =
P1,331,950 and =
P1,890,139 in 2006 and 2005,
respectively.

d.

The Group has entered into various operating lease agreements for its office spaces. As of
December 31, 2006, the future minimum rentals payable under the noncancellable operating
leases are as follows:
Within one year
After one year but not more than five years
More than five years

P35,518
=
165,762
64,469
=265,749
P

e. The Parent Company disposed of its investment in a cargo-handling unit, Davao Integrated Port
and Stevedoring Services Corporation, during the year. The disposal resulted in a net gain of =
P
262,264.
f.

On September 15, 2006, the Group acquired an additional 5.71% of the voting shares of its
minority interest, taking its ownership to 100%. Cash consideration of =
P869,000 was paid. The
acquisition was accounted for as an equity transaction under the entity concept method.

33. Financial Risk Management Objectives and Policies
The Group’s principal financial instruments comprise of cash and cash equivalents, receivables,
accounts payable and other current liabilities, redeemable preferred shares, and interest-bearing
loans. The main purpose of these financial instruments is to raise finances for its operations and
capital expenditures.
The main risks arising from the Group’s financial instruments are interest rate risk resulting from
movements in interest rates that may have an impact on outstanding long-term loans; credit risk
involving possible exposure to counter-party default on its cash investments and receivables;
liquidity risk in terms of the proper matching of the type of financing required for specific
investments; and foreign exchange risk in terms of foreign exchange fluctuations that may
significantly affect its foreign currency denominated placements and borrowings.

Interest rate risk
The Group’s exposure to market risk for changes in interest rates relates primarily to its long-term
debt and obligations under finance lease. To manage this risk, the Group determines the mix of its
debt portfolio as a function of the level of current interest rates, the required tenor of the loan, and
the general use of the proceeds of its various fund raising activities. As of December 31, 2006 and
2005, 10% and 7% of the Group’s long-term debt had floating interest rates based on MART1 rates
ranging from 6.47% to 7.73% and 10.1% to 12.1% and 9.1% to 9.7%, respectively, and 90% and
93% are with fixed rates both ranging from 9.9% to 10.7%, respectively (see Note 16). Interest
rates of obligations under finance lease range from 8.2% to 13.7% (see Note 17).
The carrying amounts, by maturity, of the financial instruments as of December 31, 2006, that are
exposed to interest rate risk are as follows:
Fixed rate - long-term debt
Floating rate - long-term debt
Obligations under finance lease

<1 year
=
P479,872

113,823
=593,695
P

1-5 years
=
P1,081,987
168,215
81,080
=
P1,331,282

Total
=
P1,561,859
168,215
194,903
=
P1,924,977

Credit risk
The Group trades only with recognized, creditworthy third parties and the exposure to credit risk is
monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not
significant. Since the Group trades only with the recognized third parties, collateral is not required
in respect of financial assets.
For its cash investments, the Group’s credit risk is generally concentrated on possible default of the
counter-party, with a maximum exposure equal to the carrying amount of these investments (see
Note 34). The risk is mitigated by the short-term and/or liquid nature of its cash investments mainly
in bank deposits and placements, which are placed with financial institutions of high credit standing.
Liquidity risk
The Group maintains sufficient cash and cash equivalents to finance its operations. Any excess cash
is invested in short-term money market placements. These placements are maintained to meet
maturing obligations and pay dividend declarations. The Group, in general, matches the appropriate
long-term funding instruments with the general nature of its equity investments.
The Group’s policy is that not more than 35% of borrowings should mature in any 12-month period.
As of December 31, 2006, 28% of its long-term debt will mature in less than one year.
Foreign Exchange
The foreign exchange risk of the Group is mainly with respect to its foreign currency-denominated
bank loans and obligation under capital lease. To mitigate the risk of incurring foreign exchange
losses, foreign currency holdings are matched against the potential need for foreign currency in
financing equity investments and new projects.

34. Financial Instruments
Set out below is a comparison by category of carrying amounts and fair values of all the Group’s
financial instruments as of December 31, 2006 and 2005:
2005

2006
Financial assets:
Cash and cash equivalents
Receivables
Available-for-sale investments

Financial liabilities:
Loans payable
Accounts payable and other
current liabilities
Long-term debt
Obligations under finance lease
Redeemable preferred shares

Carrying
Amount

Fair
Value

Carrying
Amount

Fair
Value

P
=992,600
2,104,832
59,431
P
=3,156,863

P
=992,600
2,104,832
59,431
P
=3,156,863

=872,848
P
1,900,477
41,648
=2,814,973
P

=
P872,848
1,900,477
41,648
=
P2,814,973

P
=364,720

P
=364,720

=477,053
P

=
P477,053

3,170,094
1,730,074
194,903
13,832
P
=5,473,623

3,170,094
1,772,988
201,872
14,178
P
=5,523,852

3,311,069
2,566,858
350,883
200,317
=6,906,180
P

3,311,069
2,496,713
369,854
194,554
=
P6,849,243

Fair value is defined as the amount at which the financial instrument could be exchanged in a
current transaction between knowledgeable willing parties in an arm’s-length transaction, other than
in a forced liquidation or sale. Fair values are obtained from quoted market prices, discounted cash
flow models and option pricing models, as appropriate.
The following methods and assumptions are used to estimate the fair value of each class of financial
instruments:
Cash and cash equivalents and other financial assets and financial liabilities
The carrying amount of cash and cash equivalents and other financial assets and financial liabilities
approximates fair value due to the relatively short-term maturity of these financial instruments.
Long-term borrowings, obligations under finance lease and redeemable preferred shares
The fair value of borrowings with variable interest rates approximates their carrying amounts due to
quarterly repricing of interest. The fair values of borrowings with fixed interest rate and obligations
under finance lease are based on the discounted net present value of cash flows using an effective
discount rate of 8.2% to 12.6% and 9.9% to10.7% respectively, as of December 31, 2006 and 2005.

SGV & CO

SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines

Phone: (632) 891-0307
Fax:
(632) 819-0872
www.sgv.com.ph
BOA/PRC Reg. No. 0001
SEC Accreditation No. 0012-F

INDEPENDENT AUDITOR’S REPORT
ON SUPPLEMENTARY SCHEDULES

The Stockholders and the Board of Directors
Aboitiz Transport System (ATSC) Corporation
12th Floor, Times Plaza Building
United Nations Avenue corner Taft Avenue
Ermita, Manila
We have audited in accordance with Philippine Standards on Auditing, the consolidated financial
statements of Aboitiz Transport System (ATSC) Corporation and Subsidiaries included in this Form
17-A and have issued our report thereon dated February 22, 2007. Our audits were made for the purpose
of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the
Index to Financial Statements and Supplementary Schedules are the responsibility of the
Company’s management. These schedules are presented for the purposes of complying with the
Securities Regulation Code Rule 68 and are not part of the basic financial statements. These schedules
have been subjected to the auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly state in all material respects the financial statements data required to be set forth
therein in relation to the basic financial statements taken as a whole.
SYCIP GORRES VELAYO & CO.

Ladislao Z. Avila, Jr.
Partner
CPA Certificate No. 69099
SEC Accreditation No. 0111-AR-1
Tax Identification No. 109-247-891
PTR No. 0266523, January 2, 2007, Makati City
February 22, 2007

SGV & Co is a member practice of Ernst & Young Global

1
1

46

47

48
49

49

50

51

52

53

54

55

56

57

EXHIBIT 18. SUBSIDIARY OF THE REGISTRANT

ABOITIZ TRANSPORT SYSTEM (ATSC) CORPORATION has consolidated subsidiaries
that are wholly-owned namely:

Name

Jurisdiction

Aboitiz One, Inc.
(Incorporated in January 28, 1988)

Philippines

Aboitiz Jebsen Bulk Transport Corporation
(Incorporated in May 12, 1966)

Philippines

Jebsens Maritime, Inc.
(Incorporated in January 02, 1970)

Philippines

Aboitiz Jebsens Manpower Solutions, Inc.
(Incorporated in May 31, 1994)

Philippines

Jebsen Management (BVI) Limited
(Incorporated in August 27, 1999)

British Virgin Islands

Cebu Ferries Corporation
(Incorporated in December 21, 1995)

Philippines

WG&A Supercommerce, Inc.
(Incorporated in July 2000)

Philippines

Zoom In Packages, Inc.
(Incorporated in June 06, 2002)

Philippines