COVER SHEET 4 409 SEC Registration Number ABOITIZTRANSPORTSYSTEM (ATSC) CO R P O R A T I O N (Companys Full Name) 12THFLOORT IM E S P L A Z A B UILDIN GU.N.AV E. C O R N E R T A F T AVE. E R M IT A M A N IL A (Business Address: No. Street City/Town/Province) ISMAEL R. CABONSE02-5287516 / 02-5287630 (Contract Person)(Company Telephone Number) 12311 7 -A 0 5 2 4MonthDay(Form Type)Month Day (Fiscal Year)(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. ofStockholdersDomesticForeign To be accomplished by SEC Personnel concerned File NumberLCU Document IDCashier S T A M P S 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 3.BIR Tax Identification No.000-313-401

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

5. Philippines 6.(SEC Use Only) Province, Country or other jurisdiction of incorporation or organization Industry Classification Code: 7.12th Floor Times Plaza Building United Nations Avenue corner Taft Avenue Ermita, Manila __________ 1000 Address of principal office Postal Code 8. (02) 528-7516 and (02) 528-7630. Issuer's telephone number, including area code 9.William Gothong and Aboitiz Inc. Serging Osmea 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 ClassNumber of Shares of Common Stock Outstanding and Amount of Debt Outstanding Common stock, P 1 par value2,446,136,400 Redeemable preferred stock, P 1 par value4,560,417 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 Philippinesduringtheprecedingtwelve(12)months(orforsuchshorterperiodthattheregistrantwas 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 1Business4 Item 2Properties 24 Item 3Legal Proceedings 27 Item 4 Submission of Matters to a Vote of Security Holders 27 PART II OPERATIONAL AND FINANCIAL INNFOMRATION Item 5Market for Registrants Common Equity and Related Stockholder Matters 28 Item 6Managements Discussion and Analysis of Financial Condition & Results of Operations30 Item 7Financial Statements 41 Item 8Information on Independent Accountant and Other Related Matters42 PART III CONTROL AND COMPENSATION INFORMATION Item 9Directors and Executive Officers of the Registrant 43 Item 10Executive Compensation53 Item 11Security Ownership of Certain Beneficial Owners and Management 54 Item 12Certain Relationships and Related Transactions 56 PART IV CORPORATE GOVERNANCE 57 PART V EXHIBITS AND SCHEDULES Item 13a.Exhibits58 b.Reports on SEC Form 17-C59 SIGNATURES INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES INDEX TO EXHIBITS

PART I BUSINESS AND GENERAL INFORMATION Item 1.Business ABOITIZ TRANSPORT SYSTEM (ATSC) CORPORATION (ATS) Business Development TheCompanyshistorydatesbacktoMay26,1949withtheestablishmentofWilliamLines, Inc.,apassengerandcargoshippingcompanyheadquarteredinCebu.Drivenbythevision ofprovidingthenationwiththebestshippingservices,thecompanyconsolidatedits resourcesandexpertisewithtwootherCebubasedcompaniesnamelyCarlosA.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 andGothongGroup.ThebuyoutbyAEVoftheshareholdingsofC&GGroupwasexecuted 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)toAboitizTransportSystem(ATSC)Corporation which the Securities and Exchange Commission (SEC) approved last February 4, 2004. LastOctober24,2005,theSECauthorizedtheissuanceof414,121,123commonsharesin exchange for the 100% of the outstanding capital stock of Aboitiz One Inc. (AONE), 50% of the outstandingcapitalstockofJebsenManagement(BVI)Limited(JMBVI)and62.5%ofthe outstandingcapitalstockofeachofAboitizJebsenBulkTransportCorporation(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 certainaffiliatesofACO.TheownershippercentageofACOincreasedfrom.02%to16.50% while AEV, although it remained the controlling stockholder of ATS, decreased its percentage ofownershipfrom92.69%to76.11%.Thesaidshareswaptransactionconsolidatedthe transportandlogisticsbusinessesoftheAboitizGroupandisenvisionedtomaximizethe 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),AboitizJebsenManpowerSolutions,Inc.(AJMan),JebsenMaritimeInc. (JMI), Jebsen Management (BVI) Limited (JMBVI), Zoom In Packages, Inc. (ZIP). Business of ATS TheCompanyisprincipallyengagedinprovidinginter-islandpassengertransportand cargolinerservicesincontainersorbreakbulkthrougharoutenetworkcomprising20 portsofcallinthePhilippines.Today,ATSisthelargestproviderofdomesticferry transportationservicesinthePhilippines.Itsbranchesmaintainwarehousesand containeryardsinallofkeylocationsofoperations.Italsohasextensivepassagesales network nationwide. Full branch operations are maintained in Manila, Cebu, Iloilo, Cagayan de Oro, Davao, General Santos,Bacolod,Zamboanga,Dumaguete,PuertoPrincesa,Iligan,Tagbilaran,Dipolog, Cotabato, Nasipit and Surigao.An extensive agency network covering Ormoc, Coron, Ozamiz, and Jagna strategically supports these branches. Currently,ATSfleetincludes12Companyownedand1charteredoperatingvessels.This vesselfleethasacombinedGrossRegisteredTonnage(GRT)ofapproximately104,387 metrictons(MTs),totalpassengercapacityofapproximately21,857passengersand aggregate cargo capacity of approximately 1,810 twenty-foot equivalent units (TEUs). Withanestimatedmarketshareof68%ofthedomesticpassengerferryserviceandan 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 Companys 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 inter-island 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 loweringoffaresbyAirlineshavemadethecompetitivelandscapeanexcitingonefor SuperFerry. Yearafteryear,SuperFerrydoesasurveytoseewhatthecustomersexpectfromthe company.Thetopfivecustomerexpectationshavealwaysbeenbetterpromosand discounts, schedules and routes, customer service, cleanliness, and safety and security. MultipleinitiativeswerecarriedoutbySuperferrytomeettheseexpectationsalways makingsurethatsolutionsweresimple,enjoyable,alwaysavailableasanoption,and reflective of our passion to serve. SuperFerrylaunchedtheTRIPIDFARES,abywordofTripnaTipidgiventoitslower fareswhichcustomerscanavailofanytime.Thisisayear-roundpromothatoffered discountsofupto50%onselectedportsofcall.Therewerealsospecialpromoswith attractiverates:TheBirthdayDiscountwasaninnovativeyear-roundschemethatwas veryeasyforcustomerstounderstand:"Angedadmoangdiscountmoatngpamilya mo!".TheFiestaFarepromopackagedbuy-one-take-one,orfreereturntrips,for selectedportsthathadongoingfiestas.TheSailSalepromowasamonthlypromothat encouragedpassengerstobuyticketsinadvancetoavailoflowerratesandoffereda pioneeringonerateeachforCentralVisayas,WesternVisayas,NorthernMindanao,and SouthernMindanao.Lastly,TuristangPinoywasapromodesignedtostimulatetravel duringtheSeptemberTravelMonth,andtooktheSailSalepricingapproachastep further by offering one rate for Visayas and one rate for Mindanao. TheSuperFerrycallcenterreneweditsISOcertificationforthesecondyear,ensuring that quality systems are in full force to service customer needs.The E-ticket facility and theentireSuperFerrywebsitewereredesignedtomakeitmorecustomerfriendly, providing our customers with easier access to information. SuperFerrypioneeredthefreeshuttleserviceinWesternVisayasandtheSuperConnect serviceinNorthernMindanao.Bothinitiativeswerelaunchedinpartnershipwithtop localbusoperators,ensuringthesmoothentryoftheserviceintothemarket.Italso expandedourservicedeliverytocustomers,allowedusconvenientaccesstovarious townsandcities,andprovidedaconvenientpick-upanddropoffpointforSuperFerry passengers.Inaddition,theSuperConnectpartnershipwithoneofMindanao'slargest buscompanies,RuralTransitMindanaoInc.,increasedthefrequencyofourregular 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. Boardingprocedurewasrationalizedtoaddressthedifferentboardingneedsofour passengers.Passengerswithplentyofbaggagearedirectedtothenewlycompleted Baggage Terminal Area, which has the security, baggage handling, and porterage system necessarytoprocesslargevolumesofbaggage,efficiently.Thissuccessfully decongestedanexpressboardinglaneusedbylighttravelers,seniorcitizens,minors, and persons with disabilities. Weinstitutedmoremeasurestostrengthenoursafetyandsecuritysystemand significantlycut-downinspectiontime.Highlightsincludetheinstallationofascanand shootsystem,enablingustohaveadigitalimageofeveryticketedpassenger;andthe 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,enablingustohaveadigitalimageofeveryticketedpassenger;andthe 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 expandingthevarietyofchoices.Asaresultofthesuccessfulsourcingofcheaperand betterrawmaterials,forexample,aChickenBBQthatusedtosellforP99isnow available at P55 for the same quality.Affordable impulse products are also available on sari-sari store prices of between P2 to P5. AsawayofthankingcustomerpatronageinBacolodCity,SuperFerryorganizedaMega PapremyoRafflePromo,whichawardeduptoP1.5millionworthofprizes.This successful project model will be replicated in other ports next year. Customizedapprenticeshipprogramsarecontinuouslybeingofferedonboardthe SuperFerriesforhotel,tourismandmaritimestudentsnationwide.TheMaritime Experienceprogram(MarEx)providesonthejobtrainingformaritimestudents,while ApprenticeshipbyExperienceprogram(ApEx)provideshandsontrainingfortourism, hotel & restaurant management students.Both programs are TESDA-approved and are fullyintegratedintotheeducationalcurriculumofschools.Newtrainingprogramson 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. 2GOExpressoffersservicesthatareLessContainerLoadorLCLincludingparcels 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. 2GOLogistics-offersservicesthatrequireinternationalconnectiontoandfromthe Philippine port.ATS has partnered with several agencies globally. 2GO Solutions offers service solutions for companies that require more than just freight services. 2GOFreightoffersservicesforFullContainerLoad.Thiscaterstomostkindsof products except those identified as Dangerous Cargoes.In general, these cargoes come fromvarioussegmentssuchasAgriculture(includinglivestock),Manufacturing, Construction,FSL(ForeignShippingLines),Mining,RetailandWholesale,and3PLsuch asForwardersandTruckers.Italsoacceptsrollingcargoessuchascars,trucksand equipment. ATSbelievesinbeingabletoprovideforthespecificneedsofitsmarket.2GOFreight 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 differentforms:closecontainer,specialcontainerslikeflatracks(usetocarrylumber), fruit vans, hog vans, cattle vans and reefer vans. 2GOFreightalsooffersvariedoptionsdesignedtomeetthecustomersneedsand requirements.Customerscanchooseamongdifferentdeliveryoptions-door-to-door, door-to-pier, pier-to-door, or pier-pier. ). ATSalsoboastsofhavingtheonlyCustomerInteractionCenterintheindustrythatis openfor24hours.Theyarethefrontliners who receive the bookings and confirmations from customers as well as answering any queries on status of customers cargo. The Companys net revenue mix (in millions of pesos) is as follows; 20062005 FreightP= 6,530 62% P= 6,842 59%Passage 3,020 28% 3,672 32%Others1,021 10%1,142 9% TotalP= 10,571 100%P= 11,656 100% Competition 1.Passage The passenger ferry service sector is considered as one of the primary means of inter-island transportinthePhilippines,beingmorecosteffectivecomparedwiththeothermeansof transportation.Atpresent,thedomesticshippingindustryprovidesalessexpensive alternative to air transport over long distances within the country. Onaverage,about80%oftheCompanyspassengersboardtheeconomyaccommodation with the remaining 20% split among the higher classes of accommodation tourist, business class and Suite/Stateroom. SuperFerrycoversCentral&WesternVisayasandsomepartsofNorthern&Southern Mindanao. SuperFerry competes with airlines as well as other domestic inter-island ferries.In order to attractpassengerstotravelbysea,theshippingindustryseestoitthatasuitablegap between the price of ferry tickets and airline fares is maintained. Forthepastyear,withinthetravelindustry,theriseofconsumerpreferenceforROROor landtransferwasevident.SpecificallyinPanayandBacolodareas,thereisagrowing passengermarketthatisshiftingtoanotheralternativemeansoftransportation,usingthe buses going to Manila and vice versa. Thecompanysstrategytocombatthisnewtransportalternativeistointroducenewrate 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. Cutthroatcompetitionisaneffectoffaredivingtocompensateforrisingcostsespecially fuel. There is no limit to competition in terms of pricing which can also be readily copied by any player. Intermsofservice,theplayerscompetebyprovidingreliableservicetopassengersinthe formofsafetyandon-timedeparturesandarrivals.ConvenientTicketpurchase accessibilityandbookingprocess,frequencyofschedules,improvedfacilitieson-boardand entertainment also contribute to building Customer Satisfaction. ThefollowingaretheprincipalcompetitorsofATSinthepassageservicesandthe corresponding geographic areas of competition: 1.NegrosNavigationforBacolod,Iloilo,PuertoPrincesa,CagayandeOro,Iligan, Ozamis 2.SulpicioLinesforIloilo,Iligan,Ozamis,Cebu,Cotabato,Davao,GeneralSantos, 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.PhilippineAirlinesBacolod,Butuan,CagayandeOro,Cebu,Cotabato,Davao, Dipolog, General Santos, Iloilo, Puerto Princesa, Roxas, Tagbilaran, Zamboanga 5.Bus lines Panay area In2006,itisestimatedthatatleast8.8millionpassengers,representing11%ofthetotal 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 Companys market share. Our passenger terminal in South Harbor, Manila is more efficient and hassle free compared withtheothershippingandbuslines.Weinstalledx-raymachinestoextensivelycheckon passengerbaggagesotheywillfeelmoreateasewiththeirjourney.Weinstalleddigital 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. Comparedwiththeotherplayersinthetransportindustry,numerouson-boardactivities wereconductedtoentertainpassengers.Wealsoheldvariousterminalactivitiestomake thewaitingtimefordeparturemorepleasantsuchasproductsamplings,cookingdemos, 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.Itisdeemedasthemostcostefficientmeansoftransportinggoodsandservices, mainlyintheVisayasandMindanaoareas.Thebulkofcommoditiestransportedviawater consistsoffoodandliveanimals;mineralfuels,lubricantsandrelatedmaterials;and manufactured goods. 2GOfreightdealswithcontainerizedshipmentsandrollingcargoes.Themarketcovers 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 by2GOwasat32%forCentralVisayas,followedbyNorthernMindanaoat25%,then Southern Mindanao and Western Visayas. Thecompanycovers20portsutilizing13vesselsforitsSouthbound,Northboundand Interport operations. Asearlyas2004,increaseinthepriceofoilhasgreatlyaffectedboth2GOanditsmarket.Thecompanyhadtoincreasefreightratestocoverthegrowingexpenseofoilandthe 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. Toaddressthis,2GOstartedofferingTVR(Time,Volume,RateContracts)asavalue propositiontoitskeycustomers.Furthermore,thecompanyhasintroducedalotof operational changes that are aimed to increase efficiency and response time.

a. Inthepast2years,therehasbeenagrowthinthenumberofplayersinthedomestic shipping industry.Pricing is no longer regulated, thus allowing new entrants to compete via thismeans.Bargeoperatorsandcharteredvesselsareincreasinginvolumeshipmentsas 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: SulpicioLinesBacolod,Leyte,Butuan,Cagayan,Cebu,Cotabato,Davao, Dipolog,Dumaguete,GenSan,Iligan,Iloilo,Masbate,Ormoc,Ozamis,Puerto Princesa, Surigao, Tacloban, Tagbilaran, Zamboanga

b.LorenzoShippingBacolod,Cagayan,Cebu,Cotabato,Davao,Dumaguete, General Santos, Iloilo, Zamboanga c.NegrosNavigationBacolod,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 2GOhasbeenpioneeringtechnologicaladvancesintheshippingindustry.Itistheonly companywithafulltimeCustomerInteractionCenterandacontainertrackingsystem.It alsousesafreight-on-linesystem,whichallowseasybookingandtrackingoftransactions.In2005,2GOmoveditsshippingoperationsfromNorthHarbortoSouthHarbororthe Macapagalterminal.ItistheonlydomesticshippinglinethatcurrentlydocksintheSouth Harbor,whichisoperatedbytheAsianTerminalsIncwhichalsooperatesoneofthe countrys international harbors. Thecompanybelievesinprovidingthebestintechnology,serviceandpeople.Byinvesting heavilyinmodernsystems,equipment,vesselsandputtingtheseinthehandsofhighly trained, competent and efficient workforce, ATS Freight continues to elevate the standard of shipping in the country. Safety and Quality Standards ATS,inpartnershipwithitssubsidiary,AboitizJebsenBulkTransportCorporation,an internationalshipmanagementcompanywithISO9001:2000accreditationandcertifiedas complianttotheInternationalSafetyManagementCode(ISM),maintainsitsfleetto internationalstandardsofsafetyandseaworthiness.TheCompanyensureseachshipis mannedwithqualified,medicallyfitandsuitablyexperiencedseafarersandqualifiedand competentshore-basedstafftosupportthe safe and efficient operation of vessels.Various in-houseandexternaltrainingprogramsareinstitutedforallthestafftoupgradetheir skillsandto keep them abreast with developments in international shipping. The Company and its entire fleet has to undergo a periodic ISM external audit conducted by AmericanBureauofShippingtoensurecontinuousimprovementofsafetyandqualityon board.TheISMcodeisanIMOinitiatedmandatoryrequirementforallcompaniesthat operateships.TheISMsobjectivesaretoensuresafetyatsea,preventhumaninjuryand thelossoflifeandavoiddamagetothemarineenvironmentandproperty.ThePhilippine MaritimeIndustry(MARINA)hasissuedamemorandumcircularrequiringalldomestic passenger vessels to comply with the ISM code. InthestrivetocontinuallyimproveitsSafetyandQualityStandards,thecompanyin2006, implementednewproceduressuchastheamendmentandcategorizationofsafety inspectionreports,standardizedthedrillevaluationformatandservicingproceduresoffire extinguishers,providedcagesforLPGtanksduringtheloadingandunloadingofcargoes, 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 finishedproducts,tradersofcommercial,industrialandagriculturalgoodsaswellasthe general public. The Company monitors its top 50 customers. No single customer accounts for 20% or more of the Companys freight revenue. Purchases of Materials, Parts and Supplies Materials,partsandsuppliesareobtainedmostlyfromlocalsuppliersatcompetitiverates. 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 SuppliedMajor Supplier Fuel, diesel and lubricants1.Pilipinas Shell Corp. 2.Petron Corp. 3.Chevron Phils., Inc. Vessel repair and drydocking1.Keppel Cebu Shipyard Vessel spare parts1.Technomarine Co. Ltd. 2.Vertec Marine Pte. 3.Taiyo Enterprise 4.Propmech Corporation 5.Wartsila NSD Phils. Container van repair1.COX Trucking Corp. 2.Gothong Southern Luzon Container van rental1. Interpool Stevedoring and Arrastre 1. Asian Terminal Inc. Trucking services1.COX Trucking 2.EUG Trucking 3.RS Master Trucking 4.Quicktrans 5.St. Pio Transport Insurance 1.Pioneer Insurance and Surety Corp 2.BPI MS Insurance Corporation 3.Federal Phoenix Assurance Co. Inc. 4. The Steamship Mutual Underwriting Security services1.CATENA Security Inc. Communication1.PLDT Cargo Handling Equipment Repair1.Kalmar Asia Pacific Ltd. (supply ofspare parts only) Contract for Distribution and Repair and General Services ATSalsocontractswithmorethan20majortrucking,forwardingandcontainerrepair companiesinthePhilippines,includingaffiliatedcompanies,toprovidedoortodoor, door to pier,piertodoordistributionservicesrequiredbyitscustomers,aswellasstevedoringand arrastre services.These contracts are conducted on an arms-length basis. TheCompanyspassengerticketingandcargobookingareprincipallyconductedthroughits networkofbranchesandsalesagents,mostofwhicharesituatedatportsservedbythe Company.Inaddition,independentagencies/outletsarealsomaintainedinurbanizedareas such as Manila and Cebu. TheseAgenciesandOutletsarecoveredbyAgencyContractsrenewableannually,subjectto certainconditions.Contractswithaffiliatedcompaniesforagencyandgeneralservicesare conducted on an arms-length basis. Generalservicecontractsincludecontractswithengineering,repairandservicecompanies, 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 toascertainitsadherencetovesselandmanningsafetystandards.Thecompanyisthe holderofseveralCertificatesofPublicConvenience(CPC),ProvisionalAuthority(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 ATShasacomplementof1,102employeesasofDecember31,2006,ofwhich,1,003are 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 thePhilippineAssociationofLaborManagementCouncil,whereinthelaborandthe managementworkhandinhandtoaccomplishcertaingoalsusingmutuallyacceptable means.Withthiscouncil,laborandmanagementrepresentativesdiscussanddecideon 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. ATSLMCholdsaregularyearlyconventiontobringallchairmenandrepresentativestoa forumwiththeprincipalsandofficersoftheCompany.Theconventionseekstopromulgate resolutionsmostofwhichareeconomicdemandsfromtheLaborsectorandmanagement; addressallotherconcernsandissues;amendthecharter;andtoholdelectionsforthe officers of the national LMC. TheestablishmentoftheLMCinSeptember23,1986hasgivenrisetomorebenefitsand privilegestotheemployees.Moresignificantlythemergingofthreeofthemostprominent and well respected shipping lines in the country has seen a dramatic improvement in terms of employeebenefitsandprivilegesfarbetterthananyothercompanyintheindustryoffers. Thisincludesamongothers,medicalallowances,grouphospitalizationplan,educational assistanceforqualifieddependents,mortuaryassistanceandprivilegepassforemployees and their immediate family members. Government Regulations The Maritime Industry Authority (MARINA) through Memorandum Circular No. 79 requires all owners/operatorsofinter-islandvesselsengagedinPublicTransportServicetosecurea certificate of accreditation of domestic shipping enterprise / entities from the Authority before they can provide a water transport service. TheCircularisintendedtofosterstandardsfordomesticshippingoperationsinorderto 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 allinter-islandwatertransportutilities,andconsequently,topreventtheproliferationof incompetent, inefficient, unreliable and fly-by-night operators. Accreditationservesasaprerequisitetothegrantingoffranchisesforindividualvessel operations.ATSvesselshavebeenissuedCertificatesofPublicConvenience/Provisional Authorities to operate in specified routes. Research and Development Activities TheCompanyspentonthedevelopmentandacquisitionofseveralapplicationsoftware relatedtointegratedfinancialaccounting,revenuemanagementsystemandfreightand 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 2006372,9914% 2005548,0775% 2004456,3965% Costs and Effects of Compliance with Environmental Laws With regard to environmental laws, ATS follows the regulations embodied in the International ConventionforthePreventionofPollutionfromShips,1973,asmodifiedbytheprotocolof 1978(MARPOL73/78).Thesaidconventionhasvarioustechnicalmeasuresintendedto controloilandotherformsofmarinepollution.Thedirectcosttocomplywiththis environmentallawincludeshousekeepingservices,waterandcleaningmaterialsamounting to P93.5 million or .88% of the total net revenues.

Theexistinggovernmentregulationsareintendedtoachievethegoalofthegovernmentto develop the countrys water transport system. The goal is to provide adequate, safe, efficient, economical and shipping services which are at par with the worlds 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 ATSanditssubsidiaries,inpartnershipwiththeAonRiskConsultingofSingapore,have completeditsEnterpriseWideRiskManagement(EWRM)programinAugust2006.The companynowhasitsownEWRMframeworktailorfittedtothestructureandcultureofthe company.Ithashelpedthecompanytoidentify,assess,manageandmitigatebusiness risks.Amongthemajoraspectsofthebusinesswhereriskisperceivedarevessel,cargo andpassengersafety,informationtechnology,foreignexchange,andgeneralbusiness environment. Atpresent,ATSisonthesecondphaseoftheEWRMprogram.Thisstagere-assessesall 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 businessprocesstoidentifythemajorrisksinvolvedincargohandling.Inaddition,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,whichwasincorporatedlastJanuary28,1988,isaleadingone-stopshoplogistics solutionsandtransportationservicesproviderinthePhilippines.Itisengagedinthe businessofair,landandseatransportationsuchasbutnotlimitedtocarryingand transportingofanyandallkindsofgoodsandcargo,charteringandtoactascourierof mails,lettersandpouchesofallkinds.ThroughA-Onesvarioussubsidiaries[i.e.,Aboitiz Logistics,Inc.(ALI),Hapag-LlyodPhilippines,Inc.(HLP)andCoxTruckingCorporation]and affiliates, it provides seamless total logistics solutions to its customers via air, land and sea A-Oneoffersvarioustransportationandlogisticsservicesrangingfromtransportation managementtologisticsanddistributiontocustomsbrokerageandinternationaltrade services.Inaccordancewithcustomersneeds,itofferssupplychainmanagementand logisticsservicestomajorimportersintothePhilippinesrequiringnationaldistributionas 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 andcargoandactascourierforsmalleritemssuchasmails,lettersandcashinthe Philippines. Todate,A-Onethroughitssubsidiariesandaffiliates,isamongtheleadingaircargoand 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-Onesoperationsaresupportedbyalogisticalbackbonewhichcomprise3YS-11aircraft (withacapacityof6tonseach),159deliveryvans,250motorcycles,56refrigeratedtrucks and 108 vans, 121 prime movers and trailers as well as ATS vessels ships. (1) Logistics Operations Products A-Oneskeylogisticsservicesareprimarilyprovided through the following subsidiaries and associated companies: Subsidiaries Aboitiz Logistics, Inc. (ALI) ALIprovidesvarioussupplychainmanagementandlogisticsservicessuchas,interalia, freightforwarding,containeryardmanagement,warehousinganddistributionaswellas trucking. Operating as part of an integrated, unified A-ONE group, ALI is focused on providing seamlesstotallogisticssolutionstomajorimportersintothePhilippinesrequiringnational distribution as well as major exporters from the Philippines requiring global distribution ThroughALI,A-Onealsoofferscontainerleasing,containeryardservices,containerrepair, tankcontainercleaning,testingandothertank-relatedservices,bothdomesticallyinthe Philippinesandinternationally.Itmaintainsacontaineryardwithasizeofapproximately 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 isengagedinglobaldoor-to-doorcontainertransport.Hapag-LloydContainerLineAG 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) CoxTruckingCorporationfulfilsthelandtransportrequirementsoftheGroups 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) APTSCwasestablishedinAugust1996asajointventurebetweenA-ONEandHansameyer FreightForwardersPte.Ltd.,atransportationcompanyheadquarteredinGermany specializing in project transport logistics and engineering project management consultancy. APTSCisengagedinprojectcargotransportationandmanagement,whichinvolvesthe haulage and transportation of heavy and bulk-sized equipment such as those used in power plants and telecommunication infrastructure. APTSCsservicesinvariousindustriessuchasshipbuilding,powergeneration& distribution,mining,cement,oil&gastelecommunicationsincludeglobalproject coordination of heavy cargo movement, project feasibility studies and transportation surveys, budgetcalculations,communication,deliveries,packagingconsultancy,transhipments, bargetransports,roll-offsandlandingofheavylifts,heavycargohaulage,consultancyin transportationsupporttechniques,riggingjobsonheavymachineries,deliveriesintovery remoteareaswithnoroadaccessaswellasthedesignandconstructionofjetties,beach heads, bridge reinforcements and by-passes. Refrigerated Transport Services, Inc. (RTSI) and Reefer Van Specialist, Inc. (RVSI) ThroughRTSIandRVSI,A-OneoffersrefrigeratedtransportationservicesundertheCRYO brandnameforperishablesfoodproductssuchasprocessedmeat,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, reeferstorageservice,equipmentleasing,technicalservices&reeferconsultant,contract warehousing, hauling services. The companies have the country's newest and largest fleet of over150reefercontainers&refrigeratedtrucksandthemostdiverseoperationsservicing thecitiesofMetroManila,Cebu,CagayandeOro,Iloilo,Davao,Bacolod,Zamboanga, Palawan, and General Santos. Service Offerings A-Onemarketsallitsservicesunderthe2GObrand.2GODistributionisajust-in-time operationgearedatprovidingtotaldistributionofhigh-valueandhigh-turnaroundcargoes suchasmedicinesandhealthcareproducts,electronicsparepartsandconsumeritems nationwide. It provides fast and accurate delivery of products and cargoes to any point in the Philippines.Through2GODistribution,manufacturers,suppliers,wholesalersandretailers canhaveabetterinventorymanagementsystem,moreeffectiveproductionplanningand faster order fulfillment process. Someof2GODistributionscustomersincludemajorpharmaceuticalandhealthcare productscompaniessuchasDiethelmPhils.,Inc.,Johnson&JohnsonPhils.,Inc.,Mercury Drug, Mead Johnson Nutritionals, GlaxoSmithKline as well as electronic companies such as RS Components and Hewlett Packard Philippines. A-Ones warehousing and distribution services can assist customers in managing their day-to-daywarehousingoperations. Suchservicesincludethepreparationofinvoices,stock controlrecords,consolidationanddistributionofproductstoendcustomersorto distributors. (2) Express Courier Delivery Services

Products A-Oneactsascourierofmails,lettersandpouches,deliveryandtransferofmoney 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 NeitherA-Onenoranyofitssubsidiarieshaseverbeenthesubjectofanybankruptcy, 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 insharesofstockofAboitizLogistics,Inc.(ALI),Hapag-LlyodPhilippines,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 thetwoentitieswithA-Onebeingthesurvivingentity.Thesaidcorporateactwillbe 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 brandnameatvariousstrategiclocationsnationwide.ThisretailarmofA-ONEprovides customers easy access and convenience to A-Ones express courier delivery services. F.New Products/Services A-OnestarteditsnewservicesinSupplyChainmanagementinJan15,2007underanew legalentityAboitizOneDistribution,Inc.(AODI).MajorclientsincludeNestleWaters, 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 MajorcompetitorsofA-OneintermsofcargoforwardingincludeLBC,Air21,DHL&JRS Express. H.Principal Suppliers A-OneloadswithSuperFerryvesselsofATSandwithCebuPacificAirtotransportcargoes by sea and air respectively.Some of its major truckers include Northern Luzon Trucking & Sungold Forwarders.Other suppliers include Shell, Petron, & Zenshin. I.Customer MajorcustomersincludeDiethelmPhils.,ColgatePalmolivePhils.Inc.,Kraft,United Laboratories.Totalrevenuesfromtheseclientsconstituteabout30%ofthetotalannual gross revenues. J.Transactions With and/or Dependence on Related Parties Servicestoandfromrelatedpartiesconsistmostlyofcargofreight,handlingandhauling, 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 andmaintaintransportservicesforthecarriageofgoods,mailandotherpropertybyair, bothdomesticandinternational.Thefranchiseeffectivelycoversonlytheairtransport operations of A-One. Furthermore, said franchise has a term of forty (40) years from the date ofeffectivity(i.e.,June19,1992)ofthecharter,unlesssoonerrevokedorcancelled.Asto 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 betransferred,whetherasawholeorinpartsandwhethersimultaneouslyor 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(formerlyJMCrewingLimited)wasincorporatedintheBritishVirginIslandson 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 toexcellence,JMBVIsbusinessactivitieshascontinuouslyexpandedovertheyearsandis 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.JebsensInternational(Singapore)PTELtd.,foundedonSeptember15,1989in Singapore 4.International Marketing & Logistics (IML), founded on August 14, 2000 in Australia ShipCharteringandVesselOperationsarehandledunderthePoolManagementofJebsen OrientShippingServicesA/S(JOSS).JOSSoperatesafleetofmodern,sel-sustaining,and gearedvesselsrangingfrom7,000to30,000tonsdwat.Theshipstradedrybulk commodities mainly in the Australasian region, but also spans within the Far East and across the Pacific Ocean. Ourkeycustomersinclude,interalia,PTFreeportIndonesia,PTNewmontNusaTenggura, PhosphateResourcesLimited,SanMiguelCorporation,HunterGrainPtyLtd,andAlcan Trading Ltd. JMBVI,throughitssubsidiaries,alsoprovidescompletethird-partylogisticalservices specializinginroad,railandsea-basedtransportsolutions.Itslogisticsoperationsare primarily active in Australia with various customers being serviced in inter-modal transport, bagging,distribution,andwarehousinginclusiveofsupportservices.By2007,alllogistical services will be merged under one entity Jebsens Logistics Services. SomeofourkeylogisticscustomersincludeInterfertPtyLtd,ImpactFertilizers,Industrial Energy Pty. Ltd, Hi Fert Pty Ltd, and Incitec Fertilizer Limited. B.Competition Inshipping,competitorsgenerallymaintainsingleofficeswithinthetradingarea;onlyfew ownershavegrab-fittedtonnage.Competitorsalsopossesscontractswiththesame customers. Inlogistics,atthemoment,competitorsaretheindividualmanufacturingcompanies 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 tonnageFlexible 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 Expertisefordiversetransportsolutions(e.g.,trucking,tug-barge,coalhandling, etc.) Strongrelationshipwithspecificcustomersacrossotherareasofoperations (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 Greatflexibilityinoperatingplantstohandlearangeofproductsforbaggingand blendingding C.Major Risks and the Procedures or Strategies to Address the Risks Chartering/Operations/Logistics Quality of Fleet Toexpandactivitiesbyincreasingandbalancingourtonnagetrading capacities against our cargo commitments. Business Integration Toverticallyintegrateanddevelopservicesacrossthesupplychainthrough leveragingontheexistingclientbaseinshipping&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,receivershiporsimilarproceedings.Neitherdidanyofthemundergomaterial 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 andNewJersey).Marketingtripsandattendanceininternationalmaritimeconventionsare 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 JMBVIdoesnotallocatespecificamountsorfixedpercentagesforresearchand development. I.Headcount The companys manpower complement as of December 31, 2006 is 23. Thereisnocollectivebargainingagreement(CBA)coveringtheemployeesoftheabove companies. Item 2.Properties ABOITIZ TRANSPORT SYSTEM (ATSC) CORPORATION Vessels The ATS Fleet is Philippine-flagged and registered in the name of the Company. TheCompanysoperates13vesselsconsistingof8SuperFerries,1ATSCFerry,3Cebu Ferries, and 1 Freighter. Duringtheyear,two(2)CebuFerriesweresold,OurLadyofGuadalupeandOurLadyof Fatima.InJuly2006,ATScharteredinMV2GO1,afreightervessel,fromWallock Enterprisestopartiallyreplacelostcapacityfromvesselssold.Ontheotherhand, 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 withPacificAsiaShippingCo.Ltd.,aMarshallIslandsregisteredcompany,forthesaleof thetwo(2)SuperFerries,SuperFerry17andSuperFerry18.SuperFerry 18 was delivered lastDecember2006.Meanwhile,SuperFerry17isscheduledfordeliveryinthesecond quarter of this year. ToensureATScommitmenttoserviceexcellenceandcontinuityofoperations,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 areusedinthenormalcourseofbusiness.Fordetailsoftheirlocation,pleasereferto Schedule E.1 and E.2. Insurance Coverage ATStakesoutinsuranceforallitsvessels.MarineHullandMachineryinsurancewhich coversphysicaldamagetotheshiporvesselinsured(i.e.Hull,Machineries,Equipment, Gears,andallappurtenancesconnectedtherewith)isplacedwithPioneerInsuranceand SuretyCorporation.InsurancepoliciescoveringWarandStrikesareissuedbyBPI/MS InsuranceCorporation.Inaddition,fortheothersmallervessels,MarineHull,Machinery, War and Strikes are placed with UCPB General Insurance Corporation. ProtectionandIndemnity(P&I)insurancecoveringprincipallylegalliabilitiesofshipowners are placed with British Marine Luxemburg Limited and The Steamship Mutual Management. MarineCargoinsurancecoveringclaimsarisingfromcargolossordamageisplacedwith UCPB General Insurance Corporation. Importantly,allpassengersandcrewofalltheCompany'svesselsaresufficientlyinsured againstdeathandpermanentdisabilityarisingfromaccidentsandareplacedwithPhilam Insurance Corporation. Therestofthepropertiesnationwide,includingcontainers&handlingequipmentsare likewise fully covered with insurance policies issued by reputable insurance companies. Container Yard and Warehousing Facilities TheCompanyhasoneofthemostextensivenetworksofcontaineryardsandwarehousing facilities nationwide.

Most of the Companys container yards have been cemented, whether in whole or in part,to achievegreaterefficiencyinterminaloperations,allowforshorterturnaroundtimeinport, greaterutilizationinstackingofcontainersandlowerrepairandmaintenancecostsforthe operating equipment used at the container yards. The Company also has sufficient warehouse space.Warehouse are either owned or leased by theCompany.TheCompanyswarehousenetworkconsistsofwarehousesatBacolod, Butuan,Cebu,Davao,Dumaguete,GeneralSantos,Iligan,Iloilo,Ozamis,Zamboangaand Manila. Containers and Other Equipment ATSownsandleasesavarietyofcontainersandotherequipmentofvarioustypesandsizes foruseinitscargooperationsincludingforklift,toploaders,yardtractorsandtrailersor 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 tousethecontainersforaspecifiednumberofyearswhileitcontinuestopaythelessora fixed per diem rate and gives the Company the option to acquire the containers at the end of thelease.InstallmentpurchaseagreementsallowtheCompanytopaythefullpurchase 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 Equipmentaccountintheconsolidatedbalancesheetswithdetailsasfollows(amountsin P000): Cost P= 1,032,033 Less accumulated depreciation799,276 Net book valueP= 237,757 Details of Container Lease as of December 31, 2006 are as follows: UnitsVan Size In US ($) Purchase Option Per Unit In US ($) Rate/Day Period of Lease LeaseEnd date 60020 2500.807 yrsJan 2007 85020 2500.807 yrsMar 2007 55020 2500.797 yrsMay 2007 85020 2500.807 yrsAug 2007 55020 2500.817 yrsDec 2007 60020 2500.817 yrsJul 2007 104720 2500.897 yrsDec 2007 132020 2500.887 yrsJan 2008 28220 2500.897 yrsMar 2008 35120 2500.897 yrsJun 2008 15040 2501.327 yrsAug 2008 100010 2000.607 yrsSept 2008 100010 2000.567 yrsFeb 2009 2952102000.607 yrsDec 2009 Liens and Encumbrances Long-termdebtsandbankloansarecollateralizedbysomeoftheCompanysvesselsand 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,ButuanTCT#T-15911,IliganTCT#T-59710,59709,18018,18019,22713,22712, 23111,22714,PulupandanTCT#T-82859,TagbilaranTCT#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 P000) COST ACC DEP NBV Aircraft & Flight Equipments156,332 110,231 46,101Building & Improvements 90,663 75,716 14,947Furniture, Fixtures & Equipments133,913109,555 24,358Transportation & Delivery Equipments 141,187 118,038 23,149Land & Improvements15,461 1,710 13,751TOTAL 537,556 415,250 122,306Over90%ofthetotalassetsarelocatedinManilabeingtheheadofficeofA-Oneand subsidiaries.Alloftheseassetsarefreeofanyofmortgageorlienorencumbrance.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 EquipmentP 18,516 Transportation & Delivery Equipment18,111 Others9,941 TotalP 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 TherearecertainlegalcasesfiledagainstATS,A-One,JMBVIandothersubsidiariesinthe normalcourseofbusiness.ManagementanditslegalcounselbelievethatATSCandits subsidiaries have substantial legal and factual bases for their position and are of the opinion thatlossesarisingfromthesecases,ifany,willnothaveamaterialadverseimpactonthe 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.MarketPriceofandDividendsonRegistrantsCommonEquityandRelated Stockholder Matter. A.Market Information TheCommonStockoftheCorporationislistedatthePhilippineStockExchange.Asof latest market date, April 04, 2007, the market price of the Companys common stock is P1.50 per share. BelowistherangeofhighandlowbidinformationfortheCompanyscommonequityfor each quarter within the last two fiscal years and any subsequent interim period: High Low 2007 First Quarter 2006 First Quarter Second Quarter Third Quarter Fourth Quarter 2005 First Quarter Second Quarter Third Quarter Fourth Quarter P= 1.88 P= 1.70 1.70 1.36 1.48 P= 1.82 1.80 1.72 1.72 P= 1.24 P= 1.50 1.46 0.00 1.14 P= 1.70 1.24 1.54 1.50 B. 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:

NameNo. of Shares Held % to total 1. Aboitiz Equity Ventures Inc. 1,889,482,107 77.24 2. Aboitiz and Company, Inc.384,448,39015.72 3. PCD Nominee Corporation (Filipino)89,588,0383.66 4. Klaus Schroeder19,471,2010.80 5. China Banking Corporation4,882,1300.20 6. Danel C. Aboitiz2,845,9670.12 7. Francisco Benedicto1,679,1250.07 8. Miguel G. De Asis 9. Union Properties, Inc. 1,655,153 1,578,125 0.07 0.06 10.Josephine Te11.Abacus Securities Corporation1,561,425 1,530,000 0.06 0.06 12.Enrique M. Aboitiz Jr.1,524,3300.06 13.Bauhinia Management, Inc.1,418,9510.06 14.Santiago Tanchan III1,262,5000.05 15.Constantine Tanchan1,262,5000.05 16.Lekeitio & Company, Inc. 17.PCD Nominee Corporation (Non-Filipino) 18.Xavier Jose Aboitiz 1,238,604 1,137,515 1,039,727 0.04 0.05 0.04 19.Lilian P. Cariaso 20.Montavo Management & Dev. Corp. 1,030,060 946,875 0.04 0.04 C. Cash Dividends Declaration Forthetwomostrecentfiscalyears2005and2006andsubsequentinterimperiodof1st quarter 2007, there was no cash dividend declared. The Companys 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 LastMay10,2005andJune17,2005,theCompanysBoardofDirectorsandStockholders approved,respectively,theissuanceof414,121,123millioncommonsharesfromthe increaseinauthorizedcapitalstockappliedbytheCompanywiththeSecuritiesand ExchangeCommission(SEC).SaidcommonshareswereissuedatapriceofP1.76per shareoratotalofP728,853,176.48toAboitizandCompany,Inc.(ACO),AboitizEquity Ventures(AEV),certainaffiliatesofACOandindividualFilipinoinvestors(thetransferors) inexchangeforthetransferors100%sharesinA-One,62.5%inAbojeb,62.5%inAJMSI, 62.5% in JMI and 50% in JMBVI. Last August 3, 2005, the Company submitted an application for Commissions confirmation of availability of exemption from registration of the above issuance citing SRC Section 10.2 TheCommissionmayexemptothertransactions,ifitfindsthattherequirementsof registrationunderthisCodeisnotnecessaryinthepublicinterestoffortheprotectionof the investors such as by reason of the small amount involved or the limited character of the offeringasthebasis.TheCompanybelievedthatsaidissuanceisexemptfrom 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. OnDecember20,2005,ATSCreceivedawrittenconfirmationfromtheSECthatsuch issuanceisanexempttransactionunderSection10.2oftheSecuritiesRegulationCode citingthatitislimitedincharacterthereforeregistrationisnotnecessaryinthepublic interest or for the protection of the investors. Item 6. ManagementsDiscussionandAnalysisofFinancialConditionandResultsof Operations. Revenues 2006 AboitizTransportSystemCorporation(ATSortheCompany)postedtotalconsolidated Revenues of P10.6 billion in 2006.Its freight business constitutes the bulk of the Companys revenues at 62% or P6.5 billion.It reflected a slight 5% drop versus 2005 largely because of thedeclineintheinternationalcharterbusinessfromitssubsidiarycompany,Jebsen Management(BVI)Ltd.(JMBVI)duetounfavorablemarketconditionsandtheshipping businessreductioninfleetcapacity.Likewise,ATSpassagebusinessreflectedan18% 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% oraboutP2.0billionovertheP9.7billion2004revenues.Thejumpinrevenuesislargely 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 includedintherestatedconsolidated2004financialstatementsastheywereonlyacquired by the Company in 2005.Average freight rate per TEU of the parent company increased 7% over2004.Likewise,averagerateperpassengerrose12%ascomparedtotheprevious year.Otheraccountscontributingtotheincreaseinrevenuesincludepassagemeals, logistics and other income coming from JMBVI. 2004 The Company, on consolidated basis, posted revenues totaling P9.7 billion.Passage revenue reachedP3.7billionbroughtaboutbystrongmarketingeffortsofpromotinghighervalue passenger accommodations and higher number of passengers carried during the year.The CompanysfreightbusinesslikewisepostedrevenuesofP5.0billionbroughtaboutbyits focus on higher paying and higher yielding cargoes. Cost and Expenses 2006 Asearlyas2yearsago,theCompanyhadestablishedvariouscostcuttinginitiatives.As such,totalCostsandExpensesdecreasedbyapproximatelyP779milliontoP10.7billion from P11.5 billion in 2005.The reduction in expenses came largely from 7% lower Operating CostsduetolowercharterhireexpensespertainingtoJMBVIandsubsidiaries.The Companysfuelandlubricantsexpenses,itssinglelargestexpense,remainedalmost unchanged from P3.3 billion in 2005 to P3.4 billion in 2006, despite a 14% rise in fuel prices. The Companys Terminal and Overhead Expenses also reduced by 12% and 4%, respectively, versuslastyear.Amongthemajorcontributorstothedecreaseintheseexpenses,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 TotalcostsandexpensesreachedP11.5billion,25%higheroverthesameperiodlastyear.The increase is largely attributable to the 32% surge in operating expenses.The Companys fuelandlubricantsexpenses,itssinglelargestexpense,increased23%fromP2.7billionin 2004toP3.3billionin2005,directlydrivenbytheriseinaveragefuelanddieselpricesof 34%fromP13.6toP18.3perliter.ATSalsoincurredin2005P1.9billionincharterhire expensesfromitssubsidiarieshavingoutstandingCharterPartyAgreementswithvessels owners for the use of the vessels or for sublease to third parties. Otherfactorscontributingtotheriseincostsandexpensesincludean11%increasein terminal expenses.Transportation and delivery costs surged by 58% to P173.1 million as the CompanyaddedinitslineofservicetheRoadRo-RoTruckingSysteminsupportofthe governmentsinitiativeofastrongnauticalhighway.Fuelandlubricantsunderterminal operationsalsoincreasedbyP19.2millionduetohighfuelrates.Inaddition,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 Companys overhead expenses reached P1.5 billion, about 8% over the same period last year,mainlyduetotheriseinotheroverheadexpensessuchasadministrativeexpenses pertaining to JMBVI which was not consolidated with the Company in 2004.Depreciation and amortization also escalated 34% or P44.3 million. Tohelpcounterrisingcosts,theCompanyhasbeenworkingonseveralinitiativesto continuouslybringcostsdown.TheseresultedtoP445.6millionoverallsavingsin insurance, communication, light and water, outside services, advertising and entertainment, amusementandrecreation,amongotheraccounts.Overallrepairsandmaintenancealso reducedbyP211.8million.ThisisaresultoftheCompanysincreasedefficienciesandits utmost priority in the constant maintenance of assets over the years. 2004 With21vesselsoperatingattheendoftheyear2004,theCompanystotalcostsand 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 Companys safety standards, repairs and maintenance costs relating tobothoperationsandterminalexpensesregisteredP693.3millionastheCompany continuously upgrades its fleet and operational assets/equipment. The Companys 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, theCompanysoldvariousassetsincludingthreevessels(OurLadyofFatima,OurLadyof Guadalupe, and SuperFerry 18) which generated gains of P226.4 million.Also, in line with its strategyoffocusingonitscorebusiness,theCompanyalsosolditsentireshareholdingsin DavaoIntegratedPortandStevedoringServicesCorporation(DIPPSCOR),generatinggains of P262.3 million. Proceedsofthesesaleswereutilizedtopaydowndebt,thusresultingina10%lower Finance Costs from P375.7 million in 2005 to P337.8 million in 2006. 2005 TheCompanysotherchargesamounttoP147.6million.Withatotalinterestbearingdebt (inclusive of finance lease and redeemable preferred shares) of P3.6 billion, ATS incurred net financing costs of P375.7 million. TheCompanyrecognizedP98.4milliongainondisposalofpropertyandequipmentthrough thesaleoftwovessels,OurLadyofRosaryandSuperRoro500.In2004,thegainsarose from the sale of three vessels, M/V Brinknes, Our Lady of Lipa and Our Lady of Sacred Heart.Inaddition,ATS,in2004,reflectedP208.7millioninsurancerecoveryonitsSuperFerry14 vessel which burned down while on voyage.

TheCompanyrecognizedhighergainsonforeignexchange for its obligations under finance lease (up to P29.2 million) due to a lower average dollar rate in 2005. RentalincomefortheperiodunderreviewincreasedtoP22.9millionversusP8.2million duringthesameperiodthepreviousyear.Rentalincomeiscomposedmainlyofspace rentals of vessel subcontractors doing business on board the Companys vessels. 2004 TheCompanyregisteredOtherIncometotalingP123.1million.Thisismainlybecauseit recognizedgainsfromthesaleofthreevessels,M/VBrinknes,OurLadyofLipaandOur LadyofSacredHeart,containersandothernon-performingassets,togetheramountingto P211.3million.Italsorecognizedgainsoninsurancerecovery,(P208.7million)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 P96.8millionis227%highercomparedto2005,mainlyfromoveralllowercostsand 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. NetIncomedirectlyattributabletotheequityholdersoftheparentcompanyregistered P197.3million.Thisis370%higherversusP42.0millionin2005.Similarly,theCompany registered a net loss attributable to minority interests of P5.4million particularly because of lossesgeneratedbyJMBVI,itsshipcharteringcompany,duetounfavorablemarket conditions. 2005 TheCompanyregisteredP65.7millioninnetincomein2005.Thisreflectedadropversus P512.5 million in 2004, as the companys expenses escalated higher than its rise in revenues. DespiteregisteringanincomebeforetaxofP29.6M,ATSrecognizedabenefitfromincome taxofP36.1million,duemainlytotherecognitionofnetoperatinglosscarryover(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 fortheyear.Forthefullyear2006,basicearningspershareisP0.08/share.Despitethe increaseintheweightedaveragenumberofcommonsharesoutstandingfortheyear becauseoftheadditionalissuanceofcommonsharescoveringthepreferredshare conversion(seealsoConsolidatedBalanceSheet2006),thebasicearningspershareis stillhigherthan2005ofP0.02/sharebecauseofhigherNetIncomedirectlyAttributableto the Equity Holders of the Parent. Consolidated Balance Sheet 2006 ConsolidatedassetsoftheCompanyreachedP10.3billion,a9%decreasefromitsasset level in 2005 of P11.3 billion. Totalcurrentassetsreflecteda26%increase,fromP3.6billionin2005toP4.6billionin 2006.One of the major contributors to the rise in current assets is the Companys non-trade receivablesofP186.0millionfromAbbotsfordHoldings,Inc.inrelationtothesaleof DIPPSCOR. ATSregisteredP659.5millioninNoncurrentAssetClassifiedasHeldForSale.This representstheCompanysSuperFerry17vesselwhichtheCompanysoldasper Memorandum of Agreement (MOA) dated November 13, 2006.The expected delivery date to the buyers is in the second quarter of 2007. The Companys 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. TheCompanyreduceditstotalliabilitiesbyP1.4billionfromP6.9billionin2005toP5.5 billionin2006.TotalinterestbearingdebtstoodatP2.3billion,aP1.2billionor34% reductionoverlastyear.ThisreductionenabledtheCompanytolowerinterestexpenseby 9% versus last year. Accountspayable&othercurrentliabilitiesslightlydecreasedby4%primarilyduetothe decrease in trade payables. LiabilitiesdirectlyassociatedwiththeassetclassifiedasheldforsaleofP455.0million pertainstothebankloansdirectlyrelatedtoSuperFerry17assetclassifiedasheldforsale until its delivery to its buyers in the second quarter of 2007. TheCompanyalsoreduceditsRedeemablePreferredShares(RPS)fromP200.3millionto 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 RPSor94%oftheoutstandingRPSoftheParentCompanywereconvertedtocommon shares. Asaresultoftheconversion,thecapitalstockofthecompanyincreasedP140.7million 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. TotalStockholdersEquitystoodatP4.8billion,a9%increasefromlastyearofP4.4billion.Similarly,retainedearningsalso registered a16% increase due to higher net income of the company. 2005 ConsolidatedassetsoftheCompanyreachedP11.4billion,aslightincreasefromitsasset 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.Majorincreasescamefromcashandcashequivalents,inventoriesandprepaidexpenses.Netreceivableshoweverdecreased12%toP1.9billionlargelyduetothecollectionofnon tradereceivablesandadvancestoacontractoruponcompletionofachassisfabrication contract. Total inventories of P318.9 million include fuel and lubricants, various materials, spare parts and supplies mostly on board vessels. Prepaidexpensesandothercurrentassetsregistereda31%risetoP529.9millionas creditablewithholdingtaxeswithheldbycustomersandcreditableseniorcitizendiscount accumulatedduringtheperiod.Thesewillbecreditedagainsttaxdueasthecompany comes into a taxable position in the next years. InvestmentsinassociatesofP46.9millionaretheCompanysinvestmentsinaboutfive companieswhereitexercisessignificantinfluence,butwhichATSconsidersneitheras subsidiariesnorjointventures.Thesecompaniesinclude,amongothers,NewZealand LumberShippersLtd.(atransatlanticlumbershippingcompany),RefrigeratedTransport Services,Inc.andReeferVanSpecialist,Inc(bothcompaniesareengagedinproviding refrigeratedtransportsolutions),andAboitizProjectTSCorporation(aprojecttransport solution and consultant firm). Netdeferredincometaxincreasedby67%toP242.3million,mainlyduetotheincreasein net operating loss carryover brought about by a taxable loss position of the parent company in2005.Likewise,deferredincometaxpertainingtoallowancesfordoubtfulaccountsand probable losses also increased as additional provisions were booked during the year. TotalliabilitiesamountedtoP6.9billion.Totalbankdebtfortheyear ending December 31, 2005isP3.0billion,downby4%comparedtoDecember31,2004 balance as a result of the Companyseffortstopayitsobligations.Shorttermloanspayabledecreased51%asthe companycontinuestopaydownshorttermdebt.Similarly,totalobligationsunderfinance lease have dropped 31% to P350.9 million. Accountspayable&othercurrentliabilitiesincreasedbyover10%primarilyduetothe 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 Companys outstanding redeemable preferred shares were reclassified to liability, in linewiththeadoptionofanewfinancialreportingstandardwhichqualifiesthesesharesas liability rather than equity.The adoption resulted to an increase in the shares carrying value toP200.3million.Aportionoftheincrease was charged as a reduction from the beginning retainedearnings,andtheremainderwaschargedtothecurrentyearstotalinterest expense. TotalStockholdersEquitystoodatP4.4billion,barelyadecreasefromlastyearofP4.5 billion. 2004 ConsolidatedassetsoftheCompanyreachedP11.2billion.Totalreceivablesamountingto P2.2billionarelargelyfromtradereceivables,receivablesfromaffiliatesandinsurance claims receivables. Prepaidexpensesandothernon-currentassetsstoodatP405.4million,mainlydueto investmentsindevelopingvarioussoftwareapplications,gearedtowardsfurtherimproving the Companys efficiency and reliability. TotalInventoriesoftheCompanyin2004amounttoP197.9million.Thisincludesfueland lubricants and vessel spare parts. TotalliabilitiesamountedtoP6.7billion.Totalbankdebtfortheyear ending December 31, 2004isP3.2billion,.InlinewiththeCompanysthrusttoreducedebt,paymentsonits obligation under capital lease on containers were made during the year. TotalStockholdersEquityasofDecember2004stoodatP4.5billion.TheSecuritiesand ExchangeCommissionapprovedinSeptember2004theincreaseofauthorizedcommon sharesbyP750.0millionandauthorizedtheissuanceofstockdividendbyP393.2million fromtheCompanysadditionalpaidincapital.FurthermoreonNovember2004,the Company retired P499.6 million redeemable preferred shares (about 74.9 million shares). Consolidated Cash Flow 2006 TotalnetcashgeneratedfromoperationsamountedtoP854.7million.TheCompany internallyfundedallofitscapitalexpenditurestotalingP538.5million.TheCompanyalso received proceeds from the disposal of assets and from the sale of DIPPSCOR of P1.2 billion.Theproceedsweremostlyutilizedtoliquidatedebt.FortheyearendDecember31,2006, totalloanpayments(inclusiveoffinancialleases)amountedtoP1.5billion.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 TotalcashgeneratedfromoperationsamountedtoP1.7billion.TheCompanyinternally fundedallofitscapitalexpenditurestotalingP1.0billion.Netloansandobligationunder financeleasestotalingP1.4billionwaspaid 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 Fortheyear2004,theCompanysoperatingfunds,proceedsfromsaleofassetsandloan availmentweremainlyusedtofinancetheCompanyscapitalexpendituresofP2.4billion.ThesecapitalexpendituresincludethepurchasecostofMVBrinknes(thisvesselwas subsequentlysold),vesselimprovements/refurbishmentsforSuperFerry17,SuperFerry 18 and other vessels, investments in handling equipment and facilities upgrades to improve Companys operating efficiency. Cashwasalsousedtopayloansandobligationunderfinanceleaseandcorresponding interests amounting to P1.5 billion and P384.6 million respectively. The Company also invested some P140.1 million in developing various software applications toprovidebetterservicetoitscustomersaswellastoprovideitsemployeeshighquality standard of work environment. Key Performance Indicators (KPIs) ATS management and its subsidiaries use the following KPIs to evaluate its performance: a)Revenues - is mainly composed of freight and passage revenues and are recognized whentherelatedservicesarerendered,netofpercentagetaxes.Pleasesee discussion under Consolidated Income Statement2006--Revenues section. b) EarningsBeforeInterest,Taxes,DepreciationandAmortization(EBITDA)-is calculatedbyaddingbackinterestexpenseandamortizationanddepreciationinto incomebeforeincometax.Itprovidesmanagementandinvestorswithatoolfor determining the ability to generate cash from operations to cover financial charges and income taxes.It is also a measure to evaluate the companys ability to service its debts.The Companys EBITDA for 2006 remained unchanged at P1.7 billion. c)Incomebeforeincometax(IBT)istheearnings 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-equityratio-givesanindicationofhowleveragedthecompanyis.It comparesassetsprovidedbycreditorstoassetsprovidedbyshareholders.Itis determined by dividing total liabilities over stockholders equity.ATS debt-to-equity ratio is 1.14:1. e)Currentratioisameasurementofliquiditycalculatedbydividingtotalcurrent assets by the total current liabilities.It is an indicator of the companys short-term debtpayingability.Thehighertheratio,themoreliquidthecompany.The Companyscurrentratioin2006showedanimprovementover2005levels.Thisis largelyattributabletohighercurrentassets.Pleaseseealsocurrentratio discussion on Other Information---1. section below. ComparativefiguresoftheTopFivekeyperformanceindicators(KPI)oftheCompanyfor the years ended December 31, 2006 and December 31, 2005 (amounts in thousands except for the financial ratios): ATS Dec 31, 2006Dec 31, 2005 1. Revenues10,571,18511,679,618 2. EBITDA1,725,1051,707,433 3. NIBT96,76729,608 4. Debt-to-equity ratio1.14:11.56:1 5. Current ratio0.99:10.82:1 AONE and Subsidiaries Dec 31, 2006Dec 31, 2005 1. Revenues1,201,2041,254,488 2. EBITDA77,679170,639 3. NIBT66996,819 4. Debt-to-equity ratio1.86:1.001.74:1.00 5. Current ratio1.11:1.001.12:1.00 ABOJEB and Subsidiaries Dec 31, 2006Dec 31, 2005 1. Revenues179,190235,762 2. EBITDA45,77682,937 3. NIBT35,83671,417 4. Debt-to-equity ratio2.91:1.001.31:1.00 5. Current ratio1.27:1.001.62:1.00 JMI Dec 31, 2006Dec 31, 2005 1. Revenues102,920119,465 2. EBITDA17,58542,805 3. NIBT6,04934,824 4. Debt-to-equity ratio53.35:1.00(1,176.58):1.00 5. Current ratio0.91:1.000.83:1.00 AJMSI Dec 31, 2006Dec 31, 2005 1. Revenues5,7421,024 2. EBITDA2,010(1,088) 3. NIBT1,973(1,108) 4. Debt-to-equity ratio2.53:1.0014.29:1.00 5. Current ratio1.02:1.000.68:1.00 JMBVI and Subsidiaries Dec 31, 2006Dec 31, 2005 1. Revenues1,547,4962,092,966 2. EBITDA(32,662)1,363 3. NIBT(32,662)(13,521) 4. Debt-to-equity ratio106.6:1.0012.75:1.00 5. Current ratio0.98:1.001.02:1.00 Outlook For the coming years, ATS will continue the various initiatives it has embarked on in the past.Itintendstoremainfocusedonbecomingthelowestcostoperatorinthecountrywith positive cash flows and very strong balance sheet.Efforts will be directed at liquidating debt, removinginterestcosts,rationalizingcoststructures, and increasing earning capacity of all assets.Itintendstocapitalizeonitsintegratedtransportbusinessestoachievehigher operating efficiencies and provide complete solutions to customers. 2GO,theCompanysintegratedlogisticssolutionsprovider,isstillattheforefrontin providing containerized shipping services as well as simplified solutions to its customers by offering136,atime-defined,time-pricedcargoservice;andRoRo,aself-drivencargo serviceconceptwhichisgivenpriorityloadingtoensurefasterdeliverylead-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 the3rdquarterof2006withcapacityofover444TEUs.Inaddition,unusedpassenger capacityinexistingvesselsisbeingconvertedtomakeroomfortheheighteneddemandof our RoRo service. SuperFerry,theCompanyspassengerbusiness,whichhasbeenoperatingonavery competitivelandscapein2006,willcontinueimplementingtheinitiativesithadstarted, includingofferingyearroundpromotionalratesandimprovingtheexperienceofevery traveler within the Philippines. ATSiscontinuouslyrealigningitseffortstobeabletocapitalizeoneconomicupturnand sustainprofitabilityinthelongterm.Thecompanybelievesmuchofthegrowthinthe comingyearswillbeinsupplychainmanagement,offeringmoreandmoresophisticated customerswithcompletelogisticssolutions.ThereareplanstolaunchitsSupplyChain DivisionaswellasColdChainDivisionin2007.Thecoldchainservicewillbefocusedon servingtheLooseCargoLoadmarket,linkingfarmers,fishermenandtheconsumers 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 Companys 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 ofthebankcreditorsfortheadjustmentinthefinancialratioscovenants,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 Companys current ratio is 0.99:1.00 and its debt service coverage ratio is 0.91:1.00. 2.Totalfuel/lubesexpenseisamajorcomponentoftheCompany'stotalcostand expenses.Giventhis,theCompanyisconstantlylookingforwaystoreducefuel 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.Exceptasdisclosedinthemanagementdiscussionandnotestothefinancial statements,therearenootherknowneventsthatwilltriggerdirectorcontingent financialobligationthatismaterialtothecompany,includinganydefaultor acceleration of an obligation despite the companys low current ratio. 5.Exceptasdisclosedinthemanagementdiscussionandnotestothefinancial statements,therearenootherknowntrends,eventsoruncertaintiesthathavehad or that are reasonably expected to have a material favorable or unfavorable impact on revenues or income from operations. 6.Allsignificantelementsofincomeorlossfromcontinuingoperationsarealready discussedinthemanagementdiscussionandnotestofinancialstatements. Likewiseanysignificantelementsofincomeorlossthatdidnotarisefromthe registrants continuing operations are disclosed either in the management discussion or notes to financial statements. 7.Thereisnomaterialoff-balancesheettransaction,arrangement,obligation,and otherrelationshipsofthecompanywithunconsolidatedentitiesorotherpersons created during the reporting period. 8.Seasonal aspects of the business are considered in the Companys financial forecast. 9.Thecompanydoesnotexpectanyliquidityorcashproblemwithinthenexttwelve months. Item 7. Financial Statements TheconsolidatedfinancialstatementsandscheduleslistedintheaccompanyingIndexto Financial Statements and Supplementary Schedules are filed as part of this Form 17-A. Themanagementisnotawareofanysignificantormaterialeventsortransactionsnot includednordisclosedintheconsolidatedfinancialstatementsincompliancewiththeSRC Rule 68. Item 8. Information on Independent Accountant and other Related Matters (1) External Audit Fees and Services Year endedYear ended December 31, 2006December 31, 2005 Audit Fees P1,240,000 P1,240,000 Audit-Related Fees300,000300,000 Tax Fees - - All Other Fees50,000450,000 TOTAL P 1,590,000 P 1,990,000 Audit Fees Thisrepresentsprofessionalfeesforfinancialassuranceservicesrenderedforthe Companys Annual Financial Statements, review and opinion for SEC Annual Report. Audit-Related Fees Thisrepresentsprofessionalfeesfortechnologyandsecurityriskservicesrenderedbythe external auditor in connection with the Audit on Companys 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 ThisrepresentsfeesforservicesrenderedfortrainingtheCompanysfinanceand 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. AuditservicesprovidedtotheCompanybyexternalauditor,SGV&Co.havebeenpre-approvedbytheAuditCommittee.TheAuditCommitteehasreviewedthemagnitudeand natureoftheseservicestoensurethattheyarecompatiblewithmaintainingthe independence of the external auditor. (2)ChangesinandDisagreementsWithAccountantsonAccountingandFinancial 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 businessexperienceduringthepast5years(exceptthoseyearsstatedotherwise)and otherdirectorshipsheldinreportingcompanies,includingnameofeachcompany,ofall directors and executive officers are as follows: Mr. Jon Ramon M. Aboitiz Age: 58Citizenship: 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.HeisaDirectorandChairmanoftheBoardofAboitizPowerCorp.,Phil.HydroPower Corp.,PilmicoFoodsCorp.,AboitizGroupFoundation,Inc.,AboitizJebsenBulkTransport Corp.,FilscanShipping,Inc.,GeneralCharterer,Inc.,JebsenMaritime,Inc.,AboitizPower Solutions,Inc.andAEVProperties.HeisaDirectorandViceChairmanofVisayanElectric CompanyandUnionBankofthePhilippinesandChairmanofitsExecutiveCommittee, CompensationRemunerationCommittee,RiskManagementCommittee,Corporate GovernanceCommitteeandNominationCommittee.HeisaDirectorofSanFernando Electric Light & Power Co., Southern Philippines Power Corp., Hijos de F. Escao, Aboitiz One, Inc.,Hapag-LloydPhils.,CotabatoLight&PowerCo.,CotabatoIcePlant,Inc.,Bukidnon Hydropower Corp., and Aboitiz Land. Mr. Bob D. Gothong Age: 51Citizenship: 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: HeisaDirectorandChiefExecutiveOfficerofOneWilsonPlaceHoldings,Inc.,6355Ross StreetandGothongSouthernShipping,Inc.HeiscurrentlyaDirectorofthefollowing companies:Philippine National Oil Company (PNOC), Ramon Aboitiz Foundation, Inc. (RAFI), and Carlos A. Gothong Holdings, Inc. (CAGHI). Mr. Enrique M. Aboitiz, Jr. Age: 54Citizenship: Filipino Position in the Company:President and Chief Executive Officer (May 1999 Present) Director(1997 Present) Business Experience and Current Directorship: HeisthePresidentandaDirectorofAboitizJebsenBulkTransportCorporation.Hesits 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: HeistheExecutiveVice-PresidentandChiefOperatingOfficerofAboitizEquityVentures Inc., and Senior Vice President-Chief Financial Officer of Aboitiz & Company Inc. Moreover, heisaDirectorofAboitizOne,Inc.,AboitizLandInc.,PilmicoFoodsCorp.,UnionBankof thePhilippines,andVisayanElectricCompany.HeisaDirector,PresidentandChief ExecutiveOfficerofAEVPropertiesInc.,HydroElectricDevelopmentCorp.andPhilippine HydroPowerCorp.;DirectorandExecutiveVicePresidentofDavaoLight&PowerCorp.; Chairman of Cotabato Light & Power Corp., San Fernando Electric Light & Power Co., Subic EnerzoneCorp.,LuzonHydroCorp.,Fil-AmFoodsInc.andCitySavingsBank.Heisalso the President of Aboitiz Power Corp. and Aboitiz Group Foundation. Mr. Roberto E. AboitizAge:57Citizenship: Filipino Position in the Company: Director(September 2002 Present) Business Experience and Current Directorship: HeistheSeniorVice-PresidentofAboitiz&CompanyInc.HeisalsotheChairmanofthe 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,DavaoLight&PowerCompany,Inc.,K&AMetalIndustriesInc.,Tsuneishi HoldingsInc.,TsuneishiHeavyIndustries(Cebu)Inc.,VisayanElectricCompany,Inc., AboitizGroupFoundation,Inc.andamemberoftheBoardofTrusteesofPhilippine Business for Social Progress and Sacred Heart School of the Society of Jesus, Inc. Mr. Justo A. OrtizAge: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. AboitizAge:42Citizenship: Filipino Position in the Company: Director(September 2002 Present) Business Experience and Current Directorship: HeisthePresidentandChiefExecutiveOfficerofAboitizOne,Inc.Hehasbeenwiththe AboitizOne,Inc.sinceitsinceptionasAboitizAirTransportCorporationinDecember1998 andhasheldvariouspositionsincludingMarketingManager,AssistantVicePresidentfor Marketing, Vice President and Executive Vice President for TS Express, Senior Vice President andChiefOperatingOfficer.HecurrentlysitsontheBoardofthefollowingcompanies:AboitizandCompany,Inc.,AboitizJe