2007 ANNUAL REPORT Power Corporation - Aboitiz Equity Ventures

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corporate governance To safeguard adherence to corporate principles and best practices, a Chief Compliance Officer who reports directly to the Board Chairman is designated. The auditing firm of Sycip, Gorres, Velayo & Company (SGV) is AP’s external auditor. The current audit partner is Mr. Ladislao Z. Avila, Jr. SGV is being nominated for re-election at the scheduled annual meeting of shareholders. The fees paid to the external auditors for the years 2007 and 2006 were as follows: Audit Fees Year ended December 31, 2007 15,498,880 Year ended December 31, 2006 110,000 Audit-Related Fees - - Tax Fees - - Consultancy Fees - Total 15,498,880 110,000 Of the total audit fees incurred in 2007, approximately 14.4 million was incurred by AP in connection with the IPO of its common shares in July 2007. Internal Audit It is the policy of AP to maintain an internal audit function as a primary resource of the Board of Directors, Audit Committee and management in the effective discharge of their respective duties and responsibilities of reviewing, evaluating, managing and controlling AP’s operations, including that of its subsidiaries and affiliates. Internal audit is an independent and objective assurance and consulting function designed to add value and improve AP’s operations through a systematic, disciplined approach in evaluating and improving the effectiveness of AP’s risk management, control and governance processes. It is undertaken by the Corporate Audit Team, a staff organization that functions in an advisory capacity. To maintain its objectivity, it exercises no direct responsibility or authority on operating activities or functions it reviews. The Corporate Audit Team reports to the Audit Committee and has direct access to the Chairman of the Board. The Board of Directors and senior management support the Corporate Audit Team to ensure that audits are performed without interference. The Corporate Audit Team has full, free and unrestricted access to all operating and financial records, information, systems and applications, physical properties, activities and personnel under review. Its scope of work encompasses evaluating and improving the adequacy and effectiveness of AP’s risk management, control and governance processes through risk profiling and evaluation of risk exposures, evaluation of existing internal control structure, participation in the planning, design and implementation of major information systems as a consultant to ensure that systems are properly tested, secured, documented and implemented, and undertaking of special reviews as determined by the Audit Committee. The Corporate Audit Team adheres to established professional standards and abides by the Institute of Internal Auditors’ Code of Ethics. Compliance Officer To safeguard adherence to corporate principles and best practices, a Chief Compliance Officer who reports directly to the Board Chairman is designated. Principal responsibilities include monitoring compliance with Manual on Corporate Governance, identifying, monitoring and controlling compliance risks and recommending improvements to existing policies. Presently, the Corporate Secretary holds the position in concurrent capacity. 28 • ABOITIZ POWER CORPORATION ANNUAL REPORT 2007
The Office of the Chief Compliance Officer monitors compliance with the reportorial requirements of the Securities and Exchange Commission and the Philippine Stock Exchange and reports to management the status of such compliance as well as other material legal issues confronting AP every two months. The Chief Compliance Officer works closely with the Executive Vice President for Strategy and Regulatory Affairs to ensure compliance with the rules and regulations of power industry regulators and relevant government agencies. In 2007 the Office of the Corporate Secretary started a documents management system for AP’s and its subsidiaries’ constitutive documents, contracts, government filings and other relevant business documentation as a benchmark for compliance and ensuring document integrity. DISCLOSURE AND TRANSPARENCY Ownership Structure AP discloses its ownership structure in the reports it files with the Securities and Exchange Commission (SEC) and the Philippine Stock Exchange (PSE). It submits to the PSE a list of its top 100 shareholders every quarter. It likewise submits periodically to the PSE a public ownership report that details the ownership of controlling shareholders, including the shareholdings of their subsidiaries and affiliates, and of directors and management. It also discloses its top 20 shareholders, including the record and beneficial owners owning more than 5% of AP’s outstanding capital stock, as well as the shareholdings of directors and officers in the Definitive Information Statement sent out to shareholders annually. As of December 31, 2007, Aboitiz Equity Ventures, Inc. (AEV) owns 5.40 billion common shares of AP, representing 75% of the outstanding capital stock of AP. Aboitiz & Company, Inc., in turn owns 2.48 billion common shares of AEV, representing 43% of the outstanding capital stock of AEV. PCD Nominee Corporation (Foreign) holds a total of 1.49 billion common shares of AP, representing 21% of the outstanding capital stock of AP. Disclosures AP discloses to the public its financial and operating results every quarter through its filings with the SEC and the PSE. It also discloses its full year financial and operating results in SEC Form 17-A filed with the SEC and the PSE. Its shareholders are furnished a report of its full year financial and operating results through the Definitive Information Statement sent out to the shareholders every year. In addition to the periodic reports submitted to the SEC and the PSE, AP immediately updates the investing public with any material fact or event related to AP and its business operations which may affect investors’ decision in relation to the trading of AP’s securities. In 2007, unstructured disclosures filed with the SEC and the PSE contained information about significant asset acquisitions such as the STEAG and the Ambuklao-Binga power plants, the Magat refinancing, joint venture projects, status of ongoing projects, and appointments of certain officers of AP. These unstructured disclosures are also uploaded to AP’s website. In addition to the periodic reports submitted to the SEC and the PSE, AP immediately updates the investing public with any material fact or event related to AP and its business operations which may affect investors’ decision in relation to the trading of AP’s securities. ABOITIZ POWER CORPORATION ANNUAL REPORT 2007 • 29
Page 1 and 2: Power Corporation Powering New Fron
Page 3 and 4: P o w e r i n g New Frontiers ABOIT
Page 5 and 6: FINANCIAL SUMMARY For the Year (In
Page 7 and 8: R E P O R T T O O U R S T O C K H O
Page 9 and 10: h Powering New Frontiers With deman
Page 11 and 12: Results of Operations POWER D I S T
Page 13 and 14: R E S U L T S O F O P E R A T I O N
Page 15 and 16: A SFELAPCO crew does live line work
Page 17 and 18: Results of Operations POWER G E N E
Page 19 and 20: POWER G E N E R A T I O N Hedcor si
Page 21 and 22: STEAG State Power Inc. (SPI) contri
Page 23 and 24: We expect our distribution companie
Page 25 and 26: The strong and stable financial per
Page 27 and 28: DIRECTORS SPECIAL AND REGULAR BOARD
Page 29: Director and Senior Executive Compe
Page 33 and 34: Employee Relations In AP, people ar
Page 35 and 36: P o w e r i n g New Frontiers F E A
Page 37 and 38: The rest of its capacity is traded
Page 39 and 40: The annual energy requirement will
Page 41 and 42: Gone are the long queues at VECO’
Page 43 and 44: The three utilities aim to provide
Page 45 and 46: CPPC, meanwhile, is situated on a 1
Page 47 and 48: and reliable supply of electricity.
Page 49 and 50: The fulfillment of sharing the frui
Page 51 and 52: Board of Directors Jon Ramon M. Abo
Page 53: Corporate Officers Benjamin A. Cari

2007 ANNUAL REPORT Power Corporation - Aboitiz Equity Ventures

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