part i – business and gebneral information 17a 2016...item 6 management’s discussion and...

*SGVFS022008*

C O V E R S H E E Tfor

AUDITED FINANCIAL STATEMENTS

SEC Registration Number

P W - 9 3 7

C O M P A N Y N A M E

E E I C O R P O R A T I O N A N D S U B S I D I A R I

E S

PRINCIPAL OFFICE ( No. / Street / Barangay / City / Town / Province )

N o . 1 2 M a n g g a h a n S t r e e t , B a g u m

b a y a n , Q u e z o n C i t y

Form Type Department requiring the report Secondary License Type, If Applicable

1 7 - A S E C N / A

C O M P A N Y I N F O R M A T I O N

Company’s Email Address Company’s Telephone Number Mobile Number

[email protected] 635-0843 to 49 N/A

No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day)

3,189 Every ThirdFriday of June December 31

CONTACT PERSON INFORMATION

The designated contact person MUST be an Officer of the Corporation

Name of Contact Person Email Address Telephone Number/s Mobile Number

Atty. George Ryan T.Hipolito [email protected] 635-0851 to 56 N/A

CONTACT PERSON’s ADDRESS

No. 12 Manggahan Street, Bagumbayan, Quezon City, Metro Manila, Philippines

NOTE 1 : In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the Commission withinthirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person designated.

2 : All Boxes must be properly and completely filled-up. Failure to do so shall cause the delay in updating the corporation’s records with the Commissionand/or non-receipt of Notice of Deficiencies. Further, non-receipt of Notice of Deficiencies shall not excuse the corporation from liability for its deficiencies.

EEI CORPORATION

Supplementary Schedules Required

By the Securities and Exchange Commission

As of and for the Year Ended December 31, 2016

TABLE OF CONTENTS

Page

No.

PART I - BUSINESS AND GENERAL INFORMATION

Item 1 Business and General Information

1

Item 2 Properties 13

Item 3 Legal Proceedings 14

Item 4 Submission of Matters to a Vote of Security Holders 19

PART II - OPERATIONAL AND FINANCIAL INFORMATION

Item 5 Market Price of and Dividends on Registrant’s Common

Equity and Related Stockholders’ Matters

20

Item 6 Management’s Discussion and Analysis or Plan of Operations 21

Item 7 Financial Statements 31

Item 8 Changes in and Disagreements With Accountants

and Financial Disclosure

39

PART III - CONTROL AND COMPENSATION INFORMATION

Item 9 Directors and Executive Officers of the Registrant

40

Item 10 Executive Compensation 47

Item 11 Security Ownership of Certain Beneficial Owners and Management 48

Item 12 Certain Relationships and Related Transactions 50

PART 1V - CORPORATE GOVERNANCE

Item 13 Corporate Governance

53

PART V - EXHIBITS AND SCHEDULES

Item 14 Exhibits and Reports on SEC Form 17-C

54

SIGNATURES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS,

ANALYTICAL REVIEW AND SUPPLEMENTARY

SCHEDULES

INDEX TO EXHIBITS

- 1 -

PART I – BUSINESS AND GENERAL INFORMATION

ITEM 1. BUSINESS AND GENERAL INFORMATION

EEI Corporation (EEI or the Company) was founded in 1931 as a machinery and mills supply house for

the mining industry. In the past 85 years, the Company expanded into construction services, the

distribution of a broader range of industrial machinery and systems, and supply of manpower in the

Philippines and overseas. Today, EEI is one of the country’s leading construction companies with a

reputable track record in general contracting and specialty works. It is a member of the Yuchengco

Group of Companies (YGC), one of the country’s most diversified conglomerates with interests in

banking, education, financial services, property development, and renewable energy production.

Through its long years of working and collaborating with global contractors, EEI has achieved world-

caliber project management and execution expertise with the use of better construction technologies in

all disciplines of the construction industry.

It has been involved in the installation, construction and erection of power generating facilities; oil

refineries; chemical production plants; cement plants; food and beverage manufacturing facilities;

semiconductor assembly plants; roads, bridges, railroads, ports, airports and other infrastructure; and

high rise residential and office towers, and hotel buildings. The Company also operates one of the

country’s modern steel fabrication plants.

Driven by a commitment to Philippine development and to have greater presence in the economy, EEI

continues to expand its core business to a wide array of construction competencies. The Company has

also been engaged in doing construction projects overseas for more than forty years.

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a.) The Company’s Subsidiaries

Company

Percentage of

Ownership Nature of Business

EEI Limited and Subsidiaries

(formerly EEI BVI Limited)

100% Engages in labor supply and project management and supervision

services. Holds interest in joint-venture outside the

Philippines. Formed under BVI laws on September 25, 1996. Re-

registered in the British Virgin Islands under the BVI Business

Companies Act 2044 on January 1, 2007.

EEI Construction and Marine, Inc. (ECMI)

100%

Engages in fabrication of light steel, and other structural fabrication

works. Incorporated on November 11, 1983, with SEC

Registration No. 117378.

EEI Power Corporation (EEIPC) 100% Constructs, builds, operates, owns and/or transfers, rehabilitates,

lease and transfer diesel, gas turbine, steam power plant, fossil fuel-

fired power plant, renewable energy generating facilities and other

power generating plants of any type and related facilities, intended

for supply or distribution of energy and/or electricity. Incorporated

on August 10, 1993, with SEC Registration No. ASO95-006133.

EEI Realty Corporation (ERC) 100% Engages in property investment and development. Incorporated on

May 15, 1995, with SEC Registration No. ASO95-004658.

Equipment Engineers, Inc. (EE) 100%

Engages in and carries on contracting services in any construction

works and other trade & specialty works or relating thereto or

connected therewith and to manufacture and/or furnish building

materials & supplies in connection therewith and to act as general

merchants. Incorporated on January 05, 1972, with SEC Registration

No. 46252.

JP System Asia, Inc. 60% A joint venture scaffolding and formworks rental Company. The

Company was incorporated last December 2016 with SEC Reg. No.

CS201629433 aims to bring in the Japanese scaffolding and

formworks rental standards and discipline in the Philippine

construction industry. Commercial operation will start June of 2017.

Gulf Asia International Corporation and Subsidiaries

(GAIC)

100%

Provides overseas manpower supply and recruitment services, service

contracting & outsourcing services. Incorporated on March 08, 1984,

with SEC Registration No. 119508.

EEI Corporation (Guam), Inc.

100%

Organized to engage in construction, construction service, trading of

construction materials and equipment, maintenance and operations of

industrial facilities, and construction equipment rental, repair and

maintenance. Incorporated on August 25, 2009 under the laws of

Guam. Has not started commercial operations since incorporation.

EEI Subic Corporation

100%

Organized to engage in general contracting and specialty construction

services, fabrication and production of equipment systems for

building, property development and infrastructure sectors.

Incorporated on September 14, 2009 with SEC Registration No.

CS200914058. Has not started commercial operations since

incorporation.

Bagumbayan Equipment & Industrial Plant, Inc.

(BEIPI)

100%

Organized to engage in consultancy and management services.

Incorporated on October 08, 2001 with SEC Registration No. AS091-

196568. Has not started commercial operations since its incorporation.

Philrock Construction and Services, Inc. (PCSI)

100%

Engages in providing manpower services. Incorporated on July 04,

2001 with SEC Registration No. A2001-09600. Has suspended regular

business operations since 2010.

Philmark, Inc.

100% Engages in general construction and sale of supplies and materials.

Incorporated on March 27, 1996 with SEC Registration No. 30009.

Has suspended business operations beginning year 2011. On July 21,

2014 the Board of Directors and shareholders approved the closure

and dissolution of the Company. Clearance with City Hall and BIR

already acquired. SEC documentation/submissions for dissolution on-

going.

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Joint Ventures and Associates

Company

Percentage of

Ownership Nature of Business

Al Rushaid Construction Company Ltd. (ARCC) 49% Joint venture construction company for construction projects

in Saudi Arabia. The Company is a Saudi Arabian limited

company registered in Al-Khobar on July 17, 1993 under

commercial Registration No. 2051018887.

Petro Solar Corporation 44% Incorporated on June 17, 2015 with SEC Reg. No. CS201511802

by PetroGreen Energy Corporation (PGEC) together with EEI

Power Corporation to operate the 50MW Tarlac Solar Power

Project (TSPP) in Tarlac City.

Petro Wind Energy, Inc. (PWEI) 20% Engages in the general business of generating, transmitting

and/or distributing power derived from renewable energy sources

such as, but not limited to wind, biomass, hydro, solar,

geothermal, ocean, wave and such other renewable sources of

power. Incorporated on March 06, 2013 with SEC Reg. No.

CS201304226.

b.) Contribution of Foreign Sales

The amounts and percentages of revenue attributable to foreign sales, for the calendar years ended

December 31, 2016, 2015 and 2014 are as follows:

For the Year Ended

(In Thousand Pesos) 2016 2015 2014

From an Associate (49% Owned by EEI Ltd.)* P=3,350,302 P=6,052,926 P=7,045,341

% to Total Revenues 18% 24% 29%

*Please refer to Note 11, Investments in Associates and Joint Venture, of the Company’s 2016 Audited

Financial Statements.

c.) New Product

In 2016, through its investment in PetroSolar Corporation, EEI began producing energy from its

50-megawatt solar farm in Luisita, Tarlac.

Equipment Engineers, Inc. (EE), EEI’s subsidiary which is engaged in Trading and Supply Chain

Management introduced new product lines in its distributorship portfolio.

d.) Competition

The construction sector is composed of companies that provide technical and engineering

services in the preparation of land and the construction of buildings, structures and other land

improvements. It also includes companies that conduct repair, retrofitting, renovation,

rehabilitation, alteration, maintenance and demolition of such structures.

Because of the variety of trades involved, many construction companies actually complement

rather than compete with each other. Companies differ based on the services that they offer and

on the industry segments that they serve, such as high-rise buildings, infrastructure projects,

industrial projects, and residential projects. When construction companies have the same

specialization and serve the same segments, competition is largely influenced by factors such as

the contractor’s competencies and experience, its reputation for quality work, its reliability in the

timely completion of projects, its management and financial capabilities, and its complement of

skilled labor and equipment.

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The construction industry in the Philippines is subject to regulation by the Philippine

government. Contractors are required to maintain a regular contractor’s license from the

Philippine Contractors Accreditation Board (PCAB) to conduct its business. The PCAB, which

is under the Department of Trade and Industry (DTI) classifies industry players according to their

capability to undertake projects based on financial capacity, equipment capacity, experience, and

technical personnel. In February, 2017, EEI’s classification as a general engineering contractor

was upgraded from an “AAA” to an “AAAA” rating, the highest rating for local contractors.

EEI regards, among others, the following as competitors because of the similarities of the

specialization, the industry segments being served, and the “AAAA” rating by the PCAB:

DATEM Incorporated

DM Consunji, Inc.

First Balfour Incorporated

Makati Development Corporation

The following construction companies, though classified as “AAA” by the PCAB, are still

considered as competitors:

Leighton Contractors (Philippines) Limited

Megawide Construction Corporation

e.) Sources and availability of raw materials and names of principal suppliers

Steel (Rebar) - The Company has four (4) major local suppliers namely, Steel Asia Manufacturing

Corp., Pag-asa Steel Works, Inc., Universal Steel Smelting Company, Inc. and Filipino Metals Corp.

All suppliers have the capability to supply in terms of price, quality, lead-time, and production

capacity. In addition, the suppliers are capable to supply outside Metro Manila due to their expansion

and distribution channels. Buying strategies are dependent on the current steel market situation.

Steel (Flats and Plate products) - The Company is dealing with major local traders, stockists,

wholesalers and retailers, for small and big quantity items, namely: Remington Industrial

Corporation, Regan Industrial Sales, Inc. and Steel Trust Corporation Metals .The supply sources of

these stockists are mostly in Asia, like China, South Korea, Malaysia, Thailand and Vietnam. Steel

usage is dependent on the required application and origin restriction of the client. For bulk

requirements, especially for plates and special steel whether the requirements are for actual buying or

for tendering process, the Company’s Supply Chain Management Group (SCM) can tap big steel

mills worldwide through authorized dealers like Korean Steel Mills (POSCO, DONGKUK); Japan

Steel Mills (Nippon Steel, JFE Steel, Sumitomo); Arcelor Mittal, etc. The organization has good

relationship also with big stockists in Asia namely, HG METAL MANUFACTURING LIMITED,

MITSUI & CO (ASIA PACIFIC) PTE. LTD. , Metal One, Regency Steel Asia & Steel N People to

name a few, For most of the steel requirements, SCM can do multi-country sourcing and buying,

depending on the approved sources of the client taking into consideration the steel market situation

and the required timeline of the projects. SCM Group is also a member of the South East Asian Iron

Steel Institute (SEAISI) with good relationship with its International members, mostly are steel

manufacturing suppliers (steel mills).

Cement - The Company has existing contracts with big suppliers like Holcim Philippines Inc., CRH

Republic, Cemex Philippines, Inc. and Eagle Cement. All suppliers are capable to supply in terms of

quality, production capacity and distribution channels. SCM Group also established contacts with

other manufacturers to cover outside Metro Manila requirements like Taiheiyo Cement Philippines,

Inc. in the Cebu area. For special requirements like Type II cement, local suppliers like CRH

Republic can produce and has the capacity to supply, while Cemex can manufacture cement with the

same technical standard.

Fuel - The Company has contracts with Petron Corporation, Phoenix Petroleum Philippines, Inc. &

Pilipinas Shell for project sites that require tank facilities depending on the volume required. For

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vehicles and other light and heavy equipment, the Company is using Shellcard through the extended

contract of House of Investments – YGC Procurement Shared Services. A joint review is being done

every year to determine if there’s a need to adjust prices based on the current demand and market

conditions. Continuous development of new sources is ongoing for provincial sites. This is to ensure

supply continuity in the provincial areas where the Company operates.

f.) Dependence on a single or a few customers

The Company is not dependent on any single customer or just a few customers. Any person, natural

or juridical, who wants to build a plant, infrastructure or building is a potential customer.

g.) Related Party Transactions

Please see Note 27 - Related Party Transactions, of the Company’s 2016 Audited Consolidated

Financial Statements for details.

h.) Patents, Trademarks, Copyrights, Licenses, Franchises, Concessions and Royalty

Agreements

The Company does not own any patent, trademark, copyright, franchise, concession and royalty

agreement.

i.) Government approval of Principal Products

After having complied with all the requirements for licensure in accordance with Republic Act No.

4566, as amended, and its implementing rules and regulations, the Company’s application for license

to engage in the construction contracting business in the Philippines was approved by the Philippine

Contractors Accreditation Board (PCAB).

j.) Effect of existing or probable government regulations on the business

A. National Level

1. If there will be new minimum wage levels while the projects are:

a.) Under negotiation or not yet awarded but the validity of proposal is still valid

b.) Project is currently on-going

2. If there will be new taxation laws while the projects are:



3. If there will be new Value Added Tax (VAT) laws while the projects are:

a) Under negotiation or not yet awarded but the validity of proposal is still valid

b) Project is currently on-going

4. New taxes on the prime commodities such as fuel and construction materials (local

and indent)

B. Local Level (LGU)

1. Business tax computation varies for each city/municipality

2. Changes or new local tax implemented while the projects are:



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k.) Research and Development

The Company continues to look into new developments and methodologies in the construction

industry; undertakes programs; and invest in new technologies, tools, equipment and software, to

improve its construction operations, business processes, and customer service.

Through its subsidiary, Equipment Engineers, Inc. EEI is also able to look into integrating upstream

and downstream services into its operations, with the intention of improving its product offering, and

increasing productivity to better satisfy its clients. By scanning the business landscape, it also

considers opportunities for diversification in non-allied businesses.

l.) Training and Development Costs

The Company spent a total of P291.62 million as training and development costs for the last three (3)

years as follows:

Period Covered

Amount

(000)

Percentage

to

Revenues

CY ended December 31, 2016 P=75,096 0.51%

CY ended December 31, 2015 98,628 0.52%

CY ended December 31, 2014 117,894 0.69%

Total P=291,618

m.) Costs and effects of compliance with environmental laws

On January 13, 2016, TUV SUD Asia Pacific Group certified EEI Corporation for an ISO

14001:2004 Environmental Management System and 18001:2007 Occupational Health and Safety

Management System (OHSAS). A surveillance audit was conducted on July 22, 2016 to August 5,

2016 wherein several project sites, including EEI Head Office, were audited if the Safety, Health, and

Environmental Management System really work in our everyday operation. A Maintenance

Certificate on ISO 14001:2004 and OHSAS 18001:2007 was issued to EEI Corporation on

November 24, 2016.

In line with this, EEI Corporation continuously carries out its commitment to the protection of our

environment. Continuous monitoring of our Environmental Objectives and Targets through Programs

on reduction of Energy, Water, Paper Consumption and Solid and Hazardous Waste Generation to

ensure compliance with the legal and other requirements. Pollution Control Officers (PCO) carry

through duties like monitoring radiation from its Non-Destructive Testing Facilities, the Advanced

Oxidation Process (AOP) for waste water treatment, hazardous wastes in motor pool facilities,

drainage canals, wash room areas and the like. Environmental Awareness is also integrated through

orientation and training for all employees.

EEI Corporation follows the rules of the Department of Environment and Natural Resources -

Environment Management Bureau (DENR-EMB) and Laguna Lake Development Authority (LLDA)

as shown through our quarterly and semi-annual report submissions. Same reports are also being

provided by our equipment yard in Laguna and Fabrication shop in Batangas on their part. In

collaboration with these agencies, we conducted a Linis Ilog Program in Antipolo, Rizal on April 23,

2016 and a Tree Planting Activity on October 15, 2016 in Brgy. Pintuang Bukawe, San Mateo, Rizal.

EEI works with ABS-CBN Foundation for the Bantay Baterya program by donating various lead/acid

batteries. Re-use and recycling of waste and/or indigenous materials through a Parol Making Contest

during Christmas season is part of our Waste Management Program.

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n.) Major Risks and Opportunities

The risk management function is an important aspect of corporate governance. EEI has a Risk

Management Program which has been in place since 2009. A Risk Management Council composed

of the President and CEO, the Chief Risk Officer and key department heads meet regularly to discuss

the new and emerging risks brought about by the peculiarities of new projects, changes in the market

place, economic shifts, political upheavals, disasters, unusual events and probable impending events

which had been identified in the various areas of company’s business activities. The Risk

Management Council is responsible for providing timely, relevant and comprehensive risk

information to the Board through the Board Risk Oversight Committee which is composed of four

directors. The Company is expecting the following major risks and opportunities (in no particular order) to

factor into its business and is doing the corresponding actions to properly address them:

a. Geopolitical risk and opportunities

Description: The changing of the Philippines’ government including the changes in the political

situation of other countries particularly the US and China with economies related to ours may have

effects on the construction markets where the Company has interests – particularly:

Some uncertainties in the BPO industry (which affect demand for building used as BPO

offices) as most of the demand for such comes from the United States. President Trump

intends to bring back jobs to their country under his America First policy.

It is expected that higher number of infrastructure projects will be bid out as the current

government made its plans known that development of the country’s infrastructure is one of

its main objectives.

Mitigating Measures:

With possible reduction of building projects for the BPO industry, the Company will be

selective in dealing with BPO building clients.

The Company is studying how to tap into this expected increase in infrastructure projects and

are exploring possible partnerships to successfully handle the demands of such projects and

also to diversify the risks.

b. Business concentration risk

Description: As much as the Company values its current roster of regular clients, it is always

better to create a wider client base. Doing this will not only expand the opportunities open to the

Company but also make the Company more resilient to any fluctuations on the business of our

clients.


Cement existing collaboration with major customers to expand business opportunities.

Engaging other reputable conglomerates in the construction market.

Redefine risk bearing capacity and risk appetite.

Enhance contracting capacity for possible ramping up of participation in PPP projects and

direct government contracts.

c. Credit risk

Description: As the Company’s backlog of contracts is at an all-time high, the amount of

receivables from our clients has also increased. The efficiency at which these receivables are

collected has a significant effect on the financing requirements and interest expense of the

company.

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Efforts have been done since 2016 to facilitate faster collection of receivables.

Initiate due diligence of new clients during tender stage as part of “Know Your Customers”

(KYC).

Establishing a single customer exposure limit is being explored which is meant to align the

Company’s exposure from its receivables.

d. Interest rate risk

Description: Interest rate has started to climb and will continue to increase over the next three (3)

years. Aside from higher financing cost, higher interest rate will decelerate economic growth,

which could slowdown demand for construction services.


The Company will continue to expand the list of possible banking relationships to obtain the

optimal interest rate offers.

Efforts to reduce debt levels, as long as it does not hamper our capability to perform, are

underway (such as reducing credit risk as mentioned above).

Be cautious in the slowdown in other parts of the construction market e.g. BPO and

condominium building.

e. Competition risk

Description: The boom in infrastructure and the continuing ASEAN integration are anticipated to

encourage more competition in the Philippine construction industry, particularly from new foreign

competitors.


The Company is constantly finding ways to make our services more competitive whether by

way of improving our efficiency, looking for new ways to do our work better, and explore

partnerships/alliances that will help us serve the need of the market better.

The demand for infrastructure is not limited to the Philippines but is the whole of ASEAN

region. The Company is exploring the possibility of bringing our services to other parts of the

ASEAN region to tap this demand.

Turn foreign competitors into partners. Locally, foreign contractors cannot do the job

themselves. They always need a local partner to get things done.

f. Cyber security risk

Description: Risk of cyberattacks is on the rise around the world. This threat may lead to data

fraud/theft violating data privacy rights and locking of data which may cause disruption of

operations.


Assessment of the Company vulnerability to cyberattacks has been carried out. The gaps in

information security are already identified and the necessary assets to close such gaps have

already been purchased and are currently being installed.

Obtaining Cyber insurance is also being explored and design of the policy is underway.

g. Succession Planning

Description: The Company needs to plan for the next line of managers and officers that will

succeed the incumbents who are at or near their retirement.

- 9 -


The Company has been running, for a few years now, extensive training programs to prepare the

successors of the retiring managers and officers.

h. Operational risks

Description: The Company’s construction projects can generally be divided into 3 types:

buildings, infrastructure and electromechanical. Whatever the type of project, the operational risks

that the Company encounters can be categorized under the following types of risks:

Estimation errors

Issues with manpower

Issues with equipment or tools

Issues with materials

Inefficiencies during project execution

Inefficiencies in client’s and their nominated subcontractors’ performance during project

execution

Site conditions that may affect the work

Actions by third parties (i.e. the public at large or government) that may affect the work

The operational risks that the company encounters from year to year change only in its mix mainly

depending on the mix of projects that are being executed. This is because the nature of the work in

each type of project results to a different mix of operational risks.


Increase awareness of project risk owners of the identification of risk and its impact on the

project.

Develop probabilistic forecasting capabilities to enable improved management of these

external factors.

Efforts to enhance the monitoring of project performance including the possible effects of all

type of risk exposures are being undertaken and are expected to further improve the

company’s anticipation of risks and response.

Future construction contracts are being negotiated by the company to contain provisions that

either transfers these externalities or at the very least provides a means of spreading or

minimizing the risk.

Risk mitigation also happens during the tender stage where EEI can decide to pursue or ignore

a tender. Creation of rules of thumb during project execution to contain losses when the risk

materializes.

i. Saudi country risk

Description: A relatively sizable operation of the Company is situated in the Kingdom of Saudi

Arabia (KSA) and the uncertainties in that area is of some concern. The prevailing low oil prices

and threat of ISIS continue to be factors that affect the operations there.


There are indications that oil prices may recover but not to the high levels that were

experienced before the crash in prices. Nevertheless, this is seen as a positive indicator that

business prospects in KSA may soon improve as the oil prices recovers. As for now, the

Company will ensure that existing projects earn their profit objectives.

Focus on sustainable operations and maintenance contracts where margins are higher.

Repatriation plans has long been prepared and is ready to be deployed if peace and order

situation requires it.

- 10 -

Developing new international markets particularly in the ASEAN region will fill the void due

to slowdown in Saudi Arabia.

Strategies to contain and mitigate these risks are formulated during Risk Management Council and

Risk Management Committee meetings. In addition, the various risks that had been previously

identified and the corresponding risk treatments are reviewed, reassessed, and revised accordingly.

The following risk management initiatives were undertaken in 2016:

Efforts have been made to further improve the capabilities of the risk management function –

from deterministic forecasting of the business future performance to probabilistic forecasting.

Improvement of the risk management framework to suit this objective, designing the specific

procedures to operationalize the framework, initiating the procurement of predictive tools and

identifying the data requirements were also done.

The final draft of the Company’s revised ERM company manual has already been done and is

just awaiting the approval of the Board Risk Oversight Committee.

The risk appetite and risk tolerance aligned with Company’s strategy was also drafted and also

awaiting the approval of the Board Risk Oversight Committee.

Setting up of Key Performance Indicators (KPIs) and Key Risk Indicators (KRIs) to measure

and monitor performance with strategic goals was also started;

Efforts to enhance data collection, proper storage in database, and other information systems

management improvements were also started to support the data requirements of initiatives.

- 11 -

o.) Human Resources

Manpower Year-end

2016

Average

2016

Estimate

2017

Regular

Rank & File - Monthlies 321 325 569

- Dailies 506 487 818

Supervisory - Staff 1,432 1,378 2,376

- Supervisor 667 641 1,101

Managers - Department 212 206 338

- Group 31 31 54

Officers 61 62 75

Project Workers

Rank & File - Monthlies 905 1,222 914

- Dailies 17,134 21,382 23,276

Supervisory - Staff 1,274 1,584 2,706

- Supervisor 401 480 968

Managers 50 58 233

Total Company 22,994 27,856 33,428

The Company’s project workers are usually employed on a per project basis with contracts fixed for the

duration of the particular project or a phase thereof.

p.) Labor Relations

The Parent Company’s rank and file employees belong to the EEI Progressive Workers Union

affiliated with the National Federation of Labor Unions (EEIPWU-NAFLU). Established in 1979,

this labor union is the certified exclusive bargaining agent of the rank and file employees. Another

labor union, the EEI Supervisory /Staff Employees Union (EEISSEU), an independent union which

was established in 1993, is the bargaining agent of the staff level and supervisory employees.

In 2015, EEI has renewed the Collective Bargaining Agreements (CBA) for both Unions and shall

expire on June 30, 2018.

The Company’s management has maintained good relations with its employees, and has not

experienced any strike or work stoppage for almost four (4) decades or since 1977.

q.) Training The Company continuously creates growth opportunities through its carefully programmed

operations, continuous training and development at all levels and through an impartial, steadfast

commitment to merit system as the sole basis for evaluating performance. The Company believes in

the value of plain hard work. The Company provides various training programs for its employees to

maintain competitiveness and efficiency. The training programs (in-house) for the year 2016 are as follows:

Basic Quality Tools and Techniques Seminar

General Orientation Program (GOP)

Work Attitude & Values Enhancement (WAVE) Workshop

Teambuilding Workshop

Lean Construction Seminar

Trainers for Training

Supervisory Development Program (SDP)

Essential Skills for Supervisory Success (ES3) Workshop

Creative Thinking Training

Root Cause Analysis (RCA) Training Program

Process Survey Tool Training Program

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Competency-Based Interviewing Techniques (CBIT) Workshop

Comprehensive Internship Program for Engineers

Field Engineers Development Program

Coaching Certification Training

Mentoring Certification Training

Mentoring Clinic

Internal Assessor's Training Program

Performance Management System (PMS)

Project Management Orientation Program (PMTOP)

Foreman Development Program (FDP)

Surveyor Training Program

Welding Engineers Training Program

Piping Training Program

Rigging Training Program

Formworks Training Program

Rebars Training Program

Plumbing Training Program

Electrical and Instrumentation Training Program

Mechanical Training Program

Structural Training Program

Boilermaker Training Program

Gas Tungsten Arc Welding – Shielded Metal Arc Welding (GTAW/SMAW)

Scaffolder Training Program

Platewelder Training Program

Construction Occupational Safety and Health (COSH) Seminar

Safety Engineers Development Program

Disaster and Crisis Management Training

Safety Induction Course (SIC) Seminar

Tailored First Aid/Basic Life Support Training

Appreciation Course on EHSMS Standards Seminar

Fire Safety Seminar

Disaster and Fire Management Training

Motorcycle Safety Training

Actual Fire Extinguisher Exercise

Supervisory Training Observation Program

Chemical Safety Training

HAZMAT Training

Crane and Rigging Safety Training

AED and CPR Training

Family Health Series (FHS) Certificate

Handling DOLE Inspection Seminar

HIV / AID Awareness Seminar

Clinic and Health Services Medical Evacuation Drill

Civil and Structural Inspection Seminar

Material Receiving Inspection Seminar

Mechanical Inspection for Electromechanical Seminar

Codes and Standards Seminar

Refresher Course ASTM A36/A6

ASTM Standard for Material Receiving (A325) Seminar

Nuclear Density Gauge Seminar

Non-Destructive Test Inspection Seminar

Defensive Driving Seminar

Spoolgen Seminar

- 13 -

ITEM 2. PROPERTIES

EEI and its subsidiaries own land located in the areas enumerated below.

Properties in the name of EEI Corporation and Subsidiaries as of December 31, 2016:

Acquisition Date Area (sqm) Type

EEI Corporation - Parent

Itogon, Benguet 1985 688 Residential

Majada, Calamba, Laguna 1998 29,481 Equipment yard

Lemery, Batangas 1997 390,049 Industrial

Minuyan, Norzagaray, Bulacan 2005 138,216 Agricultural

San Jose, Sta Maria, Bulacan 2005 102,633 Industrial

Minuyan, San Jose del Monte, Bulacan 2005 133,371 Agricultural

Golden Haven Memorial - Las Pinas 2003 166 Memorial Lots

Bauan, Batangas 2012 118,522 Fabrication Shop

Total 913,126

Properties in the name of Subsidiaries:

EEI Construction and Marine Inc.

Silang, Cavite 2010 21,197 Fabrication Shop

EEI Realty Corporation

Trece Martires, Cavite 1995 594,920 Residential

Calamba, Laguna 1995-96 53,207 Residential

Marikina, Suburbia East 1999 3,135 Residential

Ayala, Greenfield 2003 820 Residential

Total 652,082

Equipment Engineers, Inc.

Irisan, Benguet 2009 3,201 Residential

Itogon, Benguet 2006 367 Residential

Total 3,568

Gulf Asia International Corp.

General Trias, Cavite 2010 21,197 Fabrication Shop

EEI Power Corporation

Tagum City, Davao Del Norte 2013 7,887 Industrial

GRAND TOTAL

1998

2013

259

7,887

1,598,119

Residential

Industrial

- 14 -

ITEM 3. LEGAL PROCEEDINGS

There are various cases (civil, criminal and labor) filed by or against the Company. Any decision on

these cases, for or against the Company, will not have any material effect on the Company’s

operations and/or finances. These cases are as follows:

EEI - CIVIL CASES

CASE TITLE/NUMBER NATURE OF THE CASE

1) FASI vs. JACANA, CHUA and EEI

Corporation

CA 133443 10th Division

Commercial Case No. 13-189

RTC Branch 159 Pasig City

Patent Infringement case filed by FASI against

JACANA. EEI is a 3rd party user of the alleged patented

items. EEI has a cross claim against JACANA should it

be proven to be in violation.

Status: Appeal pending at the Supreme Court (SC)

2) Greenlee Corporation vs. EEI Corporation

Civil Case No. 08-120274

RTC Br. 11 Manila

Collection – Sum of Money

Principal Amount – P=860,948.06

Status: Regional Trial Court (RTC) decided in favor of

Greenlee Corp. Pending with Court of Appeals

(CA).

3) Go Letting & Sons, Inc. vs. EEI Corporation

Civil Case No. 2011-11-CV-01

MTC Br. 2 Tacloban City



Status: For decision

4) Sps. Bautista vs. Philrock/EEI Corporation

Civil Case No. 64868

RTC Br. 166 Pasig City

Damages

Amount - P=988,780 (compensatory/ exemplary

damages/attorney’s fees)

Status: Case decided by RTC in favor Sps. Bautista.

Pending petition for review with SC.

5) PLDT vs. Philrock; Philrock vs. Mercantile

Insurance and F. Gutierrez Construction

Corporation (FGCC)


RTC Br. 145 Makati City

Damages

Amount – P=657,926 plus 10% attorney’s fees

Status: Main case settled and PLDT case against

Philrock and Philrock’s case against Mercantile

Insurance were already closed. PLDT was paid by

Philrock with total amount of P=900,000,000 and

P=657,925.71 was paid by Mercantile Insurance.

Third party complaint against FGCC decided in favor

of EEI.

For publication of decision, but deferred considering

that defendant could not be located and may render

execution eventually ineffectual.

- 15 -

6) Dy Teban Trading Co., Inc. vs. Philrock

CA-G.R. CV No. 02137

Court of Appeals



Status: Settled during Court of Appeals-annexed

mediation. EEI/Philrock to obtain release of

RTC deposit for previous attachment. Refund

of deposit was already released.

For finality of decision.

7) Landbank of the Philippines vs.

Philrock/EEI

AGR. Case Nos. 171-AF and 178-AF

RTC Br. 23 Cabanatuan City

For Judicial determination of just compensation

For case no. 171-AF, EEI claims valuation of P=35/sq.m.,

while Landbank claims valuation for rice land of

P=5.7487/sq.m., involved area is 4.8242 hectares and for

easement P=2.0836/sq.m., involved area is 1.0 hectare.

For case no. 178-AF, EEI claims valuation of P=35/sq.m.,

while Landbank claims valuation of P=6.44/sq.m.,

involved area is 1.9756 hectares.

Status:

Court set just compensation at:

171-AF:

- P=168,250/ha

- P=20,836.44/ha for easement

178-AF:

- P=168,250/ha

In both cases:

Plus: Interest of 6% p.a. from filing of case

- Both parties filed Motion for Reconsideration (MR)

which were both denied.

- Pending Petition for Review with CA

8) Leyte Lumberyard vs. EEI

Civil Case No. 2013-02-11

RTC Br. 9, Tacloban City



Status: For presentation of Plaintiff’s evidence

9) Sps. Dioscoro and Belen Pionilla vs. EEI

and the Heirs of Fernando Mendoza


MTC-4th Judicial Region, Pagbilao, Quezon

Office of the Clerk of Court, RTC Lucena

Ejectment

Status: For judicial dispute resolution


1) People of the Philippines vs. Charina Garcia

Criminal Case No. 154721-23

MTC Br. 34 Quezon City

Batas Pambansa (BP) 22

Amount Involved – P=6,044,465.89

Status: For continuation of presentation of prosecution

evidence on March 30, 2017.

- 16 -

2) People of the Philippines vs. Glenn Asfa


MeTC Br. 34 Quezon City

Theft at Skyway Stage 3 Project

Amount Involved – P=6,000.00 more or less

Status: Mediation stage

3) People of the Philippines vs. Jonathan

Salvador


MeTC Br. 34 Quezon City

Theft at Skyway Stage 3 Project

Amount Involved – P=10,000.00 more or less

Status: Continuation of prosecution evidence

4) People of the Philippines vs. Monchito

Mandreza, Vito Habagat, Ricky Abila,

Orlino Biazon

Criminal Case No. XV-07-INQ-16G-04803

Office of the City Prosecutor - Manila

Qualified theft

Status: Complaint against V. Habagat, Abila, and

Biazon dismissed.

For arraignment with respect to Mandreza and

Balean for Theft.

EEI - LABOR CASES


1) Troy Tablante vs. EEI

NLRC NCR Case No. 09-12406-13

Illegal dismissal

Status: Labor Arbiter (LA) decision against EEI,

affirmed by NLRC. CA upheld decision. SC

denied petition for review. MR denied with

finality. For re-computation of award.

2) Raymond Competente vs. EEI

NLRC NCR Case No. OFW(M)

01-00563-14

Illegal dismissal

Status: LA dismissed complaint. On appeal by

Complainant, NLRC reversed Arbiter’s

decision. MR by EEI denied. Pending

certiorari with CA

3) Gemojim Mulgada vs. EEI

NLRC CASE NO. VAC-06-000382-15

NLRC SRAB CASE NO. VI-01-008-15

Illegal dismissal

Status: LA ruled in favor of Complainant. Affirmed by

NLRC. Certiorari with CA Cebu, denied.

Pending MR by Complainant.

4) Jayson Soriano, et al. vs. EEI


Illegal dismissal

Status: LA ruled in favor of Complainant. Pending

appeal with NLRC.

5) Alex N. Tagulao, et al. vs. EEI

-Edgardo L. Petilla

Illegal dismissal


6) Domingo L. Ataylar vs. EEI

NLRC-NCR-00-06-06594-15

Illegal dismissal

Status: Filed Petition for Certiorari with the CA

- 17 -

7) Eddy Nape vs. EEI

NLRC-NCR-01-00649-16

Illegal dismissal


8) Alfredo A. Razo vs. EEI

NLRC-NCR CASE NO. 12-14806-15

Illegal dismissal


9) Rizaldy Questo vs. EEI/JAR

LITTAUA/DD DESEMBRANA

NLRC-NCR CASE NO. 05-05379-16

Illegal dismissal

Status: Complainant’s appeal is denied for lack of

merit. The assailed decision of LA is affirmed.

10) Edmar Laborada vs. EEI/ARCC/RJLC

NLRC NCR CASE NO. (L)12-14939-16

Alleged illegal dismissal

Status: Position Paper filed. For evaluation.

11) Vito Habagat, et al. vs. EEI/RJLC

NLRC NCR CASE NO. 09-11487-16

Illegal dismissal


12) Manuel De Jesus vs. EEI/RJLC

NLRC-NCR-04-04533-16

Illegal dismissal

Status: Pending appeal with NLRC

13) Tirso Guerrero vs. EEI/JL Alama


Illegal dismissal with money claims


14) Roy Pagadora vs. EEI/RO Bernardo


Illegal dismissal


15) Johnny Calub vs. EEI/DD Abadilla/CE

Laureles


Illegal dismissal due to cessation of needs.

Status: Reply filed

16) Devie Codera vs. EEI/RS Manrique


Illegal dismissal due to cessation of needs.

Status: Reply filed

17) Eduardo Catangue vs. EEI/RJLC


Illegal dismissal

Status: Reply filed

18) Johnny Tajanlangit vs. EEI

NLRC NCR Case No.

Illegal dismissal

Status: Reply filed

19) Jonathan Maningo vs. EEI


Illegal dismissal

Status: For filing of reply

- 18 -

20) Dave Maningo vs. EEI


Illegal dismissal

Status: For filing of reply

21) Frederick Bragas vs. EEI


Illegal dismissal

Status: Awaiting resolution to dismiss case

22) Alfredo Memes vs. EEI


Illegal dismissal

Status: For case dismissal

EEI SUBSIDIARIES CASES (ALL TYPES)


1) Rico Bulalacao vs. ECMI

SC GR No. 208347

Supreme Court, Manila

Illegal dismissal

Status: Petition for Review denied. Filed MR with SC.

2) ECMI vs. Rico Bulalacao

SC GR No. 208347

Supreme Court, Manila

Illegal dismissal

Status: With Entry of Judgment from SC. Execution of

Judgment is with the LA. Awaiting resolution

of the pleadings filed by the parties.

3) Villacruel vs. GAMSI

NLRC CASE NO. RAB IV 02-00254-14-L

Illegal dismissal

Status: LA ruled in favor of Complainant. NLRC

affirmed. Pending Certiorari with the CA.

4) Estrecho vs. ECMI

NLRC RAB NO. IV-09-01243-15-C

Illegal dismissal.

Estrecho was dismissed for a gross insubordination.

Status: Currently submitted for resolution

5) Julius Razote vs. GAMSI

NLRC-NCR-10-12232-15

Illegal dismissal

Status: LA ruled in favor of Complainant, affirmed by

NLRC. Execution stage.

6) Bernardo G. Dacanay vs. ECMI

NLRC NCR CASE NO. 01-01200-10

NLRC LAC NO. 03-000854-11

Bernardo G. Dacanay vs. NLRC/EEI/RRF

Court of Appeals – Eleventh Div.

CA-G.R. SP NO. 124242

Illegal dismissal

Status: NLRC decided in favor of ECMI.

Reversed by CA. Pending petition for review

with SC.

7) DOLE complaint against ECMI For diminutions of benefits

Status: Pending MR before DOLE

8) Rogelio Lambayong vs. GAIC/LCM

NLRC-NCR-OFW(M)-05-06434-16

Illegal dismissal

Status: Submitted for Resolution

- 19 -

9) Robert Dela Pena vs. GAMSI/FGV

NLRC-NCR-OFW(M)-05-06434-16

Illegal dismissal


10) GAMSI VS. Georgia Techno Systems Collection of sum of money

Status: For service of summons

11) People of the Philippines vs. Rizza

Hernandez

Criminal Case Nos.

M-MKT-16-04842-CR

M-MKT-16-04847-CR

M-MKT-16-04849-CR

M-MKT-16-04859-CR

M-MKT-16-04866-CR

M-MKT-16-04863-CR

Falsification of private documents

Status: For arraignment

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NOT APPLICABLE

- 20 -

PART II – OPERATIONAL AND FINANCIAL INFORMATION

ITEM 5. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT’S COMMON EQUITY

AND RELATED STOCKHOLDERS’ MATTERS

Dividends per Share

Both in 2016 and 2015, the total amount of cash dividends declared and paid amounted to P=207,256,297

and P=207,280,277, respectively or P=0.20 per share. Future dividends will depend on the earnings, cash

flow, and financial condition of the Company and other factors and subject to the availability of retained

earnings not earmarked for capital expenditures.

Stock Prices The following are the quarterly high, low and closing prices of the Company:

2016 High Low Close 2015 High Low Close

Jan - Mar 7.75 5.20 7.60 Jan - Mar 11.22 9.54 9.99

Apr - Jun 8.02 7.08 7.69 Apr - Jun 10.60 8.86 9.82

Jul - Sep 10.16 7.35 7.75 Jul - Sep 10.36 7.58 7.58

Oct - Dec 7.90 5.86 6.12 Oct - Dec 8.05 4.54 5.40

As of April 12, 2017, EEI shares were traded at its highest for the price of P=9.48, lowest for P=9.32 and

closed at P=9.44.

The shares of the registrant are traded at the Philippine Stock Exchange, Inc. The number of common shares issued and subscribed as of December 31, 2016 is 1,036,401,386, out of

which 170,428,046 shares are foreign owned. There are approximately 3,189 stockholders. Top 20 Stockholders as of December 31, 2016:

Name

No. of Shares Held

% Ownership

House of Investments, Inc. 459,326,448 44.32

PCD Nominee Corporation (Filipino) 359,208,419 34.66

PCD Nominee Corporation (Non-Filipino) 169,134,441 16.32

Pan Malayan Management and Investment Corp. 21,431,002 2.07

Lim, Roy S. 2,400,000 0.23

Hydee Management & Resource Corporation 1,170,500 0.11

Yan, Lucio W. Yan &/or Clara 1,002,472 0.10

Lim, Peter S. 1,000,000 0.10

Mercury Group of Companies Inc. 620,000 0.06

Zalamea Jr., Enrique M. 600,000 0.06

R Coyiuto Securities Inc. 584,728 0.06

Rodriguez, Horacio 576,662 0.06

Munji, Divina F. 401,251 0.04

Lim, Olivia S. 400,000 0.04

Lim, Dennis S. 400,000 0.04

Seafront Resources Corporation 372,500 0.04

Uy, Perry Y. 310,930 0.03

EEI Acct. # 1 c/o EEI Corporation 310,500 0.03

Mendoza, Alberto & or Jeanie C. Mendoza 305,000 0.03

Chu, Raymond M. 300,000 0.03

Total 1,019,854,853 98.40

No securities were sold within the past 3 years, which were not registered under the Revised Securities Act.

- 21 -

ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

The following discussion should be read in conjunction with the Consolidated Audited Financial

Statements of EEI Corporation and Subsidiaries as at and for the period ended December 31, 2016 and

the notes thereto included elsewhere in this report.

Results of Operations EEI Corporation’s consolidated revenue in 2016 was P=13.59 billion. Domestic construction activities

focused on infrastructure projects, whose progress are characteristically slower than electro-mechanical

or building projects. In particular, the Skyway project faced challenges with right of way issues on public

utility lines, while the MRT7 project received inquiries from two government institutions that delayed its

construction start. Meanwhile, the construction of the Panglao airport was stalled by mandated changes

on the design and materials after the project’s commencement. EEI Corporation has been in discussion

with the proponents of the Panglao airport development and the main contractor to move the project

forward. All unworked contracts by the end of 2016 have been carried over to 2017.

Services and merchandise sales revenue were lower than those in 2015 by 2% and 6%, respectively, since

these services, under EEI’s subsidiary, partly support EEI’s construction business. On the other hand,

sales of real estate, through EEI Realty subsidiary, increased in 2016 due to greater demand for

condominium units and other consumer assets.

EEI Corporation recorded a provision amounting to P=1.4 billion as its share in the net loss of Al Rushaid

Construction Company Ltd. (ARCC), EEI’s 49%-owned joint venture in the Kingdom of Saudi Arabia.

This amount represents the probable loss arising from delays in a Naptha and Aromatic subcontract

project and possible non-repayment of ARCC’s claims from the general contractor. The general

contractor’s inability to deliver owner-supplied materials and equipment, and the late completion of civil

works by its other subcontractors kept ARCC from performing its job on time. In early 2016, ARCC

entered into a settlement agreement with the general contractor as part of its effort to recover unexpected

higher expenses. However, ARCC subsequently filed a notice of dispute with the general contractor due

to the general contractor’s behavior that both hindered ARCC’s compliance with the settlement

agreement and escalated ARCC’s total cost further. Petro Rabigh, the project’s owner, supported

ARCC’s claims against the main contractor. ARCC is negotiating with the key stakeholders to settle the

dispute and to receive compensation for higher costs incurred with the project.

The company’s direct costs of P=12.96 billion was 23% lower than that in 2015, because of the completion

of major projects in 2015 and the slow progress of the major infrastructure projects in 2016 as these were

impeded by the issues beyond EEI’s control.

- 22 -

For the year ending December 31, 2016, EEI registered a consolidated net loss of P=847.70 million,

compared to the P=202.73 million consolidated net income in 2015 as summarized below:

For the year ended

December 31

(In Thousand Pesos) 2016 2015

Income from Philippine Operations P= 793,996 P= 1,310,068

Equity share in Net Loss of Al Rushaid Construction Co. Ltd. (1,416,120) (673,736)

Pretax Income (Loss) (622,124) 636,332

Provision for Income Tax 225,577 433,597

Net Income (Loss) (P= 847,701) P= 202,734

Earnings (Loss) Per Share (P= 0.82) P= 0.20

2015 vs. 2014 EEI Corporation’s consolidated revenue in 2015 of P=18.40 billion is the highest in the history of the

Company, surpassing the previous record in 2014 by P=821.19 million or by 5%. This was achieved

solely by the growth in domestic construction contracts which logged at P=17.95 billion, an increase of

14% compared to 2014. This increase in consolidated revenues was despite reduction in revenues

generated by its subsidiaries for sales of services, merchandise sales and real estate sales; and even

despite the registered share in net loss of P=673.74 million by Al Rushaid Construction Company Ltd.

(ARCC), EEI’s 49% owned joint venture in the Kingdom of Saudi Arabia (KSA). This huge reversal in

the Company’s KSA operations reflected the heavy provisions applied for probable losses in two projects

that were still being undertaken as of the end of the year, considering the scenario that cost claims made

from the clients through negotiation or legal arbitration would not be awarded.

One of these projects made claims for incurred losses due to manpower and productivity issues, among

others; while the other project submitted a claim for costs in respect of the client’s delayed delivery of

owner supplied materials and equipment, and delayed access resulting to delayed completion of civil

works, and additional claims for the requested acceleration of the completion of the project.

The costs associated with the domestic construction contracts increased by 11% in 2015, favorably lower

than the 14% increase in revenues. Consolidated costs, however, registered at P=16.74 billion, 9% higher

than the P=15.35 billion recorded in 2014.

In 2015, EEI posted a consolidated net income of P=202.73 million, a 78% drop compared to 2014.

Yearend earnings per share was at P=0.196, compared to P=0.886 in 2014.

- 23 -

Financial Position At the end of 2016, EEI’s total assets were at P=20.20 billion, 10% lower than the 2015 yearend level of

P=22.47 billion. This drop was mainly brought about by the 30% decline in the value of the Company’s

work-in-progress, represented by the costs and estimated earnings in excess of billings on uncompleted

contracts, and the Company’s share in the net loss of ARCC.

EEI’s total liabilities stood at P=14.36 billion, 8% lower than the previous year. Significant contributors to

this were the settlement of maturing bank loans and payables, and the recoupment of down payments

from the completion of several projects during the year.

EEI’s total equity of P=5.84 billion in 2016 was 14% lower than in 2015, mostly from the 20% drop in

retained earnings brought about by the net loss incurred during the year, and the dividend declared and

paid in the early part of the year amounting to P=207.26 million.

The Company’s book value per share, which was at P=6.54 at the end of 2015, went down to P=5.64 as at

the end of 2016.

2015 vs 2014 EEI’s total assets as at December 31, 2015 stood at P=22.47 billion from P=18.35 billion in 2014,

reflecting a growth of 22%.

The bulk of this was from current assets which comprise 66% of total assets, and which grew by 24%,

from P=11.89 billion in 2014 to P=14.80 billion in 2015. The combined value of receivables and works-

in-progress increased by P=2.19 billion as at the end of 2015, reflective of the increase in construction

activity during the year.

Total noncurrent assets registered at P=7.66 billion, which was 19% more than the 2014 yearend

standing. A net increase in investments and advances in associates and joint ventures resulted from

advances made to ARCC; investments in PetroWind Energy Corporation and in PetroSolar Corporation

by the Company and by EEI Power Corporation (EEIPC), one of EEI’s fully-owned subsidiaries; and

in equity share in the losses of ARCC. EEIPC also invested in a 10% equity share in PetroGreen

Energy Corporation, thus increasing the Company’s available for sale securities by 147% to P=370.46

million. The most significant increase in non-current assets was brought about by the 19% increase in

property and equipment amounting P=696.0 million mainly from the acquisition of various machinery,

tools, construction equipment, transportation and service equipment.

EEI’s total liabilities stood at P=15.68 billion, an increase of P=4 billion, or by 34% from 2014. The

increase in construction activity boosted the billings in excess of costs and estimated earnings on

uncompleted contracts by P=1.94 billion or 64% and stood at P=4.98 billion as at the yearend. Accounts

payable also increased, for the same reason, by 15% to P=5.28 billion. Short-term debts and current

portion of long-term debt increased by 20% to P=3.62 billion while noncurrent portion of long-term debt

increased by 93% to P=1.50 billion.

EEI’s total equity increased during the period by 2%, from P=6.66 billion to P=6.78 billion. Cumulative

translation adjustments increased to P=178.30 million from P=17.42 million due to investments in ARCC

whose functional currency is in Saudi Arabia Riyals. Retained earnings, however, decreased by P=4.55

million to P=5.20 billion.

The Company’s book value per share stood at P=6.54, compared to P=6.43 at the end of 2014.

As of the end of 2015 and 2014, the debt-to-equity ratio was at 2.31:1 and 1.76:1, respectively.

- 24 -

Operating Highlights COMPLETED PROJECTS:

Building projects which were completed during the year were the Wind Residences Towers 4 and 5 of

SM Development Corporation in Tagaytay City; the Grand Hyatt Center of Bonifacio Landmark Realty

and Development Corporation in Bonifacio Global City, Taguig; the Admiral Bay Suites for Admiral

Realty Company, Inc. in Malate, Manila; and, Megaworld’s Uptown Parade, Uptown Mall and BPO

Offices, and Uptown Place Towers 3 & 4, in Bonifacio Global City.

For infrastructure projects, the Company completed the expansion of the Bocaue Toll Plaza Barrier for

Manila North Tollways Corporation which was started in the same year.

The Electromechanical projects that were completed during the period were the Condensed Milk Plant

and Milk Powdered Plant and the Flood Control Improvement of Alaska Milk Corporation in San Pedro,

Laguna; the San Gabriel 450 MW Combined Cycle Power Plant for Siemens, Inc. in Batangas City, and

the MARIS Optimisation Project of Century Drilling and Energy Services (NZ) Ltd.

Overseas, ARCC completed the Sadara Port Facilities for Sadara Chemical Company; the Affiliate Wide

EO Reactors Replacement for SABIC under Dragados; the SPOF Phase 1 Procurement and Construction

for Rabigh Arabian Water and Electricity Company under JGC Gulf International Co., Ltd.; the

PetroRabigh 2 Independent Water Steam Power Project for Rabigh Arabian Water and Electricity

Company under Mitsubishi Heavy Industries; the Marjan and Zuluf TP9 Platforms for Saudi Aramco

under STAR; the Rabigh Independent Power Plant 2 for PetroRabigh under Samsung C&T; and the

Retrofit and Upgrade Construction Works at the Saudi Aramco Ras Tanura Refinery. In addition, ARCC

provided manpower for several support services and re-tubing work for other clients in the Kingdom.

PROJECTS OBTAINED:

In 2016, EEI won the contracts for the design and construction the MRT 7 Civil Works Package and for

the Interfacing and Integration of Civil Works with the Systems Contractor based on High Level

Interfaces Delineation for Universal LRT Corporation; the expansion of the Bocaue. Balintawak,

Meycauayan, and Mindanao Toll Plaza Barriers for Manila North Tollways Corporation; the

improvement of the power distribution system for Petron Corporation in Limay, Bataan; the bored-piling

works in preparation for the construction of the Malayan Colleges Mindanao in Davao; the Insulation

works for the Therma Visayas Energy Project for Galing Power and Energy Construction Co., Ltd. in

Toledo, Cebu; the construction of Coast Residences for SMDC in Pasay City; and, the construction of the

SM 4eCom Center in Pasay City for SM Prime Holdings, Inc.

In the Kingdom of Saudi Arabia, ARCC won the SAFCO IV Reliability Improvement Project under e-

TEC Arabia Limited Co.; the erection of Saudi Kayan’s Furnace No. 10 under CTCI; the Ras Tanura

Piping Takeover under Saudi Aramco; the Saudi Kayan EO/EG DBN Project under Wison; and, pipe

spool fabrication for Saipem Taqa Al Rushaid Fabricators Co. Ltd.

ON-GOING PROJECTS

The building projects that the Company was still working on as 2016 ended were four projects for

Megaworld Corporation namely, the One Eastwood Avenue Tower 1 and Tower 2 in Eastwood City,

Quezon City, the Noble Place in Binondo, Manila, and the Bayshore 6 Cluster in Pasay City; three

projects for SM Development Corporation, namely the Green Residences in Manila City; Air Residences

in Makati City; Fame Residences 1 in Mandaluyong City; Beacon Tower 3 of New Pacific Resources

Management, Inc. in Makati City; Monte de Tesoro’s Ore Central in Bonifacio Global City in Taguig;

the Corporate Center and Skysuites of Double Dragon Properties Corp. in Quezon City; the Filinvest

Festival Supermall Expansion of Filinvest Land, Inc. in Alabang, Muntinlupa City; Finance Center of

Daiichi Properties, Inc. in Bonifacio Global City,Taguig; the GGLC Aeropark Quad 1 (Phase 1) of

Global Gateway Development Corporation in Clark, Angeles, Pampanga; and, the ETY Building of

Enrique T. Yuchengco, Inc. in Binondo, Manila.

- 25 -

Infrastructure projects in progress were the Runway Extension of Caticlan Airport of Transaire

Development Holdings Corporation in Malay, Aklan; the Communication, Navigation and

Surveillance/Air Traffic Management Systems Development of the Department of Transportation and

Communication under Sumitomo Corporation; Sections 3 & 4 of the Skyway Stage 3 of San Miguel

Corporation/Citra Central Expressway Partnership; and the New Bohol (Panglao) Airport of the Chiyoda-

Mitsubishi Corporation joint venture in Bohol.

Electromechanical projects that were still in-progress were the 3x135 MW Coal-fired Power Plant for

FDC Utilities in the Phividec Industrial Estate in Misamis Oriental; the Therma Visayas Energy Project

for Galing Power and Energy Construction Co., Ltd. in Cebu; and, the Pagbilao Power Plant Unit 3-

Mechanical Package 1 for Daelim Philippines, Inc. in Pagbilao, Quezon Province.

ARCC continues to work on the Jazan Refinery and Terminal of Saudi Aramco under Daewoo; the

Safanivah Works for Saudi Aramco; the Yanpet U10 Convection Upgrade Works for Yanpet Saudi-

Yanbu Petrochemical Company under e-TEC Arabia Limited Co.; and, the Mechanical Works for the

Naphtha and Aromatic Package of the Rabigh II Refining and Petrochemical project of the Saudi

Aramco and Sumitomo Chemical Co. joint venture under SAIPEM. In addition, ARCC still services the

maintenance contract of the Saudi Aramco Total Refining and Petrochemical Company’s Refinery in a

joint venture with Sankyu of Japan.

Prospects and Outlook At the end of 2016, the Company’s unworked portion of existing contracts amounted to P=57.49 billion

including ARCC’s unworked portion of P=11.77 billion.

There has been a notable increase in infrastructure projects, and the new government administration is

expected to continue to push for infrastructure development. The Company sees this as a good growth

opportunity since it is confident in its capabilities of undertaking such work.

In the Kingdom of Saudi Arabia (KSA), the prices of crude oil are seen to continue at low levels in the

short to medium term. The decline in revenues has prompted the Saudi government to cut spending, as

initiatives towards growing the non-oil sectors and implementing tax reforms continue. Analysts consider

the uncertainties about future oil prices and escalations of regional tensions to be among those that may

have an impact on the KSA’s economic growth.

In light of the unfavorable developments in its joint venture in the KSA, coupled with the falling oil

prices which could result in a slowdown of construction activity in the petrochemical industry, the

Company is intensifying its pursuit of large infrastructure, power, and industrial projects in other

industries, not just in the KSA but in other countries and most especially, in the domestic market.

The backlog of existing projects is healthy, and overall, EEI expects a robust performance in its domestic

operations driven by buildings, large infrastructure and industrial projects in its pipeline. It foresees more

projects, especially from high probability winnable prospects currently being pursued. There is also

optimism in the business opportunities outside the Philippines and the KSA, and the fruition of the

development works being undertaken by its local subsidiaries.

EEI Power Corporation has already been reaping from its 20% stake in PetroWind Energy, Inc. and its

44% stake in PetroSolar Corporation.

With this outlook, the Company believes that it will achieve sustained growth in the medium term.

- 26 -

Key Performance Indicators

The most significant key indicators of future performance of the Company are the following:

1. Construction contracts and orders – denote the value of construction projects won by the

Company. Work to be done on these projects determines its revenue potential. In our domestic

market, contracts and orders increase during an expansionary period when private business is on

an investment mode, with significant capital expenditures allotted for new capacity and

expansion and upgrading, and when government is spending for physical infrastructure.

In our overseas markets, orders tend to rise when investors (quasi private/government entities)

and corporations invest on new upstream and downstream petroleum facilities and new power

and mining facilities. This usually happens during a period of prolonged high price of oil or basic

metals/minerals which encourages capacity expansion projects and spurs new infrastructure

projects in the host countries. The regime of high petroleum and metal prices in the past has

spurred increased construction activities in the Middle East, East Asia and Africa. But when the

price of oil and precious metals go down, projects for expansion are sometimes put on hold.

2. Production – represents the value of construction work accomplished by the Company during

the period in review. It is synonymous to sales revenue since these are recognized at the value

corresponding to the percentage of completion of the projects and orders. Production is

determined by capacity in terms of manpower, equipment and management resources, and higher

productivity of the factors of production. These translate to better financial performance.

3. Orders backlog – corresponds to the value of unfinished portions of projects; thus providing a

measure of the near-term future source of production and revenues of the Company. Backlog has

a tendency to increase during times when private companies (both local and foreign) are on an

expansionary cycle, as they undertake capital expansion and/or modernization of their respective

factories and plants. It also occurs when national and local government is on a pump priming

mode of investing on infrastructure. Bigger backlog means a probability of higher profit in the

future.

4. Liquidity – refers to existing cash and cash resources and the capability of the Company to

quickly draw financial resources (such as working capital and other credit lines) to fund

operations and construction activities. This ability to deploy financial resources is critical in

fulfilling its contract obligations and ensuring the operational and financial viability of the

Company.

- 27 -

Materials, Trends, Events or Uncertainties known to Management that would have material

impact on future operations

a. Any known trends, demands, commitments, events or uncertainties that will result in or that are

reasonably likely to result in the registrant’s liquidity increasing or decreasing in any material

way.

In the domestic scene, the Company anticipates its short to medium-term growth to be sustained by

infrastructure and electromechanical projects, given the Philippine government’s plans for

aggressive infrastructure development in the next six years and the growing demand for traditional

and renewable energy.

With the price of oil still significantly lower than 2014 levels, the Saudi government has embarked

on a long-term plan for economic reform that puts less dependence on the state’s oil revenues and

more on diversified small and medium-sized enterprises from the private sector. This may continue

to suppress construction activities, particularly by the petrochemical companies in Saudi Arabia.

Other than these, the Company does not know of, or perceive of any other factors that will result in

the Company’s current position.

b. Any trends, events or uncertainties that are not public knowledge that would have a favorable or

unfavorable material impact on net sales or revenues or income from continuing operations of the

Company.

The number of bids that the Company is invited to participate in, and the likelihood of winning a bid

cannot be accurately predicted as these are dependent on many factors which are not within the

control of the Company. Furthermore, the type of construction project, the size, and the scope of the

required work varies from project to project.

In general, the operating activities of the Company are carried uniformly over the calendar year.

There are no significant elements of revenue, income or loss that did not come from the Company’s

continuing operations other than those disclosed in the notes to financial statements.

c. Others

There are no known unusual undisclosed events that will trigger the settlement of a direct or

contingent financial obligation that is material to the Company. There are usual customer complaints

and workmanship claims which are handled on a day-to-day basis.

There are no undisclosed material off-balance sheet transactions, arrangements, obligations

(including contingent obligations), and other relationships of the Company with unsolicited entities

or other persons created during the reporting period.

There are no substantial commitments for abnormal capital expenditures.

- 28 -

ANALYSIS AND DISCUSSION OF OPERATIONS OF SUBSIDIARIES

Equipment Engineers, Inc.

Equipment Engineers Inc.’s (EE) traditional trading business posted gross revenues amounting to P=295

million, 38% lower than 2015, stalled by implementation delays in projects of its clients. While the total

revenues declined year-on-year, the non-construction related revenues pertaining to petroleum-related

products increased by 26%.

EE has made significant progress in developing new businesses since the creation of its Opportunity

Development Group in 2015, both for construction and non-construction related industries. EE’s

portfolio of products catering to non-construction industries have expanded. EE also registered a new

company in partnership with two Japanese entities focusing on scaffolds sale and rental.

With its Supply Chain Management Team, EE succeeded in piloting its SuperStore business which offers

cost savings and procurement efficiencies leveraging on its sourcing and selling expertise. EE likewise

expanded its footprint with representations in Visayas and Mindanao.

2015 vs. 2014 Equipment Engineers, Inc. (EE) is on-track with its development plan and has soared to new heights in

2015. The massive business re-engineering which started in 2014 and continued in 2015 resulted in

numerous accomplishments for EE in its 16-year history. EE closed 2015 with over P=477.63 million in

gross revenues, surpassing its target by 28% and more than doubling its 5-year historical average. This

resulted in a net income of P=30.08 million – six times more than its net income in 2014.

As part of its long term plan, EE established in 2015 its Opportunity Development Group (ODG), to

serve the needs of its Supply Chain Management Department, its Trading group, and EEI Power,

another EEI subsidiary which is an associate EE. The ODG is under the Business Development arm

of EE and its purpose is to identify opportunities with focus on the non-construction space, and

develop new revenue streams to diversify the organization and adapt to the rapidly changing business

landscape.

EEI Power Corporation

The continuous operation in 2016 of EEI Power Corporation’s (EEIPC) 15-Megawatt Peaking Plant in

Tagum City, serving the customers of Davao del Norte Electric Cooperative, generated an income of

P=13.7 million.

The commitment of (EEIPC) to expand its power generation portfolio was strengthened with the

commercial operation in February 2016 of the 50-Megawatt Luisita-1 Solar PV Power Plant in Tarlac,

which was accorded eligibility to the Feed-in-Tariff (FiT). In 2016, EEIPC’s earnings from its 44% share

in this plant reached P=73.4 million.

At the same time, EEIPC’s 20% stake in PetroWind Corporation’s 36-Megawatt Nabas-1 Wind Power

Plant in Aklan, which has been in operation since June 2015, earned P=26.8 million for the year.

Overall, EEIPC posted a net income of P=113.74 million in 2016.

2015 vs. 2014 EEI Power Corporation (EEIPC) continues to operate its 15-megawatt Peaking Plant in Tagum City,

Davao Del Norte. In 2015, it posted a net income of P=36.97 million, 20% lower than its net income in

2014 due to unexpected maintenance requirements.

- 29 -

During the year, EEIPC focused on undertaking more power generation projects, with emphasis on

renewable energy. In 2015, the company took a 44% stake in the 50-megawatt Luisita Solar PV Plant in

Tarlac which started commercial operations on February 10, 2016.

EEIPC also has a 20% share in the 36-megawatt Nabas Wind Power Plant of PetroWind Energy

Corporation in Aklan which started commercial operations on June 10, 2015.

EEI Construction and Marine, Inc.

EEI Construction and Marine, Inc. (EEICMI) continued to deliver exceptional results in 2016 as it

generated gross revenues of P=427 million, 16% higher compared to the 2015 revenues. EEICMI ended

the year with a net income of P=48.2 million.

Majority of its projects were obtained from petroleum companies which were embarking on expansion

programs. Other major projects were obtained from its traditional clients that required the construction

tanks and the installation of storage and distribution systems in various parts of the country.

2015 vs. 2014 In 2015, EEI Construction and Marine, Inc. (EEICMI) generated P=369.44 million worth of projects, 11%

higher compared to its revenues in 2014. This resulted in a net income of P=42.04 million.

Major projects were obtained from its traditional clients in the petrochemical industry, mostly

undertaking capacity expansion and facilities upgrades, as well as relocating activities. EEICMI also

served several of EEI Corporation’s projects, most notable of which was the fabrication of board ups for

the Metro Manila Skyway Stage 3 Project.

EEI Realty Corporation Total revenues for EEI Realty reached P=19.8 million, 147% higher than that of the previous year. The

revenue was mainly from its existing projects in Royal Parks @Grosvenor located in Tanza Cavite, and

Suburbia East in Marikina City. Due however to the updates in taxes related to its Tanza property

amounting to P=3.2 million, the company ended the year with a net loss of P=1.32 million.

During the year, EEI Realty sold several housing and condominium units of EEI Corporation in its

Fairways Tower and Manggahan Village properties, totalling P=34.8 million. The company likewise

continued to render property management services for EEI Corporation in leasing out condominium units

at Kingswood Condominium in Makati and Robinsons Place Residences in Ermita, Manila and in

marketing other condominium units at Fairways Tower, Bonifacio Global City. Marketing assistance was

also provided to EEI Corporation in selling 167 lots in Golden Haven Memorial Park, Las Piñas City and

in offering its 39.15 hectare landholding in Bgy. Mataas na Bayan, Lemery Batangas to potential buyers

looking for a good-sized property.

2015 vs. 2014 In 2015, revenue from the sales of housing units in Suburbia East in Marikina City was 56% lower than

that of the previous year, owing to the very low level of remaining inventory. Of the three phases of this

development, 99.6% of the properties have been sold. Since its inception in 2002 until the end of 2015,

the Suburbia East project recorded cumulative sales of P=1.25 billion.

As a result of its operating activities, EEI Realty registered a net income of P=1.03 million, a 150%

increase compared to its 2014 performance.

EEI Realty also rendered property management services for EEI Corporation in leasing out and arranging

the sale of the latter’s real estate assets.

- 30 -

Gulf Asia International Corporation

GAIC Manpower Services, Inc. The GAIC Group, composed of Gulf Asia International Corporation (GAIC) and GAIC Manpower

Services, Inc. (GAMSI), posted a consolidated net income of P=17.04 million in 2016, 11 % lower than

2015 net income P=19.12 million.

GAIC registered a net loss of P=3.37 million in 2016. The revenues generated from EEI overseas projects

decreased by 34% from P=15.27 million in 2015 to P=10.13 million in 2016, due to a 31% decline in the

number of men deployed. During the year, there were deployment bans to some major markets like

Libya, Iraq and Syria due to the unstable peace and order situation in those countries.

Aside from the traditional accounts from Middle East countries as well as from Equatorial Guinea, Papua

New Guinea and Malaysia, orders were also obtained from new accounts from Saudi Arabia, Qatar,

UAE, Hongkong, Fiji and Ascencion Island.

GAMSI, on the other hand, registered an income of P=20.47 million in 2016, a 11% improvement over its

2015 performance. While the Yuchengco Group of Companies remains to be a major customer, GAMSI

was able to acquire a good number of new janitorial and building maintenance service contracts.

2015 vs. 2014 The companies Gulf Asia International Corporation (GAIC) and GAIC Manpower Services, Inc.

(GAMSI), which comprise the GAIC Group, posted a consolidated net income of P=19.12 million in

2015, 19% lower than its 2014 net income of P=23.68 million.

GAIC, which deals mainly with overseas manpower placements, saw an 18% drop in the demand from

its traditional clients from 2014 to 2015. The deployment ban, particularly to Libya, due to the

unstable peace and order situation also affected GAIC’s business. Still, most of the requirements came

from its traditional accounts in the Middle East, Equatorial Guinea, Papua New Guinea and Malaysia,

while it managed to acquire new accounts in Saudi Arabia, Qatar, United Arab Emirates, and Hong

Kong.

On the other hand, the income contributed by GAMSI grew by 10% from P=17.91 million in 2014 to

P=18.39 million in 2015. While some service contracts were not renewed and manpower was reduced in

some of the existing projects, GAMSI was able to acquire new janitorial and building maintenance

service contracts from new and existing clients. The Yuchengco Group of Companies continues to be a

major customer of GAMSI.

- 31 -

ITEM 7. FINANCIAL STATEMENTS

The consolidated audited financial statements of the Company for 2016 are attached herein for reference.

The schedules listed in the accompanying index to Supplementary Schedules are filed as part of this

Form 17-A.

- 33 -

As at December 31

2016 2015 Movement %

Equity

Capital stock

Authorized - 2,000,000,000 shares - P=1 par value

Issued and subscribed P=1,036,401,386 P=1,036,401,386 – –

Additional paid-in capital 477,037,443 477,037,443 – –

Cumulative translation adjustments 288,318,236 178,297,375 110,020,861 62%

Retained earnings 4,146,577,047 5,201,534,360 (1,054,957,313) -20%

Actuarial losses on retirement liability (104,942,615) (114,786,609) (9,843,994) -9%

Net unrealized gains on available-for-sale securities 4,054,052 6,479,392 (2,425,340) -37%

Treasury stock (3,720,790) (3,720,790) – -

Total Equity 5,843,724,759 6,781,242,557 (937,517,798) -14%

P=20,203,094,143 P=22,471,733,401 (P=2,268,639,258) -10%

- 34 -

EEI Corporation and Subsidiaries

Consolidated Statements of Income

Years Ended December 31

2016 2015 Movement %

REVENUE

Construction contracts P=13,826,137,816 P=17,951,605,599 (P=4,125,467,783) -23%

Services 837,751,325 857,814,110 (20,062,785) -2%

Merchandise sales 151,925,069 161,510,267 (9,585,198) -6%

Real estate sales 19,778,021 7,998,576 11,779,445 147%

14,835,592,231 18,978,928,552 (4,143,336,321) -22%

Equity in net losses of associates and joint ventures (1,316,130,128) (676,309,562) 639,820,566 95%

Interest income 61,329,134 28,750,588 32,578,546 113%

Other income –net 9,262,881 70,794,563 (61,531,682) -87%

13,590,054,118 18,402,164,141 (4,812,110,023) -26%

COSTS

Construction contracts 12,126,749,307 15,815,224,732 (3,688,475,425) -23%

Services 690,118,889 793,036,707 (102,917,818) -13%

Merchandise sales 128,723,605 128,776,339 (52,734) 0%

Real estate sales 13,935,705 5,605,693 8,330,012 149%

12,959,527,506 16,742,643,471 (3,783,115,965) -23%

SELLING AND ADMINISTRATIVE

EXPENSES 1,086,419,677 856,637,733 229,781,944

27%

FINANCE COSTS AND OTHER

EXPENSES – Net

Interest expense – promissory notes 162,772,755 136,421,295 26,351,460 19%

Interest expense – finance lease - 4,913 (4,913) -100%

Foreign exchange losses – net 3,457,907 30,124,959 (26,667,052) -89%

166,230,662 166,551,167 (320,505) 0%

INCOME (LOSS) BEFORE INCOME TAX (622,123,727) 636,331,770 (1,258,455,497) n/a

PROVISION FOR INCOME TAX 225,577,289 433,597,441 (208,020,152) -48%

NET INCOME (LOSS) (P=847,701,016) P=202,734,329 (P=1,050,435,345) n/a

Earnings (loss) per share – Basic and Diluted (0.818) 0.196 (1.014) n/a

- 35 -

EEI CORPORATION AND SUBSIDIARIES

ANALYTICAL REVIEW

DECEMBER 31, 2016

Consolidated Statement of Financial Position Accounts

Cash and cash equivalents

The net decrease of P=241.2 million or 19% was due to payment of maturing short-term loans with

various local banks; and purchase of several transportation and construction equipment for newly

awarded projects.

Receivables

The receivables grew by P=387.6 million or 6% due to substantial increase in retention receivables

from various customers, particularly NEPC Power Construction Corporation, Megaworld

Corporation, Citra Central Expressway Corporation, Araneta Center Hotel Inc., and Filinvest Land,

Inc.

Due from related parties

The net increase of P=4.9 million or 7% was mainly due to the increase in receivables of GAIC

Manpower Services, Inc. (GAMSI), a local subsidiary of EEI Corporation, from various companies

under Yuchengco Group.

Cost and estimated earnings in excess of billings on uncompleted contracts

The significant decrease of P=1.8 billion or 30% was due to completion of major domestic projects

which include: FDC Misamis 3x135MW Coal Power Plant for NEPC Power Construction

Corporation in Misamis Oriental; Caticlan Airport Development Design & Build for Interim Runway

Extension for Transaire Holdings Corporation in Malay, Aklan; The New CNS-ATM Project Package

1 and 2 for Sumitomo Corporation; Star Trec Project – Bundle 1B for Pilipinas Shell Petroleum

Corporation in Batangas City; and San Gabriel Unit 70 450MW Combined Cycle Power Plant

Project for Siemens Inc. in Santa Rita, Batangas.

Inventories

The net increase of P=110.4 million or 25% was mainly due to higher purchases of fireproofing and

waterproofing materials and petroleum products amounting to P=80 million by Equipment Engineers,

Inc., another local subsidiary of EEI Corporation.

Other current assets

The net increase of P=260.4 million or 36% is due to reclassification of receivable from a customer

from other noncurrent assets to other current assets due to agreement that the receivable would be

collected in 2017.

Investments in associates and joint ventures

The net decrease of P=996 million or 44% is attributed to the following:

49% equity share in net loss of Al-Rushaid Construction Co. Ltd. (ARCC), an associate of EEI

Limited, a foreign subsidiary of EEI Corporation amounting to P=1.4 billion;

Additional investment in ARCC of P=294.9 million.

44% equity share in net earnings of PetroSolar Corporation amounting to P=73.4 million;

20% equity share in net earnings of PetroWind Energy, Inc. of P=26.6 million.

Investment properties

The net decrease of P=27.7 million or 12% was attributable to the sale of five (5) condominium units

and six (6) parking lot spaces at Fairways Tower, Taguig City; fifteen (15) parcel of lots in Itogon,

Ifugao; three (3) parking lot spaces at Manggahan Village, Quezon City; and fifty eight (58)

memorial lots at Golden Haven Memorial Park in Las Pinas City.

- 36 -

Deferred tax assets

The net decrease of P=25.7 million or 23% was due to tax effect on unrealized foreign currency

exchange loss and accrued retirement amounting to P=12.1 million and P=12.7 million, respectively.

Retirement assets

The net increase of P=2.7 million or 37% was due to the yearly retirement fund set aside for the

retiring regular employees by local subsidiaries of the Company.

Other noncurrent assets

The net decrease of P=111.6 million or 34% was due to reclassification of Parent Company’s

receivable from a customer from other noncurrent assets to other current assets amounting to P=380.3

million.

Bank loans

The net decrease of P=380 million or 11% relates mainly to total payments of maturing loans for the

year amounting to P=10.3 billion against availments of P=9.9 billion.

Accounts payable and other current liabilities

The net decrease of P=277.5 million or 5% was mainly due to settlement of various accounts payable

incurred during the year.

Income tax payable

The decrease of P=4.1 million or 52.7% was due to the applied creditable withholding tax amounting

to P=325.9 million, and lower net income posted by domestic operations of the Company.

Due to related parties

The net increase of P=8.0 million or 5% was mainly due to increase in computer units and accessories

purchased with Pan Pacific Computer Center, Inc., a related party, by Parent Company.

Customers’ deposits

The decrease of P=2.3 million or 12% was due to the application of deposit on the progress billings for

various clients other than construction contracts.

Billings in excess of costs and estimated earnings on uncompleted contracts

The significant decrease of P=330.4 million or 7% was attributable mainly to the recoupment of down

payments from various completed projects such as FDC Misamis 3x135MW Coal Power Plant for

NEPC Power Construction Corporation in Misamis Oriental; Caticlan Airport Development Design

& Build for Interim Runway Extension for Transaire Holdings Corporation in Malay Aklan;

Rehabilitation of Condensed Milk Plant and Milk Powdered Plant for Alaska Milk Corporation in

San Pedro Laguna; and 50MW Nabas Wind Power Plant for Petro Energy Resources Corporation in

Nabas, Aklan; as well as from on-going projects such as GGLC Aeropark Quad 1 (Phase 1) for

Global Gateway Development Corporation in Clark Pampanga; and Metro Manila Skyway Stage 3

Project Section 3 & 4 for Citra Central Expressway Corporation.

Long-term debt – net of current portion

The decrease of P=285.7 million or 19% was due to payment of amortization on the seven (7) year

long-term debt of P=1.5 billion by the Parent Company with a local bank.

Retirement liability

The net decrease in retirement liability of P=59.1 million or 45% was mainly due to higher monthly

contributions by the Parent Company from P=7.1 million in 2015 to P=10.2 million in 2016.

- 37 -

Cumulative translation adjustments

The increase of P=110 million or 62% was due to foreign exchange translation adjustments of EEI

Limited whose functional currency is US dollar.

Retained earnings

The significant decrease of P=1.1 billion or 20% pertains to net loss posted during the year amounting

to P=847.7 million and dividends declared and paid amounting to P=207.3 million.

Actuarial losses on retirement liability

The decrease of P=9.8 million or 9% pertains to the actual return of plan assets, actuarial changes

arising from changes in financial and geographical assumptions and experience adjustments.

Net unrealized gains on available-for-sale securities

The net decrease of P=2.4 million or 37% pertains to lower fair market value of Philippine Long

Distance Telephone Company shares.

Consolidated Statement of Income Accounts

Revenue and costs of construction contracts

The decrease in construction contracts revenue amounting P=4.1 billion or 23% and corresponding

decrease in cost of construction amounting P=3.7 billion or 23% pertains mainly to the completion of

the following major projects for the year 2016 such as FDC Misamis 3x135MW Coal Power Plant

for NEPC Power Construction Corporation in Misamis Oriental; Slag Flotation Plant for Philippine

Associated Smelting and Refinery Corporation in Isabel, Leyte; The New CNS Sumitomo ATM

Contract Package 1 and 2 for Sumitomo Corporation; Star Trec Project – Bundle 1B for Pilipinas

Shell Petroleum Coorporation in Batangas City; Uptown Mall Towers 1, 2, 3 & 4 and BPO Offices

for Megaworld Corporation in Taguig City; Segment 9 North Link Road Project Phase 1 for Manila

North Tollways Corporation; Rehabilitation Of Condensed Milk Plant and Milk Powdered Plant for

Alaska Milk Corporation in San Pedro, Laguna; San Gabriel Unit 70 450MW Combined Cycle Power

Plant Project for Siemens Inc. in Santa Rita Batangas; Caticlan Airport Development Design & Build

for Interim Runway Extension for Transaire Holdings Corporation in Malay, Aklan.

In addition, EEI Corporation’s Skyway project encountered right of way issues which slowed its

progress. The MRT 7 project, likewise could not progress as planned because EEI’s client had to

address inquiries and demands from the Quezon City local government; and secure DENR permit for

the tree cutting activity along Commonwealth Avenue.

Revenue and cost of services

The decline in revenue of services amounting P=20 million and its corresponding cost of services

amounting P=102.9 million or 13% of EEI Power Corp., a local subsidiary, was due to reduced

delivery of electricity during the time of repairs and maintenance works performed at the 15 MW

Peaking Power Plant in Tagum City, Davao del Norte.

Revenue of merchandise sales

The decline in revenue from merchandise sales amounting P=9.6 million or 6% of Equipment

Engineers, Inc., was attributable to lower sales volume of various product lines; i.e. waterproofing

and fireproofing materials and UPP pipes.

Revenue and costs of real estate sales

The increase in revenue from real estate sales amounting P=11.8 million or 147% and its related costs

amounting P=8.3 million or 149% of EEI Realty Corp., a local subsidiary, were due to sale of two (2)

units house and lots at Suburbia East in Marikina City and twenty six (26) units of socialized

housing at The Royal Parks in Tanza, Cavite.

- 38 -

Equity in net losses of associates and joint ventures

The significant increase of P=639.8 million or 95% was primarily due to higher net loss reported for

the year by ARCC due to provisions for probable losses because of delays in a major project. The

49% share in net loss of the Parent Company amounted to P=1.4 billion, partially cushioned by the

equity share in net earnings from PetroSolar Energy, Inc. and PetroWind Energy, Inc. amounting to

P=73.4 million and P=26.6 million, respectively.

Interest income

Interest income grew by P=32.6 million or 113% from Company’s short term investments,

receivables, advances and others.

Other income

The net decrease of P=61.5 million or 87% was due to cumulative translation adjustment of foreign

subsidiary EEI Limited and write-off of certain long outstanding accounts amounting to P=28.1

million and P=15.1 million, respectively.

Selling and administrative expenses

The increase of P=229.8 million or 27% was principally due to increase in the following:

1. Personnel related expenses of P=131.8 million – mainly salaries and fringes of demobilized

personnel P=40 million, payment of HealthCare premiums P=14.5 million; and training

allowances of trainees undergoing Field Engineers Development Program (FEDP) P=6.8

million.

2. Skills training expense P=50.5 million

3. Research and development P=13.4 million

4. Professional fees P=9.7 million

5. Miscellaneous expenses P=15.1 million.

Interest expense

Net interest expense went up by P=26.4 million or 19% due to higher short-term loan availments for

the year.

Foreign exchange (gain) loss - net

The net decrease in foreign exchange loss of P=26.7 million or 89% was due to conversion difference

of payables account with a foreign subsidiary.

Provision for income tax

The net decrease of P=208 million or 48% was brought by decrease in provision of Parent Company

by P=189.3 million.

- 39 -

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

INFORMATION ON INDEPENDENT ACCOUNTANT

Audit and Audit-Related Fees

The aggregate fees billed for the Company and its subsidiaries for the professional services rendered by

the external auditor for the examination of the annual financial statements amounted to P=8.5 million in

2016 and P=7.4 million in 2015, inclusive of VAT. There are no other assurance and related services by

the external auditor that are reasonably related to the performance of the audit or review of the Company

and its subsidiaries’ financial statements.

Tax Fees and All Other Fees

The Audit Committee based on the recommendation by the Internal Audit and Management, evaluates

the need for such professional services and approves the engagement and the fees to be paid for the

services.

There are no changes and disagreements with accountants in accounting and financial disclosure.

Representatives of the Company, including their principal accountants, who are expected to be present

in the meeting, will have the opportunity to make a statement if they desire to do so and are expected to

be available to respond to appropriate questions.

- 40 -

PART III - CONTROL AND COMPENSATION INFORMATION

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Members of the Board of Directors as of December 31, 2016:

The Directors of the Company are elected at the Annual Stockholders’ Meeting to hold office

until the next succeeding Annual Meeting or until their respective successors have been elected

and qualified. None of the members of the Board of Directors and Officers of the Company own

more than 10% of the registrant’s securities.

The business experiences of the incumbent directors for the last five (5) years are as follows:

DIRECTORS:

ALFONSO T. YUCHENGCO, 93 yrs. old, Filipino, has been the Chairman of the Board since July

15, 2011 up to the present. He is also the Chairman of the Board of Yuchengco Group of

Companies, MICO Equities, RCBC Realty Corporation, Yuchengco Center De LaSalle University,

Yuchengco Museum, YGC Corporate Services, Inc., Graduate School of Business of De La Salle

University and Far Eastern University Institute of Law, AY Foundation, Enrique T. Yuchengco, Inc.,

Honda Cars Kalookan, Inc., Malayan Insurance Co. (HK) Ltd., Philippine Integrated Advertising

Agency, Inc., Malayan Colleges Laguna, Inc., Y Realty Corporation and Luisita Industrial Park

Corporation; Chairman of the Board and Director of GPL Holdings, Inc.; Chairman of the Board and

CEO of Pan Malayan Management and Investment Corporation (PMIC); Honorary Chairman of

Compania Operatta ng Pilipinas, Inc.; Director of Malayan Insurance Co, Inc., House of Investments,

Inc., RCBC Land, Inc., Sunlife Grepa Financial Inc., and Malayan Securities Corporation;

Chairman, Emeritus of Rizal Commercial Banking Corporation (RCBC), Bantayog ng mga Bayani

(Pillars of Heroes Foundation), Philippine Constitutional Association (PHILCONSA) and Asian

Bankers Association; Chairman of the Board of Trustees of Mapua Institute of Technology and

PWU-Bayanihan Folk Arts Foundation, Inc.; Vice Chairman of the Board of Judges of Blessed

Teresa of Calcutta Awards; Member, Board of Governors of Pacific Forum based in Honolulu,

Hawaii; Member of Board of Overseers of Columbia University, Business School (New York, USA);

Member, Honors Committee & Member, Board of Directors of International Insurance Society (IIS);

Member, Board of Trustees of University of St. La Salle, Affiliate College (Roxas City); Member of

the International Advisory Board of Waseda Institute for Asia Pacific Studies; Member of the

International Business Advisory Board of University of Alabama - Culverhouse College of

Commerce and Business Administration; Member, Advisory Board of Ritsumeikan Asia Pacific

University; President Emeritus & Chairman, Advisory Board of Confederation of Asia-Pacific

Chamber of Commerce & Industry (CACCI); Trustee Emeritus of The Asia Society (New York);

Honorary Member of Dabaw Kaisa Foundation, Inc.; His past experiences are: Presidential Adviser

on Foreign Affairs with Cabinet Rank, Office of the President; Trustee Emeritus of University of San

Francisco (USA); Member, Council of Advisers of Philippines-Japan Society, Inc.; Chairman of the

Board of Great Life Financial Assurance Corporation and Bantayog ng mga Bayani (Pillars of

Heroes Foundation); Member, Board of Trustees of Alliant International University; Chairman of

the Advisory Board of Corporate Governance Institute of the Philippines, and Confederation of Asia-

Pacific Chambers of Commerce and Industries (CACCI); Member, International Board of Trustees of

University of San Francisco, USA; Trustee Emeritus of Mclaren School of Business; Chairman

Emeritus of Philippine Ambassadors Foundation; Honorary Chairman of Rizal Commercial Banking

Corporation (RCBC); Member, Council of Adviser of Philippines-Japan Society, Incorporated and

Philippines-Japan Economic Cooperation Committee (PHILJEC)

HELEN Y. DEE, 72 yrs. old, Filipino, has been a Director since June 11, 2002 to March 16, 2005 and

June 09, 2006 to the present. She was elected Vice-Chairman of the Board on July 15, 2011. She is also

Chairperson of House of Investments, Inc., Landev Corp., HI-Eisai Pharmaceuticals, Inc., Manila

Memorial Park, Inc., Mapua Information Technology Center, Inc., Rizal Commercial Banking Corp.,

Pan Malayan Realty Corp., RCBC Savings Bank, La Funeraria Paz-Sucat, Malayan Insurance Co.,

- 41 -

Xamdu Motors, Inc., National Reinsurance Corp. of the Phils., Seafront Resources Corp.,

PetroEnergy Corp., RCBC Leasing & Finance Corp., Petrowind Energy, Inc.,and Malayan High School

of Science, Inc.; Chairman & CEO of Tameena Resources, Inc.; Chairman & President of Hydee

Management & Resources, Inc., Financial Brokers Insurance Agency, Inc. and Mijo Holdings, Inc.; Vice

Chairman of Pan Malayan Management & Investment Corp. and West Spring Development Corp.;

Director of Philippine Long Distance Telephone Co., MICO Equities, Inc., Pan Malayan Management &

Investment Corp., Honda Cars Phils., Inc., Isuzu Philippines, Inc., Luisita Industrial Park Corp., AY

Holdings, Inc., RCBC Realty Corp., Pan Malayan Express, Honda Cars Kalookan, Sunlife Grepa

Financial, Inc., Philippine Integrated Advertising Agency, Inc., iPeople, Inc., Y Realty, Inc.,

PetroEnergy Resources Corp., and Luis Miguel Foods; Director & Chairman, Execom of RCBC Forex

Brokers Corp.; Director & Execom Member of Great Life Financial Assurance Corp.; Director & Vice

President of Nth Millennium Foundation of the Phils., Inc.; President of Moira Management, Inc., YGC

Corporate Services, Inc., and GPL Holdings; Vice President of A. T. Yuchengco, Inc.; Member, Board of

Trustees and Treasurer of Philippine Philharmonic Society, Inc.; Member, Board of Trustees of Mapua

Institute of Technology, and Philippine Business for Education; Trustee of Malayan Colleges Laguna,

Inc.; Member, Advisory Board of Asean Insurance Council; Member of Philippine Insurers Club;

Treasurer of Business Harmony Realty, Inc. Her past experiences are: Chairperson of Merchants Bank;

Chairman & President of Grepalife Fixed Income Fund Corp., and Grepalife Asset Management Corp.;

Vice Chairman of Zurich Insurance (Taipei), Ltd., KK Converter, Inc., and Chailease Finance Corp.;

Vice President & Director of Hermoza Ecozone Development Corp.; President of HI-Daiei Trading Co.,

Inc., and Equitas Insurance Brokers, Inc.; Chairman, President & CEO of House of Investments, Inc.;

Member of World‘s Presidents’ Organization; Director of South Western Cement Corp., La Funeraria

Paz, Inc., and Great Pacific Life Assurance Corp.; Chairman of PetroEnergy Resources Corporation.

ROBERTO JOSE L. CASTILLO, 63 yrs. old, Filipino, was elected Director on April 15, 2005 and the

President and Chief Executive Officer of the company since January 01, 2006. He is also Chairman of

The Philippines Japan Economic Cooperation Committee, Gulf Asia International Corporation, GAIC

Manpower Services, Inc., and GAIC Professional Services, Inc.; Director of Al Rushaid Construction

Company, Tong Hsing Electronics Philippines, Inc., SQ Resources Inc., SN Resources Inc., Somerset

Hospitality Holdings Philippines Inc., Ascott Hospitality Holdings Philippines, Inc., Kubota-Kasui

Philippines Corporation PetroWind Energy, Inc., PetroGreen Energy Corporation, PetroSolar Energy

Corporation, Brightnote Assets Corporation and Hermosa Ecozone Development Estate; Chairman of

Advisory Board, Camelray Industrial Corporation; Chairman and President of Equipment Engineers, Inc.,

EEI Construction & Marine, Inc., EEI Realty Corporation, Philrock Construction & Services, Inc.,

Philmark, Inc., and EEI Power Corporation; President of UST-AMV College of Accountancy

Foundation, Inc.; Execom Member, Export Development Council; Member of Management Association

of the Philippines, Philippine Chamber of Commerce & Industry, Wharton-Penn Club of the Philippines;

Trustee of SGV Foundation, Philippine Quality Awards Foundation, and EEI Foundation. His past

experiences are: Director of Camelray-JTCI Corporation and Fujikasui Phils. Corp.; President of

Camelray Industrial Corp., Camelray Town Corp., and Camelray Holdings, Inc.; Director/Vice President

for External Affairs of the Philippine Constructors Association; Execom Member, Construction Safety

Foundation, Inc.; Director, Laguna Chamber of Commerce and Industry; Trustee, Kabalikat sa Kaunlaran

Foundation; Treasurer, UST-AMV College of Accountancy Foundation, Inc.; Chairman of Execom,

Camelray JTCI Corporation; Co-Chairman, The Philippines Japan Economic Cooperation Committee.

JUAN KEVIN G. BELMONTE, 54 yrs. old, Filipino, was elected Director on June 19, 2009. He is also

the President and Chief Executive Officer of Philstar.com, the leading Filipino mega-portal which brings

to the net the best news, infotainment and e-commerce content designed specifically for the Filipino

global community. Concurrently, he is the Vice Chairman of Nuvoland Philippines, a real estate firm;

Director of Philstar Daily, Inc., IP Ventures, Inc., Coal Asia, CasaEurope, Inc. (which distributes

Porcelonosa products in the Philippines), and Nationwide Development Corporation (NADECOR);

President of People Asia. His past experiences are: President of Nuvoland Philippines; Director of

IPVG, a listed firm, IP E-Games and Development Bank of the Philippines; Partner in-charge of the

Revenue Enhancement and Strategy Services Practice of the SGV Business Consulting Division;

Member and former President of Northwestern Alumni Association.

- 42 -

ROBERTO F. DE OCAMPO, 70 yrs. old, Filipino, was elected Independent Director on March 16,

2005. He is also Chairman of the Board of Advisors for RFO Center for Public Finance and Regional

Economic Cooperation; Chairman and CEO of Philippine Veterans Bank; Chairman of Stradcom

Corporation, Tollways Association of the Philippines, MoneyTree Publishing Corporation, Public

Finance Institute of the Philippines, British Alumni Association, Centennial Asia Advisors Pte. Ltd.,

Philippine Asset Management, Inc., Hatch Asia, Inc., Foundation for Economic Freedom, Center for Phil.

Futuristics Studies & Management Inc., Intervest Project Inc. (IPI), AIM Conference for Economic

Freedom (ACCM), Libera International Advisory Board (London), and Governanc Commission for

Government Owned and Controlled Corporations (GCG) Multi-Sectoral Governance Counsel (MSGC);

Vice Chairman of Tranzen Group, Montalban Methane Power Corporation, Agus 3 Hydro Power

Corporation, La Costa Development Corporation and Makati Business Club. Mr. De Ocampo is also

an Independent Director and Chairman, Audit Committee in House of Investments, Inc., Alaska Milk

Corp., Bankard, Inc., Beneficial Life Insurance Co., Inc., Robinsons Land Corporation, Salcom Power

Corporation, DFNN Inc., PHINMA Corp., Robinson‘s Land Corporation and Investment & Capital

Corporation of the Philippines (ICCP); Director of Global Reporting Initiative (GRI), Pacific Gaming

Investments Pte. Ltd., Banker’s Association of the Philippines, and Philippine Business for the

Environment (PBE); United Overseas Bank Phils., Vice Chairman, Board of Trustees of Makati

Business Club; Member, Board of Trustees of Sycip Gorres Velayo & Co. Foundation, Children’s Hour

and Philippine Business for the Environment; Board of Trustees & Chairman, Execom of Ramos Peace &

Development Foundation (RPDEV); Board of Trustees/Treasurer of Association of the Awardees of the

Order of the Legion of Honneur and the National Order of Merit (Phil. Chapter); He is also a Founding

Director of Emerging Markets Forum and Centennial Group (Washington), D.C.; Member, Board of

Advisers of ARGOSY Fund, Inc., AES Corporation (Phils.), Corporate Governance Institute of the

Philippines, and Teach for the Philippines; Philippine Cancer Society Member, Board of Advisors of

Philippine Quality and Productivity Movement, Inc.; Member of Asia Pacific Group representing

ASEAN (Trilateral Commission) and CIMB Group International Advisory Panel; Strategic Advisor,

Renewable Energy Asia Fund (Berkeley Energy, UK); Member, Advisory Council of Health Justice

Philippines; Member of Global Advisory Board of The Conference Board (New York); Member

for Life – Philippine Constitution Association; Founding Trustee of A Life for Others Foundation.

Member of CIMB Group International Advisory Panel. His past experiences are: President of Asian

Institute of Management; Chairman of Dun & Brandstreet (Asia Pacific) Pte. Ltd., First Asia Transit

Partners (Philippines), First Philippine Fund, Inc. (New York), Philippine Associated Smelting &

Refining Corporation, Eastbay Realty, Inc., Emerald Headway Distributors, Inc., Grace Park

International, Inc., MediData, Inc., Prime East Properties, Inc., JP Latex Technology, Inc., Philand Group

of Companies, Stradcom International Holdings, Inc., DFNN International, Centennial Asia Advisors Pte.

Ltd., Universal LRT Corporation Ltd., Intervest Project, Inc., Libera International Advisory Board

(London), Eastbay Resorts, Inc., Thomson Ratings Philippines, and Asian Aerospace Inc.; Chairman,

Board of Trustees of De La Salle University; Senior Advisor of Planters Bank, Sycip Gorres Velayo &

Co. (SGV), Ateneo University Scholarship Foundation and Magbasa Kita Foundation; President of

Management Association of the Philippines and Philippine Quality & Productivity Movement and Philam

Asset Management, Inc.; Board of Advisers of Bantay Bata ( ABS-CBN Foundation, Inc.); Vice

Chairman, Board of Trustees of Montalban Methane Power Corporation, Agus 3 Hydro Power

Corporation, and La Costa Development Corporation; Vice Chairman of Universal LRT Corporation Ltd

and Seaboard Eastern Insurance Co.; Director & Chairman, Audit Committee of PSi Technologies, Inc.;

Director of AIG-Philam Savings Bank, Inc., Globe Telecom, Inc., Bacnotan Consolidated Industries Inc.,

Manila Polo Club, Investment & Capital Corporation of the Philippines (ICCP) Group of Companies,

Philippine Phosphate Fertilizer Corporation, Thunderbird Resorts, Inc. Manila Electric Company, ABS-

CBN Corporation, United Overseas Bank Philippines and AB Capital & Investment Corporation;

Executive Director of AIM–Gov. Jose B. Fernandez, Jr., and Center for Banking and Finance; Member,

Board of Trustees of Angeles University Foundation and Asian Institute of Management; Member, Board

of Advisers of NAVIS Capital Partners, Foundation for Economic Freedom, and Sa Aklat Sisikat

Foundation, Inc.; Vice Chairman, Board of Trustees of Makati Business Club; Vice Chairman of

Seaboard Eastern Insurance Company, Inc.; Independent Director in Rizal Commercial Banking

Corporation; Director of Governance Commission for Government Owned or Controlled Corporations

(GCG), AB Capital and Investment Corporation, and Pacific Gaming Investments, Pte Ltd.; Vice

President of Center for Phil. Futuristics Studies and Management Inc.; Director & President of Philam

- 43 -

Fund, Inc., Philam Bond Fund, Inc., Philam Strategic Growth Fund Inc., Philam Managed Income Fund

Inc., AIG Global Bond Fund, Inc., Philam Dollar Bond Fund Inc., and GSIS Mutual Fund Inc.; Vice

Chairman of Philippines-United States Business Council; Director of United Overseas Bank Phils.;

Member, Board of Trustees of Philippine Business for the Environment; Founding Member of BOAO

Forum for Asia; Member for Life - Philippine Constitution Association; Member of CIMB Group

International Advisory Panel.

WILFRIDO E. SANCHEZ, 79 yrs. old, Filipino, has been a Director since March 16, 2005. He is also

Director in Adventure International Tours, Inc., Amon Trading Corp., House of Investments, Inc.,

EMCOR, Inc., J-DEL Investment and Management Corp., JRV Foundation, Inc., K Servico Trade, Inc.,

LT Group, Inc., Transnational Diversified Corp. and Universal Robina Corp.; Independent Director of

Center for Leadership & Change, Inc., Eton Properties Phils., Inc., Kawasaki Motor Corp. and Magellan

Capital Holdings Corporation; Tax Counsel of Quiason Makalintal Barot Torres Ibarra Sison and

Damaso Law Firm (QMBTISD); Member of Integrated Bar of the Philippines. His past business

experiences are: Chairman, Taxes & Tariff of the Philippine Committee of American Chamber of

Commerce; Co-Chairman, Tax Committee of Philippine Chamber of Commerce; Managing Director

& Head, Tax Division of SGV & Co.; Vice Chairman & Director of Center for Leadership and

Change, Inc.; Vice President & Director of JVR Foundation, Inc.; Director of NYK-TDG Maritime

Academy and Wodel, Inc., and Transnational Plans, Inc, Grepalife Asset Management Corp., Grepalife

Fixed Income Fund Corp., Omico Corporation, APEX (Phils.) Equities Corp., Grepalife Bond Fund

Corp., Jubilee Shipping Corp., PET Plans, Inc., Philippine Pacific Ocean Lines, Inc., Transnational

Financial Services, Inc. (formerly Transnational Securities, Inc.), and Wodel Manpower Services, Inc.;

Director of PetNet Inc., Rizal Commercial Banking Corp., and Transnational Diversified Group, Inc.

FILEMON T. BERBA, JR., 78 yrs. old, Filipino, was elected as Independent Director on September

08, 2006 to June 19, 2009, and March 19, 2010 to the present. He is also an Independent Director of D

& L Industries, Inc.; President of Philippine Foundation for Science and Technology; President

Emeritus of Philippine Quality Award Foundation (operates the Science Centrum and Traveling

Interactive Science Exhibits); Member, Board of Trustees of Society for the Advance of Technology

Management in the Philippines. His past experiences are: Vice Chairman & Chief Executive Officer of

Philippine Electric Corporation (PHILEC); Vice Chairman of Manila Water Company, Inc.; President of

Manila Water Company and Globe Telecom and Philippine Quality Award Foundation; Vice President

of Philippine Foundation for Science and Technology; Member of the Board of Regents of University of

the Philippines, Batangas State University, and La Salle Canlubang; Director of North Luzon Railways

Corporation, and Philippine Securities Trading Corporation; Board of Trustees of Philippine Foundation

for Science & Technology; Member, Board of Trustees (Industry Sector Representative) Philippine

Science High School System; Independent Director of Chemrez Technologies, Inc., iPeople, and RCBC

Leasing and Finance Corporation; Board of Trustees and Founding Member of Philippine Quality &

Productivity Movement; Member, Board of Trustees of UP Engineering Research & Development

Foundation, Inc.

MEDEL T. NERA, 61 yrs. old, Filipino, was elected as Director on July 15, 2011 up to present. Mr.

Nera is presently the Director, President and Chief Executive Officer of House of Investments, Inc.;

President of RCBC Realty Corporation; Director of National Reinsurance Corporation of the

Philippines, Inc. and Seafront Resources Corporation; Treasurer and Member of the Board of

Directors of CRIBS Foundation, Inc.; and Member, Management Association of the Philippines and

Philippine Institute of Certified Public Accountants. Included in his past experiences are: Vice

President and Member of the Board of Governors of the Management Association of the Philippines;

Member, Ernst and Young Far East Area Advisory Council; President, Development Dimensions

International, Inc.; Member, IT and E-Commerce Council of the Philippines, and Senior Partner,

Markets Leader and Financial Services Audit Practice; Head of Sycip Gorres Velayo & Co. CPAs,

(SGV) and Ernst and Young in the Far East.

RENATO C. VALENCIA, 74 yrs. old, Filipino, was elected as Independent Director on September

08, 2015. He is also an Independent Director of House of Investments, Inc.; Chairman of i-People,

Inc.; Director of Metropolitan Bank and Trust Company, Anglo Philippine Holdings Corporation,

- 44 -

Malayan Insurance Company, Inc., and Vulcan Industrial & Mining Corporation; Member of

Management Association of the Philippines; and Financial Executives Institute of the Philippines.

His past experiences are: President & CEO/Director of Roxas Holdings, Inc.; Director of i-People,

Inc. and Roxas and Company, Inc.; Director and Board Adviser of Philippine Veterans Bank; Vice

Chairman of Independent Insight, Inc.

Executive Officers:

ROBERTO JOSE L. CASTILLO, 63 yrs. old, Filipino, was elected Director on April 15, 2005 and

the President and Chief Executive Officer of the Company since January 01, 2006. He is also

Chairman of The Philippines Japan Economic Cooperation Committee, Gulf Asia International

Corporation, GAIC Manpower Services, Inc. and GAIC Professional Services, Inc.; Director of Al

Rushaid Construction Company Ltd., Tong Hsing Electronics Philippines, Inc., SQ Resources Inc.,

SN Resources Inc., Somerset Hospitality Holdings Philippines Inc., Ascott Hospitality Holdings

Philippines, Inc., Kubota-Kasui Philippines Corporation PetroWind Energy, Inc., PetroGreen Energy

Corporation, PetroSolar Energy Corporation, Brightnote Assets Corporation and Hermosa Ecozone

Development Corp.; Chairman of Advisory Board, Camelray Industrial Corporation; Chairman and

President of Equipment Engineers, Inc., EEI Construction & Marine, Inc., EEI Realty Corporation,

Philrock Construction & Services, Inc., Philmark, Inc., and EEI Power Corporation; President of

UST-AMV College of Accountancy Foundation, Inc.; Execom Member, Export Development

Council; Member of Management Association of the Philippines, Philippine Chamber of Commerce

& Industry, Wharton-Penn Club of the Philippines, Trustee of SGV Foundation, Philippine Quality

Awards Foundation, and EEI Foundation. His past experiences are: Director of Camelray-JTCI

Corporation and Fujikasui Phils. Corp.; President of Camelray Industrial Corp., Camelray Town

Corp., and Camelray Holdings, Inc.; Director/Vice President for External Affairs of the Philippine

Constructors Association; Execom Member, Construction Safety Foundation, Inc.; Director, Laguna

Chamber of Commerce and Industry; Trustee, Kabalikat sa Kaunlaran Foundation; Treasurer, UST-

AMV College of Accountancy Foundation, Inc.; Chairman of Execom, Camelray JTCI Corporation;

Co-Chairman, The Philippines Japan Economic Cooperation Committee.

ANTONIO S. PASCUA, 67 yrs. old, Filipino, is the Executive Vice President of the Company, and

concurrently, General Manager, Construction Division. He also serves as Director of EEI

Construction and Marine, Inc., Equipment Engineers, Inc., Philrock Construction & Services, Inc.,

EEI Power Corporation; and Trustee of EEI Foundation and EEI Retirement Fund Inc.

NORMAN K. MACAPAGAL, 62 yrs. old, Filipino, is the Senior Vice President for Overseas

Marketing. He was previously based in Saudi Arabia as Senior Vice President and General Manager

of Al-Rushaid Construction Company Ltd.

OSCAR D. MERCADO, 65 yrs. old, Filipino, is the Senior Vice President for Marketing and

Engineering of Construction Division. He serves as Director of Gulf Asia International Corporation,

GAIC Manpower Services, Inc. and EEI Construction and Marine, Inc.; Chairman and President of

EEI Retirement Fund Inc. He is a Member of the Philippine Construction Accreditation Board

(PCAB) and Philippine Overseas Construction Board (POCB).

GLENN F. VILLASENOR, 42 yrs. old, Filipino, is the Senior Vice President for Knowledge and

Change Management of the Company. He also serves as a Director of Equipment Engineers, Inc.,

EEI Power Corporation, EEI Construction & Marine, Inc., EEI Realty Corporation, Gulf Asia

International Corporation and GAIC Manpower Services Inc. Prior to EEI, he served as Vice

President for Aircraft Base Technical Support of Lufthansa Technik Philippines (LTP) which is

responsible for Planning, Facilities Management, Tools and Equipment Engineering. He also held

several key leadership positions in LTP in the fields of Information Technology (IT), Human

Resources (HR), Lean Management and Corporate Development. Mr. Villasenor is an alumnus of

Mapua Institute of Technology, graduating with a degree of Bachelor of Science in Industrial

Engineering. A certified Six Sigma practitioner and a graduate of a Lufthansa Management

- 45 -

Development program, he holds an MBA degree and a Career Executive Service Officer (CESO)

eligibility as well.

FERDINAND O. SIA, 40 yrs. old, Filipino, is the Senior Vice President and Chief Finance Officer

of the Company. He also serves as Director of Equipment Engineers, Inc., EEI Power Corporation,

EEI Construction & Marine, Inc., EEI Realty Corporation, Gulf Asia International Corporation and

GAIC Manpower Services, Inc. He served as Regional Results Management Specialist for East Asia

and South Asia regions at International Finance Corporation (IFC) of the World Bank from 2013 to

2016. Earlier, he handled operational strategy for North America, Latin America, and Asia regions

at Bristol-Myers Squibb Company in New Jersey, USA. He obtained an MBA degree from the

Wharton School of the University of Pennsylvania, and a Master degree in Economics from the

National University of Singapore.

MERCADO T. MAGNO, 64 yrs. old, Filipino, is the Senior Vice President and General Manager

for Saudi operations of the Company. He is based in Saudi Arabia as Senior Vice President of Al-

Rushaid Construction Company Ltd.

HANS CHRISTIAN O. LOPEZ, 53 yrs. old, Filipino, is the Vice President for Infrastructure

operations of the Company. He also serves as Vice President of EEI Retirement Fund Inc.

HIPOLITO P. PUNZALAN, JR., 65 yrs. old, Filipino, is the Vice President for Electromechanical

and Industrial operations of the Company.

FERDINAND M. DEL PRADO, 56 yrs. old, Filipino, is the Vice President for Marketing of the

Company. He also serves as Treasurer of EEI Retirement Fund Inc.

JULIAN B. DE DIOS, JR., 62 yrs. old, Filipino, is the Vice President for Project Control Group and

Logistics of the Company.

ANTONIO A. VILLAMOR, JR., 62 yrs. old, Filipino, is the Vice President and Chief Risk Officer

of the Company. He is also the Corporate Secretary of Southern Luzon Institute, Inc. and a member

of Philippine Institute of Certified Public Accountants, Information Systems Audit and Control

Association (ISACA), Philippine Chapter, and Risk and Insurance Management Society (RIMS),

Delaware Chapter, USA.

REYNALDO J. DIZON, 59 yrs. old, Filipino, is the Vice President for Human Resources

Management of the Company. He also serves as Director of Equipment Engineers, Inc., EEI Power

Corporation, EEI Construction and Marine, Inc., EEI Realty Corporation, Philrock Construction and

Services, Inc. and Philmark, Inc. His previous experiences are HRM Director, Site HRM and

Country HR Director of STMicroelectronics Philippines, Inc. (formerly NXP Semiconductors

Philippines, Inc.).

DIVINA F. MUNJI, 69 yrs. old, Filipino, is the Vice President for Human Resources Staff Services

of the Company. She is also a Member of the Board of Trustees and Corporate Secretary of EEI

Retirement Fund Inc.

REBECCA R. TONGSON, 56 yrs. old, Filipino, is the Vice President and Controller of the

Company. She also serves as Assistant Treasurer of Equipment Engineers, Inc., EEI Power

Corporation, EEI Construction & Marine, Inc., EEI Realty Corporation, Gulf Asia International

Corporation, and GAIC Manpower Services, Inc. She is a Director of Intergraph Process and

Building Solutions Philippines, Inc. and a member of Philippine Institute of Certified Public

Accountants and Philippine Association of Management Accountants.

- 46 -

MARIETTA R. VELASCO, 65 yrs. old, Filipino, is the Vice President for Legal and Contracts of the

Company. She also serves as Corporate Secretary of Equipment Engineers, Inc., EEI Power

Corporation, EEI Construction & Marine, Inc., Bagumbayan Equipment & Industrial Products, Inc.

and EEI Foundation, Inc.

LOURDES R. AVILA, 59 yrs. old, Filipino, is the Vice President for Internal Audit & Chief Audit

Executive of the Company. She is a member of the Philippine Institute of Certified Public

Accountants.

VICTOR G. PEREZ, 44 yrs. old, Filipino, is the Vice President for Treasury of the Company. He is

also the Treasurer of Equipment Engineers, Inc., EEI Power Corporation, EEI Construction &

Marine, Inc., EEI Realty Corporation, Gulf Asia International Corporation, and GAIC Manpower

Services, Inc. He spent seventeen (17) years in the banking industry before joining EEI.

Following are the Executive Officers of the Company as of December 31, 2016:

POSITION

NAME

Director, Chairman Alfonso T. Yuchengco

Director, Vice Chairperson Helen Y. Dee

Director, President & Chief Executive Officer Roberto Jose L. Castillo

Executive Vice President and General Manager Antonio S. Pascua

Senior Vice President, Overseas Marketing Norman K. Macapagal

Senior Vice President, Engineering and Marketing

Senior Vice President, Knowledge and Change Management

Senior Vice President and Chief Finance Officer

Senior Vice President and General Manager, KSA Operations

Oscar D. Mercado

Glenn F. Villasenor

Ferdinand O. Sia

Mercado T. Magno

Vice President, Operations - Infrastructure

Vice President, Operations - Electromechanical and Industrial

Vice President, Marketing

Hans Christian O. Lopez

Hipolito P. Punzalan, Jr.

Ferdinand M. Del Prado

Vice President, Project Control and Logistics Julian B. de Dios, Jr.

Vice President and Chief Risk Officer

Vice President, Human Resources Management

Antonio A. Villamor, Jr.

Reynaldo J. Dizon

Vice President, Human Resources Staff Services

Vice President and Controller

Vice President, Legal & Contracts

Vice President, Internal Audit & Chief Audit Executive

Vice President, Treasury

Divina F. Munji

Rebecca R. Tongson

Marietta R. Velasco

Lourdes R. Avila

Victor G. Perez

- 47 -

ITEM 10. EXECUTIVE COMPENSATION

The members of the Board of Directors except those holding management positions in the Company are

entitled with per diem ranging from P=11,111 to P=16,667 for attendance in any regular or special

meeting, and per diem ranging from P=22,222 to P=23,529 for attending meetings of Board committees.

Total salaries, bonuses and benefits for the last two fiscal years and estimated to be paid for the ensuing

year to the principal executive, operating and financial officers are as follows:

Summary Compensation Table (in Php)

Name 2017 Projected 2016 Actual 2015 Actual

Salary Bonus Benefits Salary Bonus Benefits Salary Bonus Benefits

Roberto Jose L. Castillo

Antonio S. Pascua

Norman K. Macapagal

Oscar D. Mercado

Glenn F. Villasenor

Ferdinand O. Sia

Top Officers 32,088,000 2,674,000 17,022,280 22,958,000 1,801,500 20,482,253 25,368,000 2,114,000 28,648,294

All other Officers 94,361,329 13,417,400 29,630,439 90,374,072 12,327,275 47,310,095 78,595,675 10,542,464 35,069,282

There are no other cash compensation granted to all officers and directors in addition to the above summary of

compensation.

There are no outstanding warrants or options held by any director, officer or employee.

The directors of the Company are not involved in any of the following transactions:

a. Standard arrangement and any other material arrangements;

b. Employment contracts and termination of employment and change-in-control arrangements

c. Outstanding warrants or options; and

d. Adjustments or amendments on the price of stock warrants or options

- 48 -

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security ownership of persons owning more than 5% of the registrant’s securities as of December 31, 2016.

As of December 31, 2016, EEI knows of no one who beneficially owns in excess of 5% of EEI’s

common stock except as set forth in the table below:

Class

Name/Address

of record owner and

Relationship of Issuer

Name of Beneficial

Owner and

Relationship

With Record Owner

Nationality

No. of

Shares Held

Percentage

Held

Common

Common

House of Investments*

(Parent Company)

2/F, Grepalife Building

221 Sen. Gil Puyat Ave.,

Makati City

The Chairman of the

Board, Ms. Helen Y.

Dee, upon authority of

the Board directs voting

and disposition of the

shares

PCD Nominee Corp.*

PCD Nominee Corp.*

*No person owns more

than 5%

Helen Y. Dee

Chairman of the Board

Filipino

Filipino

Non-Filipino

563,363,646

255,171,221

169,134,441

54.36%

24.62%

16.32%

* Indirect ownership of shares included.

There has been no change in control of the registrant since the beginning of the last fiscal year and there

is no arrangement which may result in a change of control.

- 49 -

The table below shows the securities beneficially owned by all directors, nominees and executive officers

of EEI as of December 31, 2016

Title of

Class Name of BOD/Officers Positions Nationality

Amount of

Beneficial

Ownership

Kind of

Interest

Percentage

(%)

Common Alfonso T. Yuchengco Director & Chairman Filipino 3 Direct 0.0000

Common Helen Y. Dee

Director & Vice

Chairperson Filipino

15

1,415,800

Direct

Indirect

0.0000

0.1366

Common Roberto Jose L. Castillo

Director , President &

Chief Executive Officer Filipino 200,005 Direct 0.0193

Common Juan Kevin G. Belmonte Director Filipino 1,500,000 Indirect 0.1447

Common Roberto F. De Ocampo Independent Director Filipino 54,005 Direct 0.0052

Common Filemon T. Berba, Jr. Independent Director Filipino 35 Direct 0.0000

Common Renato C. Valencia Independent Director Filipino 15 Direct 0.0000

Common Wilfrido E. Sanchez Director Filipino 5 Direct 0.0000

Common Medel T. Nera Director Filipino 2 Direct 0.0000

Common Antonio S. Pascua Executive Vice President Filipino 64 Direct 0.0000

Common Mercado T. Magno SVP- KSA Operations Filipino 540 Direct 0.0000

Common Divina F. Munji VP – HR Staff Services Filipino 401,251 Direct 0.0387

TOTAL 3,571,740 0.3445

The aggregate number of shares owned of record by the Chairman, Vice Chairperson, President,

Executive Vice President and Senior Vice President as a group as of December 31, 2016 is 1,616,427

shares or approximately 0.1560% of the registrant’s outstanding capital stock.

The aggregate number of shares owned by all officers and directors as a group (except those included in

the immediately preceding paragraph) as of December 31, 2016 is 1,955,313 shares or approximately

0.1887% of the registrant’s outstanding capital stock.

Beneficial or record owner has no right to acquire additional shares within 30 days arising from options,

warrants, rights conversion, privilege or similar obligations or otherwise.

- 50 -

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

There is no director, executive officer, nominee for director, beneficial holder, or any family member

involved in any business transaction with EEI and subsidiaries.

There are no material transactions which were negotiated by the Company with parties whose

relationship with the Company fall outside the definition of “related parties” under Philippine

Accounting Standards 24, Related Party Disclosures, but with whom the Company has relationship

that enables such parties to negotiate terms that may not be available from other, more clearly

independent parties on an arm’s length basis.

In 2016, the Parent Company was engaged by Malayan Colleges Mindanao (A MAPUA School,

Inc.) for the bored piling works located in Talomo, Ma-a, Davao City. Contract price amounted to

P=171.8 million and was completed on December 16, 2016. There are no outstanding receivables as at

December 31, 2016.

In 2015, the Parent Company was contracted by Enrique T. Yuchengco, Inc. for the general

construction of ETY Building in Binondo, Manila for P=663.4 million. Outstanding receivables as at

December 31, 2016 and 2015 amounted to nil and P=23.07 million, respectively. The construction is

still on-going as of March 10, 2017.

In 2014, the Parent Company was engaged by Malayan Colleges Laguna, Inc. for the construction of

its three-storey building in Cabuyao, Laguna. Contract price amounted to P=291.4 million. The

construction was completed on August 25, 2015. Outstanding receivables was nil as of December

31, 2016 and P=23.8 million as of December 31, 2015.

In 2014, the Parent Company was engaged by Malayan Insurance Company, Inc. for the rectification

works of Malayan Plaza amounting to P=13.4 million. EEI completed the project on November 8,

2014.

In 2013, EEI Power Corporation (EPC) acquired 20% stake in PetroWind Energy, Inc. (PWEI) for

P=118.75 million. PWEI was incorporated in the Philippine Securities and Exchange Commission

(SEC) on March 6, 2013, primarily to carry on the general business of generating, transmitting and/or

distributing power derived from renewable energy. PWEI has a wind energy project in Nabas, Aklan

and started commercial operations on June 10, 2015.

On August 01, 2013, the Parent Company was contracted by PWEI for the construction of 18 units

WTG foundations, roadways and temporary landing pad intended for the 36MW Nabas Wind Power

Project (NWPP) in Nabas, Aklan for P=1,122.0 million. The project was completed on April 30, 2015.

The outstanding receivables amounted to P=303.8 million and P=272.3 million as at December 31, 2016

and December 31, 2015, respectively.

On November 21, 2013, PetroGreen Energy Corporation (PGEC), CapAsia ASEAN Wind Holdings

Cooperatief U.A. and the EPC entered into a Shareholders’ Agreement (SA). PGEC, CapAsia and

EPC agree that their equity ownership ratio in PWEI is at 40%, 40% and 20%, respectively. The

transaction made PWEI a joint venture between PGEC, CapAsia and EPC by virtue of the SA signed

among the three parties.

In 2014, PWEI issued additional shares and EPC paid additional P=122.25 million.

In 2015, EPC purchased 0.16 million shares from PWEI amounting P=16.02 million. This transaction

did not result to a change in the 20% ownership of EPC over the joint venture.

In 2015, EPC purchased 3.7 million shares from PetroSolar Corporation (PSOC) amounting to P=

366.43 million which resulted to 44% ownership. PSOC was incorporated in the Philippine SEC

- 51 -

on June 17, 2015 primarily to carry out the general business of generating, transmitting and/or

distributing power derived from renewable energy resources. PSOC owns and operates a 50-

megawatt solar farm in Tarlac City. The plant started operations on February 10, 2016.

In 2006, the Parent Company sold parcels of land to EEI-RFI, a trustee of the Parent Company

employees retirement fund (the Fund). The Fund is managed by RCBC Trust and Investment

Division. The parcels of land sold are located in Manggahan, Quezon City and Bauan, Batangas (see

Notes 10 and 14). Interest income recognized from the receivables from EEI-RFI is disclosed in

Note 24. The receivables bear interest rate of 5% per annum in 2016, 2015 and 2014.

Starting January 2007, the Parent Company and EEI-RFI entered into operating lease agreement for

the said land and improvements. The term is for one year and renewable at the option of the Parent

Company provided that for each and every renewal, the monthly rental shall be increased upon

mutual agreement of both parties. Rental expense for the property located in Manggahan, Quezon

City amounted to P=52.1 million and P=49.6 million in 2016 and 2015, respectively.

On December 12, 2012, the Parent Company acquired certain parcels of land including land

improvements located in Bauan, Batangas from EEI-RFI, amounting P=581.8 million, inclusive of

12% VAT. The operating lease agreement of the said properties between the Parent Company and

EEI-RFI was terminated on the same date.

In 2013, the receivable from the EEI-RFI amounting to P=390.0 million was restructured and

reclassified as other noncurrent assets with fixed interest rate of 5% per annum. In 2016, the parties

agreed to extend the term of payment until April 30, 2021.

Independent Directors Among the nine (9) Directors as at December 31, 2016, Filemon T. Berba, Jr., Roberto F. De Ocampo

and Renato C. Valencia are independent directors of the Company.

The Company knows of no event as specified in RSA, Rule 3-3 Part V (a) 4 that are material to an

evaluation of the ability or integrity of any director of the Company.

There is no director, executive officer, nominee for director, beneficial holder, or any family member

involved in any business transaction with EEI and subsidiaries.

Family Relationship The Chairman of the Board, Ambassador Alfonso T. Yuchengco is the father of Helen Y. Dee, the Vice-

Chairperson of the Company. All other Directors and Officers are not related by consanguinity or affinity

with each other.

Significant Employees While the Company acknowledges that each and every employee has a role and contribution to make, it

also strongly believes that no one is indispensable in the organization. Thus, the loss of an employee, or

even an officer, will not cause any serious dislocation or disruption in the business of the Company. The

company of course endeavors to retain good and deserving employees through its compensation program,

training and the like.

Moreover, as a matter of principle, the Company sees to it that the maintenance of good relations with a

client, customer or any other third party, is not the sole responsibility of any individual. Thus, the success

of a transaction, undertaking, or project does not depend on any one employee. In this sense, it can be

said that the Company does not have what the Rules refers to as significant employees.

- 52 -

Involvement in certain Legal Proceedings

Since 2011, there have been no on-going legal proceedings, petition for bankruptcy, nor conviction by

final judgment against any Director and Executive Officer of the Company that is material to an

evaluation of their ability or integrity to become such a Director or Executive Officer. Neither has any of

them been subject to any Order, Judgment, or Decree, nor involved in any proceeding for violation of a

Securities or Commodities law.

- 53 -

PART 1V – CORPORATE GOVERNANCE

ITEM 13. CORPORATE GOVERNANCE

Pursuant to SEC Memorandum Circular No. 20 (Series of 2016) dated December 08, 2016, the Annual

Corporate Governance Report (ACGR) for 2016 is no longer required to be attached herein.

- 54 -

PART V – EXHIBITS AND SCHEDULES

ITEM 14. EXHIBITS AND REPORTS ON SEC FORM 17-C

A. Exhibits

See the accompanying Index to Exhibits.

B. Reports on SEC Form 17-C

The Company filed the following reports on SEC Form 17-C (Current Report) during the period January

to December 31, 2016:

Date Filed Description

January 04, 2016

January 29, 2016

February 17, 2016

March 04, 2016

March 11, 2016

May 05, 2016

May 17, 2016

July 01, 2016

July 13, 2016

August 18, 2016

September 20, 2016

1. Saudi Joint Venture receives Safety Milestone Award

2. Biggest Philippine solar plant to-date starts power export to

Luzon grid

3. MRT-7 Contract for the Engineering, Procurement, Construction

and Commissioning (EPC)

4. Results of Board of Director’s meeting

5. 50.07MWp Tarlac Solar Power Project

6. Energy Regulatory Commission released the PAO-FIT eligible

power plant to PetroSolar’s 50MW Tarlac-1 solar facility

7. Resignation of Mr Leovigildo R. de Castro, Jr. as Senior Vice

President and Chief Finance Officer

8. Results of Annual Stockholders’ Meeting

9. PetroSolar Corporation receives FIT Certification

10. Consortium of EEI Corp. and Hyundai Rotem Company

11. Newly hired Executive Officers

- 55 -


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND SUPPLEMENTARY SCHEDULES

SEC FORM 17-A

CONSOLIDATED FINANCIAL STATEMENTS

Statement of Management’s Responsibility for Consolidated Financial Statements

Report of Independent Auditors’ Report

Consolidated Statements of Financial Position as at December 31, 2016 and 2015

Consolidated Statements of Income for the years ended

December 31, 2016, 2015 and 2014

Consolidated Statements of Comprehensive Income for the years ended

December 31, 2016, 2015 and 2014

Consolidated Statements of Changes in Equity for the years ended

December 31, 2016, 2015 and 2015

Consolidated Statements of Cash Flows for the years ended

December 31, 2016, 2015 and 2014

Notes to Consolidated Financial Statements

SUPPLEMENTARY SCHEDULES

Report of Independent Auditors’ on Supplementary Schedules

Schedules Required under SRC Rule 68-E

A. Financial Assets

B. Amounts Receivable from Directors, Officers, Employees, Related Parties, and

Principal Stockholders (Other than Related Parties)

C. Amounts Receivable from Related Parties which are Eliminated during the

Consolidation of Financial Statements

D. Intangible Assets - Other Assets

E. Long-term Debt

F. Indebtedness to Related Parties

G. Guarantees of Securities of Other Issuers

H. Capital Stock

Additional Components

Schedule of Financial Soundness Indicators

Schedule of Retained Earnings Available for Dividend Declaration

Schedule of all the effective standards and interpretations under PFRS as of December 31, 2016

Map of the relationships of the Companies within the Group

- 56 -


INDEX TO EXHIBITS

Form 17-A

No. Page No.

NA Plan of Acquisition, Reorganization, Arrangements, Liquidation, or Succession NA

NA Instruments Defining the Rights of Security Holders, Including Indentures NA

NA Voting Trust Agreement NA

NA Material Contracts NA

NA Annual Report to Security Holders, Form 17-Q or Quarterly Report to Security

Holders

NA

NA Letter re: Change in Certifying Accountant NA

NA Report Furnished to Security Holders NA

NA Subsidiaries of the Registrant NA

NA Published Report Regarding Matters Submitted to Vote to Security Holders NA

NA Consent of Expert and Independent Counsel NA

NA Power of Attorney NA

NA Additional Exhibits NA

NA - Not Applicable

*SGVFS022008*

INDEPENDENT AUDITOR’S REPORT

The Board of Directors and StockholdersEEI CorporationNo. 12 Manggahan StreetBagumbayan, Quezon City

Opinion

We have audited the consolidated financial statements of EEI Corporation and its subsidiaries (theGroup), which comprise the consolidated statements of financial position as at December 31, 2016 and2015, and the consolidated statements of income, consolidated statements of comprehensive income,consolidated statements of changes in equity and consolidated statements of cash flows for each of thethree years in the period ended December 31, 2016, and notes to the consolidated financial statements,including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,the consolidated financial position of the Group as at December 31, 2016 and 2015, and its consolidatedfinancial performance and its consolidated cash flows for each of the three years in the period endedDecember 31, 2016 in accordance with Philippine Financial Reporting Standards (PFRSs).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Ourresponsibilities under those standards are further described in the Auditor’s Responsibilities for the Auditof the Consolidated Financial Statements section of our report. We are independent of the Group inaccordance with the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics)together with the ethical requirements that are relevant to our audit of the consolidated financialstatements in the Philippines, and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in ouraudit of the consolidated financial statements of the current period. These matters were addressed in thecontext of our audit of the consolidated financial statements as a whole, and in forming our opinionthereon, and we do not provide a separate opinion on these matters. For each matter below, ourdescription of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of theConsolidated Financial Statements section of our report, including in relation to these matters.Accordingly, our audit included the performance of procedures designed to respond to our assessment ofthe risks of material misstatement of the consolidated financial statements. The results of our audit

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph

BOA/PRC Reg. No. 0001, December 14, 2015, valid until December 31, 2018SEC Accreditation No. 0012-FR-4 (Group A), November 10, 2015, valid until November 9, 2018

A member firm of Ernst & Young Global Limited

*SGVFS022008*

- 2 -

procedures, including the procedures performed to address the matters below, provide the basis for ouraudit opinion on the accompanying consolidated financial statements.

Recognition of revenue and cost from construction contracts

More than 90% of the Group’s revenue are derived from fixed price construction projects on electro-mechanical works, production facilities, buildings and infrastructure. Revenue and cost from constructionprojects are determined using the percentage of completion method determined based on physicalprogress of the construction project. We consider this as a key audit matter because this process iscomplex and requires the technical expertise of the Group’s engineers, particularly with respect to thecalculation of estimated costs to complete, stage of completion and contract price variations. Note 5 tothe consolidated financial statements provide the relevant discussion regarding this matter.

Audit response

We obtained an understanding of the Group’s processes to accumulate actual costs incurred and toestimate the expected cost to complete and tested the relevant controls. We considered the competence,capabilities and objectivity of the Group’s engineers by referring to their qualifications, experience andreporting responsibilities. We examined the signed supplemental agreements with customers for pricevariations and the approved total estimated completion costs and any revisions thereto. On a samplingbasis, we tested actual costs incurred by examining invoices and other supporting third partycorrespondence. We also conducted ocular inspections on selected sample projects. During site visits,we discussed the status of the projects under construction with the Group’s engineers. Likewise, weinspected the related project documentation and inquired about the significant deviations from thetargeted completion.

Accounting for investment in Al-Rushaid Construction Company Ltd.

As disclosed in Note 11 to the consolidated financial statements, the Group owns 49% equity interest inAl-Rushaid Construction Company Ltd. (ARCC), a company incorporated in the Kingdom of SaudiArabia and an associate engaged in the construction business. The investment in this associate isaccounted for under the equity method and tested for impairment in case an impairment indicator isidentified. As of December 31, 2016, ARCC recognized deferred tax asset on net operating losscarryover of P=492.6 million. We consider the accounting for the results of and investment in ARCC as akey audit matter due to the Group’s share in ARCC’s net earnings and the carrying value of theinvestment. In addition, management’s assessment process on the recoverability of the tax loss is basedon assumptions, which are affected by expected future market or economic conditions.

Audit response

We sent instructions to ARCC’s statutory auditors to perform an audit on the relevant financialinformation of ARCC for the purpose of the consolidated financial statements of the Group, detailingtheir scope of work and reporting requirements. We obtained an understanding of the statutory auditor’skey audit areas, their planned audit procedures and significant areas of estimation and judgment. We alsoreviewed their working papers and obtained relevant conclusion statements related to their auditprocedures. Furthermore, we also evaluated management’s assumptions and inquired with the Group’smanagement on the basis of the projections. We compared key assumptions such as revenue growth rateand gross margin rate against historical performance.


*SGVFS022008*

- 3 -

Other Information

Management is responsible for the other information. The other information comprises the informationincluded in the SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A and Annual Reportfor the year ended December 31, 2016, but does not include the consolidated financial statements and ourauditor’s report thereon. The SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A andAnnual Report for the year ended December 31, 2016 are expected to be made available to us after thedate of this auditor’s report.

Our opinion on the consolidated financial statements does not cover the other information and we will notexpress any form of assurance conclusion thereon.

In connection with our audits of the consolidated financial statements, our responsibility is to read theother information identified above when it becomes available and, in doing so, consider whether the otherinformation is materially inconsistent with the consolidated financial statements or our knowledgeobtained in the audits, or otherwise appears to be materially misstated.

Responsibilities of Management and Those Charged with Governance for the ConsolidatedFinancial Statements

Management is responsible for the preparation and fair presentation of the consolidated financialstatements in accordance with PFRSs, and for such internal control as management determines isnecessary to enable the preparation of consolidated financial statements that are free from materialmisstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’sability to continue as a going concern, disclosing, as applicable, matters related to going concern andusing the going concern basis of accounting unless management either intends to liquidate the Group or tocease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as awhole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s reportthat includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit conducted in accordance with PSAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if, individually or in theaggregate, they could reasonably be expected to influence the economic decisions of users taken on thebasis of these consolidated financial statements.

*SGVFS022008*

- 4 -

As part of an audit in accordance with PSAs, we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:

∂ Identify and assess the risks of material misstatement of the consolidated financial statements,whether due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk ofnot detecting a material misstatement resulting from fraud is higher than for one resulting from error,as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override ofinternal control.

∂ Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Group’s internal control.

∂ Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by management.

∂ Conclude on the appropriateness of management’s use of the going concern basis of accounting and,based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Group’s ability to continue as a going concern. Ifwe conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the consolidated financial statements or, if such disclosures areinadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up tothe date of our auditor’s report. However, future events or conditions may cause the Group to ceaseto continue as a going concern.

∂ Evaluate the overall presentation, structure and content of the consolidated financial statements,including the disclosures, and whether the consolidated financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.

∂ Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements.We are responsible for the direction, supervision and performance of the audit. We remain solelyresponsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scopeand timing of the audit and significant audit findings, including any significant deficiencies in internalcontrol that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence, and to communicate with them all relationships and othermatters that may reasonably be thought to bear on our independence, and where applicable, relatedsafeguards.

From the matters communicated with those charged with governance, we determine those matters thatwere of most significance in the audit of the consolidated financial statements of the current period andare therefore the key audit matters. We describe these matters in our auditor’s report unless law or


*SGVFS022008*

- 5 -

regulation precludes public disclosure about the matter or when, in extremely rare circumstances, wedetermine that a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report isWenda Lynn M. Loyola.

SYCIP GORRES VELAYO & CO.

Wenda Lynn M. LoyolaPartnerCPA Certificate No. 109952SEC Accreditation No. 1540-A (Group A), March 8, 2016, valid until March 8, 2019Tax Identification No. 242-019-387BIR Accreditation No. 08-001998-117-2016, February 15, 2016, valid until February 14, 2019PTR No. 5908712, January 3, 2017, Makati City

March 10, 2017


*SGVFS022008*

EEI CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 312016 2015

ASSETS

Current AssetsCash and cash equivalents (Note 6) P=1,029,018,227 P=1,270,242,080Receivables (Note 7) 6,727,540,336 6,339,948,341Costs and estimated earnings in excess of billings

on uncompleted contracts (Note 8) 4,192,250,584 5,946,503,761Due from related parties (Note 27) 79,415,085 74,552,130Inventories (Note 9) 558,737,219 448,318,138Other current assets (Note 10) 981,228,652 720,822,342

Total Current Assets 13,568,190,103 14,800,386,792

Noncurrent AssetsInvestments in associates and joint ventures (Note 11) 1,269,935,971 2,265,940,563Available-for-sale (AFS) financial assets (Note 12) 368,030,884 370,456,224Investment properties (Note 14) 203,480,382 231,228,384Property and equipment (Note 13) 4,481,549,476 4,357,137,503Retirement assets (Note 28) 9,939,515 7,280,197Deferred tax assets - net (Note 26) 83,999,489 109,691,793Other noncurrent assets (Note 15) 217,968,323 329,611,945

Total Noncurrent Assets 6,634,904,040 7,671,346,609P=20,203,094,143 P=22,471,733,401

LIABILITIES AND EQUITY

Current LiabilitiesBank loans (Note 16) P=2,950,000,000 P=3,330,000,000Accounts payable and other current liabilities (Note 17) 4,999,622,397 5,277,110,575Income tax payable (Note 26) 3,671,560 7,762,154Current portion of long-term debt (Note 18) 285,714,286 285,714,286Due to related parties (Note 27) 164,538,085 156,583,327Billings in excess of costs and estimated earnings

on uncompleted contracts (Note 8) 4,652,903,301 4,983,318,365Customers’ deposits 16,641,303 18,903,475

Total Current Liabilities 13,073,090,932 14,059,392,182

Noncurrent LiabilitiesLong-term debt - net of current portion (Note 18) 1,214,285,714 1,500,000,000Retirement liabilities (Note 28) 71,992,738 131,098,662

Total Noncurrent Liabilities 1,286,278,452 1,631,098,662Total Liabilities 14,359,369,384 15,690,490,844

EquityCapital stock - P=1 par value (Notes 19 and 31) Authorized - 2,000,000,000 shares Issued - 1,036,401,386 shares 1,036,401,386 1,036,401,386Additional paid-in capital 477,037,443 477,037,443Treasury stock (3,720,790) (3,720,790)Other comprehensive income - net (Notes 12 and 28) 187,429,673 69,990,158Retained earnings (Note 32) 4,146,577,047 5,201,534,360 Total Equity 5,843,724,759 6,781,242,557

P=20,203,094,143 P=22,471,733,401

See accompanying Notes to Consolidated Financial Statements.

*SGVFS022008*

EEI CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME

For the Years Ended December 312016 2015 2014

REVENUEConstruction contracts P=13,826,137,816 P=17,951,605,599 P=15,708,635,605Services 837,751,325 857,814,110 1,182,902,192Merchandise sales 151,925,069 161,510,267 169,990,675Real estate sales 19,778,021 7,998,576 18,358,731

14,835,592,231 18,978,928,552 17,079,887,203Equity in net earnings (losses) of associates and

joint ventures (Note 11) (1,316,130,128) (676,309,562) 423,796,203Interest income (Note 24) 61,329,134 28,750,588 35,082,174Other income - net (Note 25) 9,262,881 70,794,563 42,212,202

13,590,054,118 18,402,164,141 17,580,977,782

COSTSConstruction contracts (Note 20) 12,126,749,307 15,815,224,732 14,261,798,939Services (Note 21) 690,118,889 793,036,707 936,936,558Merchandise sales (Note 22) 128,723,605 128,776,339 136,923,345Real estate sales (Note 9) 13,935,705 5,605,693 14,647,753

12,959,527,506 16,742,643,471 15,350,306,595

SELLING AND ADMINISTRATIVE EXPENSES(Note 23) 1,086,419,677 856,637,733 788,775,950

FINANCE COSTS AND OTHER EXPENSES - NetInterest expense - promissory notes (Notes 16 and 18) 162,772,755 136,421,295 123,593,807Interest expense - finance lease − 4,913 89,060Foreign exchange losses (gains) - net 3,457,907 30,124,959 (119,170)

166,230,662 166,551,167 123,563,697

INCOME (LOSS) BEFORE INCOME TAX (622,123,727) 636,331,770 1,318,331,540

PROVISION FOR INCOME TAX (Note 26)Current 204,103,840 435,924,643 384,587,214Deferred 21,473,449 (2,327,202) 15,470,477

225,577,289 433,597,441 400,057,691

NET INCOME (LOSS) (P=847,701,016) P=202,734,329 P=918,273,849

Earnings (Loss) Per Share - Basic and Diluted(Note 29) (P=0.8180) P=0.1956 P=0.8861


*SGVFS022008*

EEI CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 312016 2015 2014

NET INCOME (LOSS) (P=847,701,016) P=202,734,329 P=918,273,849

OTHER COMPREHENSIVE INCOMEItem not to be reclassified to profit or loss in subsequent periods: Remeasurement gains (losses) on retirement liabilities (Note 28) 14,062,849 (45,216,989) 216,085,262 Income tax effect (4,218,855) 13,565,097 (64,825,579)

9,843,994 (31,651,892) 151,259,683Items to be reclassified to profit or loss in subsequent periods: Cumulative translation adjustments 110,020,861 160,874,867 12,531,799 Net unrealized gains (losses) on available-for-sale financial assets (Note 12) (2,425,340) (2,892,527) 1,557,656

117,439,515 126,330,448 165,349,138

TOTAL COMPREHENSIVE INCOME (LOSS) (P=730,261,501) P=329,064,777 P=1,083,622,987


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EEI CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITYFOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014

Other Comprehensive Income - Net of Deferred Tax Effect

Capital Stock(Notes 19

and 31)

AdditionalPaid-InCapital

TreasuryStock

RemeasurementLosses on

RetirementLiability(Note 28)

CumulativeTranslation

Adjustments

Net UnrealizedGain on

AFS FinancialAssets

(Note 12) Subtotal

RetainedEarnings

(Note 32) Total

Balances at December 31, 2013 P=1,036,401,386 P=477,037,443 (P=3,720,790) (P=234,394,400) P=4,890,709 P=7,814,263 (P=221,689,428) P=4,495,086,736 P=5,783,115,347Net income – – – – – – − 918,273,849 918,273,849Other comprehensive income – – – 151,259,683 12,531,799 1,557,656 165,349,138 – 165,349,138Total comprehensive income – – – 151,259,683 12,531,799 1,557,656 165,349,138 918,273,849 1,083,622,987Dividends declared – – – – – – − (207,280,277) (207,280,277)

Balances at December 31, 2014 1,036,401,386 477,037,443 (3,720,790) (83,134,717) 17,422,508 9,371,919 (56,340,290) 5,206,080,308 6,659,458,057Net income – – − − − − − 202,734,329 202,734,329Other comprehensive income – – − (31,651,892) 160,874,867 (2,892,527) 126,330,448 − 126,330,448Total comprehensive income – – − (31,651,892) 160,874,867 (2,892,527) 126,330,448 202,734,329 329,064,777Dividends declared – – − − − − − (207,280,277) (207,280,277)

Balances at December 31, 2015 1,036,401,386 477,037,443 (3,720,790) (114,786,609) 178,297,375 6,479,392 69,990,158 5,201,534,360 6,781,242,557Net loss − − − − − − − (847,701,016) (847,701,016)Other comprehensive income − − − 9,843,994 110,020,861 (2,425,340) 117,439,515 − 117,439,515Total comprehensive loss − − − 9,843,994 110,020,861 (2,425,340) 117,439,515 (847,701,016) (730,261,501)Dividends declared − − − − − − − (207,256,297) (207,256,297)

Balances at December 31, 2016 P=1,036,401,386 P=477,037,443 (P=3,720,790) (P=104,942,615) P=288,318,236 P=4,054,052 P=187,429,673 P=4,146,577,047 P=5,843,724,759


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EEI CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS


CASH FLOWS FROM OPERATING ACTIVITIESIncome (loss) before income tax (P=622,123,727) P=636,331,770 P=1,318,331,540Adjustments for:

Equity in net losses (earnings) of associates and joint ventures (Note 11) 1,316,130,128 676,309,562 (423,796,203)Depreciation and amortization (Notes 13, 14 and 15) 633,612,489 520,729,599 407,908,328Interest expense (Notes 16 and 18) 162,772,755 136,426,208 123,682,867Unrealized foreign exchange loss - net (777,969) 39,623,663 3,874,776Loss on liquidation of subsidiaries (Note 25) 26,174,418 − −Loss on sale of property and equipment (Note 25) 291,180 − −Dividend income (66,723) (7,873,504) (24,472)Gain on sale of investment properties (Note 25) (11,707,531) (5,390,206) –Interest income (61,329,134) (28,750,588) (35,082,174)Movements in net retirement liabilities (47,702,393) (14,132,937) 5,894,536

Operating income before working capital changes 1,395,273,493 1,953,273,567 1,400,789,198Decrease (increase) in:

Receivables (367,467,210) (373,007,743) (2,244,858,499)Costs and estimated earnings in excess of billings

on uncompleted contracts 1,733,563,958 (1,899,331,796) (2,448,952,573)Due from related parties 23,590,220 (15,279,380) (9,434,517)Inventories (110,419,081) (11,357,553) (17,862,012)Other current assets 45,956,661 17,264,993 (286,727,138)

Increase (decrease) in:Accounts payable and other current liabilities (272,647,160) 686,531,159 1,856,010,900Due to related parties 14,301,646 26,644,967 3,679,108Customers’ deposits (2,262,172) (26,693,748) 11,076,671Billings in excess of costs and estimated earnings

on uncompleted contracts (330,415,064) 1,942,619,768 1,952,787,877Net cash flows generated from operations 2,129,475,291 2,300,664,234 216,509,015Interest received 61,668,646 35,060,744 29,336,466Interest paid (164,920,621) (133,625,938) (115,330,554)Income taxes paid (374,231,232) (420,708,399) (423,966,882)Net cash flows provided by (used in) operating activities 1,651,992,084 1,781,390,641 (293,451,955)

CASH FLOWS FROM INVESTING ACTIVITIESProceeds from disposals of:

Property and equipment 2,749,322 5,466,157 5,936,814Investment properties 33,916,695 26,134,425 –

Acquisitions of:Property and equipment (Note 13) (734,971,232) (1,136,775,501) (497,959,262)Investment properties (Note 14) − − (12,200,000)Investments in associates (Note 11) (294,869,355) (901,276,990) (122,250,000)AFS financial assets (Note 12) − (167,505,224) –Software costs (Note 15) − (2,463,081) (3,325,547)

Decrease (increase) in other noncurrent assets (Note 15) (32,750,425) (44,640,073) 30,203,791Dividends received 66,723 7,873,504 233,222,659Net cash flows used in investing activities (1,025,858,272) (2,213,186,783) (366,371,545)

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CASH FLOWS FROM FINANCING ACTIVITIESProceeds from:

Bank loans (Note 16) P=9,875,000,000 P=10,970,000,000 P=6,655,000,000Long-term debt (Note 18) − 1,500,000,000 442,454,200

Payments of:Bank loans (Note 16) (10,255,000,000) (10,465,000,000) (6,502,000,000)Long-term debt (Note 18) (285,714,286) (678,626,485) (53,571,429)Cash dividends (207,256,297) (207,280,277) (207,280,277)

Decrease in other noncurrent liabilities − (281,259) (3,518,477)Net cash flows provided by (used in) financing activities (872,970,583) 1,118,811,979 331,084,017

EFFECTS OF EXCHANGE RATE CHANGES ONCASH AND CASH EQUIVALENTS 5,612,918 19,376,861 (5,265,692)

NET INCREASE (DECREASE) IN CASH ANDCASH EQUIVALENTS (241,223,853) 706,392,698 (334,005,175)

CASH AND CASH EQUIVALENTSAT BEGINNING OF YEAR 1,270,242,080 563,849,382 897,854,557

CASH AND CASH EQUIVALENTS ATEND OF YEAR (Note 6) P=1,029,018,227 P=1,270,242,080 P=563,849,382


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EEI CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information

EEI Corporation (the Parent Company) is a stock corporation incorporated on April 17, 1931under the laws of the Philippines. On July 15, 1980, the Parent Company’s corporate life wasextended for another fifty years starting April 17, 1981. The Parent Company is engaged ingeneral contracting and construction equipment rental. Its registered office address is No. 12Manggahan Street, Bagumbayan, Quezon City.

The Parent Company’s shares of stock are publicly traded at the Philippine Stock Exchange (PSE).It is a subsidiary of House of Investments, Inc., which is also incorporated in the Philippines. Theultimate parent company of EEI Corporation is Pan Malayan Management and InvestmentCorporation (PMMIC).

The consolidated financial statements were approved for issue by its Board of Directors (BOD) onMarch 10, 2017.

2. Basis of Preparation

The consolidated financial statements have been prepared on a historical cost basis, except foravailable-for-sale (AFS) financial assets which have been measured at fair value. Theaccompanying consolidated financial statements are presented in Philippine Peso (P=), which isalso the Parent Company’s functional currency. Except as indicated, all amounts are rounded offto the nearest Peso.

Statement of ComplianceThe consolidated financial statements have been prepared in compliance with Philippine FinancialReporting Standards (PFRSs).

Basis of ConsolidationThe consolidated financial statements include the Parent Company and the following companiesthat it controls:

Percentage of OwnershipPlace ofIncorporation Nature of Business

FunctionalCurrency

2016 2015Direct Indirect Direct Indirect

EEI Limited (formerly EEI BVI Ltd.) British Virgin Islands

Holding company US Dollar 100 ‒ 100 ‒

Clear Jewel Investments, Ltd. (CJIL) British Virgin Islands

Holding company US Dollar ‒ 100 ‒ 100

EEI Corporation (Singapore) Pte. Ltd* Singapore Construction Singapore Dollar

‒ ‒ ‒ 100

EEI Nouvelle-Caledonie SARL* New Caledonia Construction French Franc ‒ ‒ ‒ 100Nimaridge Investments, Limited British Virgin

IslandsHolding company US Dollar ‒ 100 ‒ 100

EEI (PNG), Ltd Papua New Guinea

Holding company US Dollar − 100 − 100

EEI Corporation (Guam), Inc. United States of America

Construction US Dollar 100 ‒ 100 ‒

EEI Construction and Marine, Inc. Philippines Construction Philippine peso 100 ‒ 100 ‒EEI Realty Corporation (EEI Realty) Philippines Real estate Philippine peso 100 ‒ 100 ‒EEI Subic Corporation Philippines Construction Philippine peso 100 ‒ 100 ‒Equipment Engineers, Inc. (EE) Philippines Construction Philippine Peso 100 ‒ 100 ‒JP Systems Asia Inc. (JPSAI)** Philippines Rental of scaffolding and

formworksPhilippine Peso

‒ 60 ‒ ‒*Liquidated in 2016**Incorporated in December 2016

(Forward)

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Percentage of OwnershipPlace ofIncorporation Nature of Business

FunctionalCurrency

2016 2015Direct Indirect Direct Indirect

EEI Power Corporation (EPC) Philippines Power generation Philippine Peso 84 16 84 16Gulf Asia International Corporation (GAIC) Philippines Manpower services Philippine peso 100 ‒ 100 ‒GAIC Professional Services, Inc. (GAPSI) Philippines Manpower services Philippine peso ‒ 100 ‒ 100GAIC Manpower Services, Inc. (GAMSI) Philippines Manpower services Philippine peso ‒ 100 ‒ 100Bagumbayan Equipment & IndustrialProducts, Inc.

Philippines Consultancy services Philippine peso100 ‒ 100 ‒

Philmark, Inc. Philippines Construction Philippine peso 100 ‒ 100 ‒Philrock Construction and Services, Inc. Philippines Manpower services Philippine peso 100 ‒ 100 ‒

Control is achieved when the Group is exposed, or has rights, to variable returns from itsinvolvement with the investee and has the ability to affect those returns through its power over theinvestee. Specifically, the Group controls an investee if and only if the Group has:

a) power over the investee (i.e. existing rights that give it the current ability to direct the relevantactivities of the investee);

b) exposure, or rights, to variable returns from its involvement with the investee; andc) the ability to use its power over the investee to affect its returns.

Generally, there is a presumption that a majority of voting rights result in control. To support thispresumption and when the Group has less than a majority of the voting or similar rights of aninvestee, the Group considers all relevant facts and circumstances in assessing whether it haspower over an investee, including:

a) the contractual arrangement with the other vote holders of the investeeb) rights arising from other contractual arrangementsc) the Group’s voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicatethat there are changes to one or more of the three elements of control. Consolidation of asubsidiary begins when the Group obtains control over the subsidiary and ceases when the Grouploses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired ordisposed of during the year are included in the consolidated statements of income andconsolidated statements of comprehensive income from the date the Group gains control until thedate the Group ceases to control the subsidiary.

Subsidiaries are entities over which the Parent Company has the power to govern the financial andoperating policies generally accompanying a shareholding of more than one half of the votingrights. Subsidiaries are fully consolidated from the date of acquisition, being the date on whichthe Group obtains control, and continue to be consolidated until the date when such control ceases.

The consolidated financial statements are prepared with the same financial reporting period as theParent Company using the consistent accounting policies. All significant intercompany balancesand transactions, intercompany profits and expenses and gains and losses are eliminated duringconsolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as anequity transaction. If the Group loses control over a subsidiary, it:

∂ derecognizes the assets (including goodwill) and liabilities of the subsidiary;∂ derecognizes the carrying amount of any non-controlling interests;∂ derecognizes the cumulative translation differences recorded in equity;∂ recognizes the fair value of the consideration received;∂ recognizes the fair value of any investment retained;

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∂ recognizes any surplus or deficit in profit or loss; and∂ reclassifies the parent’s share of components previously recognized in OCI to profit or

loss or retained earnings, as appropriate, as would be required if the Group had directlydisposed of the related assets or liabilities.

3. Changes in Accounting Policies

The accounting policies adopted are consistent with those of the previous financial year, exceptthat the Group has adopted the following new accounting pronouncements startingJanuary 1, 2016. Adoption of these pronouncements did not have any significant impact on theGroup’s financial position or performance unless otherwise indicated.

∂ Amendments to PFRS 10, PFRS 12 and PAS 28, Investment Entities: Applying theConsolidation Exception

∂ Amendments to PFRS 11, Accounting for Acquisitions of Interests in Joint Operations∂ PFRS 14, Regulatory Deferral Accounts∂ Amendments to PAS 1, Disclosure Initiative∂ Amendments to PAS 16 and PAS 38, Clarification of Acceptable Methods of

Depreciation and Amortization∂ Amendments to PAS 16 and PAS 41, Agriculture: Bearer Plants∂ Amendments to PAS 27, Equity Method in Separate Financial Statements∂ Annual Improvements to PFRSs 2012 - 2014 Cycle

• Amendment to PFRS 5, Changes in Methods of Disposal• Amendment to PFRS 7, Servicing Contracts• Amendment to PFRS 7, Applicability of the Amendments to PFRS 7 to Condensed

Interim Financial Statements• Amendment to PAS 19, Discount Rate: Regional Market Issue• Amendment to PAS 34, Disclosure of Information ‘Elsewhere in the Interim

Financial Report’

Standards issued but not yet effectivePronouncements issued but not yet effective are listed below. Unless otherwise indicated, theGroup does not expect that the future adoption of the said pronouncements to have a significantimpact on its consolidated financial statements. The Group intends to adopt the followingpronouncements when they become effective.

Effective beginning on or after January 1, 2017

∂ Amendment to PFRS 12, Clarification of the Scope of the Standard (Part of AnnualImprovements to PFRSs 2014 - 2016 Cycle)

∂ Amendments to PAS 7, Statement of Cash Flows, Disclosure InitiativeThe amendments to PAS 7 require an entity to provide disclosures that enable users offinancial statements to evaluate changes in liabilities arising from financing activities,including both changes arising from cash flows and non-cash changes (such as foreignexchange gains or losses). On initial application of the amendments, entities are notrequired to provide comparative information for preceding periods. Early application ofthe amendments is permitted.

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Application of amendments will result in additional disclosures in the 2017 consolidatedfinancial statements of the Group.

∂ Amendments to PAS 12, Income Taxes, Recognition of Deferred Tax Assets forUnrealized Losses


∂ Amendments to PFRS 2, Share-based Payment, Classification and Measurement ofShare-based Payment Transactions

∂ Amendments to PFRS 4, Insurance Contracts, Applying PFRS 9, Financial Instruments,with PFRS 4

∂ PFRS 15, Revenue from Contracts with CustomersPFRS 15 establishes a new five-step model that will apply to revenue arising fromcontracts with customers. Under PFRS 15, revenue is recognized at an amount thatreflects the consideration to which an entity expects to be entitled in exchange fortransferring goods or services to a customer. The principles in PFRS 15 provide a morestructured approach to measuring and recognizing revenue.

The new revenue standard is applicable to all entities and will supersede all currentrevenue recognition requirements under PFRSs. Either a full or modified retrospectiveapplication is required for annual periods beginning on or after January 1, 2018.

The Group is currently assessing the impact of PFRS 15.

∂ PFRS 9, Financial InstrumentsPFRS 9 reflects all phases of the financial instruments project and replaces PAS 39,Financial Instruments: Recognition and Measurement, and all previous versions ofPFRS 9. The standard introduces new requirements for classification and measurement,impairment, and hedge accounting. PFRS 9 is effective for annual periods beginning onor after January 1, 2018, with early application permitted. Retrospective application isrequired, but providing comparative information is not compulsory. For hedgeaccounting, the requirements are generally applied prospectively, with some limitedexceptions.

The adoption of PFRS 9 will have an effect on the classification and measurement of theGroup’s financial assets and impairment methodology for financial assets, but will haveno impact on the classification and measurement of the Group’s financial liabilities. TheGroup is currently assessing the impact of adopting this standard.

∂ Amendments to PAS 28, Measuring an Associate or Joint Venture at Fair Value (Part ofAnnual Improvements to PFRSs 2014 - 2016 Cycle)

∂ Amendments to PAS 40, Investment Property, Transfers of Investment PropertyThe amendments clarify when an entity should transfer property, including property underconstruction or development into, or out of investment property. The amendments statethat a change in use occurs when the property meets, or ceases to meet, the definition ofinvestment property and there is evidence of the change in use. A mere change inmanagement’s intentions for the use of a property does not provide evidence of a changein use. The amendments should be applied prospectively to changes in use that occur on

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or after the beginning of the annual reporting period in which the entity first applies theamendments. Retrospective application is only permitted if this is possible without theuse of hindsight.

∂ Philippine Interpretation IFRIC-22, Foreign Currency Transactions and AdvanceConsiderationThe interpretation clarifies that in determining the spot exchange rate to use on initialrecognition of the related asset, expense or income (or part of it) on the derecognition of anon-monetary asset or non-monetary liability relating to advance consideration, the dateof the transaction is the date on which an entity initially recognizes the nonmonetary assetor non-monetary liability arising from the advance consideration. If there are multiplepayments or receipts in advance, then the entity must determine a date of the transactionsfor each payment or receipt of advance consideration. The interpretation may be appliedon a fully retrospective basis. Entities may apply the interpretation prospectively to allassets, expenses and income in its scope that are initially recognized on or after thebeginning of the reporting period in which the entity first applies the interpretation or thebeginning of a prior reporting period presented as comparative information in the financialstatements of the reporting period in which the entity first applies the interpretation.


∂ PFRS 16, LeasesUnder the new standard, lessees will no longer classify their leases as either operating orfinance leases in accordance with PAS 17, Leases. Rather, lessees will apply the single-asset model. Under this model, lessees will recognize the assets and related liabilities formost leases on their balance sheets, and subsequently, will depreciate the lease assets andrecognize interest on the lease liabilities in their profit or loss. Leases with a term of 12months or less or for which the underlying asset is of low value are exempted from theserequirements.

The accounting by lessors is substantially unchanged as the new standard carries forwardthe principles of lessor accounting under PAS 17. Lessors, however, will be required todisclose more information in their financial statements, particularly on the risk exposure toresidual value.

Entities may early adopt PFRS 16 but only if they have also adopted PFRS 15. Whenadopting PFRS 16, an entity is permitted to use either a full retrospective or a modifiedretrospective approach, with options to use certain transition reliefs.

The Group is currently assessing the impact of adopting PFRS 16.

Deferred effectivity

∂ Amendments to PFRS 10 and PAS 28, Sale or Contribution of Assets between an Investorand its Associate or Joint Venture

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4. Significant Accounting Policies

Revenue and Cost RecognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to theGroup and the revenue can be reliably measured. The Group assesses its revenue arrangementsagainst specific criteria in order to determine if it is acting as principal or agent. In arrangementswhere the Group is acting as principal to its customers, revenue is recognized on a gross basis.However, if the Group is acting as an agent to its customers, only the amount of net commissionretained is recognized as revenue. The following specific recognition criteria must also be metbefore revenue is recognized:

Construction contractsRevenue from construction contracts are recognized using the percentage-of-completion methodof accounting. Under this method, revenues are generally measured on the basis of estimatedcompletion of the physical proportion of the contract work. Revenue from labor supply contractswith project management and supervision are recognized on the basis of man-hours spent.

Contract costs include all direct materials and labor costs and those indirect costs related tocontract performance. Expected losses on contracts are recognized immediately when it isprobable that the total contract costs will exceed total contract revenue. The amount of such lossis determined irrespective of whether or not work has commenced on the contract; the stage ofcompletion of contract activity; or the amount of profits expected to arise on other contracts,which are not treated as a single construction contract. Changes in contract performance, contractconditions and estimated profitability, including those arising from contract penalty provisions andfinal contract settlements that may result in revisions to estimated costs and gross margins arerecognized in the year in which the changes are determined. Profit incentives are recognized asrevenue when their realization is reasonably assured.

The asset “Costs and estimated earnings in excess of billings on uncompleted contracts” representstotal costs incurred and estimated earnings recognized in excess of amounts billed. The liability“Billings in excess of costs and estimated earnings on uncompleted contracts” represents billingsin excess of total costs incurred and estimated earnings recognized. Contract retentions arepresented as part of “Trade receivables” under the “Receivables” account in the consolidatedstatement of financial position.

ServicesRevenue is recognized as the related services are rendered. Revenue derived from the generationand/or supply of electricity is recognized based on the actual delivery of electricity as agreed uponbetween parties.

Merchandise salesRevenue from merchandise sales is normally recognized when the buyer accepts delivery andwhen installation and inspection are complete. However, revenue is recognized immediately uponthe buyer’s acceptance of delivery when the installation process is simple in nature. Cost ofmerchandise sold is recognized as an expense when the related goods are sold.

Equipment rentalRevenue from equipment rental arises from the Group’s equipment that are being held for rentals.Revenue is recognized as it accrues.

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Real estate salesRevenue on sale of raw parcels of land with no future obligation to develop the property isrecognized using the full accrual method.

Sale of developed lots and residential units is accounted for using the full accrual method ofaccounting. Under this method, the revenue is recognized when: (a) the collectibility of the salesprice is reasonably assured; (b) the earnings process is virtually complete; and (c) the seller doesnot have a substantial continuing involvement with the subject properties. The collectibility of thesales price is considered reasonably assured when: (a) the buyers have actually confirmed theiracceptance of the related loan applications after the same have been delivered to and approved byeither the banks or other financing institutions for externally financed accounts; and (b) the downpayment comprising a substantial portion of the contract price is received and the capacity to payand credit worthiness of buyers have been reasonably established for sales under the deferred cashpayment arrangement.

If any of the criteria under the full accrual method is not met, the deposit method is applied untilall the conditions for recording a sale are met. Pending recognition of sale, cash received frombuyers is recognized as deposit from customers presented under the “Customers’ deposits”account in the liabilities section of the consolidated statement of financial position.

Cost of real estate salesCost of real estate sales is recognized consistent with the revenue recognition method applied.

The cost of inventory recognized in profit or loss on disposal is determined with reference to thespecific costs incurred on the property and an allocation of any non-specific cost based on therelative size of the property sold.

Interest incomeRevenue is recognized as interest accrues using the effective interest method.

ExpensesExpenses are recognized in the consolidated statement of income when decrease in futureeconomic benefits related to a decrease in an asset or an increase of a liability has arisen that canbe measured reliably.

Selling and administrative expensesSelling expenses are costs incurred to sell goods and services. They include advertising amongothers. Administrative expenses constitute costs of administering the business. Selling andadministrative expenses are expensed as incurred.

Current versus Noncurrent ClassificationThe Group presents assets and liabilities in consolidated statement of financial position based oncurrent/noncurrent classification. An asset as current when it is:

∂ Expected to be realized or intended to be sold or consumed in normal operating cycle∂ Held primarily for the purpose of trading∂ Expected to be realized within twelve (12) months after the reporting period or∂ Cash and cash equivalent unless restricted from being exchanged or used to settle a

liability for at least twelve months after the financial reporting period

All other assets are classified as noncurrent.

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A liability is current when:∂ It is expected to be settled in normal operating cycle∂ It is held primarily for the purpose of trading∂ It is due to be settled within twelve (12) months after the financial reporting period or∂ There is no unconditional right to defer the settlement of the liability for at least twelve

(12) months after the reporting period

The Group classifies all other liabilities as noncurrent. Deferred tax assets and liabilities areclassified as noncurrent assets and liabilities.

Cash and Cash EquivalentsCash includes cash on hand and in banks. Cash equivalents are short-term, highly liquidinvestments that are readily convertible to known amounts of cash with original maturities of three(3) months or less and that are subject to an insignificant risk of change in value.

Financial Assets and Financial LiabilitiesDate of recognitionThe Group recognizes a financial asset or a financial liability in the consolidated statement offinancial position when it becomes a party to the contractual provisions of the instrument.Purchases or sales of financial assets that require delivery of assets within the time frameestablished by regulation or convention in the marketplace are recognized on the settlement date.The Group follows the settlement date accounting where an asset to be received and liability to bepaid are recognized on the settlement date and derecognition of an asset that is sold and therecognition of a receivable from the buyer are recognized on the settlement date.

Initial recognition and measurementAll financial assets and financial liabilities are initially recognized at fair value. Except forfinancial assets at fair value through profit or loss (FVPL), the initial measurement of financialassets and liabilities includes transaction costs. The Group classifies its financial assets in thefollowing categories: financial assets at FVPL, held-to-maturity (HTM) investments, AFSfinancial assets, and loans and receivables. The Group classifies its financial liabilities intofinancial liabilities at FVPL and other financial liabilities. The classification depends on thepurpose for which the investments were acquired and whether they are quoted in an active market.Management determines the classification of its investments at initial recognition and, whereallowed and appropriate, re-evaluates such designation at every reporting date.

Fair value measurementFair value is the estimated price that would be received to sell an asset or paid to transfer a liabilityin an orderly transaction between market participants at the measurement date. The fair valuemeasurement is based on the presumption that the transaction to sell the asset or transfer theliability takes place either:

∂ In the principal market for the asset or liability, or∂ In the absence of a principal market, in the most advantageous market for the asset or

liability.

The principal or the most advantageous market must be accessible to the Group.

The fair value of an asset or a liability is measured using the assumptions that market participantswould use when pricing the asset or liability, assuming that market participants act in theireconomic best interest.

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A fair value measurement of a non-financial asset takes into account a market participant's abilityto generate economic benefits by using the asset in its highest and best use or by selling it toanother market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for whichsufficient data are available to measure fair value, maximizing the use of relevant observableinputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the consolidated financialstatements are categorized within the fair value hierarchy, described as follows, based on thelowest level input that is significant to the fair value measurement as a whole:

∂ Level 1 - Quoted (unadjusted) market prices in active markets for identical assets orliabilities

∂ Level 2 - Valuation techniques for which the lowest level input that is significant to thefair value measurement is directly or indirectly observable

∂ Level 3 - Valuation techniques for which the lowest level input that is significant to thefair value measurement is unobservable

For assets and liabilities that are recognized in the consolidated financial statements on a recurringbasis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair valuemeasurement as a whole) at the end of each financial reporting period.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilitieson the basis of the nature, characteristics and risks of the asset or liability and the level of the fairvalue hierarchy as explained above.

‘Day 1’ differenceWhere the transaction price in a non-active market is different to the fair value from otherobservable current market transactions in the same instrument or based on a valuation techniquewhose variables include only data from observable market, the Group recognizes the differencebetween the transaction price and fair value (a ‘Day 1’ difference) in the consolidated statementsof income unless it qualifies for recognition as some other type of asset or liability. In cases whereuse is made of data which is not observable, the difference between the transaction price andmodel value is only recognized in the consolidated statements of income when the inputs becomeobservable or when the instrument is derecognized. For each transaction, the Group determinesthe appropriate method of recognizing the ‘Day 1’ difference amount.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments thatare not quoted in an active market. Such assets are carried at amortized cost using the EIR methodless any allowance for impairment. Amortized cost is calculated taking into account any discountor premium on acquisition and include fees that are an integral part of the EIR and transactioncosts. Long-term receivables are valued using the discounted cash flow methodology. Gains andlosses are recognized in the consolidated statements of income when the loans and receivables arederecognized or impaired, as well as through the amortization process. Loans and receivableswhich are expected to be realized within twelve months from the reporting date are classifiedunder current assets. Otherwise, these are classified as noncurrent assets.

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As of December 31, 2016 and 2015, the Group’s loans and receivables include trade receivables,consultancy fees, due from related parties, miscellaneous deposits, receivable from sale ofinvestment properties, receivable from EEI Retirement Fund, Inc., receivable from a customer andother receivables.

AFS financial assetsAFS financial assets are those non-derivative financial assets that are designated as AFS or are notclassified in any of the three other categories. After initial recognition, AFS financial assets aremeasured at fair value with gains or losses being recognized as a separate component of the equityuntil the investment is derecognized or until the investment is determined to be impaired at whichtime the cumulative gain or loss previously reported in the equity is included in the consolidatedstatements of income. AFS financial assets which are expected to be sold within twelve (12)months from the reporting date are classified under current assets. Otherwise, these are classifiedas noncurrent assets.

The fair value of investments that are actively traded in organized financial markets is determinedby reference to quoted market bid prices at the close of business on the reporting date. Forinvestments where there is no active market, except for investments in unquoted AFS financialassets, fair value is determined using valuation techniques. Such techniques include using recentarm’s length market transactions, reference to the current market value of another instrumentwhich is substantially the same, discounted cash flow analysis and option pricing models. In theabsence of a reliable basis of determining fair value, investments in unquoted AFS financial assetsare carried at cost less allowance for impairment losses, if any.

The Group’s AFS financial assets represent investments in quoted and unquoted equity shares.

Other financial liabilitiesOther financial liabilities are initially recognized at the fair value of the consideration received lessdirectly attributable transaction costs. Financial liabilities are classified under this category if theyare not held for trading or not designated as FVPL upon the inception of the liability.

After initial recognition, other financial liabilities are subsequently measured at amortized costusing the effective interest method. Amortized cost is calculated by taking into account any issuecosts, and any discount or premium on settlement.

Gains and losses are recognized in the consolidated statement of income when the liabilities arederecognized as well as through the amortization process.

As of December 31, 2016 and 2015, the Group’s other financial liabilities include accountspayable and other current liabilities, bank loans, long-term debt and due to related parties.

Impairment of financial assetsThe Group assesses at each reporting date whether there is objective evidence that a financial assetor a group of financial assets is impaired. A financial asset or a group of financial assets isdeemed to be impaired if, and only if, there is objective evidence of impairment as a result of oneor more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’)and that loss event (or events) has an impact on the estimated future cash flows of the financialasset or the group of financial assets that can be reliably estimated. Evidence of impairment mayinclude indications that a borrower or a group of borrowers are experiencing significant financialdifficulty, default or delinquency in interest or principal payments, the probability that they willenter bankruptcy or other financial reorganization and where observable data indicate that there ismeasurable decrease in the estimated future cash flows, such as changes in arrears or economicconditions that correlate with defaults.

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Assets carried at amortized costIf there is objective evidence that an impairment loss on loans and receivables carried at amortizedcost has been incurred, the amount of the loss is measured as the difference between the asset’scarrying amount and the present value of estimated future cash flows (excluding future creditlosses that have not been incurred) discounted at the financial asset’s original EIR (that is, the EIRcomputed at initial recognition). The carrying amount of the asset shall be reduced either directlyor through the use of an allowance account. The amount of the loss shall be recognized in theconsolidated statement of income. Loans and receivables, together with the associated allowanceaccounts, are written off when there is no realistic prospect of future recovery and all collateral hasbeen realized.

If, in a subsequent period, the amount of the impairment loss decreases because of an eventoccurring after the impairment was recognized, the previously recognized impairment loss isreversed. Any subsequent reversal of an impairment loss is recognized in the consolidatedstatement of income, to the extent that the carrying value of the asset does not exceed itsamortized cost at the reversal date.

AFS financial assetsFor AFS financial assets, the Group assesses at each reporting date whether there is objectiveevidence that a financial asset or group of financial assets is impaired.

In the case of equity investments classified as AFS financial assets, this would include asignificant or prolonged decline in the fair value of the investments below its cost. Where there isevidence of impairment, the cumulative loss measured as the difference between the acquisitioncost and the current fair value, less any impairment loss on that financial asset previouslyrecognized in the consolidated statement of comprehensive income is removed from equity andrecognized in the consolidated statement of income. Impairment losses on equity investments arenot reversed through the consolidated statement of income. Increases in fair value afterimpairment are recognized directly in the consolidated statement of comprehensive income.

Derecognition of Financial Assets and LiabilitiesFinancial assetsA financial asset (or, where applicable a part of a financial asset or part of a group of similarfinancial assets) is derecognized when: (a) the rights to receive cash flows from the asset haveexpired; or (b) the Group has transferred its rights to receive cash flows from the asset or hasassumed an obligation to pay them in full without material delay to a third party under a“pass-through” arrangement; and either (i) has transferred substantially all the risks and rewards ofthe asset, or (ii) has neither transferred nor retained substantially all the risks and rewards of theasset, but has transferred control of the asset.

Where the Group has transferred its rights to receive cash flows from an asset and has neithertransferred nor retained substantially all the risks and rewards of the asset nor transferred controlof the asset, the asset is recognized to the extent of the Group’s continuing involvement in theasset. Continuing involvement that takes the form of a guarantee over the transferred asset ismeasured at the lower of the original carrying amount of the asset and the maximum amount ofconsideration that the Group could be required to repay.

Financial LiabilitiesA financial liability is derecognized when the obligation under the liability is discharged orcancelled or has expired. Where an existing financial liability is replaced by another from thesame lender on substantially different terms, or the terms of an existing liability are substantiallymodified, such an exchange or modification is treated as a derecognition of the original liability

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and the recognition of a new liability, and the difference in the respective carrying amounts isrecognized in the consolidated statement of income.

Offsetting of Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount is reported in theconsolidated statements of financial position if there is a currently enforceable legal right to set offthe recognized amounts and there is intention to settle on a net basis, or to realize the asset andsettle the liability simultaneously. The Group assesses that it has a currently enforceable right ofoffset if the right is not contingent on a future event, and is legally enforceable in the normalcourse of business, event of default, and event of insolvency or bankruptcy of the Group and all ofthe counterparties.

InventoriesInventories are stated at the lower of cost and net realizable value (NRV). Cost includes purchaseprice and other costs directly attributable to its acquisition such as non-refundable taxes, handlingand transportation cost. The cost of real estate inventories includes (a) land cost; (b) freehold andleasehold rights for land; (c) amounts paid to contractors for construction; (d) borrowing costs,planning and design cost, cost of site preparation, professional fees, property taxes, constructionoverheads and other related costs that are directly attributable in bringing the real estateinventories to its intended condition.

Cost of inventories is generally determined using the moving-average method, except for landinventory of EEI Realty and cost of equipment inventories of Equipment Engineers, which isaccounted for using the specific identification method.

NRV is the current replacement cost.

Nonrefundable commissions paid to sales or marketing agents on the sale of real estate units areexpensed when paid.

Value-Added Tax (VAT)Input VAT is recognized when the Group purchases goods or services from a VAT registeredsupplier or vendor. This account is offset against any output VAT previously recognized.

Output VAT pertains to the 12% tax due on the Group’s sales of goods and services.

The outstanding balance of output VAT is included under accounts payable and other currentliabilities while the input VAT is included under other current assets.

Prepaid ExpensesThese are recorded as asset before they are utilized and apportioned over the period covered by thepayment and charged to the appropriate account in the consolidated statement of income whenincurred.

Other Current AssetsOther current assets pertain to other resources controlled by the Group as a result of past eventsand from which future economic benefits are expected to flow to the Group within the financialreporting period.

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Investments in Associates and Joint VenturesThe Group has 49% investment in Al-Rushaid Construction Company Limited (ARCC) which isincorporated and based in the Kingdom of Saudi Arabia and is currently accounted for as anassociate.

In 2013, the Group acquired 20% stake in Petro Wind Energy, Inc. (PWEI) and was accounted foras an associate. In 2014, investment in PWEI is accounted as joint venture due to change in equityownership in PWEI after the Shareholders Agreement became in effect (Note 11).

In 2015, the Group acquired 44% stake in PetroSolar Corporation (PSoC) and was accounted foras an associate.

An associate is an entity in which the Group has significant influence and which is neither asubsidiary nor a joint venture. A joint venture is a contractual arrangement whereby two or moreparties undertake an economic activity that is subject to joint control, and a jointly controlledentity is a joint venture that involves the establishment of a separate entity in which each venturerhas an interest.

Investments in associate and joint venture which are jointly controlled entities are accounted forunder the equity method of accounting. Under this method, the cost of investment is increased ordecreased by the equity in the associate and joint venture’s net earnings or losses since the date ofacquisition and reduced by dividends received. Unrealized intercompany profits are eliminated upto the extent of the proportionate share thereof.

The reporting dates and the accounting policies of the associate and joint venture conform to thoseused by the Group for like transactions and events in similar circumstances.

Property and EquipmentProperty and equipment, except for land, are stated at cost, less accumulated depreciation andamortization and impairment loss, if any. Land is carried at cost less any impairment in value.The initial cost of property, plant and equipment consists of its purchase price, including importduties, taxes and any directly attributable costs of bringing the asset to its working condition andlocation for its intended use. Expenditures incurred after the assets have been put into operation,such as repairs and maintenance, are normally charged to operation in the year in which the costsare incurred. In situations where it can be clearly demonstrated that the expenditures have resultedin an increase in the future economic benefits expected to be obtained from the use of an item ofproperty and equipment beyond its originally assessed standard of performance, the expendituresare capitalized as an additional cost of property and equipment.

The estimated useful lives and depreciation and amortization method are reviewed periodically toensure that the periods and method of depreciation and amortization are consistent with theexpected pattern of economic benefits from items of property and equipment.

Depreciation or amortization of an item of property equipment begins when it becomes availablefor use, i.e., when it is in the location and condition necessary for it to be capable of operating inthe manner intended by management. Depreciation or amortization ceases at the earlier of thedate that the item is classified as held for sale (or included in a disposal group that is classified asheld for sale) in accordance with PFRS 5, Noncurrent Assets Held for Sale and DiscontinuedOperations, and the date the item is derecognized.

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Depreciation is computed using the straight-line method over the following estimated useful lives:

Number of yearsMachinery, tools and construction equipment 1 - 20Buildings and improvements 10 - 20Transportation and service equipment 5Furniture, fixtures and office equipment 3 - 5

Amortization of improvements is computed over the estimated useful life of the improvement orterm of the lease, whichever is shorter.

Construction in progress represents property and equipment under construction and is stated atcost. This includes cost of construction and equipment and other direct costs. Construction inprogress are reclassified to the appropriate class of property and equipment when construction ofthe asset is completed.

Property and equipment are written off when either these are disposed of or when these arepermanently withdrawn from use and there is no more future economic benefits expected fromtheir use or disposal. Any gain or loss arising on derecognition of the asset (calculated as thedifference between the net disposal proceeds and the carrying amount of the asset) is included inthe consolidated statement of income in the year the asset is derecognized.

When assets are retired or otherwise disposed of, the cost and their related accumulateddepreciation and amortization and any impairment in value are removed from the accounts andany resulting gain or loss is credited to or charged against current operations.

Investment PropertiesInvestment properties, except for land, are stated at cost less accumulated depreciation andimpairment loss, if any, including transaction costs. The carrying amount includes the cost ofreplacing part of an existing investment property at the time that cost is incurred if the recognitioncriteria are met. Land is carried at cost less any impairment in value.

Investment properties are derecognized when either they have been disposed of or when theinvestment property is permanently withdrawn from use and no future economic benefit isexpected from its disposal.

Transfers are made to or from investment property only when there is a change in use. For atransfer from investment property to owner-occupied property or inventory, the deemed cost forsubsequent accounting is the carrying value of the investment property transferred at the date ofchange in use. If owner-occupied property or inventory becomes an investment property, theGroup accounts for such property in accordance with the policy stated under property andequipment or inventory, respectively, up to the date of change in use.

Depreciation is computed using the straight-line method over the estimated useful life of fifteen(15) to twenty (20) years.

Software CostsSoftware costs are stated at cost less accumulated amortization and any impairment in value.Costs related to software purchased by the Group for use in the operations are amortized on astraight-line basis over a period of three (3) years.

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Costs associated with developing and maintaining computer software programs are recognized asan expense when incurred. Costs that are directly associated with identifiable and unique softwarecontrolled by the Group and will generate economic benefits exceeding costs beyond one year, arerecognized as intangible assets to be measured at cost less accumulated amortization and provisionfor impairment losses, if any.

Impairment of Nonfinancial AssetsFor property, plant and equipment, software costs, investments in associate and joint venture andinvestment properties, the Group assesses at each reporting date whether there is an indication thatan asset may be impaired. If any such indication exists, or when annual impairment testing for anasset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’srecoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to selland its value in use, and is determined for an individual asset, unless the asset does not generatecash inflows that are largely independent of those from other assets or groups of assets. Where thecarrying amount of an asset exceeds its recoverable amount, the asset is considered impaired andis written down to its recoverable amount. In assessing value in use, the estimated future cashflows are discounted to their present value using pre-tax discount rate that reflects current marketassessments of the time value of money and the risks specific to the asset. In determining fairvalue less cost to sell, recent market transactions are taken into account, if available. If no suchtransaction can be identified, an appropriate valuation model is used. These calculations arecorroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or otheravailable fair value indicators.

An assessment is made at each reporting date as to whether there is any indication that previouslyrecognized impairment losses may no longer exist or may have decreased. If such indicationexists, the recoverable amount is estimated. A previously recognized impairment loss is reversedonly if there has been a change in the estimates used to determine the asset’s recoverable amountsince the last impairment loss was recognized. If that is the case, the carrying amount of the assetis increased to its recoverable amount. That increased amount cannot exceed the carrying amountthat would have been determined, net of depreciation and amortization, had no impairment lossbeen recognized for the asset in prior years. Such reversal is recognized in the consolidatedstatement of income unless the asset is carried at revalued amount, in which case the reversal istreated as a revaluation increase.

After such reversal, the depreciation and amortization charge is adjusted in future periods toallocate the asset’s revised carrying amount, less any residual value, on a systematic basis over itsremaining useful life.

Borrowing CostsInterest and other related financing charges on borrowed funds used to finance propertydevelopment are capitalized as part of development costs (included under “Inventories” account)and the acquisition and construction of a qualifying asset (included under “Construction inprogress” account in property and equipment) are capitalized to the appropriate asset accounts.Capitalization of borrowing costs commences when the expenditures and borrowing costs arebeing incurred during the construction and related activities necessary to prepare the asset for itsintended use are in progress. It is suspended during extended periods in which active developmentis interrupted and ceases when substantially all the activities necessary to prepare the asset for itsintended use are complete. The capitalization for inventories account is based on the weightedaverage borrowing cost and specific borrowing for property and equipment.

The borrowing costs capitalized as part of property and equipment are amortized using thestraight-line method over the estimated useful lives of the assets. If after capitalization of the

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borrowing costs, the carrying amount of the asset exceeds its recoverable amount, an impairmentloss is recorded in the consolidated statement of income.

All other borrowing costs are expensed in the period in which they occur.

Foreign Currency-denominated Transactions and TranslationThe consolidated financial statements are presented in Philippine Peso (P=), which is the ParentCompany’s functional and presentation currency. Each entity in the Group determines its ownfunctional currency and items included in the financial statements of each entity are measuredusing that functional currency.

Transactions denominated in foreign currencies are recorded using the applicable exchange rate atthe date of the transaction. Outstanding monetary assets and monetary liabilities denominated inforeign currencies are retranslated using the applicable rate of exchange at the end of reportingperiod. Foreign exchange gains or losses are recognized in the Group’s statements of income.Nonmonetary items that are measured in terms of historical cost in foreign currency are translatedusing the exchange rates as at the dates of initial transactions. Non-monetary items measured atfair value in a foreign currency are translated using the exchange rates at the date when the fairvalue was determined.

The functional currencies of EEI Limited and Subsidiaries, the Group’s subsidiaries, are UnitedStates Dollar, Singaporean Dollar and Saudi Arabia Riyal. As at reporting date, the assets andliabilities of foreign subsidiaries are translated into the presentation currency of the Group (thePhilippine Peso) at the closing rate as at the reporting date, and the consolidated statements ofincome accounts are translated at monthly weighted average exchange rate. The exchangedifferences arising on the translation of foreign subsidiaries are taken directly to a separatecomponent of equity under cumulative translation adjustments account while the exchangedifferences arising from translation of financial statements of its associate is included as part ofinvestments in associate under the caption equity in cumulative translation adjustments account.

Upon disposal of a foreign subsidiary, the deferred cumulative amount recognized in othercomprehensive income relating to that particular foreign operation is recognized in theconsolidated statements of income.

Retirement BenefitsThe net defined benefit liability or asset is the aggregate of the present value of the defined benefitobligation at the end of the financial reporting period reduced by the fair value of plan assets (ifany), adjusted for any effect of limiting a net pension asset to the asset ceiling. The asset ceiling isthe present value of any economic benefits available in the form of refunds from the plan orreductions in future contributions to the plan.

The cost of providing benefits under the pension plans is actuarially determined using theprojected unit credit method.

Pension expenses comprise the following:

a) Service costb) Net interest on the net defined benefit liability or assetc) Remeasurements of net defined benefit liability or asset

Service costs which include current service costs, past service costs and gains or losses on non-routine settlements are recognized as expense in profit or loss.

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Past service costs are recognized in profit or loss on the earlier of:

∂ The date of the plan amendment or curtailment, and∂ The date that the Group recognizes related restructuring costs

These amounts are calculated periodically by independent qualified actuaries.

Net interest on the net defined benefit liability or asset is the change during the period in the netpension liability or asset that arises from the passage of time which is determined by applying thediscount rate based on government bonds to the net defined benefit liability or asset. Net intereston the net defined benefit liability or asset is recognized as expense or income in profit or loss.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change inthe effect of the asset ceiling (excluding net interest on defined benefit liability) are recognizedimmediately in other comprehensive income in the period in which they arise. Remeasurementsare not reclassified to profit or loss in subsequent periods.

Fair value of plan assets is based on market price information. When no market price is available,the fair value of plan assets is estimated by discounting expected future cash flows using adiscount rate that reflects both the risk associated with the plan assets and the maturity or expecteddisposal date of those assets (or, if they have no maturity, the expected period until the settlementof the related obligations). If the fair value of the plan assets is higher than the present value ofthe defined benefit obligation, the measurement of the resulting defined benefit asset is limited tothe present value of economic benefits available in the form of refunds from the plan or reductionsin future contributions to the plan.

Plan assets are not available to the creditors of the Group, nor can they be paid directly to theGroup.

The Group’s right to be reimbursed of some or all of the expenditure required to settle a definedbenefit obligation is recognized as a separate asset at fair value when and only whenreimbursement is virtually certain.

Income TaxCurrent taxCurrent tax assets and liabilities are measured at the amount expected to be recovered from or paidto the taxation authorities. The tax rates and tax laws used to compute the amount are those thatare enacted or substantively enacted, at the reporting date in the countries where the Groupoperates and generates taxable income.

Current tax relating to items recognized directly in equity is recognized in equity and not in theconsolidated statements of income.

Deferred taxDeferred tax is provided using the liability method on temporary differences between the tax basesof assets and liabilities and their carrying amounts for financial reporting purposes at the financialreporting date.

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Deferred tax liabilities are recognized for all taxable temporary differences, except:

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

∂ In respect of taxable temporary differences associated with investments in subsidiaries,associates and interests in joint arrangements, when the timing of the reversal of thetemporary differences can be controlled and it is probable that the temporary differenceswill not reverse in the foreseeable future

Deferred tax assets are recognized for all deductible temporary differences, carryforward ofunused tax credits from excess minimum corporate income tax (MCIT) over regular corporateincome tax (RCIT) and net operating loss carryover (NOLCO), to the extent that it is probable thattaxable profit will be available against which the deductible temporary differences andcarryforward of unused MCIT and NOLCO can be utilized.

Deferred tax assets are recognized for all deductible temporary differences, the carry forward ofunused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent thatit is probable that taxable profit will be available against which the deductible temporarydifferences, and the carry forward of unused tax credits and unused tax losses can be utilized,except:

∂ When the deferred tax asset relating to the deductible temporary difference arises from theinitial recognition of an asset or liability in a transaction that is not a business combinationand, at the time of the transaction, affects neither the accounting profit nor taxable profitor loss

∂ In respect of deductible temporary differences associated with investments in associatesand interests in joint ventures, deferred tax assets are recognized only to the extent that itis probable that the temporary differences will reverse in the foreseeable future andtaxable profit will be available against which the temporary differences can be utilized

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to theextent that it is no longer probable that sufficient taxable profit will be available to allow all orpart of the deferred tax asset to be used. Unrecognized deferred tax assets are re-assessed at eachfinancial reporting date and are recognized to the extent that it has become probable that futuretaxable profit will allow the deferred tax assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to theyear when the asset is realized or the liability is settled, based on tax rates (and tax laws) that havebeen enacted or substantially enacted at the financial reporting date.

Deferred income tax relating to items recognized outside profit or loss is recognized in correlationto the underlying transactions either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists tooffset current tax assets against current tax liabilities and the deferred taxes relate to the sameentity and the same taxation authority.

Operating LeasesOperating leases represent those leases under which substantially all risks and rewards ofownership of the leased assets remain with the lessors. Lease receipts (payments) under operating

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lease agreements are recognized as income (expense) on a straight-line basis over the term of thelease.

ProvisionsProvisions are recognized when the Group has a present obligation (legal or constructive) as aresult of a past event, it is probable that an outflow of resources embodying economic benefits willbe required to settle the obligation and a reliable estimate can be made of the amount of theobligation. If the effect of the time value of money is material, provisions are determined bydiscounting the expected future cash flows at a pre-tax rate that reflects current market assessmentof the time value of money and, where appropriate, the risks specific to the liability. Wherediscounting is used, the increase in the provision due to the passage of time is recognized asinterest expense.

Where the Group expects a provision to be reimbursed, the reimbursement is recognized as aseparate asset but only when the receipt of the reimbursement is virtually certain. The expenserelating to any provision is recognized in profit or loss, net of any reimbursement.

ContingenciesContingent liabilities are not recognized in the consolidated financial statements. These aredisclosed unless the possibility of an outflow of resources embodying economic benefits isremote. Contingent assets are not recognized in the consolidated financial statements but aredisclosed when an inflow of economic benefits is probable.

Stock Option PlanNo benefit expense is recognized relative to the shares issued under the stock options plan. Whenthe shares related to the stock options plan are subscribed, these are treated as capital stockissuances. The stock option plan is exempt from PFRS 2, Share-based Payment.

Basic and Diluted Earnings per ShareBasic earnings per share is computed by dividing net income applicable to common shares by theweighted average number of common shares issued and outstanding during the year, afterretroactive adjustments for any subsequent stock dividends. Diluted earnings per share, ifapplicable, is computed by dividing net income applicable to common shares by the weightedaverage number of common shares issued and outstanding during the year after giving effect toassumed exercise of stock options and retroactive effect of stock dividends declared.

Segment ReportingThe Group’s operating businesses are organized and managed separately according to the natureof services provided, with each segment representing a strategic business unit that offers differentproducts and serves different markets. Financial information on business segments is presented inNote 30 to the consolidated financial statements.

Capital StockThe Group records common stocks at par value and additional paid-in capital in excess of the totalcontributions received over the aggregate par values of the equity shares. Incremental costsincurred directly attributable to the issuance of new shares are shown in equity as a deductionfrom proceeds, net of tax. When the Group purchases its own shares of capital stock (treasuryshares), the consideration paid, including any attributable incremental costs, is deducted fromequity until the shares are cancelled or reissued of. Where such shares are subsequently sold orreissued, any consideration received, net of any directly attributable incremental transaction costsand the related tax effects is included in equity.

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Retained EarningsRetained earnings represent the cumulative balance of periodic net income or loss, prior periodadjustments, effect of changes in accounting policy and other capital adjustments. The individualaccumulated retained earnings of the subsidiaries are available for dividends when they aredeclared by the subsidiaries as approved by their respective BOD. Retained earnings are furtherrestricted for the payment of dividends to the extent of the cost of treasury shares (Note 32).

Events after the Financial Reporting DateAny post year-end events up to the date of auditor’s report that provide additional informationabout the Group’s position at the reporting date (adjusting events) are reflected in the consolidatedfinancial statements. Post year-end events that are not adjusting events are disclosed whenmaterial, in notes the consolidated financial statements.

5. Significant Accounting Judgments and Estimates

The preparation of the Group’s consolidated financial statements requires management to makejudgments, estimates and assumptions that affect the reported amounts of revenues, expenses,assets and liabilities, and the accompanying disclosures. Uncertainty about these assumptions andestimates could result in outcomes that require a material adjustment to the carrying amount ofassets or liabilities affected in future periods. The effects of any changes in estimates will bereflected in the consolidated financial statements as they become reasonably determinable.Judgments and estimates are continually evaluated and are based on historical experience andother factors, including expectations of future events that are believed to be reasonable under thecircumstances.

The following presents a summary of these significant accounting judgments and estimates:

JudgmentsContingenciesThe Group is involved in various claims in the ordinary course of business. The estimate of theprobable costs for the resolution of these claims has been developed in consultation with outsidecounsel is based upon an analysis of potential results. The Group’s management believes that theoutcome of these claims will not have a material adverse effect on the Group’s financial positionor operating results. It is possible, however, that future results of operations could be materiallyaffected by changes in estimates or in the effectiveness of the strategies relating to these claims.

Estimates and AssumptionsThe key assumptions concerning the future and other key sources of estimation uncertainty at thereporting date, that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year, are described below. The Groupbased its assumptions and estimates on parameters available when the financial statements wereprepared. Existing circumstances and assumptions about future developments, however, maychange due to market changes or circumstances arising that are beyond the control of theGroup. Such changes are reflected in the assumptions when they occur.

Recognition of revenue and cost from construction contractsRevenues and costs from construction projects are determined using the percentage of completionbased on the physical progress of the construction projects. Apart from involving significantestimates, this process is complex and requires the technical expertise of the Group’s engineers,particularly with respect to the calculation of estimated costs to completion.

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As of December 31, 2016 and 2015, the costs and estimated earnings in excess of billings onuncompleted contracts amounted to P=4,192.3 million and P=5,946.5 million, respectively. Billingsin excess of costs and estimated earnings on uncompleted contracts amounted to P=4,652.9 millionand P=4,983.3 million as of December 31, 2016 and 2015, respectively (see Note 8).

Estimation of allowance for doubtful accountsThe Group maintains allowances for doubtful accounts at a level considered adequate to providefor potential uncollectible receivables. The level of this allowance is evaluated by management onthe basis of factors that affect the collectibility of the accounts. These factors include, but are notlimited to, the length of the Group’s relationship with the customer, the customer’s paymentbehavior and other known market factors. The Group reviews the age and status of receivablesand identifies accounts that are to be provided with allowances on a continuous basis or those withexisting allowances needing reversals.

The carrying value of loans and receivables are disclosed in Notes 7, 10, 15 and 27 to theconsolidated financial statements.

Estimation of retirement obligationsThe determination of the obligation and retirement cost are dependent on the selection of certainassumptions used by actuaries in calculating such amounts. Those assumptions include, amongothers, discount rates and salary increase rates. While the Group believes that the assumptions arereasonable and appropriate, significant differences in the actual experience or significant changesin the assumptions may materially affect the retirement obligations.

Retirement assets amounted to P=9.9 million and P=7.3 million as of December 31, 2016 and 2015,respectively whereas retirement liabilities amounted to P=72.0 million and P=131.1 million as ofDecember 31, 2016 and 2015, respectively (see Note 28).

Realizability of deferred tax assetsThe Group reviews the carrying amounts of deferred taxes of each entity in the Group at eachreporting date and reduces deferred tax assets to the extent that it is no longer probable thatsufficient taxable profit will be available to allow all or part of the deferred tax assets to beutilized.

Deferred tax assets recognized by the Group are disclosed in Note 26 to the consolidated financialstatements.

6. Cash and Cash Equivalents

This account consists of:

2016 2015Cash on hand P=1,902,330 P=4,175,736Cash in banks 1,025,999,408 1,264,988,117Cash equivalents 1,116,489 1,078,227

P=1,029,018,227 P=1,270,242,080

Cash in banks earns interest at the respective bank deposit rates. Cash equivalents are made forvarying periods of up to three (3) months depending on the immediate cash requirements of theGroup and earn annual interest at the respective short-term investment rates.

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Interest income from cash in banks and short-term investments amounted to P=11.2 million,P=2.5 million and P=2.2 million in 2016, 2015 and 2014, respectively (see Note 24).

7. Receivables


2016 2015Trade receivables (including retention receivables

amounting to P=3.3 billion and P=2.5 billion in2016 and 2015, respectively) P=5,815,625,807 P=5,301,390,692

Advances to suppliers and subcontractors 568,640,550 738,100,885Consultancy fees 305,946,232 289,688,635Receivable from sale of investment properties 30,113,684 25,911,485Advances to officers and employees 14,795,278 20,191,022Other receivables 60,540,763 64,544,500

6,795,662,314 6,439,827,219Less allowance for doubtful accounts 68,121,978 99,878,878

P=6,727,540,336 P=6,339,948,341

Trade receivables mainly pertain to amounts arising from domestic and foreign constructioncontracts. These receivables are based on the monthly progress billings provided to customersover the period of the construction. These trade receivables are generally on a 30-day credit term.

Movements in the allowance for doubtful accounts for the years ended December 31 follow:

2016

Trade receivables

Advances to suppliers and

subcontractors

Advances toofficers and

employeesOther

receivables TotalBalances at beginning of year P=67,921,840 P=23,996,873 P=697,313 P=7,262,852 P=99,878,878Provisions (Note 23) 1,547,078 − − 1,104,313 2,651,391Recoveries (Note 23) (500,000) (274,984) − − (774,984)Write-offs (33,621,290) − (12,017) − (33,633,307)Balances at end of year P=35,347,628 P=23,721,889 P=685,296 P=8,367,165 P=68,121,978

2015

Trade receivables

Advances to suppliers and

subcontractors

Advances toofficers andemployees

Other receivables Total

Balances at beginning of year P=76,230,170 P=32,085,736 P=1,165,805 P=7,262,852 P=116,744,563Provisions (Note 23) 1,778,410 − − − 1,778,410Recoveries (Note 23) − (8,088,863) − − (8,088,863)Write-offs (10,086,740) − (468,492) − (10,555,232)Balances at end of year P=67,921,840 P=23,996,873 P=697,313 P=7,262,852 P=99,878,878

Allowance for doubtful accounts is determined based on specific assessment by the Group.

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8. Costs, Estimated Earnings and Billings on Uncompleted Contracts

The details of the costs, estimated earnings and billings on uncompleted contracts follow:

2016 2015Total costs incurred P=57,629,587,385 P=56,199,099,834Add estimated earnings 6,255,395,155 5,567,001,273

63,884,982,540 61,766,101,107Less total billings 64,345,635,257 60,802,915,711

(P=460,652,717) P=963,185,396

The foregoing balances are reflected in the consolidated statements of financial position under thefollowing accounts:

2016 2015Costs and estimated earnings in excess of

billings on uncompleted contracts P=4,192,250,584 P=5,946,503,761Billings in excess of costs and estimated

earnings on uncompleted contracts (4,652,903,301) (4,983,318,365)(P=460,652,717) P=963,185,396

9. Inventories


2016 2015At cost:

Land and land development P=219,021,006 P=219,256,480Subdivision lots and condominium units for sale 98,455,666 85,875,299Raw lands 45,229,389 44,916,103

362,706,061 350,047,882

At cost and at NRV:Construction materials P=81,538,956 P=28,405,761Merchandise 79,520,741 35,968,716Spare parts and supplies 34,971,461 33,895,779

196,031,158 98,270,256P=558,737,219 P=448,318,138

A summary of the movement in real estate inventories is set out below:

2016 2015Balance at beginning of year P=350,047,882 P=348,572,719Repossessed inventories 3,324,291 6,454,348Construction/development costs incurred 23,269,593 626,508Cost of real estate sales (13,935,705) (5,605,693)Balances at end of year P=362,706,061 P=350,047,882

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The total cost of inventories recognized in the consolidated statements of income amounted toP=121.9 million, P=120.3 million and P=123.4 million in 2016, 2015 and 2014, respectively(see Note 22).

10. Other Current Assets


2016 2015Receivable from a customer P=380,296,805 P=−Current portion of receivable from EEI-RFI - net

(Notes 15, 24 and 27) 45,266,388 117,361,532Creditable withholding taxes 177,887,747 11,850,949Input value-added taxes (VAT) 285,948,254 452,809,544Prepaid expenses 36,575,440 84,309,900Miscellaneous deposits 49,071,313 50,102,484Others 9,945,132 8,150,360

984,991,079 724,584,769Less allowance for impairment 3,762,427 3,762,427

P=981,228,652 P=720,822,342

Receivable from customer represents advances to project owner that bear interest at 7.25% perannum which will be collected in 2017.

Miscellaneous deposits mainly represent the Group’s refundable rental, utilities and guaranteedeposits on various machinery and equipment items.

11. Investments in Associates and Joint Ventures

The investments relate to the following investee companies:

Percentage of ownershipNature of business 2016 2015

Joint ventures ECW Joint Venture, Inc. (ECW) Construction − 50 PetroWind Energy, Inc. (PWEI) Renewable energy 20 20Associates

Al-Rushaid Construction Company Limited (ARCC) Construction 49 49 PetroSolar Corporation (PSOC) Renewable energy 44 44

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Details of the Group’s investments in associates and joint ventures follow:

2016ARCC ECW PWEI PSOC Total

Acquisition cost: Balance, January 1 P=18,142,815 P=10,080,000 P=257,020,000 P=366,430,990 P=651,673,805 Reclassification 518,826,000 – – – 518,826,000 Additions 294,869,355 – – – 294,869,355 Write-off – (10,080,000) – – (10,080,000) Balance, December 31 831,838,170 – 257,020,000 366,430,990 1,455,289,160

Accumulated equity in net earnings (losses): Balance, January 1 1,034,654,653 − (12,840,943) (8,066,880) 1,013,746,830 Equity in net earnings (losses) (1,416,119,668) − 26,626,435 73,363,105 (1,316,130,128) Balance, December 31 (381,465,015) − 13,785,492 65,296,225 (302,383,298)Subtotal 450,373,155 – 270,805,492 431,727,215 1,152,905,862Equity in cumulative translation adjustments 117,030,109 − – − 117,030,109

P=567,403,264 P=− P=270,805,492 P=431,727,215 P=1,269,935,971

2015ARCC ECW PWEI PSOC Total

Acquisition cost:Balance, January 1 P=18,142,815 P=10,080,000 P=241,000,000 P=− P=269,222,815Additions – – 16,020,000 366,430,990 382,450,990Balance, December 31 18,142,815 10,080,000 257,020,000 366,430,990 651,673,805

Accumulated equity in net earnings(losses):Balance, January 1 1,708,390,828 − (18,334,436) − 1,690,056,392Equity in net earnings (losses) (673,736,175) − 5,493,493 (8,066,880) (676,309,562)Balance, December 31 1,034,654,653 – (12,840,943) (8,066,880) 1,013,746,830

Subtotal 1,052,797,468 10,080,000 244,179,057 358,364,110 1,665,420,635Equity in cumulative translation

adjustments 91,773,928 − − − 91,773,928Advances 518,826,000 − − − 518,826,000

1,663,397,396 10,080,000 244,179,057 358,364,110 2,276,020,563Less allowance for impairment loss − 10,080,000 − − 10,080,000

P=1,663,397,396 P=− P=244,179,057 P=358,364,110 P=2,265,940,563

ARCCEEI Limited extended advances to ARCC amounting to P=518.8 million in 2015. These advanceswere converted into additional investment in ARCC in 2016 and were presented as part ofadditions to the investment in ARCC. EEI Limited made additional investment of P=294.9 millionto ARCC in 2016.

ECWECW is a joint venture between the Parent Company and Walter Construction Group Limited(WCG) and act as a general contractor for the RCBC Plaza project. The Parent Company wroteoff this joint venture in 2016, which was provided with full allowance in previous years.

PWEIIn 2013, EPC acquired 20% stake in PWEI for P=118.75 million. PWEI was incorporated onMarch 6, 2013, primarily to carry on the general business of generating, transmitting and/ordistributing power derived from renewable energy sources such as, but not limited to wind,biomass, hydro, solar, geothermal, ocean, wave and such other renewable sources of power, andfrom conventional sources such as coal, fossil fuel, natural gas, nuclear, and other viable or hybridsources of power corporation, public electric utilities, electric cooperative and markets. PWEI hasa wind energy project in Nabas, Aklan and has started construction activities on April 29, 2013.

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On November 21, 2013, PetroGreen Energy Corporation (PGEC), CapAsia ASEAN WindHoldings Cooperatief U.A. and EEI Power entered into a Shareholders’ Agreement (SA). The SAwill govern their relationship as the shareholders of PWEI as well as containing their respectiverights and obligations in relation to PWEI. Further, the SA contains provisions regarding votingrequirements for relevant activities that require unanimous consent of all the parties. PGEC,CapAsia and EEI Power agree that their equity ownership ratio in PWEI is at 40%, 40% and 20%,respectively.

Although the Share Purchase Agreement (SPA) and the SA were executed on November 21, 2013,these did not result to PGEC’s loss of control over PWEI in 2013. The loss of control did nothappen until the Closing Date. On February 14, 2014, the Closing Date, the payment has beenreceived from sale of the shares as executed in the Deed of Assignment covering the transfer ofshares from PGEC to CapAsia and all the conditions precedent have been satisfactory completed.Hence, the transaction made PWEI a joint venture between PGEC, CapAsia and EEI Power byvirtue of the SA signed among the three parties governing the manner of managing PWEI. PGEClost control over PWEI while CapAsia was given full voting and economic rights as a 40%shareholder.

PSOCIn 2015, the Company purchased 3.7 million shares from PSOC amounting to P=366.4 millionwhich resulted to 44% ownership. PSOC was incorporated on June 17, 2015 primarily to carryout the general business of generating, transmitting, and/or distributing power derived fromrenewable energy resources. It has a 50 megawatt solar farm in Tarlac City.

Below are the summarized financial information relating to the Group’s significant associates:

December 31, 2016ARCC PWEI PSOC

Current assets P=4,966,534,096 P=1,042,850,142 P=455,156,856Noncurrent assets 2,448,152,336 4,046,771,484 2,959,109,374

Total assets P=7,414,686,432 P=5,089,621,626 P=3,414,266,230Current liabilities P=5,371,999,778 P=999,876,514 P=327,740,291Noncurrent liabilities 884,720,809 2,735,717,651 2,108,125,427

Total liabilities P=6,256,720,587 P=3,735,594,165 P=2,435,865,718

Revenue P=6,837,351,150 P=769,941,511 P=558,522,494Cost (9,703,030,518) (568,447,331) (199,119,971)Gross margin (2,865,679,368) 201,494,180 359,402,523Selling and administrative, and

other expenses (650,445,110) (68,362,003) (182,667,782)Pre-tax income (loss) (3,516,124,478) 133,132,177 176,734,741Proportionate ownership in the associate 49% 20% 44%

(1,722,900,994) 26,626,435 77,763,286Income tax 306,781,326 − (4,400,181)Equity in net earnings (losses) (P=1,416,119,668) P=26,626,435 P=73,363,105

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December 31, 2015ARCC PWEI PSOC

Current assets P=8,268,216,000 P=477,157,841 P=1,263,124,662Noncurrent assets 2,179,209,587 4,276,656,045 2,889,095,008

Total assets P=10,447,425,587 P=4,753,813,886 P=4,152,219,670Current liabilities P=6,094,745,824 P=957,432,597 P=1,526,668,501Noncurrent liabilities 2,016,819,771 2,760,586,005 2,313,884,989

Total liabilities P=8,111,565,595 P=3,718,018,602 P=3,840,553,490

Revenue P=12,352,910,118 P=312,912,033 P=5,589,830Cost (13,700,845,596) (159,935,743) −Gross margin (1,347,935,478) 152,976,290 5,589,830Selling and administrative, andother expenses (370,779,254) (125,508,825) (23,923,649)

Pre-tax income (loss) (1,718,714,732) 27,467,465 (18,333,819)Proportionate ownership in the

associate 49% 20% 44%(842,170,219) 5,493,493 (8,066,880)

Income tax 168,434,044 − −Equity in net earnings (losses) (P=673,736,175) P=5,493,493 (P=8,066,880)

The Group’s share in the net income of ARCC is subject to 20% Saudi Arabian income taxes.

The reconciliation of the net assets of the associates to the carrying amounts of the investmentsrecognized in the consolidated financial statements follows:

2016ARCC PWEI PSOC

Net assets of an associate P=1,157,965,845 P=1,354,027,461 P=978,400,512Proportionate ownership in the

associate 49% 20% 44%Share in net identifiable assets 567,403,264 270,805,492 430,496,225Transaction costs – – 1,230,990Carrying value of investment P=567,403,264 P=270,805,492 P=431,727,215

2015ARCC ECW PWEI PSOC

Net assets of an associate P= 2,335,859,992 P=23,584,514 P=1,035,795,284 P=311,666,180Proportionate ownership in the

associate 49% 50% 20% 44%Share in net identifiable assets 1,144,571,396 11,792,257 207,159,057 137,133,119Share in deposits for future

stocks subscription – – 37,020,000 220,000,000Transaction costs – – – 1,230,991Advances 518,826,000 (1,712,257) – –Carrying value of investment 1,663,397,396 10,080,000 244,179,057 358,364,110Less allowance for impairment

loss − 10,080,000 − −P=1,663,397,396 P=− P=244,179,057 P=358,364,110

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12. AFS Financial Assets


2016 2015Quoted shares - at fair value P=17,501,128 P=19,926,468Unquoted shares - at cost 350,529,756 350,529,756

P=368,030,884 P=370,456,224

The rollforward analyses of AFS financial assets for the years ended December 31 follows:

2016 2015At January 1 P=370,456,224 P=149,688,527Additions − 167,505,224Reclassification − 70,155,000Reduction − (14,000,000)Fair value (2,425,340) (2,892,527)At December 31 P=368,030,884 P=370,456,224

In 2015, the Group purchased 10% equity interest in PetroGreen Energy Corporation (PGEC) forP=237.3 million and acquired additional shares of YGC Corporate Services, Inc. for P=0.4 million.

In 2015, the Group wrote off its investment in Brightnote Asset Corporation and its relatedsubscription payable amounting to P=14.0 million because the investee issued a certificate ofdecrease in capital stock with the same amount.

Presented below are the movements in net unrealized gains on AFS financial assets for the yearsended December 31:

2016 2015 2014At January 1 P=6,479,392 P=9,371,919 P=7,814,263Fair value changes (2,425,340) (2,892,527) 1,557,656At December 31 P=4,054,052 P=6,479,392 P=9,371,919

The unquoted AFS financial assets consist of shares of the following companies:

2016 2015PetroGreen Energy Corporation P=237,279,889 P=237,279,889Hermosa Ecozone Development Corp 100,000,000 100,000,000Brightnote Assets Corporation 11,000,000 11,000,000YGC Corporate Services, Inc. 1,580,336 1,580,336Tower Club 500,000 500,000Royale North Woods 121,856 121,856Architectural Center Club, Inc. 32,000 32,000Philippine Contractors Association 10,000 10,000Philippine Exporters Trading Corp. 5,000 5,000Pilipino Telephone Company 675 675At December 31 P=350,529,756 P=350,529,756

Fair value for these unquoted financial assets cannot be determined reliably because these equityinstruments represent ordinary and preferred shares in private companies that are not quoted onany market and do not have any comparable industry peer that is listed.

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13. Property and Equipment

The rollforward analyses of this account follow:

2016

Land,Buildings and

Improvements

Machinery,Tools and

ConstructionEquipment

Transportationand ServiceEquipment

Furniture,Fixtures,

and OfficeEquipment

ConstructionIn Progress Total

CostAt beginning of year P=985,553,350 P=4,160,010,618 P=689,431,580 P=659,981,463 P=6,960,777 P=6,501,937,788Additions 4,199,234 399,721,070 269,045,780 58,803,523 3,201,625 734,971,232Retirements/disposals − (11,489,918) (8,186,871) (36,834,104) − (56,510,893)Reclassifications 1,096,801 11,621,423 (10,160,714) (1,460,709) (1,096,801) −Transfers − 20,631,262 − 57,957 − 20,689,219At end of year 990,849,385 4,580,494,455 940,129,775 680,548,130 9,065,601 7,201,087,346Accumulated depreciation and

amortizationAt beginning of year 119,753,362 1,321,087,324 219,394,622 484,564,977 − 2,144,800,285Depreciation and amortization 29,718,178 408,913,063 99,918,394 89,658,341 − 628,207,976Retirements/disposals − (10,327,117) (6,639,896) (36,503,378) − (53,470,391)Reclassifications − 2,325,888 (865,179) (1,460,709) − −At end of year 149,471,540 1,721,999,158 311,807,941 536,259,231 − 2,719,537,870Net book value P=841,377,845 P=2,858,495,297 P=628,321,834 P=144,288,899 P=9,065,601 P=4,481,549,476

2015

Land,Buildings andImprovements

Machinery,Tools and

ConstructionEquipment

Transportationand ServiceEquipment

Furniture,Fixtures,

and OfficeEquipment

ConstructionIn Progress Total

CostAt beginning of year P=976,025,556 P=3,372,866,686 P=397,588,477 P=606,146,955 P=36,864,277 P=5,389,491,951Additions − 728,466,343 305,439,472 98,091,836 4,777,850 1,136,775,501Retirements/disposals (2,285,827) (32,542,911) (13,596,369) (48,508,411) − (96,933,518)Reclassifications 9,774,454 − − 104,986 (9,879,440) −Transfers 2,039,167 91,220,500 − 4,146,097 (24,801,910) 72,603,854At end of year 985,553,350 4,160,010,618 689,431,580 659,981,463 6,960,777 6,501,937,788Accumulated depreciation and

amortizationAt beginning of year 88,295,583 1,043,539,423 166,040,635 430,475,541 − 1,728,351,182Depreciation and amortization 31,457,779 309,763,796 64,884,280 101,810,609 − 507,916,464Retirements/disposals − (32,215,895) (11,530,293) (47,721,173) − (91,467,361)At end of year 119,753,362 1,321,087,324 219,394,622 484,564,977 − 2,144,800,285Net book value P=865,799,988 P=2,838,923,294 P=470,036,958 P=175,416,486 P=6,960,777 P=4,357,137,503

Construction in progress pertains to cost of construction of improvements on buildings andleasehold not yet completed.

The distribution of the depreciation and amortization expense of the Group’s property andequipment follows:

2016 2015 2014Cost of construction contracts (Note 20) P=483,036,014 P=373,765,749 P=278,963,346Cost of services (Note 21) 51,639,582 43,663,201 42,760,005Selling and administrative expenses

(Note 23) 93,367,317 90,487,514 73,332,597Capitalized as part of cost of inventories 165,063 − −

P=628,207,976 P=507,916,464 P=395,055,948

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14. Investment Properties

The rollforward analyses of this account follow:

2016

Land

Residential Houses,Condominium Units

and Parking Slots TotalCostBalances at beginning of year P=199,061,054 P=55,752,311 P=254,813,365Disposals (7,430,969) (27,883,636) (35,314,605)Balances at end of year 191,630,085 27,868,675 219,498,760

Accumulated depreciationBalances at beginning of year − 23,584,981 23,584,981Depreciation (Note 23) − 1,336,639 1,336,639Disposals − (8,903,242) (8,903,242)Balance at end of year − 16,018,378 16,018,378Net book value P=191,630,085 P=11,850,297 P=203,480,382

2015

Land

Residential Houses,Condominium Units

and Parking Slots TotalCostBalances at beginning of year P=205,668,223 P=71,807,111 P=277,475,334Disposals (6,607,169) (16,054,800) (22,661,969)Balances at end of year 199,061,054 55,752,311 254,813,365

Accumulated depreciationBalances at beginning of year − 22,494,343 22,494,343Depreciation (Note 23) − 3,008,388 3,008,388Disposals − (1,917,750) (1,917,750)Balance at end of year − 23,584,981 23,584,981Net book value P=199,061,054 P=32,167,330 P=231,228,384

Land classified as investment properties include parcels of land located in Batangas, Benguet,Cavite, Nueva Ecija, Bulacan and memorial lots in Las Piñas with carrying values ofP=180.1 million, P=6.3 million, P=0.5 million, P=0.2 million, P=2 thousand and P=4.5 million,respectively, as of December 31, 2016. Carrying values of parcels of land located in Batangas,Benguet, Cavite, Nueva Ecija, Bulacan and memorial lots in Las Piñas amounted toP=180.1 million, P=9.5 million, P=0.5 million, P=0.2 million, P=2 thousand and P=8.7 million,respectively, as of December 31, 2015.

Parcels of land in Batangas and Benguet has a fair value amounting to P=292.5 million andP=7.4 million, respectively as of December 5, 2016 determined based on valuation performed by anindependent appraiser whose report was dated December 12, 2016. Management believes thatthere is no significant change in the fair value of the investment property from December 5, 2016to December 31, 2016 because there were no significant improvements made to the saidinvestment property since the last appraisal and no impairment indicators existed as ofDecember 31, 2016.

The fair values of the aforementioned investment property were determined using the marketapproach which is a valuation technique that uses prices and other relevant information generated

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by market transactions involving identical or comparable assets and adjusted to reflect differenceson size, location, frontage/visability, view and utilization (Level 3 - Significant unobservableinputs).

The aggregate carrying values of the condominium units located in Taguig, Manila and Makatiamounted to P=10.8 million and P=27.7 million as of December 31, 2016 and 2015, respectively.Parking slots located in Taguig and Pasig have carrying values amounting to P=1.0 million andP=4.6 million as of December 31, 2016 and 2015, respectively.

As of December 31, 2016 and 2015, the fair values of the condominium units and the parking slotsamounted to P=18.7 million and P=58.1 million, respectively, based on market transactions involvingidentical or comparable assets and adjusted to reflect any differences in the characteristics of theproperties (Level 3 - Significant unobservable inputs).

Rental income derived from the investment properties amounted to P=4.5 million, P=1.7 million,P=2.6 million in 2016, 2015 and 2014, respectively. Direct operating expenses incurred in relationto these investment properties amounted to P=0.6 million, P=0.3 million and P=0.2 million in 2016,2015 and 2014, respectively.

15. Other Noncurrent Assets

Other noncurrent assets consist of:

2016 2015Receivable from EEI-RFI - net of current portion

(Note 10) P=178,000,000 P=156,000,000Receivable from a customer (Note 10) − 162,326,173Software cost 2,073,257 6,141,131Others 37,895,066 5,144,641

P=217,968,323 P=329,611,945

The Parent Company sold a parcel of land to EEI RFI, a trustee of the Parent Company’semployee retirement fund in previous years. Both parties agreed the selling price be repaid ininstallments and bear annual interest rate of 5%. In 2016, the Parent Company and the Fundagreed to extend the term of the payment until April 30, 2021 (see Note 27).

The rollforward analyses of the Group’s software costs in 2016 and 2015 follow:

2016 2015CostBalance at beginning of year P=36,008,313 P=33,545,232Additions − 2,463,081Balance at end of year 36,008,313 36,008,313Accumulated amortizationBalance at beginning of year 29,867,182 20,062,435Amortization (Note 23) 4,067,874 9,804,747Balance at end of year 33,935,056 29,867,182Net book value P=2,073,257 P=6,141,131

As of December 31, 2016, the remaining amortization period of the software is 1 year.

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16. Bank Loans

The Group availed of several unsecured short-term bank loans with a number of local banks.These loans will mature in 2017 with annual interest rates ranging from 2.50% - 2.65% and2.50% - 2.60% in 2016 and 2015, respectively.

Interest expense incurred on these loans amounted to P=91.9 million, P=69.7 million andP=74.1 million in 2016, 2015 and 2014, respectively.

17. Accounts Payable and Other Current Liabilities


2016 2015Accounts payable P=3,371,586,426 P=3,566,770,762Deferred output taxes 590,644,128 545,789,901Retention payable 588,450,354 624,088,462Accrued expenses 117,304,938 108,367,812Output tax payable 133,291,352 247,720,752Business tax payable 90,341,291 60,675,169Advances from joint venture partners 32,381,854 32,381,854Withholding taxes 27,763,823 49,077,772SSS and other contributions 21,601,155 19,012,705Subscription payable 14,357,213 14,357,213Dividends payable 5,999,995 5,999,995Others 5,899,868 2,868,178

P=4,999,622,397 P=5,277,110,575

Accrued expenses consist of:

2016 2015Accrued interest P=9,307,246 P=11,240,593Accrued salaries and wages 3,708,767 4,270,328Other accrued expenses 104,288,925 92,856,891

P=117,304,938 P=108,367,812

Subscription payable represents unpaid subscriptions on AFS financial asset.

Other accrued expenses consist of audit and legal fees, outside services utilities and accrual ofother expenses that are expected to be settled within 1 year.

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18. Long-term Debt


2016 2015Fixed-rate corporate promissory notes P=1,089,285,715 P=1,303,571,429Fixed-rate term loan 410,714,285 482,142,857

1,500,000,000 1,785,714,286Less current portion 285,714,286 285,714,286

P=1,214,285,714 P=1,500,000,000

Fixed-rate corporate promissory notesIn 2014, the Parent Company received P=500.0 million proceeds from the issuance of unsecuredfixed-rate corporate promissory notes to a local bank that bear annual interest of 5.2%.Subsequently, the bank reduced the interest rate to 4.8% effective starting May 26, 2015 untilmaturity. The promissory notes mature within seven (7) years from the date of issuance.

On June 15, 2015, the Parent Company received P=1,000.0 million proceeds from the issuance ofan unsecured fixed-rate corporate promissory note to a local bank that bears annual interest of4.8%. The promissory note matures within seven (7) years from the date of issuance.

The proceeds from the promissory notes were used for general corporate and project financingrequirements.

Interest expense incurred on these corporate notes amounted to P=47.9 million, P=40.1 million andP=15.1 million in 2016, 2015 and 2014, respectively.

Fixed-rate term loanOn August 28, 2015, EEI Power availed a P=500.0 million long-term loan from a local bank thatbears an annual interest of 4.8%. The loan is payable in equal quarterly installments and willmature on August 27, 2022.

Interest expense incurred on these corporate notes amounted to P=23.0 million, P=26.6 million andP=34.4 million in 2016, 2015 and 2014, respectively.

Movements in the account follow:

2016 2015Promissory Note Term Loan Promissory Note Term Loan

Balance at beginning of year P=1,303,571,429 P=482,142,857 P=446,428,570 P=517,912,201Availments − − 1,000,000,000 500,000,000Payments (214,285,714) (71,428,572) (142,857,141) (535,769,344)Balance at end of year 1,089,285,715 410,714,285 1,303,571,429 482,142,857Less current portion 214,285,715 71,428,571 214,285,715 71,428,571

P=875,000,000 P=339,285,714 P=1,089,285,714 P=410,714,286

The aforementioned loans require the Group to maintain certain financial ratios. As ofDecember 31, 2016 and 2015, the Group was in compliance with the loan covenants.

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19. Stock Option Plan

The Parent Company’s stock option plan, as amended (Amended Plan), had set aside 35 millioncommon shares for stock options available to regular employees, officers and directors of theParent Company and its subsidiaries.

Under the Amended Plan, the option or subscription price must be equal to the book value of theParent Company’s common stock but not less than 80% of the average market price quoted in PSEfor five trading days immediately preceding the grant, but in no case less than the par value. Theoption or subscription price should be paid over a period of five years in 120 equal semi-monthlyinstallments. Shares acquired under the Amended Plan are subject to a holding period of one year.

A summary of the plan availments is shown below.

Number ofShares

Shares allocated under the Original Stock Option Plan 19,262,500Shares allocated under the Amended Stock Option Plan 15,737,500

Total shares allocated 35,000,000Shares subscribed under the Original Stock Option Plan 19,365,815Shares subscribed under the Amended Stock Option Plan 10,886,188

Total shares subscribed 30,252,003Shares allocated at end of year 4,747,997

The Parent Company opted to avail the exemption in PFRS 1, First-time Adoption of PhilippineFinancial Reporting Standards, from applying PFRS 2 upon adoption on January 1, 2005 as itallows non-adoption of PFRS 2 for equity instruments that were granted on or before November 7,2002. Since 2000, there were no shares under the stock option plan that were granted, forfeited,exercised and expired.

No benefit expense is recognized relative to the shares issued under the stock option plan. Whenoptions are exercised, these are treated as capital stock issuances. The stock option plan is exemptfrom PFRS 2.

20. Costs of Construction Contracts


2016 2015 2014Personnel expenses P=5,119,261,703 P=5,174,228,371 P=4,664,108,039Equipment costs and others 3,960,863,198 5,337,771,601 4,852,094,411Materials 2,563,588,392 4,929,459,011 4,466,633,143Depreciation and amortization (Note 13) 483,036,014 373,765,749 278,963,346

P=12,126,749,307 P=15,815,224,732 P=14,261,798,939

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21. Costs of Services


2016 2015 2014Personnel expenses P=453,721,530 P=433,671,097 P=446,560,794Materials 153,330,165 261,413,533 381,589,383Depreciation and amortization (Note 13) 51,639,582 43,663,201 42,760,005Others 31,427,612 54,288,876 66,026,376

P=690,118,889 P=793,036,707 P=936,936,558

22. Costs of Merchandise Sales


2016 2015 2014Inventories (Note 9) P=121,927,390 P=120,342,656 P=123,435,180Personnel expenses 4,291,512 5,140,442 8,304,361Others 2,504,703 3,293,241 5,183,804

P=128,723,605 P=128,776,339 P=136,923,345

23. Selling and Administrative Expenses


2016 2015 2014Personnel expenses P=510,681,023 P=380,275,937 P=397,204,411Depreciation and amortization

(Notes 13, 14 and 15) 98,771,830 103,300,649 86,184,977Rent (Note 27) 58,015,357 54,147,376 54,211,286Professional fees 57,034,444 47,324,027 42,345,621Travel and transportation 53,401,534 52,248,195 47,312,730Training 50,544,647 − −Taxes and licenses 39,213,249 44,923,211 39,416,597Outside services 37,031,746 28,499,168 29,231,119Utilities 30,732,415 30,688,463 31,944,381Food, meals and others 20,057,224 22,326,091 19,599,267Repairs and maintenance 18,992,430 29,851,721 9,723,866Research and development 13,366,431 − −Donations 9,298,573 7,829,312 5,055,045Supplies 7,820,847 6,519,705 9,046,596Entertainment, amusement and recreation 7,137,876 4,682,446 3,613,660Insurance 6,870,429 8,218,347 7,205,726Management fee 5,328,428 2,142,857 2,142,857Advertising 4,677,690 2,248,416 7,019,657Net provision (recovery) of inventory

obsolescence 2,118,396 − (460,452)Premium on bonds 2,007,923 1,385,919 1,110,111Net provision (recovery) of doubtful accounts

(Note 7) 1,876,407 (6,310,453) (15,343,880)Others 51,440,778 36,336,346 12,212,375

P=1,086,419,677 P=856,637,733 P=788,775,950

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Others include stock listing fees, freight, membership fees and dues, employee welfare and bankcharges and miscellaneous expenses.

24. Interest Income


2016 2015 2014Trade receivable and receivable from a

customer (Note 10) P=36,430,339 P=5,826,784 P=8,680,227Receivable from EEI-RFI (Notes 10 and 15) 11,928,075 16,269,348 17,652,530Cash in banks and short-term investments

(Note 6) 11,234,521 2,514,982 2,153,720Receivable from related parties (Note 27) 1,736,199 4,139,474 6,595,697

P=61,329,134 P=28,750,588 P=35,082,174

25. Other Income - Net


2016 2015 2014Tax refund/discount P=14,791,234 P=5,701,647 P=7,406,912Gain (loss) on disposal of:

Investment properties (Note 14) 11,707,531 5,390,206 −Property and equipment (Note 13) (291,180) − –

Rent income (Note 14) 7,929,240 5,141,355 6,030,018Income from extinguishment of payables 5,459,033 28,522,851 –Gain on sale of scrap 1,780,131 1,378,474 1,987,794Income from defaults − 6,900,718 –Reversal of provision for losses − − 6,000,000Recoveries from sale of obsolete inventory − − 115,786Loss on liquidation of subsidiaries (26,174,418) − −Others (5,938,690) 17,759,312 20,671,692

P=9,262,881 P=70,794,563 P=42,212,202

In 2016, the Group wrote-off dormant and closed subsidiaries and recognized a loss ofP=26.2 million. The loss mainly pertains to the reclassification of cumulative translationadjustment relating to EEI Corporation (Singapore) Pte. Ltd. previously taken up in othercomprehensive income to profit or loss.

26. Income Taxes

The provision for income tax consists of:

2016 2015 2014Current P=204,103,840 P=435,924,643 P=384,587,214Deferred 21,473,449 (2,327,202) 15,470,477

P=225,577,289 P=433,597,441 P=400,057,691

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The components of the Group’s deferred tax assets and liabilities follow:

2016 2015Deferred income tax items recognized in profit or loss:

Deferred income tax assets:Allowance for doubtful accounts P=20,436,593 P=29,963,663Unrealized foreign exchange losses 5,135 12,070,546Unamortized past service cost 32,427,737 25,614,038Retirement liability − 81,114NOLCO 7,519,684 370,467MCIT 3,410,917 1,445,523Others 3,235,014 4,631,438

67,035,080 74,176,789Deferred income tax liabilities:

Retirement assets 26,359,439 12,129,835Capitalized borrowing cost 1,413,032 1,518,718Unrealized foreign exchange gains 238,526 1,483Accrued rent − 29,221

28,010,997 13,679,257Deferred income tax item recognized in other

comprehensive income:Deferred income tax asset on remeasurement loss

on defined benefit plans 44,975,406 49,194,261Deferred tax assets - net P=83,999,489 P=109,691,793

Reconciliation of net deferred tax assets follows:Balance at beginning of year P=109,691,793 P=93,799,494

Tax income (expense) recognized in:Profit and loss (21,473,449) 2,327,202Other comprehensive income (4,218,855) 13,565,097

Balance at end of year P=83,999,489 P=109,691,793

The Group did not recognize deferred tax liabilities on undistributed earnings and cumulativetranslation adjustments of foreign subsidiaries in 2016 and 2015 since the Group determined thatthe timing of the reversal of the temporary difference can be controlled by the Group andmanagement does not expect the reversal of the temporary differences in the foreseeable future.The undistributed earnings of the Group’s foreign subsidiaries amounted to P=448.0 million andP=1.9 billion as at December 31, 2016 and 2015, respectively.

The Group did not recognize any deferred tax asset in relation to unexpired share options as thishas negative intrinsic value.

The Group did not recognize deferred tax assets on the following future deductible differences asmanagement assessed that it is not probable that sufficient taxable profit will be available to allowall or part of the deferred tax assets to be utilized.

2016 2015NOLCO P=144,244 P=169,550Allowance for doubtful accounts 101,427 101,427MCIT 2,510 2,862Allowance for probable losses 159,043 −

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As at December 31, 2016, the Group’s NOLCO and MCIT that can be claimed as deduction fromfuture taxable income follows:

Year Incurred NOLCO MCIT Year of Expiration2016 P=23,862,474 P=2,374,219 20192015 66,795 724,398 20182014 1,280,587 314,810 2017

P=25,209,856 P=3,413,427

The movements of NOLCO and MCIT are summarized as follow:

NOLCO

YearIncurred Amount Applied Expired Balance

Year ofExpiration

2016 P=23,862,474 P=− P=− P=23,862,474 20192015 66,795 − − 66,795 20182014 3,380,595 2,100,008 − 1,280,587 20172013 57,058 50,508 6,550 − 2016

P=27,366,922 P=2,150,516 P=6,550 P=25,209,856

MCIT

YearIncurred Amount Applied Expired Balance

Year ofExpiration

2016 P=2,374,219 P=− P=− P=2,374,219 20192015 724,398 − − 724,398 20182014 644,465 329,655 − 314,810 20172013 79,522 42,803 36,719 − 2016

P=3,822,604 P=372,458 P=36,719 P=3,413,427

The reconciliation between the statutory and effective income tax rates follows:

2016 2015 2014Statutory income tax rate 30.0% 30.0% 30.0%Add (deduct) reconciling items:

Income subjected to final taxes at lower rates 0.5 (0.2) (0.1)Change in unrecognized deferred taxes − (1.2) (1.1)Equity in net earnings of associates and joint ventures (63.5) 31.9 (9.6)Others (3.3) 7.6 11.1

Effective income tax rate (36.3%) 68.1% 30.3%

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27. Related Party Transactions

The outstanding balances and transactions with related parties in 2016 and 2015 consist of thefollowing:

2016

Related party TransactionAmount /

VolumeOutstanding

Balance Terms Conditions

Parent company Due from related parties P=− P=6,880,788 Non-interest bearingUnsecured,

no impairmentRendering janitorial services 11,122,850 − − −Due to related parties − (23,966,567) Non-interest bearing UnsecuredPurchase of management services (3,024,857) − − −

Associate Due to related parties − (123,234,530) Non-interest bearing UnsecuredEntities under thecommon control Due from related parties − 72,534,297 Non-interest bearing

Unsecured,no impairment

Rendering janitorial services 329,456,748 − − −Sale of supplies 354,720 − − −Interest income on cash advances 1,736,199 − − −Due to related parties − (17,336,988) Non-interest bearing −Cash and cash equivalents − 967,481,874 − −Interest income 5,085,213 − − −Trade receivables − 69,576,963 Non-interest bearing UnsecuredRevenue from construction contracts 595,553,920 − − −

Trade receivables − 303,770,291Interest bearing,

5% per annum UnsecuredInterest income on receivables 10,160,630 − − −

Other affiliates Receivable from EEI-RFI (Notes 10 and 15) − 223,266,388

Interest bearing,5% per annum Unsecured

Lease of property (52,093,125) − Non-interest bearing UnsecuredInterest earned 11,928,075 − − −

2015

Company TransactionAmount /

VolumeOutstanding


Parent Due from related parties P=− P=3,825,160 Non-interest bearingUnsecured,

no impairmentRendering janitorial services 11,584,278 − – –Due to related parties − (33,413,051) Non-interest bearing UnsecuredPurchase of management services (2,142,857) − – –

Associate Due from related parties − 988,593 Non-interest bearingUnsecured,

no impairmentRendering janitorial services 141,689 − − −Due to related parties − (370,376) Non-interest bearing Unsecured

Entities under thecommon control Due from related parties − 69,738,377 Non-interest bearing

Unsecured,no impairment

Rendering janitorial services 232,292,247 − – –Sale of supplies 288,635 − – –Interest income on cash advances 4,139,474 − − −Due to related parties − (122,799,900) Non-interest bearing UnsecuredRendering janitorial services 175,324,181 − – –Lease of properties (281,259) − – –Interest expense (4,913) − – –

Cash and cash equivalents − 949,805,740Interest bearing; 0.20%

- 0.25% per annumUnsecured,

no impairmentInterest income 2,464,147 − – –Trade receivables − 441,728,412 Non-interest bearing UnsecuredRevenue from construction contracts 593,343,047 − − −

Other affiliates Receivable from EEI-RFI (Notes 10 and 15) − 273,361,532

Interest bearing,5% per annum

Secured,no impairment

Lease of property (49,612,500) − Non-interest bearing UnsecuredInterest income 16,269,348 − – –

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a. In 2016, the Parent Company was engaged by Malayan Colleges Mindanao for the boredpiling works located in Talomo, Ma-a, Davao City. Contract price amounted toP=171.8 million. The project was completed on December 16, 2016.

b. In 2015, the Parent Company was contracted by Enrique T. Yuchengco, Inc. for the generalconstruction of ETY Building in Binondo, Manila for P=663.4 million. Outstandingreceivables as of December 31, 2016 and 2015 amounted to nil and P=23.07 million,respectively. The construction is still on-going as of December 31, 2016.

c. In 2014, the Parent Company was engaged by Malayan Colleges Laguna, Inc. for theconstruction of its three-storey building in Cabuyao, Laguna. Contract price amounted toP=291.4 million. The construction was completed on August 25, 2015. Outstandingreceivables amounted to nil and P=23.8 million as of December 31, 2016 and 2015,respectively.

d. In 2014, the Parent Company was engaged by Malayan Insurance Company, Inc. for therectification works of Malayan Plaza amounting to P=13.4 million. EEI completed the projecton November 8, 2014.

e. In 2013, the Parent Company was contracted by PWEI for the construction of 18 units WTGfoundations, roadways and temporary landing pad intended for the 36MW Nabas Wind PowerProject (NWPP) in Nabas, Aklan for P=1,100.0 million. The project was completed inApril 30, 2015. The outstanding receivables amounted to P=303.8 million and P=272.3 millionas of December 31, 2016 and 2015, respectively.

f. In 2014, the Parent Company issued a Parent Company Guarantee to Saudi Aramco MobilRefinery Company Limited (SAMREF) and Sadara Chemical Company to guarantee the fulland timely performance by Al Rushaid Construction Co., Ltd. (ARCC) of all its obligationsunder the contract entered between ARCC and the said parties. This is in effect up to 2015.

g. In 2006, the Parent Company sold parcels of land to EEI-RFI, a trustee of the Parent Companyemployees retirement fund (the Fund). The Fund is managed by RCBC Trust and InvestmentDivision. The parcels of land sold are located in Manggahan, Quezon City and Bauan,Batangas (see Notes 10 and 14). Interest income recognized from the receivables fromEEI-RFI is disclosed in Note 24. The receivables bear interest of 5% per annum in 2016,2015 and 2014.

Starting January 2007, the Parent Company and EEI-RFI entered into operating leaseagreements for the said land and improvements. The terms are for one year and renewable atthe option of the Parent Company provided that for each and every renewal, the monthlyrentals shall be increased upon mutual agreement of both parties. Rental expense for theproperty located in Manggahan, Quezon City amounted to P=52.1 million and P=49.6 million in2016 and 2015, respectively (see Note 23).

On December 12, 2012, the Parent Company acquired certain parcels of land including landimprovements located in Bauan, Batangas from EEI-RFI, amounting to P=581.8 million,inclusive of 12% VAT. The operating lease agreement of the said properties between theParent Company and EEI-RFI was terminated on the same date.

In 2013, the receivable from the EEI-RFI amounting to P=390.0 million was restructured andreclassified to other noncurrent assets with fixed 5% interest rate per annum. In 2016, theParent Company and the Fund agreed to extend the term of the payment until April 30, 2021.

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h. As of December 31, the Group’s retirement plan assets include investments in equitysecurities of the following entities:

2016 2015Rizal Commercial Banking Corporation P=24,930,703 P=24,522,003House of Investments, Inc. 212,486 220,400EEI Corporation 39,609 39,695

P=25,182,798 P=24,782,098

Gain arising from investments in the shares of stocks of the aforementioned companiesamounted to P=2.9 million, P=2.6 million and P=2.8 million in 2016, 2015 and 2014, respectively.

i. The remuneration of members of key management personnel are as follows:

2016 2015 2014Short-term benefits P=150,742,506 P=142,422,517 P=126,330,450Post-employment benefits 44,510,689 37,915,198 3,561,397

P=195,253,195 P=180,337,715 P=129,891,847

Terms and conditions of transactions with related partiesOutstanding balances at year-end are unsecured, interest-free and settlement occurs in cash. Therehave been no guarantees provided or received for any related party receivables or payables. Thesemainly consist of advances and reimbursement of expenses. The Group has not recognized anyimpairment on amounts due from affiliated companies for the years ended December 31, 2016 and2015. This assessment is undertaken each financial year through a review of the financial positionof the related party and the market in which the related party operates.

28. Retirement Benefits

The Group has a funded, noncontributory plan covering substantially all of its employees. Theretirement funds are being administered and managed through EEI Corporation and SubsidiariesRetirement fund, with Rizal Commercial Banking Corporation (RCBC) as Trustee. The Group,however, reserves the right to discontinue, suspend or change the rates and amounts of itscontributions at any time on account of business necessity or adverse economic conditions. Thelatest actuarial valuation was made last December 31, 2016.

Under the existing regulatory framework, Republic Act 7641 requires a provision for retirementpay to qualified private sectors employee in the absence of any retirement plan in the entity,provided however that the employee retirement benefits under any collective bargaining and otheragreements shall not be less than those provided under law. The Law does not require minimumfunding of plan.

The following table summarizes the components of pension expense recognized in the Group’sconsolidated statements of income and the amounts recognized in the Group’s consolidatedstatements of financial position for the plan:

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The components of pension expense follow:

2016 2015Current service cost P=84,090,854 P=78,911,229Net interest cost 6,356,293 4,371,399Pension expense P=90,447,147 P=83,282,628

Movements in the present value of defined benefit obligations follow:

2016 2015Balance at beginning of year P=903,427,885 P=845,753,984Current service cost 84,090,854 78,911,229Interest cost 46,304,011 39,653,668Benefits paid (101,672,412) (54,720,712)Remeasurement losses (gains) arising from:

Experience adjustments 16,310,920 21,593,088Changes in financial assumptions (23,458,730) (27,763,372)

Balance at end of year P=925,002,528 P=903,427,885

Movements in the present value of the plan assets follow:

2016 2015Balance at beginning of year P=779,609,420 P=753,019,571Interest income included in net interest cost 39,947,718 35,282,269Actual return excluding amount included in net interest cost 6,915,039 (51,387,273)Contributions 138,149,540 96,418,773Benefits paid (101,672,412) (53,723,920)Balance at end of year P=862,949,305 P=779,609,420

Actual return on plan assets amounted to P=46.9 million and (P=16.1 million) in 2016 and 2015,respectively.

The Group expects to contribute P=112.9 million to the Fund in 2017.

The retirement assets and liabilities recognized in the consolidated statements of financial positionas of December 31 follows:

2016 2015Present value of defined benefit obligations P=925,002,528 P=903,427,885Fair value of plan assets (862,949,305) (779,609,420)

P=62,053,223 P=123,818,465

The amounts reflected in the consolidated statements of financial position are as follows:

2016 2015Retirement assets P=9,939,515 P=7,280,197Retirement liabilities (71,992,738) (131,098,662)

(P=62,053,223) (P=123,818,465)

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Movements in the net retirement liabilities follow:

2016 2015At January 1 P=123,818,465 P=92,734,413Pension expense 90,447,147 83,282,628Remeasurement loss (gain) (14,062,849) 45,216,989Benefits paid directly by the Group – (996,792)Contributions (138,149,540) (96,418,773)At December 31 P=62,053,223 P=123,818,465

The major categories and fair value of the plan assets are as follows:

2016 2015Investments in:

Government securities P=639,694,359 P=403,193,520Equity securities 109,899,229 68,007,525Debt and other securities 32,762,151 26,143,605

Cash and cash equivalents 72,701,335 277,634,351Interest and other receivables 8,842,041 5,485,725Accrued trust fees and other payables (949,810) (855,306)

P=862,949,305 P=779,609,420

The plan assets are being held by the RCBC Trust and Investment Division. The investingdecisions of the plan assets are made by the authorized officers of the Parent Company.

The plan assets consist of the following:

∂ Investment in government securities - includes investment in Philippine Retail Treasury Bonds(RTBs) and Fixed Rate Treasury Notes (FXTNs).

∂ Investment in equity securities - includes investment in common and preferred shares traded inthe Philippine Stock Exchange.

∂ Investment in debt and other securities - include investment in long-term debt notes and retailbonds.

∂ Cash and cash equivalents - include savings and time deposit.

∂ Interest and other receivables - pertain to interest and dividends receivable on the investmentsin the fund.

The management performed an Asset-Liability Matching Study (ALM) annually. The overallinvestment policy and strategy of the Group’s defined benefit plan is guided by the objective ofachieving an investment return which, together with contributions, ensures that there will besufficient assets to pay retirement benefits as they fall due while also mitigating the various risk ofthe plans.

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Principal actuarial assumptions used to determine defined benefit obligations follow:

2016 2015 2014Discount rate

Beginning of year 5.07% 4.56% 4.41%End of year 5.37% 5.07% 4.56%

Salary increasesBeginning of year 6.00% 6.00% 8.00%End of year 6.00% 6.00% 6.00%

The sensitivity analysis below has been determined based on reasonably possible changes of eachsignificant assumption on the defined benefit obligation as at the reporting period, assuming allother assumption were held constant:

2016 2015

Increase(decrease)

Effect ondefined benefit

obligation(in millions)

Increase(decrease)

Effect ondefined benefit

obligation(in millions)

Discount rates + 0.5% (P=40.0) + 0.5% (P=38.7)- 0.5% 40.0 - 0.5% 39.1

Salary increase rates + 1.0% 89.8 + 1.0% 87.5- 1.0% (89.8) - 1.0% (86.2)

Shown below is the maturity analysis of the undiscounted benefit payments:

2016 2015Expected

Benefit PaymentExpected

Benefit PaymentLess than one year P=200,960,228 P=190,494,017More than one to five years 195,365,164 226,397,075More than five to ten years 453,790,735 371,885,358More than 10 to 15 years 664,449,115 658,340,691More than 15 to 20 years 825,481,131 727,179,531More than 20 years 6,980,864,312 6,279,583,057

The average duration of the defined benefit obligation is 21 years as of December 31, 2016 and2015.

29. Earnings (Loss) Per Share

The following table presents information necessary to calculate earnings per share:

2016 2015 2014Net income (loss) (P=847,701,016) P=202,734,329 P=918,273,849Weighted average number of common shares 1,036,281,485 1,036,281,485 1,036,281,485Earnings per share - basic/diluted (P=0.8180) P=0.1956 P=0.8861

The exercise price of unexercised stock options is still higher than the average market price duringthe year making the options anti-dilutive, hence, no diluted earnings per share is calculated.

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The weighted average number of common shares is computed as follows:

2016 2015 2014Number of common shares issued and outstanding 1,036,401,386 1,036,401,386 1,036,401,386Less treasury shares 119,901 119,901 119,901

1,036,281,485 1,036,281,485 1,036,281,485

30. Segment Information

For management purposes, the Group is organized into business units based on geographicallocation, which comprises of two main groupings as follows:

1. Domestic - all transactions and contracts entered in the Philippines2. Foreign - all transactions and contracts entered outside the Philippines

∂ EEI Limited - incorporated in British Virgin Islands∂ Clear Jewel Investments, Ltd. - incorporated in British Virgin Islands∂ EEI Corporation (Singapore) Pte. Ltd. - incorporated in Singapore∂ EEI-Nouvelle Caledonie SARL - incorporated in New Caledonia∂ Nimaridge Investments, Limited - incorporated in British Virgin Islands∂ EEI Corporation (Guam) - incorporated in the United States of America∂ Al Rushaid Construction Company Limited - incorporated in the Kingdom of Saudi

Arabia

Management monitors construction revenue and segment net income for the purpose of makingdecision about resources allocation. Segment performance is evaluated based on net income andconstruction revenue, which is accounted for differently in the consolidated statements of income.

Segment reporting is consistent in all periods presented as there are no changes in the structure ofthe Group’s internal organization that will cause the composition of its reportable segment tochange.

Transfer prices between operating segments are on an arm’s length basis in a manner similar totransactions with third parties.

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(In thousand pesos)2016

Domestic Foreign Combined Elimination ConsolidatedAssets Current assets P=13,704,724 P=5,319,706 P=19,024,430 (P=5,456,240) P=13,568,190 Noncurrent assets 7,980,809 2,007,796 9,988,605 (3,353,701) 6,634,904Total Assets P=21,685,533 P=7,327,502 P=29,013,035 (8,809,941) P=20,203,094

Liabilities Current liabilities P=13,536,830 P=5,507,083 P=19,043,913 (P=5,970,822) P=13,073,091 Noncurrent liabilities 1,286,278 884,721 2,170,999 (884,721) 1,286,278Total Liabilities P=14,823,108 P=6,391,804 P=21,214,912 (6,855,543) P=14,359,369

Revenue P=15,155,294 P=6,837,351 P=21,992,645 (P=7,157,053) P=14,835,592Direct cost (13,279,229) (9,703,031) (22,982,260) 10,022,732 (12,959,528)Operating expenses (1,074,302) (600,866) (1,675,168) 588,748 (1,086,420)Interest expense (164,728) − (164,728) 1,955 (162,773)Share in net income (losses) of associates and joint ventures 99,989 (1,416,119) (1,316,130) ‒ (1,316,130)Other income (charges) 199,827 (92,428) 107,399 (40,265) 67,134Income before tax 936,851 (4,975,093) (4,038,242) 3,416,117 (622,125)Provision for income tax (225,863) − (225,863) 286 (225,577)Net income (loss) P=710,988 (P=4,975,093) (P=4,264,105) P=3,416,403 (P=847,702)

Other disclosuresDepreciation and amortization P=633,612 P=− P=633,612 P=− P=633,612Capital expenditures 734,971 − 734,971 − 734,971Interest income 63,279 5 63,284 (1,955) 61,329Investments in associates and joint ventures 702,533 567,403 1,299,936 − 1,269,936

2015Domestic Foreign Combined Elimination Consolidated

Assets Current assets P=15,101,257 P=9,388,522 P=24,489,779 (P=9,689,393) P=14,800,386 Noncurrent assets 7,921,257 2,973,739 10,894,996 (3,223,649) 7,671,347Total Assets P=23,022,514 P=12,362,261 P=35,384,775 (P=12,913,042) P=22,471,733

Liabilities Current liabilities P=14,940,421 P=7,283,170 P=22,223,591 (P=8,164,199) P=14,059,392 Noncurrent liabilities 1,631,099 958,834 2,589,933 (958,834) 1,631,099Total Liabilities P=16,571,520 P=8,242,004 P=24,813,524 (P=9,123,033) P=15,690,491

Revenue P=19,496,674 P=12,352,910 P=31,849,584 (P=12,870,655) P=18,978,929Direct cost (17,106,428) (13,700,845) (30,807,273) 14,064,630 (16,742,643)Operating expenses (846,318) (714,831) (1,561,149) 704,511 (856,638)Interest expense (140,207) − (140,207) 3,781 (136,426)Share in net losses of associates and joint ventures (2,573) (673,737) (676,310) ‒ (676,310)Other income (charges) 69,874 183,098 252,972 (183,552) 69,420Income before tax 1,471,022 (2,553,405) (1,082,383) 1,718,715 636,332Provision for income tax (433,597) − (433,597) − (433,597)Net income P=1,037,425 (P=2,553,405) (P=1,515,980) P=1,718,715 P=202,735

Other disclosuresDepreciation and amortization P=520,730 P=− P=520,730 P=− P=520,730Capital expenditures 1,139,239 − 1,139,239 − 1,139,239Interest income 31,481 4 31,485 (2,734) 28,751Investments in associates and joint ventures 602,543 1,663,397 2,265,940 − 2,265,940

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2014Domestic Foreign Combined Elimination Consolidated

Assets Current assets P=12,106,920 P=9,212,963 P=21,319,883 (P=9,428,687) P=11,891,196 Noncurrent assets 6,045,323 3,542,709 9,588,032 (3,126,855) 6,461,177Total Assets P=18,152,243 P=12,755,672 P=30,907,915 (P=12,555,542) P=18,352,373

Liabilities Current liabilities P=12,238,734 P=5,722,524 P=17,961,258 (P=7,139,179) P=10,822,079 Noncurrent liabilities 870,836 858,806 1,729,642 (858,806) 870,836Total Liabilities P=13,109,570 P=6,581,330 P=19,690,900 (P=7,997,985) P=11,692,915

Revenue P=17,286,602 P=14,589,606 P=31,876,208 (P=14,796,321) P=17,079,887Direct cost (15,414,821) (12,349,933) (27,764,754) 12,414,447 (15,350,307)Operating expenses (789,306) (1,371,306) (2,160,612) 1,371,836 (788,776)Interest expense (132,042) − (132,042) 8,359 (123,683)Share in net income of associates and joint ventures 423,796 − 423,796 − 423,796Other income (charges) 154,922 (106,878) 48,044 29,370 77,414Income before tax 1,529,151 761,489 2,290,640 (972,309) 1,318,331Provision for income tax (296,814) (103,244) (400,058) − (400,058)Net income P=1,232,337 P=658,245 P=1,890,582 (P=972,309) P=918,273

Other disclosuresDepreciation and amortization P=407,908 P=− P=407,908 P=− P=407,908Capital expenditures 501,285 − 501,285 − 501,285Interest income 41,169 284 41,453 (6,371) 35,082Investments in associates and joint ventures 1,706,353 232,746 1,939,099 − 1,939,099

Notes to operating segments:

a. Intersegment revenue, cost and expenses, assets and liabilities are eliminated on consolidation.These are accounted for under PFRSs.

b. Other income (charges) consist of:

2016 2015 2014Interest income P=61,329,134 P=28,750,588 P=35,082,174Other income 9,262,881 70,794,563 42,212,202Foreign exchange gain (loss) - net (3,457,907) (30,124,959) 119,170

P=67,134,108 P=69,420,192 P=77,413,546

c. The foreign segment above includes the equity in net earnings (losses) from ARCC.

d. There were no concentration of revenue for major customer that reached the 10% threshold in2016 and 2015. The foreign segment has revenue from one major customer that meets the10% threshold in 2014 amounting to P=1.8 billion.

31. Capital Stock

The Group’s common shares were registered with the Securities and Exchange Commission(SEC) on August 28, 1997. The total number of shares registered with SEC at that time was2,000 million with original issue price amounting to P=1.0 per share. As of December 31, 2016 and2015, the Group had 3,189 and 3,207 shareholders on record, respectively.

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Capital ManagementThe primary objective of the Group’s capital management is to ensure that it maintains healthycapital ratios in order to support its business and maximize shareholder value.

The Group manages its capital structure and makes adjustments to it, in light of changes ineconomic conditions. To maintain or adjust the capital structure, the Group may adjust thedividend payment to shareholders or issue new shares. No changes were made in the objectives,policies or processes for the years ended December 31, 2016 and 2015.

The Group considers total equity as its capital.

The Group monitors capital using a debt-to-equity ratio, which is total liabilities divided by totalequity. The Group’s policy is to maintain a debt-to-equity ratio lower than 3:1.

2016 2015Current liabilities P=13,073,090,932 P=14,059,392,182Noncurrent liabilities 1,286,278,452 1,631,098,662Total liabilities (a) 14,359,369,384 15,690,490,844Equity (b) 5,843,724,759 6,781,242,557

Debt to Equity Ratio (a/b) 2.46:1 2.31:1

32. Retained Earnings

The details of the Group’s declaration of cash dividends for the years ended December 31, 2016,2015 and 2014 are as follow:

Date of BODApproval Amount

Amountper share Record date Payment Date

March 4, 2016 P=103,628,149 P=0.10 April 8, 2016 April 29, 2016March 4, 2016 103,628,148 0.10 September 1, 2016 September 26, 2016

P=207,256,297

March 4, 2015 P=103,640,139 P=0.10 April 8, 2015 April 30, 2015March 4, 2015 103,640,138 0.10 September 1, 2015 September 25, 2015

P=207,280,277

March 21, 2014 P=51,820,070 P=0.05 April 7,2014 April 28, 2014March 21, 2014 51,820,069 0.05 June 2, 2014 June 27, 2014March 21, 2014 51,820,069 0.05 September 1, 2014 September 26, 2014March 21, 2014 51,820,069 0.05 December 1, 2014 December 23, 2014

P=207,280,277

Under the Tax Code of the Philippines, publicly listed companies are allowed to accumulateretained earnings in excess of capital stock and are exempt from improperly accumulated earningstax.

The accumulated earnings of subsidiaries which are included in the Group’s retained earningsamounted to P=888.6 million and P=2,284.0 million as of December 31, 2016 and 2015,respectively, are not available for dividend declaration. Retained earnings are further restricted forpayment of dividends to the extent of cost of treasury shares amounting to P=3.7 million as of

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December 31, 2016 and 2015 and deferred tax assets amounting to P=67.0 million andP=74.2 million as of December 31, 2016 and 2015, respectively.

Retained earnings available for dividend declaration amounted to P=3.0 billion and P=2.8 billion asof December 31, 2016 and 2015, respectively.

The Group takes into consideration the financing requirements of its construction projects whendeciding the amount to be declared as dividends.

33. Financial Instruments

Fair Value InformationCash and cash equivalents, trade receivables, consultancy fees, receivable from sale of investmentproperty, receivable from a customer, due from related parties, miscellaneous deposits, bankloans, accounts payable and other current liabilities and due to related partiesThe carrying amounts of these instruments approximate fair values due to their short-termmaturities and demand feature.

Quoted AFS financial assetsFair values of investments in equity shares listed with Philippine Stock Exchange amounting toP=6.7 million and P=9.9 million as of December 31, 2016 and 2015, respectively, were determinedby reference to the quoted price in the stock exchange at the end of the reporting period (Level 1 -quoted prices in active market).

Fair values of investments in club/golf shares amounting to P=17.5 million and P=19.9 million as ofDecember 31, 2016 and 2015, respectively, were determined by reference to the price of the mostrecent transaction at the end of the reporting period (Level 2 - significant observable inputs).

Receivable from EEI RFIThe fair values of the receivable amounting to P=225.3 million and P=273.9 million as ofDecember 31, 2016 and 2015, respectively, were estimated as the present value of all future cashflows discounted using the applicable rates for similar types of loans (Level 2 - significantobservable inputs). Discount rates used in 2016 and 2015 were 4.73% and 4.85%, respectively.

Long-term debtThe fair values of the interest-bearing long-term loans amounting to P=1,512.2 million andP=1,796.0 million as of December 31, 2016 and 2015, respectively, were estimated as the presentvalue of all future cash flows discounted using the applicable rates for similar types of loans(Level 2 - significant observable inputs). Discount rates used in 2016 and 2015 were 4.73% and4.85%, respectively.

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34. Financial Risk Management Objectives and Policies

The main purpose of the Group’s financial instruments is to raise finances for the Group’soperations.

The main risks arising from the Group’s financial instruments are credit risk, liquidity risk andforeign currency risk. The policies for managing these risks are summarized as follows:

Credit RiskThe exposure to credit risk on its receivables relates primarily to the inability of project owners tofully settle the unpaid balance of contract receivables and other claims owed to the Group. Creditrisk is managed in accordance with the Group’s credit risk policy which requires the evaluation ofthe creditworthiness of the project owners by engaging the service of an accredited third partycredit analyst.

The Group does not have any significant concentration of credit risk. Its gross maximumexposure to credit risk is equivalent to the carrying value of its financial assets as presented in theconsolidated statements of financial position.

Credit risk is managed since the titles of the properties sold by the Group from its real estateoperations are retained until receivables are fully collected and the fair values of these propertiesheld as collateral are sufficient to cover the carrying values of the receivables.

There can be some credit exposures on project commitments and contingencies as atDecember 31, 2016 and 2015 represented by work accomplishments on backlog of projects whichare not yet invoiced. These exposures are, however, limited to a few months workaccomplishment as work are frozen as soon as the Group is able to determine that the risk ofnon-collection materializes. This risk is, however, mitigated by the Group’s contractor’s lien onthe project. A contractor’s lien is the legal right of a contractor to takeover the project in-progressand has priority in the settlement of contractor’s receivables and claims on the project in the eventof insolvency of the project owner. The Group assesses that the value of projects in-progress isusually higher than receivables from and future commitments with the project owners(see Note 7).

The analyses of loans and receivables follow:

2016Neither

Past Duenor Impaired

Past Due but Not Impaired ImpairedFinancial

Assets<30 days30 to <60

days60 to <90

days >90 days TotalTrade receivables P=3,831,588,103 P=614,642,795 P=264,430,835 P=93,344,304 P=976,272,142 P=35,347,628 P=5,815,625,807Consultancy fees − − − − 305,946,232 − 305,946,232Receivable from sale of investment properties 30,113,684 − − − − − 30,113,684Other receivables 47,459,046 468,439 695,782 400,900 3,149,431 8,367,165 60,540,763Due from related parties 79,415,085 − − − − − 79,415,085Receivable from a customer 380,296,805 − − − − − 380,296,805Miscellaneous deposits 408,678 1,901,439 520,227 130,157 42,348,385 3,762,427 49,071,313Receivable from EEI

Retirement Fund, Inc. 223,000,000 − − − 266,388 − 223,266,388P=4,592,281,401 P=617,012,673 P=265,646,844 P=93,875,361 P=1,327,982,578 P=47,477,220 P=6,944,276,077

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2015Neither


Past Due but Not Impaired ImpairedFinancial

Assets<30 days30 to <60

days60 to <90

days >90 days TotalTrade receivables P=3,680,446,984 P=609,266,851 P=250,611,760 P=150,595,687 P=542,547,570 P=67,921,840 P=5,301,390,692Consultancy fees − − − − 289,688,635 − 289,688,635Receivable from sale of investment properties 25,911,485 − − − − − 25,911,485Other receivables 16,621,017 1,182,125 1,865,930 571,129 37,041,447 7,262,852 64,544,500Due from related parties 74,552,130 − − − − − 74,552,130Receivable from a customer 162,326,173 − − − − − 162,326,173Miscellaneous deposits 9,326,024 − − 2,383,047 34,630,986 3,762,427 50,102,484Receivable from EEI

Retirement Fund, Inc. 273,361,532 − − − − − 273,361,532P=4,242,545,345 P=610,448,976 P=252,477,690 P=153,549,863 P=903,908,638 P=78,947,119 P=6,241,877,631

The risk that past due receivables from project owners will not be collected is mitigated by the factthat the Group can resort to carry out its contractor’s lien over the project with varying degrees ofeffectiveness depending on the jurisprudence applicable on or country location of the project.Trade and retention receivables from project owners are normally high standard because of thecreditworthiness of project owners and the collection remedy of contractor’s lien accordedcontractor in certain cases.

The tables below summarize the credit quality of the Group’s neither past due nor impaired loansand receivables.

2016Neither Past Due nor Impaired

High Grade Standard Grade TotalTrade receivables P=1,151,690,372 P=2,679,897,731 P=3,831,588,103Receivable from sale of investment properties 30,113,684 − 30,113,684Other receivables 45,087,778 2,371,268 47,459,046Due from related parties 79,415,085 − 79,415,085Receivable from customer 380,296,805 − 380,296,805Miscellaneous deposits 380,000 28,678 408,678Receivable from EEI-RFI 223,000,000 − 223,000,000

P=1,909,983,724 P=2,682,297,677 P=4,592,281,401

2015Neither Past Due nor Impaired

High Grade Standard Grade TotalTrade receivables P=1,395,194,315 P=2,285,252,669 P=3,680,446,984Receivable from sale of investment properties 25,911,485 − 25,911,485Other receivables 14,758,656 1,862,361 16,621,017Due from related parties 74,552,130 − 74,552,130Receivable from customer 162,326,173 − 162,326,173Miscellaneous deposits 8,279,930 1,046,094 9,326,024Receivable from EEI-RFI 273,361,532 − 273,361,532

P=1,954,384,221 P=2,288,161,124 P=4,242,545,345

Neither past due nor impaired trade receivables, consultancy fees, other receivables andmiscellaneous deposits are classified into ‘high grade’ and ‘standard grade’. Neither past due norimpaired cash and cash equivalents, due from related parties and receivables from EEI-RFI arenormally ‘high grade’ in nature. The Group sets financial assets as ‘high grade’ based on theGroup’s positive collection experience. On the other hand, ‘standard grade’ are those which havecredit history of default in payments.

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Liquidity RiskLiquidity risk is the risk that the Group will be unable to meet its payment obligations as they falldue. The Group seeks to manage its liquidity risk to be able to meet its operating cash flowrequirements, finance capital expenditures and service maturing debts. To cover its short-term andlong-term funding requirements, the Group intends to use internally generated funds and availableshort-term and long-term credit facilities. Credit lines are obtained from BOD-designated banks atamounts based on financial forecasts approved by BOD.

The tables below summarize the maturity profile of the Group’s financial assets. The maturitygroupings are based on the remaining period from the end of the reporting period to thecontractual maturity date.

*Excludes statutory liabilities

2016On demand < 1 year 1 to < 2 years > 2 years Total

Financial LiabilitiesAccounts payable and accrued expenses* P=2,733,272,411 P=683,597,682 P=685,736,403 P=992,297 P=4,103,598,793Bank loans Peso loan − 2,950,000,000 − − 2,950,000,000 Interest − 12,760,417 − − 12,760,417Long-term debt Peso loan − 285,714,286 285,714,286 928,571,428 1,500,000,000 Interest − 67,287,712 53,490,683 81,004,361 201,782,756Due to related parties 164,538,085 − − − 164,538,085

2,897,810,496 3,999,360,097 1,024,941,372 1,010,568,086 8,932,680,051

Financial AssetsCash Cash on hand and in banks 1,027,901,738 − − − 1,027,901,738 Short-term investments 1,116,489 − − − 1,116,489Receivables Trade receivables 2,033,245,781 3,731,210,096 8,466,967 7,355,335 5,780,278,179 Consultancy fees − 305,946,232 − − 305,946,232 Other receivables 39,961,989 10,477,905 874,352 859,352 52,173,598Due from related parties 79,415,085 − − − 79,415,085

3,181,641,082 4,047,634,233 9,341,319 8,214,687 7,246,831,321Liquidity gap (position) (P=283,830,586) (P=48,274,136) P=1,015,600,053 P=1,002,353,399 P=1,685,848,730


Financial LiabilitiesAccounts payable and accrued expenses* P=2,051,815,634 P=1,623,343,874 P=655,086,898 P=3,048,785 P=4,333,295,191Bank loans Peso loan − 3,330,000,000 − − 3,330,000,000 Interest − 72,170,878 − − 72,170,878Long-term debt Peso loan − 307,272,794 1,179,583,993 298,857,498 1,785,714,285 Interest − 41,648,848 − − 41,648,848Due to related parties 37,352,425 − − − 37,352,425

2,089,168,059 5,374,436,394 1,834,670,891 301,906,283 9,600,181,627

(Forward)

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*Excludes statutory liabilities

Foreign currency riskCurrency risk is the potential decline in the value of the financial instruments due to exchange ratefluctuations. The Group’s currency arise mainly from cash and receivables which aredenominated in a currency other than the Group’s functional currency or will be denominated insuch a currency.

The following tables demonstrate the sensitivity to a reasonably possible change in the US dollar(USD), Singapore dollar (SGD), Euro (EUR) and Japan yen (YEN) currency rates, with allvariables held constant, of the Group’s profit before tax (due to changes in the fair value ofmonetary assets and liabilities):

2016 2015Percentage

increase/decreasein foreign currency

Effect on profitbefore tax

(in PHP)

Percentageincrease/ decrease

in foreign currency

Effect on profitbefore tax(in PHP)

USD + 2.1% P=1,316,205 +2.5% P=1,946,165SGD + 4.1% 495,498 +2.3% 408,063EUR + 1.9% 15,917 +2.6% 76,098YEN + 3.9% 948 +2.3% 2,722,936GBP + 1.8% 214 +13.4% 1,880

USD - 2.1% (P=1,316,205) -2.5% (P=1,946,165)SGD - 4.1% (495,498) -2.3% (408,063)EUR - 1.9% (15,917) -2.6% (76,098)YEN - 3.9% (948) -2.3% (2,722,936)GBP - 1.8% (214) -13.4% (1,880)

The forecasted movements in percentages used were sourced by management from an affiliatedbank.


Financial AssetsCash Cash on hand and in banks P=1,269,163,853 P=− P=− P=− P=1,269,163,853 Short-term investments 1,078,227 − − − 1,078,227Receivables Trade receivables 2,365,729,240 2,817,476,103 15,210,985 35,052,524 5,233,468,852 Consultancy fees − 289,688,635 − − 289,688,635 Other receivables 6,876,235 31,953,720 13,779,395 4,672,298 57,281,648Due from related parties 74,552,130 − − − 74,552,130

3,717,399,685 3,139,118,458 28,990,380 39,724,822 6,925,233,345Liquidity gap (position) (P=1,628,231,626) P=2,235,317,936 P=1,805,680,511 P=262,181,461 P=2,674,948,282

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The foreign currency denominated financial assets and financial liabilities in original currenciesand equivalents to the functional and presentation currency are as follows:

2016

USD1 SGD2 EUR3 YEN4 GBP5Equivalents in

PHPFinancial assets

Cash and cash equivalents $1,212,826 S$353,997 €16,740 ¥57,919 £− P=73,353,633Receivables 196,780 − − − − 9,783,902

1,409,606 353,997 16,740 57,919 − 83,137,535Financial liabilities

Accounts payable andaccrued expenses 156,078 − − − 200 7,772,372

$1,253,528 S$353,997 €16,740 ¥57,919 (£200) P=75,365,1631 Exchange rate used - P=49.72 to US$12 Exchange rate used - P=34.35 to S$13 Exchange rate used - P=51.84 to €14 Exchange rate used - P=0.42 to ¥15 Exchange rate used - P=60.87 to £1

2015

USD1 SGD2 EUR3 YEN4 GBP5Equivalents in

PHPFinancial assets

Cash and cash equivalents $211,901 S$531,071 €16,731 ¥62,202,248 £− P=52,898,100Receivables 697,691 − 40,800 245,838,594 − 130,821,382

909,592 531,071 57,531 308,040,842 − 183,719,482Financial liabilities

Accounts payable andaccrued expenses 483,434 8,599 167 − 200 23,061,319

$426,158 S$522,472 €57,364 ¥308,040,842 (£200) P=160,658,1631 Exchange rate used - P=47.06 to US$12 Exchange rate used - P=33.52 to S$13 Exchange rate used - P=51.74 to €14 Exchange rate used - P=0.39 to ¥15 Exchange rate used - P=70.18 to £1

35. Other Matters

a. In 2016, Equipment Engineers, Inc. acquired 60% ownership in JPSAI for P=30.0 million.JPSAI was incorporated on December 19, 2016 and is engaged in the business of rental andsupplying scaffolding and formworks. As of March 10, 2017, JPSAI has not yet startedcommercial operations.

b. On April 30, 2016, ARCC filed a claim with the International Court of Arbitration in Londonfor the RP2 Naphtha and Aromatics Package Project in respect of the delay, disruption andacceleration of works to complete the Project. Subsequently, additional claim ofSR100.0 million (P=1,328.1 million) has been submitted to the main contractor, Snamprogetti,for the associated prolongation cost for further extension of Mechanical Completion fromApril 30, 2016 to August 25, 2016 due to continuing delays attributable to Snamprogetti.

On May 31, 2016, ARCC entered into a settlement agreement with Snamprogetti wherein thelatter will pay the former SR141.0 million (P=1,872.6 million) for the aforementioned claims.

On October 26, 2016, ARCC submitted a claim of SR166.0 million (P=2,204.6 million) of theprolongation and disruption cost due to the continued failures and delays attributable to themain contractor Snamprogetti.

As of March 10, 2017, ARCC and Snamprogetti have not agreed on the final settlementamount.

EEI CORPORATION AND SUBSIDIARIESINDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND SUPPLEMENTARY SCHEDULESSEC FORM 17-A

CONSOLIDATED FINANCIAL STATEMENTS

Statement of Management’s Responsibility for Consolidated Financial Statements

Report of Independent Auditors’ Report

Consolidated Statements of Financial Position as at December 31, 2016 and 2015

Consolidated Statements of Income for the years ended December 31, 2016, 2015 and 2014

Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015 and 2014

Consolidated Statements of Changes in Equity for the years ended December 31, 2016, 2015 and 2014

Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014

Notes to Consolidated Financial Statements

SUPPLEMENTARY SCHEDULES

Report of Independent Auditors’ on Supplementary Schedules

Schedules Required under SRC Rule 68, As AmendedA. Financial AssetsB. Amounts Receivable from Directors, Officers, Employees, Related Parties, and

Principal Stockholders (Other than Related Parties)C. Amounts Receivable from/Payable to Related Parties which are Eliminated during the

Consolidation of Financial StatementsD. Intangible AssetsE. Long-term DebtF. Indebtedness to Related PartiesG. Guarantees of Securities of Other IssuersH. Capital Stock

Additional ComponentsI. Schedule of Reconciliation of Retained Earnings Available for Dividend Declaration

II. Schedule of all the effective standards and interpretations under PFRS as at December 31, 2016

III. Map of the relationships of the Companies within the Group

IV.Schedule of Financial Soundness Indicators

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INDEPENDENT AUDITOR’S REPORTON SUPPLEMENTARY SCHEDULES

The Board of Directors and StockholdersEEI CorporationNo. 12 Manggahan StreetBagumbayan, Quezon City

We have audited in accordance with Philippine Standards on Auditing (PSAs) the consolidated financialstatements of EEI Corporation and its subsidiaries (the Group) as at December 31, 2016 and 2015 and foreach of the three years in the period ended December 31, 2016, included in this Form 17-A and haveissued our report thereon dated March 10, 2017. Our audits were made for the purpose of forming anopinion on the basic financial statements taken as a whole. The schedules listed in the Index toConsolidated Financial Statements and Supplementary Schedules are the responsibility of the Group’smanagement. These schedules are presented for the purpose of complying with the Securities RegulationCode Rule No. 68, As Amended (2011), and are not part of the basic financial statements. Theseschedules have been subjected to the auditing procedures applied in the audit of the basic financialstatements and, in our opinion, in all material respects, the information required to be set forth therein inrelation to the basic financial statements taken as a whole.



March 10, 2017


Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph


A member firm of Ernst & Young Global LimitedA member firm of Ernst & Young Global Limited

*SGVFS022008*

EEI CORPORATION AND SUBSIDIARIESSUPPLEMENTARY INFORMATION AND DISCLOSURES REQUIRED ONSRC RULE 68 AS AMENDEDDECEMBER 31, 2016

Philippine Securities and Exchange Commission (SEC) issued the amended Securities RegulationCode Rule SRC Rule 68 which consolidates the two separate rules and labeled in the amendment as“Part I” and “Part II”, respectively. It also prescribed the additional information and schedulerequirements for issuers of securities to the public.

Below are the additional information and schedules required by SRC Rule 68, as Amended (2011) thatare relevant to the Group. This information is presented for purposes of filing with the SEC and is notrequired part of the basic financial statements.

Schedule A. Financial AssetsThe Group is not required to disclose the financial assets in equity securities as the total available-for-share securities amounting P=368.0 million do not constitute 5% or more of the total current assets ofthe Group as at December 31, 2016.

Schedule B. Amounts Receivable from Directors, Officers, Employees, Related Partiesand Principal Stockholders (Other than Related Parties)Below is the schedule of advances to employees of the Group with balances above P=100,000 as atDecember 31, 2016:

Name

Balance atbeginning

of year AdditionsCollections/Liquidations

Balance atend of period

Macapagal, Norman K. (Senior Vice President) P=1,532,053 P=23,688 (P=23,688) P=1,532,053Mercado, Oscar D. (Senior Vice President) 1,453,861 22,359 (1,476,220) −Cabrera, Lovette O. (Project Manager) 159,546 − (159,546) −San Miguel, Simon Elmer D. (Asst. Vice President) 489,035 − (489,035) −Villarin, Pantaleon T. Jr. (Manager) 168,289 − (168,289) −Alonzo, Antonina J. (Group Supervisor) 121,292 − − 121,292Canero, Raul C. (Supervisor) 117,460 − − 117,460Burgos, Manuel B. (Construction Manager) 108,150 19,043 (19,043) 108,150Zulueta, Reynaldo S. (Accounting Supervisor) 101,197 − (95,267) 5,930Albarda, Joh Christian (Junior Cost Engineer) 209,959 − (43,093) 166,866Largosta, Christopher M. (Accounting Supervisor) 198,846 − (49,176) 149,670Sunga, Renato Z. (HRD Training Supervisor) 107,321 139,133 (41,750) 204,704Edorot, Rico C. (Construction Superintendent) 131,477 − (131,477) −Matibag, Jun E. (Rigger A) 173,582 − (42,000) 131,582Bernal, Edgardo A. (Group Supervisor) 125,549 − − 125,549Cadiz, Cirilo Victoriano L. (Supervisor) 113,333 − (58,538) 54,795Alcaraz, Jimmy S. (Supervisor, MEPF) 204,207 4,201 (35,765) 172,643Bondoc, Alberto D. (Foreman, Gen. Structural) 116,980 − (116,980) −Bundalian, Rolando S. (Manager, Equipment Serv) 101,760 12,350 (12,350) 101,760Duran, Roque C. (Foreman, Welding) 109,453 285,187 (394,640) −Encila, William L. (Supervisor, Forms & Scaf) 144,516 10,000 (62,729) 91,787Manalo, Noelito D. (Driver, HDE-Crane) 326,975 − (326,975) −Lalisan, Bernabe O. (Foreman, Scaffolding) − 175,634 (54,856) 120,778Tampos Jr. Eduardo C. (Foreman, Equipt./Tools Ctrl) − 139,945 (26,500) 113,445Abragan, Edmundo F. (Foreman, Warehousing) − 129,268 − 129,268Alon, Ronaldo M. (Supervisor, Logistics) − 100,000 − 100,000Puyat, Gil S. (Construction Manager) − 380,000 (212,474) 167,526Cruz, Garizaldy F. (AVP-Sales & Marketing) − 535,152 − 535,152Realin, Marco Dindo H. (Product Manager III) − 929,405 (261,000) 668,405Reyes, Roberto B., Jr. (Support Group Head) − 730,000 (613,670) 116,330TOTAL P=6,314,841 P=3,635,365 (P=4,915,061) P=5,035,145

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*SGVFS022008*

The amounts of advances to empoyees as shown above are classified under current assets. There wereno amounts written off during the year.

Schedule C. Amounts Receivable from/Payable to Related Parties which are Eliminated during theConsolidation of Financial Statements

The following is the schedule of receivables from related parties, which are eliminated in theconsolidated financial statements as at December 31, 2016:

Name and Designation of Debtor

Balance atbeginning of

period Additions Amountscollected

Balance at endof period

EEI Realty Corp P=62,430,584 P=1,048,674 (P=7,913,299) P=55,565,959Equipment Engineers, Inc. 15,484,879 57,035,125 (5,018,122) 67,501,882Philrock Construction & Services, Inc. 42,114,096 3,257 – 42,117,353Philmark, Inc. 33,704,596 – – 33,704,596EEI Power Corp. 26,495,321 11,174,501 (4,209,948) 33,459,874Gulf Asia International Corp. 17,584,340 1,711,988 (7,206,387) 12,089,941EEI Construction & Marine, Inc. 7,943,768 8,225,803 (6,423,616) 9,745,955EEI Corporation (GUAM) Inc. 2,308,868 139,660 (10,084) 2,438,444GAIC Manpower Services Inc. 5,213 120,223 (124,539) 897Bagumbayan Equipment Industrial Products, Inc. 38,525 44 (38,569) −EEI Ltd. 988,593 523,572 (1,512,165) −Total P=209,098,783 P=79,982,847 (P=32,456,729) P=256,624,901

The following is the schedule of payable to related parties, which are eliminated in the consolidatedfinancial statements as at December 31, 2016:

Name and Designation of Debtor

Balance atbeginning of

period Additions Amountscollected

Balance at endof period

EEI Ltd. P=279,707,893 P=3,346,933 (P=252,952,042) P=30,102,784EEI Construction & Marine, Inc 209,799,236 248,096,663 (371,208,382) 86,687,517Equipment Engineers, Inc. 122,650,579 153,540,329 (211,323,129) 64,867,779EEI Subic Corporation 89,079,662 – − 89,079,662Gulf Asia International Corp. 971,737 16,597,603 (17,120,677) 448,663GAIC Manpower Services Inc. 1,709,114 4,687,090 (5,426,274) 969,930Bagumbayan Equipment Industrial Products, Inc. 1,522,150 29,760 (71,305) 1,480,605EEI Realty Corporation 947,347 3,596,223 (4,322,354) 221,216EEI Power Corporation 12,791 − (12,791) −EEI Nouvelle Caledonie 2,107,840 − (2,107,840) −Total P=708,508,349 P=429,894,601 (P=864,544,794) P=273,858,156

Schedule D. Intangible AssetThe Group has intangible asset amounting P=2.1 million as at December 31, 2016.

DescriptionBeginning

balanceAdditions

of costCharged to cost

and expensesCharged to

other accounts

Other chargesadditions

(deductions) Ending balanceSoftware Cost

(included in“OtherNoncurrentAsset” account inthe consolidatedstatement offinancial position P=6,141,131 P=− P=4,067,874 P=− P=− P=2,073,257

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*SGVFS022008*

Schedule E. Long-term DebtBelow is the schedule of long-term debt of the Group:

Type of Obligation Amount Current Noncurrent Collateral

Parent Company Fixed-rate corporate promissory notes with effective interest of 4.8000% per annum for seven (7) years P=1,089,285,715 P=214,285,715 P= 875,000,000 Clean/No Collateral

EEI PowerPeso-denominated seven (7) year term loan, with interest of 4.8000% per annum inclusive of two-year grace period on principal amortization 410,714,285 71,428,571 339,285,714

With CorporateGuarantee

P=1,500,000,000 P=285,714,286 P=1,214,285,714

Schedule F. Indebtedness to Related Parties (Long Term Loans from Related Companies)As at December 31, 2016, the Parent Company has no long-term loans from its related parties.

Schedule G. Guarantees of Securities of Other IssuersThere are no guarantees of securities of other issuing entities by the Group as at December 31, 2016.

Schedule H. Capital Stock

Title of issueNumber of

shares authorized

Number ofshares issued

and outstandingas shown underrelated balance

sheet caption

Number ofshares

reserved foroptions,

warrants,conversion

and otherrights

Number ofshares held byrelated parties

Directors,Officers and

Employees OthersCommon Shares 2,000,000,000 1,036,281,485 35,000,000 605,393,599 3,571,740 427,316,146Preferred Shares 400,000,000 – – – – –

EEI CORPORATIONRECONCILIATION OF RETAINED EARNINGS AVAILABLE FORDIVIDEND DECLARATION

Unappropriated retained earnings, January 1, 2016 P=2,731,206,723Less: Deferred tax asset (57,745,000)

Unappropriated retained earnings, January 1, 2016, as adjusted 2,673,461,723Net income during the period closed to retained earnings 547,764,511Add: Unrealized foreign exchange loss, after tax 318,975Less: Dividend declarations during the year (207,256,297)

Treasury stock (3,720,790)

Unappropriated retained earnings available for dividenddistribution, December 31, 2016 P=3,010,568,122

EEI CORPORATION AND SUBSIDIARIESSCHEDULE OF ALL THE EFFECTIVE STANDARDS ANDINTERPRETATIONS UNDER PFRS AS AT DECEMBER 31, 2016

Below is the list of all effective PFRS, Philippine Accounting Standards (PAS) and PhilippineInterpretations of International Financial Reporting Interpretations Committee (IFRIC) as ofDecember 31, 2016:

PHILIPPINE FINANCIAL REPORTING STANDARDSAND INTERPRETATIONSEffective as of December 31, 2016 Adopted

NotAdopted

NotApplicable

Framework for the Preparation and Presentation ofFinancial StatementsConceptual Framework Phase A: Objectives and qualitativecharacteristics

Ο

PFRSs Practice Statement Management Commentary Ο

Philippine Financial Reporting Standards

PFRS 1(Revised)

First-time Adoption of PhilippineFinancial Reporting Standards Ο

Amendments to PFRS 1 and PAS 27: Costof an Investment in a Subsidiary, JointlyControlled Entity or Associate

Ο

Amendments to PFRS 1: AdditionalExemptions for First-time Adopters Ο

Amendment to PFRS 1: LimitedExemption from Comparative PFRS 7Disclosures for First-time Adopters

Ο

Amendments to PFRS 1: SevereHyperinflation and Removal of Fixed Datefor First-time Adopters

Ο

Amendments to PFRS 1: GovernmentLoans Ο

PFRS 2 Share-based Payment Ο

Amendments to PFRS 2: VestingConditions and Cancellations Ο

Amendments to PFRS 2: Group Cash-settled Share-based Payment Transactions Ο

Amendments to PFRS 2: Classificationand Measurement of Share-based PaymentTransactions

Ο

PFRS 3(Revised)

Business CombinationsΟ

- 2 -


NotAdopted

NotApplicable

PFRS 4 Insurance Contracts Ο

Amendments to PAS 39 and PFRS 4:Financial Guarantee Contracts Ο

Amendments to PFRS 4: ApplyingPFRS 9, Financial Instruments withPFRS 4, Insurance Contracts

Ο

PFRS 5 Non-current Assets Held for Sale andDiscontinued Operations Ο

PFRS 6 Exploration for and Evaluation of MineralResources Ο

PFRS 7 Financial Instruments: Disclosures Ο

Amendments to PFRS 7: Reclassificationof Financial Assets Ο

Amendments to PFRS 7: Reclassificationof Financial Assets - Effective Date andTransition

Ο

Amendments to PFRS 7: ImprovingDisclosures about Financial Instruments Ο

Amendments to PFRS 7: Disclosures -Transfers of Financial Assets Ο

Amendments to PFRS 7: Disclosures -Offsetting Financial Assets and FinancialLiabilities

Ο

Amendments to PFRS 7: MandatoryEffective Date of PFRS 9 and TransitionDisclosures

Ο

Amendments to PFRS 7: HedgeAccounting Ο

PFRS 8 Operating Segments Ο

PFRS 9 (finalversion)

Financial InstrumentsΟ*

PFRS 10 Consolidated Financial Statements Ο

Amendments to PFRS 10: TransitionGuidance Ο

Amendments to PFRS 10: InvestmentEntities Ο

*Not early adopted

- 3 -


NotAdopted

NotApplicable

PFRS 10 Amendments to PFRS 10: Sale orContribution of Assets between an Investorand its Associate or Joint Venture

Ο**

Amendments to PFRS 10: InvestmentEntities - Applying the ConsolidationException

Ο

PFRS 11 Joint Arrangements Ο


Amendments to PFRS 11: Accounting forAcquisitions of Interests in JointOperations

Ο

PFRS 12 Disclosure of Interests in Other Entities Ο


Amendments to PFRS 12: InvestmentEntities Ο

Amendments to PFRS 12: InvestmentEntities - Applying the ConsolidationException

Ο

PFRS 13 Fair Value Measurement Ο

PFRS 14 Regulatory Deferral Accounts Ο

PFRS 15 Revenue from Contracts with Customers Ο*Amendments to PFRS 15, Clarifications toPFRS 15 Ο*

PFRS 16 Leases Ο*Philippine Accounting Standards

PAS 1(Revised)

Presentation of Financial Statements Ο

Amendment to PAS 1: Capital Disclosures Ο

Amendments to PAS 32 and PAS 1:Puttable Financial Instruments andObligations Arising on Liquidation

Ο

Amendments to PAS 1: Presentation ofItems of Other Comprehensive Income Ο

Amendments to PAS 1, DisclosureInitiative Ο

PAS 2 Inventories Ο

*Not early adopted**Effectivity was deferred by the Financial Reporting Standards Council

- 4 -


NotAdopted

NotApplicable

PAS 7 Statement of Cash Flows Ο

Amendments to PAS 7: DisclosureInitiative Ο*

PAS 8 Accounting Policies, Changes inAccounting Estimates and Errors Ο

PAS 10 Events after the Reporting Period Ο

PAS 11 Construction Contracts Ο

PAS 12 Income Taxes Ο

Amendment to PAS 12 - Deferred Tax:Recovery of Underlying Assets Ο

Amendments to PAS 12: Recognition ofDeferred Tax Assets for Unrealized Losses Ο*

PAS 16 Property, Plant and Equipment Ο

Amendments to PAS 16: Clarification ofAcceptable Methods of Depreciation andAmortization

Ο

Amendments to PAS 16: Agriculture -Bearer Plants Ο

PAS 17 Leases Ο

PAS 18 Revenue Ο

PAS 19(Revised)

Employee Benefits Ο

Amendments to PAS 19: Defined BenefitPlans: Employee Contributions Ο

PAS 20 Accounting for Government Grants andDisclosure of Government Assistance Ο

PAS 21 The Effects of Changes in ForeignExchange Rates Ο

Amendment: Net Investment in a ForeignOperation Ο

PAS 23(Revised)

Borrowing CostsΟ

PAS 24(Revised)

Related Party DisclosuresΟ

PAS 26 Accounting and Reporting by RetirementBenefit Plans Ο

PAS 27(Amended)

Separate Financial StatementsΟ

*Not early adopted

- 5 -


NotAdopted

NotApplicable

Amendments to PAS 27: InvestmentEntities Ο

Amendments to PAS 27: Equity Methodin Separate Financial Statements Ο

PAS 28(Amended)

Investments in Associates and JointVentures Ο

PAS 28(Amended)

Amendments to PAS 28: Sale orContribution of Assets between anInvestor and its Associate or Joint Venture

Ο**

Amendments to PAS 28, InvestmentEntities: Applying the ConsolidationException

Ο

PAS 29 Financial Reporting in HyperinflationaryEconomies Ο

PAS 32 Financial Instruments: Disclosure andPresentation Ο

Amendments to PAS 32 and PAS 1:Puttable Financial Instruments andObligations Arising on Liquidation

Ο

Amendment to PAS 32: Classification ofRights Issues Ο

Amendments to PAS 32: OffsettingFinancial Assets and Financial Liabilities Ο

PAS 33 Earnings per Share Ο

PAS 34 Interim Financial Reporting Ο

PAS 36 Impairment of Assets Ο

PAS 37 Amendments to PAS 36: RecoverableAmount Disclosures for Non-FinancialAssets

Ο

Provisions, Contingent Liabilities andContingent Assets Ο

PAS 38 Intangible Assets Ο

Amendments to PAS 38: Clarification ofAcceptable Methods of Depreciation andAmortization

Ο

PAS 39 Financial Instruments: Recognition andMeasurement Ο

**Effectivity was deferred by the Financial Reporting Standards Council

- 6 -


NotAdopted

NotApplicable

PAS 39 Amendments to PAS 39: Transition andInitial Recognition of Financial Assets andFinancial Liabilities

Ο

Amendments to PAS 39: Cash FlowHedge Accounting of Forecast IntragroupTransactions

Ο

Amendments to PAS 39: The Fair ValueOption Ο

Amendments to PAS 39 and PFRS 4:Financial Guarantee Contracts Ο

Amendments to PAS 39 and PFRS 7:Reclassification of Financial Assets Ο

Amendments to PAS 39 and PFRS 7:Reclassification of Financial Assets -Effective Date and Transition

Ο

Amendments to Philippine InterpretationIFRIC-9 and PAS 39: EmbeddedDerivatives

Ο

Amendment to PAS 39: Eligible HedgedItems Ο

Amendments to PAS 39: Novation ofDerivatives and Continuation of HedgeAccounting

Ο

Amendments to PAS 39: HedgeAccounting Ο

PAS 40 Investment Property Ο

Amendments to PAS 40: Transfers ofInvestment Property Ο*

PAS 41 Agriculture Ο

Amendments to PAS 41: Agriculture -Bearer Plants Ο

Annual Improvements to PFRSsImprovements to PFRSs (2008) Ο

Improvements to PFRSs (2009) Ο

Improvements to PFRSs (2010) Ο

Annual Improvements to PFRSs (2009-2011 Cycle) Ο


*Not early adopted

- 7 -


NotAdopted

NotApplicable



Annual Improvements to PFRSs (2014-2016 Cycle) Ο*

Philippine InterpretationsIFRIC 1 Changes in Existing Decommissioning,

Restoration and Similar Liabilities Ο

IFRIC 2 Members' Share in Co-operative Entitiesand Similar Instruments Ο

IFRIC 4 Determining Whether an ArrangementContains a Lease Ο

IFRIC 5 Rights to Interests arising fromDecommissioning, Restoration andEnvironmental Rehabilitation Funds

Ο

IFRIC 6 Liabilities arising from Participating in aSpecific Market - Waste Electrical andElectronic Equipment

Ο

IFRIC 7 Applying the Restatement Approach underPAS 29 Financial Reporting inHyperinflationary Economies

Ο

IFRIC 9 Reassessment of Embedded Derivatives Ο

Amendments to Philippine InterpretationIFRIC 9 and PAS 39: EmbeddedDerivatives

Ο

IFRIC 10 Interim Financial Reporting andImpairment Ο

IFRIC 12 Service Concession Arrangements Ο

IFRIC 13 Customer Loyalty Programmes Ο

IFRIC 14 The Limit on a Defined Benefit Asset,Minimum Funding Requirements andtheir Interaction

Ο

Amendments to Philippine InterpretationsIFRIC-14, Prepayments of a MinimumFunding Requirement

Ο

IFRIC 16 Hedges of a Net Investment in a ForeignOperation Ο

IFRIC 17 Distributions of Non-cash Assets toOwners Ο

IFRIC 18 Transfers of Assets from Customers Ο

*Not early adopted

- 8 -


NotAdopted

NotApplicable

IFRIC 19 Extinguishing Financial Liabilities withEquity Instruments Ο

IFRIC 20 Stripping Costs in the Production Phase ofa Surface Mine Ο

IFRIC 21 Levies Ο

IFRIC 22 Foreign Currency Transactions andAdvance Consideration Ο*

SIC-7 Introduction of the Euro Ο

SIC-10 Government Assistance - No SpecificRelation to Operating Activities Ο

SIC-15 Operating Leases - Incentives Ο

SIC-25 Income Taxes - Changes in the Tax Statusof an Entity or its Shareholders Ο

SIC-27 Evaluating the Substance of TransactionsInvolving the Legal Form of a Lease Ο

SIC-29 Service Concession Arrangements:Disclosures Ο

SIC-31 Revenue - Barter Transactions InvolvingAdvertising Services Ο

SIC-32 Intangible Assets - Web Site Costs Ο*Not early adopted

Standards tagged as “Not applicable” have been adopted by the Group but have no significant coveredtransactions for the year ended December 31, 2016.

Standards tagged as “Not adopted” are standards issued but not yet effective as at December 31, 2016.The Group will adopt the Standards and Interpretations when these become effective.

EEI CORPORATION AND SUBSIDIARIESMAP OF RELATIONSHIPS OF THE COMPANIES WITHIN THE GROUP

Group StructureBelow is a map showing the relationship between and among the Group and its ultimate parent company, subsidiaries, and associates as atDecember 31, 2016:

PAN MALAYAN MANAGEMENT &INVESTMENT CORPORATION

(ULTIMATE PARENT)

HOUSE OF INVESTMENTS, INC.(MIDDLE PARENT)

EEIConstruction& Marine Inc.

100%

EEI RealtyCorporation

100%

EEI PowerCorporation

EEI - 84%EE - 16%

EquipmentEngineers, Inc.

100%

Philrock Const.& Services, Inc.

100%

Philmark, Inc.100%

EEI SubicCorporation

100%

Bagumbayan Eqpt. &Industrial Products,

Inc. 100%

EEI BVI, Ltd.100%

Al-RushaidConstruction

Company Limited49%

(Associate)

EEI Corporation(Guam), Inc.

100%

Gulf AsiaInternationalCorporation

100%

GAIC ManpowerServices, Inc.

100%

GAICProfessionalServices, Inc.

100%

EEI CORPORATION

Clear JewelInvestments

Limited100%

NimaridgeInvestments,

Limited100%

EEI (PNG) Ltd.100%

JP System AsiaInc.60%

PetroWindEnergy, Inc.

20%(Joint Venture)

PetroSolarCorporation

44%(Associate)

*SGVFS022008*

EEI CORPORATION AND SUBSIDIARIESSCHEDULE OF FINANCIAL SOUNDNESS INDICATORSAS AT DECEMBER 31, 2016 and 2015

Financial Soundness Indicator

Below are the financial ratios that are relevant to the Group for the years ended December 31, 2016and 2015:

Financial ratios 2016 2015Current ratio Current assets 1.04:1 1.05:1

Current liabilities

Solvency ratio Net income plus depreciation (0.10):1 0.05:1Total liabilities

Debt to equity ratio Total liabilities 2.46:1 2.31:1Total equity

Asset-to-equity ratio Total assets 3.46:1 3.31:1Total equity

Interest rate coverage ratio EBIT* (3.20):1 4.23:1Interest expense

Return on assets Net income (4%) 1%Average total assets

Return on equity Net income (13%) 3%Average total equity

*Earnings before interest and taxes (EBIT)

*SGVFS019856*

INDEPENDENT AUDITOR’S REPORT

The Board of Directors and StockholdersEEI Limited and Subsidiaries

Opinion

We have audited the consolidated financial statements of EEI Limited and its subsidiaries (the Group),which comprise the consolidated statements of financial position as at December 31, 2016 and 2015, andthe consolidated statements of income, consolidated statements of other comprehensive income,consolidated statements of changes in equity and consolidated statements of cash flows for the years thenended, and notes to the consolidated financial statements, including a summary of significant accountingpolicies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,the consolidated financial position of the Group as at December 31, 2016 and 2015, and its consolidatedfinancial performance and its consolidated cash flows for the years then ended in accordance withPhilippine Financial Reporting Standards (PFRSs).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Ourresponsibilities under those standards are further described in the Auditor’s Responsibilities for the Auditof the Consolidated Financial Statements section of our report. We are independent of the Group inaccordance with the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics)together with the ethical requirements that are relevant to our audit of the consolidated financialstatements in the Philippines, and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and Those Charged with Governance for the ConsolidatedFinancial Statements

Management is responsible for the preparation and fair presentation of the consolidated financialstatements in accordance with PFRSs, and for such internal control as management determines isnecessary to enable the preparation of consolidated financial statements that are free from materialmisstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’sability to continue as a going concern, disclosing, as applicable, matters related to going concern andusing the going concern basis of accounting unless management either intends to liquidate the Group or tocease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.


Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph



*SGVFS019856*

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Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as awhole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s reportthat includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit conducted in accordance with PSAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if, individually or in theaggregate, they could reasonably be expected to influence the economic decisions of users taken on thebasis of these consolidated financial statements.

As part of an audit in accordance with PSAs, we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:

∂ Identify and assess the risks of material misstatement of the consolidated financial statements,whether due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk ofnot detecting a material misstatement resulting from fraud is higher than for one resulting from error,as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override ofinternal control.

∂ Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Group’s internal control.

∂ Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by management.

∂ Conclude on the appropriateness of management’s use of the going concern basis of accounting and,based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Group’s ability to continue as a going concern. Ifwe conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the consolidated financial statements or, if such disclosures areinadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up tothe date of our auditor’s report. However, future events or conditions may cause the Group to ceaseto continue as a going concern.

∂ Evaluate the overall presentation, structure and content of the consolidated financial statements,including the disclosures, and whether the consolidated financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.

∂ Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements.We are responsible for the direction, supervision and performance of the audit. We remain solelyresponsible for our audit opinion.


*SGVFS019856*

- 3 -

We communicate with those charged with governance regarding, among other matters, the planned scopeand timing of the audit and significant audit findings, including any significant deficiencies in internalcontrol that we identify during our audit.



March 10, 2017


*SGVFS019856*

EEI LIMITED AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL POSITION(Amounts in United States Dollar)

December 312016 2015

ASSETS

Current AssetsCash (Note 6) $162,173 $537,006Receivables (Note 7) 6,143,598 6,143,598Due from related parties (Note 10) 635,235 5,930,286

Total Current Assets 6,941,006 12,610,890

Noncurrent AssetInvestment in an associate (Note 8) 11,390,665 35,236,900

$18,331,671 $47,847,790

LIABILITIES AND EQUITY

Current LiabilitiesAccounts payable and accrued expenses (Note 9) $274,716 $292,996Due to related parties (Note 10) 2,388,131 2,400,990

Total Current Liabilities 2,662,847 2,693,986

EquityCapital stock - $1 par value

Authorized - 2,000,000 sharesIssued - 1,689,822 shares 1,689,822 1,689,822

Cumulative translation adjustments:Subsidiaries – (566,511)Associate (Note 8) (112,414) (112,414)

Retained earnings 14,091,416 44,142,907Total Equity 15,668,824 45,153,804

$18,331,671 $47,847,790


*SGVFS019856*

EEI LIMITED AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(Amounts in United States Dollar)

Years Ended December 312016 2015

SALE OF SERVICES $ $

EXPENSESGeneral and administrative expenses (Note 11) 348,190 3,736,364

EQUITY IN NET LOSS OF AN ASSOCIATE (Note 8) (29,181,235) (14,164,466)

OTHER INCOME (CHARGES) (Note 12) (522,066) 175,574

NET LOSS ($30,051,491) ($17,725,256)


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EEI LIMITED AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME(Amounts in United States Dollar)


NET LOSS ($30,051,491) ($17,725,256)

OTHER COMPREHENSIVE INCOME (LOSS)Item to be reclassified to profit or loss in subsequent

periods:Cumulative translation adjustments 566,511 (23,656)

TOTAL COMPREHENSIVE LOSS ($29,484,980) ($17,748,912)


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EEI LIMITED AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(Amounts in United States Dollar)

Cumulative Translation AdjustmentsCapital Stock Subsidiaries Associate Retained Earnings Total


Balances at December 31, 2014 $1,689,822 ($542,855) ($112,414) $61,868,163 $62,902,716Net loss – – – (17,725,256) (17,725,256)Other comprehensive loss – (23,656) – – (23,656)Total comprehensive loss – (23,656) – (17,725,256) (17,748,912)

Balances at December 31, 2015 1,689,822 (566,511) (112,414) 44,142,907 45,153,804Net loss – – – (30,051,491) (30,051,491)Other comprehensive income – 566,511 – – 566,511Total comprehensive loss – 566,511 – (30,051,491) (29,484,980)

Balances at December 31, 2016 $1,689,822 $– ($112,414) $14,091,416 $15,668,824

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EEI LIMITED AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in United States Dollar)


CASH FLOWS FROM OPERATING ACTIVITIESNet loss ($30,051,491) ($17,725,256)Adjustments for:

Equity in net losses of an associate (Note 8) 29,181,235 14,164,466Loss on liquidation of subsidiaries (Note 12) 524,261 –Interest income (Note 12) (97) (81)Unrealized foreign exchange loss (gain) (Note 12) (2,098) 2,709

Operating loss before working capital changes (348,190) (3,558,162)Decrease (increase) in:

Receivables – 841,126Due from related parties 5,295,051 13,505,197

Increase (decrease) in:Accounts payable and accrued expenses 14,798 (223,617)Due to related parties (12,859) 7,420

Net cash flows generated by operations 4,948,800 10,571,964Interest received 97 81Net cash flows provided by operating activities 4,948,897 10,572,045

CASH FLOWS USED IN INVESTING ACTIVITIESAdditional investment in an associate (Note 8) (5,335,000) –Advances extended to an associate (Note 8) – (11,000,000)Net cash flows used in investing activities (5,335,000) (11,000,000)

EFFECTS OF EXCHANGE RATE CHANGESON CASH 11,270 (26,366)

NET DECREASE IN CASH (374,833) (454,321)

CASH AT BEGINNING OF YEAR 537,006 991,327

CASH AT END OF YEAR (Note 6) $162,173 $537,006


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EEI LIMITED AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Amounts in United States Dollar)

1. Corporate Information

EEI Limited (the Parent Company) is a stock corporation incorporated under the laws of theBritish Virgin Islands on September 25, 1996. The Parent Company is a holding company whichprimary purpose is to purchase, acquire and undertake the whole or any part of the business,goodwill, assets and liabilities of any person, firm or company and to enter into partnership, jointventure or profit sharing arrangement with any person, firm or company.

The Parent Company is a wholly owned subsidiary of EEI Corporation, a listed companyincorporated under the laws of the Philippines and is engaged in general contracting andconstruction equipment rental. The ultimate parent company of EEI is Pan Malayan Managementand Investment Corporation, also incorporated under the laws of the Philippines.

The Parent Company maintains its books of accounts in United States (US) Dollars in thePhilippine office of EEI Corporation, which provides business and administrative support to theParent Company.

The registered office address of the Parent Company is Offshore Incorporations Centre, RoadTown, Tortola, British Virgin Islands.

The consolidated financial statements of the Group were approved for issue by the Board ofDirectors (BOD) on March 10, 2017.

2. Basis of Preparation

The consolidated financial statements of the Group have been prepared on the historical cost basisand are presented in US Dollars ($), which is also the Parent Company’s functional currency.Except as indicated, all amounts are rounded off to the nearest US Dollar.

Statement of ComplianceThe Parent Company, being a subsidiary of a listed company in the Philippines, prepares theseconsolidated financial statements for submission to the Philippine Securities and ExchangeCommission as required under Paragraph 9 (B), Part II of Securities Regulation Code Rule 68, AsAmended (2011).

Basis of ConsolidationThe consolidated financial statements include the Parent Company and the following companiesthat it controls as of December 31:

Percentage of ownership

Subsidiaries Place of incorporation Nature of business Functional currency2016 2015

Direct Indirect Direct IndirectClear Jewel Investments, Ltd. British Virgin Islands Holding company US Dollar 100 – 100 –EEI Corporation (Singapore)

Pte. Ltd.*Singapore Construction services

Singapore Dollar – – – 100Nimaridge Investments Ltd. British Virgin Islands Holding company US Dollar 100 – 100 –EEI (PNG), Ltd Papua New Guinea Holding company US Dollar – 100 – 100EEI Nouvelle-Caledonie

SARL* New CaledoniaConstruction services

French Franc – – 100 –*Liquidated in 2016

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Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Groupobtains control, and continue to be consolidated until the date when such control ceases.

Control is achieved when the Group is exposed, or has rights, to variable returns from itsinvolvement with the investee and has the ability to affect those returns through its power over theinvestee. Specifically, the Group controls an investee if and only if the Group has:

a) power over the investee (i.e. existing rights that give it the current ability to direct the relevantactivities of the investee);

b) exposure, or rights, to variable returns from its involvement with the investee; andc) the ability to use its power over the investee to affect its returns.

Consolidated financial statements are prepared using uniform accounting policies for liketransactions and other events in similar circumstances. Adjustments, where necessary, are made toensure consistency with the policies adopted by the Group.

All intra-group balances, transactions, income and expenses, and profits and losses resulting fromintra-group transactions are also eliminated in full. However, intra-group losses are alsoeliminated but are considered as impairment indicator of the assets transferred.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as anequity transaction. If the Group loses control over a subsidiary, it:

∂ derecognizes the assets (including goodwill) and liabilities of the subsidiary;∂ derecognizes the carrying amount of any non-controlling interests;∂ derecognizes the cumulative translation differences recorded in equity;∂ recognizes the fair value of the consideration received;∂ recognizes the fair value of any investment retained;∂ recognizes any surplus or deficit in profit or loss; and∂ reclassifies the group’s share of components previously recognized in other comprehensive

income to profit or loss or retained earnings, as appropriate, as would be required if the Grouphad directly disposed of the related assets or liabilities

3. Changes in Accounting Policies

The accounting policies adopted are consistent with those of the previous financial year, exceptthat the Group has adopted the following new accounting pronouncements startingJanuary 1, 2016. Adoption of these pronouncements did not have any significant impact on theGroup’s financial position or performance unless otherwise indicated.

∂ Amendments to PFRS 10, PFRS 12 and PAS 28, Investment Entities: Applying theConsolidation Exception

∂ Amendments to PFRS 11, Accounting for Acquisitions of Interests in Joint Operations∂ PFRS 14, Regulatory Deferral Accounts∂ Amendments to PAS 1, Disclosure Initiative∂ Amendments to PAS 16 and PAS 38, Clarification of Acceptable Methods of

Depreciation and Amortization∂ Amendments to PAS 16 and PAS 41, Agriculture: Bearer Plants∂ Amendments to PAS 27, Equity Method in Separate Financial Statements

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∂ Annual Improvements to PFRSs 2012 - 2014 Cycle• Amendment to PFRS 5, Changes in Methods of Disposal• Amendment to PFRS 7, Servicing Contracts• Amendment to PFRS 7, Applicability of the Amendments to PFRS 7 to Condensed

Interim Financial Statements• Amendment to PAS 19, Discount Rate: Regional Market Issue• Amendment to PAS 34, Disclosure of Information ‘Elsewhere in the Interim

Financial Report’

Standards issued but not yet effectivePronouncements issued but not yet effective are listed below. Unless otherwise indicated, theGroup does not expect that the future adoption of the said pronouncements to have a significantimpact on its consolidated financial statements. The Group intends to adopt the followingpronouncements when they become effective.


∂ Amendment to PFRS 12, Clarification of the Scope of the Standard (Part of AnnualImprovements to PFRSs 2014 - 2016 Cycle)

∂ Amendments to PAS 7, Statement of Cash Flows, Disclosure Initiative∂ Amendments to PAS 12, Income Taxes, Recognition of Deferred Tax Assets for

Unrealized Losses


∂ Amendments to PFRS 2, Share-based Payment, Classification and Measurement ofShare-based Payment Transactions

∂ Amendments to PFRS 4, Insurance Contracts, Applying PFRS 9, Financial Instruments,with PFRS 4

∂ PFRS 15, Revenue from Contracts with Customers∂ PFRS 9, Financial Instruments

PFRS 9 reflects all phases of the financial instruments project and replaces PAS 39,Financial Instruments: Recognition and Measurement, and all previous versions ofPFRS 9. The standard introduces new requirements for classification and measurement,impairment, and hedge accounting. PFRS 9 is effective for annual periods beginning onor after January 1, 2018, with early application permitted. Retrospective application isrequired, but providing comparative information is not compulsory. For hedgeaccounting, the requirements are generally applied prospectively, with some limitedexceptions.

The adoption of PFRS 9 will have an effect on the classification and measurement of theGroup’s financial assets and impairment methodology for financial assets, but will haveno impact on the classification and measurement of the Group’s financial liabilities.

∂ Amendments to PAS 28, Measuring an Associate or Joint Venture at Fair Value (Part ofAnnual Improvements to PFRSs 2014 - 2016 Cycle)

∂ Amendments to PAS 40, Investment Property, Transfers of Investment Property∂ Philippine Interpretation IFRIC-22, Foreign Currency Transactions and Advance

Consideration

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∂ PFRS 16, Leases

Deferred effectivity

∂ Amendments to PFRS 10 and PAS 28, Sale or Contribution of Assets between an Investorand its Associate or Joint Venture

4. Significant Accounting Policies

CashCash includes cash on hand and in banks.

Financial InstrumentsDate of recognitionThe Group recognizes a financial asset or a financial liability in the consolidated statement offinancial position when it becomes a party to the contractual provisions of the instrument.Purchases or sales of financial assets that require delivery of assets within the time frameestablished by regulation or convention in the marketplace are recognized on the settlement date.The Group follows the settlement date accounting where an asset to be received and liability to bepaid are recognized on the settlement date and derecognition of an asset that is sold and therecognition of a receivable from the buyer are recognized on the settlement date.

Initial recognition of financial assets and financial liabilitiesAll financial assets and financial liabilities are initially recognized at fair value. Except forsecurities at fair value through profit or loss (FVPL), the initial measurement of financial assetsand liabilities includes transaction costs. The Group classifies its financial assets in the followingcategories: financial assets at FVPL, held-to-maturity (HTM) investments, AFS securities, andloans and receivables. The Group classifies its financial liabilities into financial liabilities atFVPL and other financial liabilities. The classification depends on the purpose for which theinvestments were acquired and whether they are quoted in an active market. Managementdetermines the classification of its investments at initial recognition and, where allowed andappropriate, re-evaluates such designation at every reporting date.

The classification depends on the purpose for which the financial assets were acquired andwhether they are quoted in an active market. Management determines the classification of itsinvestments at initial recognition and, where allowed and appropriate, re-evaluates suchdesignation at every reporting date.

Financial instruments are classified as liability or equity in accordance with the substance of thecontractual arrangement. Interest, dividends, gains and losses relating to a financial instrument ora component that is a financial liability, are reported as expense or income. Distributions toholders of financial instruments classified as equity are charged directly to equity, net of anyrelated income tax benefits.

As of December 31, 2016 and 2015, the Group has no financial assets and liabilities at FVPL,HTM investments and AFS securities.

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Fair Value MeasurementFair value is the estimated price that would be received to sell an asset or paid to transfer a liabilityin an orderly transaction between market participants at the measurement date. The fair valuemeasurement is based on the presumption that the transaction to sell the asset or transfer theliability takes place either:

∂ In the principal market for the asset or liability, or∂ In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to the Group.

The fair value of an asset or a liability is measured using the assumptions that market participantswould use when pricing the asset or liability, assuming that market participants act in theireconomic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's abilityto generate economic benefits by using the asset in its highest and best use or by selling it toanother market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for whichsufficient data are available to measure fair value, maximizing the use of relevant observableinputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statementsare categorized within the fair value hierarchy, described as follows, based on the lowest levelinput that is significant to the fair value measurement as a whole:

∂ Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities∂ Level 2 - Valuation techniques for which the lowest level input that is significant to the fair

value measurement is directly or indirectly observable; and∂ Level 3 - Valuation techniques for which the lowest level input that is significant to the fair

value measurement is unobservable.

For assets and liabilities that are recognized in the financial statements on a recurring basis, theGroup determines whether transfers have occurred between Levels in the hierarchy by re-assessingcategorization (based on the lowest level input that is significant to the fair value measurement asa whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilitieson the basis of the nature, characteristics and risks of the asset or liability and the level of the fairvalue hierarchy as explained above.

“Day 1” differenceWhere the transaction price in a non-active market is different from the fair value from otherobservable current market transactions in the same instrument or based on a valuation techniquewhose variables include only data from observable market, the Group recognizes the differencebetween the transaction price and fair value (a “Day 1” difference) in profit or loss under “Interestand other income (charges)” accounts unless it qualifies for recognition as some other type of assetor liability. In cases where fair value is determined using data which is not observable, thedifference between the transaction price and model value is only recognized in profit or loss when

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the inputs become observable or when the instrument is derecognized. For each transaction, theGroup determines the appropriate method of recognizing the “Day 1” difference amount.

Loans and receivablesLoans and receivables are nonderivative financial assets with fixed or determinable payments andfixed maturities that are not quoted in an active market. They are not entered into with theintention of immediate or short-term resale and are not designated as AFS financial asset orfinancial assets at FVPL. This accounting policy relates to the consolidated statements offinancial position captions “Receivables” and “Due from related parties”.

After initial measurement, the loans and receivables are subsequently measured at amortized costusing the effective interest method, less allowance for impairment. Amortized cost is calculatedby taking into account any discount or premium on acquisition and fees that are an integral part ofthe effective interest rate. The losses arising from impairment of such loans and receivables arerecognized in the consolidated statements of income.

Other financial liabilitiesOther financial liabilities are financial liabilities not designated at FVPL where the substance ofthe contractual arrangement results in the Group having an obligation either to deliver cash oranother financial asset to the holder or to satisfy the obligation other than by the exchange of afixed amount of cash.

After initial measurement, other financial liabilities are subsequently measured at amortized costusing the effective interest method. Amortized cost is calculated by taking into account anydiscount or premium on the issue and fees that are an integral part of the effective interest rate.

Gains and losses are recognized in the consolidated statement of income when the liabilities arederecognized or impaired, as well as through the amortization process.

This accounting policy relates to the consolidated statements of financial position captions“Accounts payable and accrued expenses” and “Due to related parties”.

Assets carried at amortized costIf there is objective evidence that an impairment loss on loans and receivables carried at amortizedcost has been incurred, the amount of the loss is measured as the difference between the asset’scarrying amount and the present value of estimated future cash flows (excluding future creditlosses that have not been incurred) discounted at the financial asset’s original effective interest rate(that is, the effective interest rate computed at initial recognition). The carrying amount of theasset shall be reduced either directly or through use of an allowance account. The amount of theloss shall be recognized in the consolidated statement of income.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can berelated objectively to an event occurring after the impairment was recognized, the previouslyrecognized impairment loss is reversed. Any subsequent reversal of an impairment loss isrecognized in the consolidated statement of income, to the extent that the carrying value of theasset does not exceed its amortized cost at the reversal date.

Derecognition of Financial Assets and Financial LiabilitiesFinancial assetA financial asset (or, where applicable a part of a financial asset or part of a group of similarfinancial assets) is derecognized where: (a) the right to receive cash flows from the asset hasexpired; (b) the Group has transferred its right to receive cash flows from the asset or has assumed

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an obligation to pay them in full without material delay to a third party under a pass-througharrangement and either: (i) has transferred substantially all the risks and rewards of the asset;or (ii) has neither transferred nor retained substantially all the risks and rewards of the asset, buthas transferred control of the asset.

Where the Group has transferred its rights to receive cash flows from an asset or has entered into apass-through arrangement, and has neither transferred nor retained substantially all the risks andrewards of the asset nor transferred control of the asset, the asset is recognized to the extent of theGroup’s continuing involvement in the asset. Continuing involvement that takes the form of aguarantee over the transferred asset is measured at the lower of the original carrying amount of theasset and the maximum amount of consideration that the Group could be required to repay.

Financial liabilityA financial liability is derecognized when the obligation under the liability is discharged orcancelled or has expired. Where an existing financial liability is replaced by another from thesame lender on substantially different terms, or the terms of an existing liability are substantiallymodified, such an exchange or modification is treated as a derecognition of the original liabilityand the recognition of a new liability, and the difference in the respective carrying amounts isrecognized in profit or loss.

Impairment of Financial AssetsThe Group assesses at each reporting date whether a financial asset or a group of financial assets isimpaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if,there is objective evidence of impairment as a result of one or more events that has occurred afterthe initial recognition of the asset (an incurred “loss event”) and that loss event (or events) has animpact on the estimated future cash flows of the financial asset or the group of financial assets thatcan be reliably estimated. Evidence of impairment may include indications that the borrower or agroup of borrowers is experiencing significant financial difficulty, default or delinquency ininterest or principal payments, the probability that they will enter bankruptcy or other financialreorganization and where observable data indicate that there is measurable decrease in theestimated future cash flows, such as changes in arrears or economic conditions that correlate withdefaults.

Offsetting Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount reported in the consolidatedstatement of financial position if, and only if, there is a currently enforceable legal right to offsetthe recognized amounts and there is an intention to settle on a net basis, or to realize the asset andsettle the liability simultaneously. The Group assesses that it has a currently enforceable right ofoffset if the right is not contingent on a future event, and is legally enforceable in the normalcourse of business, event of default, and event of insolvency or bankruptcy of the Group and all ofthe counterparties.

Investment in an AssociateThe Group has 49% investment in Al-Rushaid Construction Company Limited (ARCC) which isincorporated and based in the Kingdom of Saudi Arabia and is currently accounted for as anassociate. An associate is an entity in which the Group has significant influence and which isneither a subsidiary nor joint venture. Investment in an associate is accounted for under the equitymethod of accounting. Under this method, the cost of investment is increased or decreased by theequity net earnings or losses since the date of acquisition and reduced by dividends received.Unrealized intercompany profits are eliminated up to the extent of the proportionate share thereof.

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The reporting date and the accounting policies of the associate conform with those used by theGroup for like transactions and events in similar circumstances.

Impairment of Investment in an AssociateThe Group assesses investment in an associate at each reporting date whether there is anyindication that asset may be impaired. If any such indication exists, or when annual impairmenttesting for an asset is required, the Group makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset fair value less costs to sell and its value inuse. Where the carrying amount of an asset exceeds its recoverable amount, the asset isconsidered impaired and is written down to its recoverable amount. In assessing value in use, theestimated future cash flows are discounted to their present value using a pre-tax discount rate thatreflects current market assessment of the time value of money and the risks specific to the asset.In determining fair value less costs to sell, an appropriate valuation model is used. Thesecalculations are corroborated by valuation multiples or other available fair value indicators.Impairment losses are recognized in the consolidated statement of income.

A previously recognized impairment loss is reversed only if there has been a change in theestimates used to determine the asset’s recoverable amount since the last impairment loss wasrecognized. If that is the case the carrying amount of the asset is increased to its recoverableamount. That increased amount cannot exceed the carrying amount that would have beendetermined had no impairment loss been recognized for the asset in prior years. Such reversal isrecognized in the consolidated statement of income.

EquityCapital stock is measured at par value for all shares issued. When the Parent Company issuesmore than one class of stock, a separate account is maintained for each class of stock and thenumber of shares issued. Incremental costs incurred directly attributable to the issuance of newshares are shown in equity as a deduction from proceeds, net of tax.

Retained earnings represent accumulated earnings of the Group less dividends declared and anyadjustment arising from application of new accounting standards, policies or corrections of errorsapplied retroactively.

Revenue and Cost RecognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to theGroup and the revenue can be reliably measured. The Group assesses its revenue arrangementsagainst specific criteria in order to determine if it is acting as principal or agent. The Group hasconcluded that it is acting as a principal in all of its revenue arrangements. The following specificrecognition criteria must also be met before revenue is recognized:

Sale of servicesRevenue from labor supply contracts with project management and supervision is recognized onthe basis of man-hours spent, while consultancy fee is recognized as their related services arerendered. Costs of services include all direct materials and labor costs, and those indirect costsrelated to contract performance.

Interest incomeInterest income is recognized as the interest accrues taking into account the effective yield on theasset.

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Expenses“General and administrative expenses” are expenses that arise in the course of the ordinaryoperations of the Group. Expenses are recognized when incurred.

Foreign Currency-denominated Transactions and TranslationThe consolidated financial statements are presented in US Dollars, which is the Parent’s functionaland presentation currency. Each entity in the Group determines its own functional currency anditems included in the consolidated financial statements of each entity are measured using thatfunctional currency.

Transactions in foreign currencies are initially recorded in the functional currency rate at the dateof the transaction. Monetary assets and liabilities denominated in foreign currencies areretranslated at the functional currency closing rate as at the reporting date. All differences aretaken to consolidated statement of income. Nonmonetary items that are measured in terms ofhistorical cost in foreign currency are translated using the exchange rates as at the dates of initialtransactions. Nonmonetary items measured at fair value in a foreign currency are translated usingthe exchange rates at the date when the fair value was determined.

The functional currencies of the Group’s subsidiaries is United States Dollar. As at reporting date,the assets and liabilities of these subsidiaries are translated into the presentation currency of theGroup (United States Dollar) at the closing rate as at the reporting date, and the consolidatedstatement of income accounts are translated at monthly weighted average exchange rate. Theexchange differences arising on the translation of these subsidiaries are taken directly to a separatecomponent of equity under cumulative translation adjustments account.

The functional currency of the Group’s associate, ARCC, is Saudi Arabia Riyal. The movementin the closing rate for Saudi Arabia Riyal against US Dollar is accounted for in the movement ofequity for ARCC. The exchange differences arising on the translation are taken directly under“Cumulative translation adjustments” as a separate component of equity.

Upon disposal of a foreign subsidiary, the deferred cumulative amount recognized in othercomprehensive income relating to that particular foreign operation is recognized in theconsolidated statement of income.

ProvisionsProvisions are recognized when: (a) the Group has a present obligation (legal or constructive) as aresult of a past event, (b) it is probable that an outflow of resources embodying economic benefitswill be required to settle the obligation and (c) a reliable estimate can be made of the amount ofthe obligation. Where the Group expects a provision to be reimbursed, the reimbursement isrecognized as a separate asset but only when the reimbursement is virtually certain. Provisions arereviewed at each reporting date and adjusted to reflect the current best estimate.

ContingenciesContingent liabilities are not recognized in the consolidated financial statements. They aredisclosed unless the possibility of an outflow of resources embodying economic benefits isremote. Contingent assets are not recognized in the consolidated financial statements butdisclosed when an inflow of economic benefits is probable.

Events after the Financial Reporting DatePost year-end events up to the date of the auditor’s report that provide additional informationabout the Group’s position at the reporting date (adjusting events) are reflected in the consolidated

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financial statements. Post year-end events that are not adjusting events are disclosed in the notesto the consolidated financial statements when material.

5. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the accompanying consolidated financial statements requires management tomake estimates and assumptions that affect the amounts reported in the consolidated financialstatements and accompanying notes. The judgments, estimates and assumptions used in theaccompanying consolidated financial statements are based upon management’s evaluation ofrelevant facts and circumstances as at the date of the consolidated financial statements. Actualresults could differ from such estimates.

EstimateThe key assumptions concerning the future and other key sources of estimation uncertainty at thereporting date, that have a significant risk of causing a material adjustment to the carrying amountsof assets and liabilities within the next financial year, are described below. The Group based itsassumptions and estimates on parameters available when the financial statements were prepared.Existing circumstances and assumptions about future developments, however, may change due tomarket changes or circumstances arising that are beyond the control of the Group. Such changesare reflected in the assumptions when they occur.

Estimating allowance for doubtful accountsThe Group maintains an allowance for doubtful accounts at a level considered adequate to providefor potential uncollectible receivables. The level of this allowance is evaluated by management onthe basis of factors that affect the collectability of the accounts. These factors include, but are notlimited to, the length of the Group’s relationship with the debtor, the debtor’s payment behaviorand known market factors. The Group reviews the age and status of receivables and identifiesaccounts that are to be provided with allowances on a continuous basis.

As at December 31, 2016 and 2015, the carrying value of receivables amounted to $6.14 million.The carrying value of due from related parties amounted to $0.64 million and $5.93 million as atDecember 31, 2016 and 2015, respectively (see Notes 7 and 10).

6. Cash


2016 2015Cash on hand $– $292Cash in banks 162,173 536,714

$162,173 $537,006

Cash in banks earns interest at the bank deposit rates.

Interest income from cash in banks amounted to $97 and $81 in 2016 and 2015, respectively (seeNote 12).

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7. Receivables


2016 2015Consultancy fees (Note 10) $6,141,895 $6,141,895Nontrade 1,703 1,703

$6,143,598 $6,143,598

The Parent Company’s consultancy fees arise from its management and advisory services toARCC.

Nontrade receivables are noninterest-bearing and due and demandable.

8. Investment in an Associate

This account represents the Parent Company’s 49% interest in ARCC, an associate, incorporatedin the Kingdom of Saudi Arabia and engaged in electro-mechanical work, industrial plantconstruction and related works. The movements in this account follow:

2016 2015

Acquisition cost: Balance at beginning of year $765,102 $765,102 Additions 5,335,000 – Reclassification 11,000,000 –Balance at end of year 17,100,102 765,102

Accumulated equity in net earnings (losses):Balance at beginning of year 23,584,212 37,748,678

Equity in net losses (29,181,235) (14,164,466) Balance at end of year (5,597,023) 23,584,212Subtotal 11,503,079 24,349,314Equity in cumulative translation adjustments (112,414) (112,414)Advances – 11,000,000

$11,390,665 $35,236,900

The summarized financial information relating to the associate follows:

2016 2015Current assets $99,703,825 $176,175,701Noncurrent assets 49,146,917 43,922,676

Total assets $148,850,742 $220,098,377

Current liabilities $107,843,601 $127,876,610Noncurrent liabilities 17,760,886 42,758,706

Total liabilities $125,604,487 $170,635,316

Total equity $23,246,255 $49,463,061

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2016 2015Revenues $144,936,521 $272,612,727Cost 203,772,103 300,601,820Gross margin (58,835,582) (27,989,093)Other expenses (13,697,232) (8,144,751)Loss before income tax (72,532,814) (36,133,844)Proportionate ownership in the associate 49% 49%Equity in loss before income tax (35,541,079) (17,705,584)Income tax 6,359,844 3,541,118Equity in net loss ($29,181,235) ($14,164,466)

The reconciliation of the net assets of the associate to the carrying amounts of the interest in anassociate recognized in the consolidated financial statements is as follows:

2016 2015Net assets of an associate $23,246,255 $49,463,061Proportionate ownership in the associate 49% 49%Share in the net identifiable assets 11,390,665 24,236,900Advances – 11,000,000Carrying value of investment $11,390,665 $35,236,900

9. Accounts Payable and Accrued Expenses


2016 2015Accounts payable $243,655 $165,027Accrued expenses 31,061 125,799Others – 2,170

$274,716 $292,996

Trade and nontrade payables are expected to be settled within 12 months after the reporting date.

10. Related Party Transactions

Details of transactions entered into with related parties follow:

2016

CategoryAmount /

VolumeOutstanding

Balance Terms ConditionsGroup’s Parent Companya. Management and technical fees $ $635,235 Non-interest bearing Unsecured, no

impairmentAssociateb. Consultancy fee receivable 6,141,895 Non-interest bearing Unsecured, no

impairmentc. Due from related parties –* – Unsecured, with

impairmentd. Due to related parties

(Forward)

(2,387,462) Non-interest bearing Unsecured

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2016

CategoryAmount /

VolumeOutstanding


Entity under common controle. Due to related party - EEI Power

Corporation$ ($669) Non-interest bearing Unsecured

Accounting services 9,495 – –

Affiliatef. Cash – 47,194 Interest bearing,

prevailing bankdeposit rate

Unsecured, noimpairment

Interest income 95 – – –*Provided with allowance for doubtful accounts amounting to $887,767 as of December 31, 2016

2015

CategoryAmount /

VolumeOutstanding

Balance Terms ConditionsGroup’s Parent Companya. Management and technical fees $ $5,930,286 Non-interest

bearingUnsecured, no

impairmentManagement fee 1,761,790 – –Technical fee 1,600,000 – –

Associateb. Consultancy fee receivable 6,141,895 Non-interest

bearingUnsecured, no

impairmentc. Due from related party –* – Unsecured, with

impairmentd. Due to related parties (2,393,570) Non-interest

bearingUnsecured

Entity under common controle. Due to related party - EEI Power

Corporation(7,420) Non-interest

bearingUnsecured

Accounting services 9,569 – – –

Affiliatef. Cash – 52,081 Interest bearing,

prevailing bankdeposit rate

Unsecured, noimpairment

Interest income 77 – –*Provided with allowance for doubtful accounts amounting to $887,767 as of December 31, 2015

Compensation of the key management personnel of the Group amounted to $0.19 million in 2016and 2015.

Terms and conditions of transactions with related partiesOutstanding balances at year-end are unsecured, interest-free and settlement occurs in cash. Therehave been no guarantees provided or received for any related party receivables or payables. Thesemainly consist of advances and reimbursement of expenses. The Company has not recognized anyimpairment on amounts due from affiliated companies for the years ended December 31, 2016 and2015. This assessment is undertaken each financial year through a review of the financial positionof the related party and the market in which the related party operates.

- 14 -

*SGVFS019856*

11. General and Administrative Expenses

General and administrative expenses consist of:

2016 2015Personnel expenses $231,612 $286,463Professional fees 31,542 39,518Management and technical services fees (Note 10) – 3,361,790Others 85,036 48,593

$348,190 $3,736,364

Others include bank charges and final taxes.

12. Other Income (Charges)

2016 2015Foreign exchange gain (loss) $2,098 ($2,709)Interest income 97 81Loss on write-off of subsidiaries (524,261) –Others – 178,202

($522,066) $175,574

In 2016, the Group wrote-off dormant and closed subsidiaries and recognized a loss of$0.52 million. The loss mainly pertains to the reclassification of cumulative translationadjustment relating to EEI Corporation (Singapore) Pte. Ltd. previously taken up in othercomprehensive income to profit or loss.

13. Fair Value of Financial Instruments and Financial Risk Management Objective and Policies

Fair Value of Financial InstrumentsAs at December 31, 2016 and 2015, the carrying amounts of the Group’s financial assets andfinancial liabilities approximate their fair values due to their short term maturities and demandfeature.

Financial Risk Management Objectives and PoliciesThe main risks arising from the Group’s financial assets and financial liabilities are liquidity risk,credit risk and foreign currency risk. The BOD reviews and agrees on the policies for managingthese risks, which are summarized as follows:

Liquidity riskLiquidity or funding risk is the risk that an entity will encounter difficulty in raising funds to meetcommitments associated with financial instruments. Liquidity risk may result from either theinability to sell financial assets quickly at their fair values or counterparty failing on repayment ofa contractual obligation or inability to generate cash inflows as anticipated. The Group’s practiceis to maintain a level of cash that is sufficient to fund its monthly cash requirements. Operatingexpenses and working capital requirements are funded through cash collections and borrowingsfrom related parties.

- 15 -

*SGVFS019856*

As of December 31, 2016 and 2015, the Group’s financial liabilities are either due anddemandable or to be settled within one year from the year-end based on contractual maturities.These financial liabilities can be settled using all the Group’s financial assets which are also dueand demandable and matures with one year from year-end.

Credit riskCredit risk is the risk that one party to a financial instrument will fail to discharge an obligationand cause the other party to incur a financial loss.

With respect to the credit risk arising from receivables and due from related parties, the Group’sexposure to credit risk arises from default of the counterparties, with a maximum exposure equalto the carrying amount of these financial assets.

The exposure to credit risk on its receivables is managed in accordance with the Group’s creditrisk policy which requires the evaluation of the creditworthiness of the debtors such as financialperformance for the past three years.

The aging analyses of financial assets that are past due but not impaired are as follows:

2016Neither Past Due but not Impaired


Less than6 months

6 monthsand above Impaired Total

Consultancy fees receivable $ $ $6,141,895 $– $6,141,895Nontrade receivable – – 1,703 – 1,703Due from related parties 635,235 – – 887,767 1,523,002

$635,235 $– $6,143,598 $887,767 $7,666,600

2015Neither Past Due but not Impaired


Less than6 months

6 monthsand above Impaired Total

Consultancy fees receivable $ $ $6,141,895 $– $6,141,895Nontrade receivable 1,703 – – 1,703Due from related parties 5,930,286 – – 887,767 6,818,053

$5,930,286 $1,703 $6,141,895 $887,767 $12,961,651

As at December 31, 2016 and 2015, consultancy receivables and due from related parties that areneither past due nor impaired are classified as high grade. High grade pertains to receivables fromcounterparties that have strong capacity to meet financial commitments.

Foreign currency riskForeign currency risk is the potential decline in the value of the financial assets and financialliabilities due to exchange rate fluctuations. Exposure to foreign currency risk arises mainly whenreceivables and payables are denominated in a foreign currency other than the Group’s functionalcurrency or will be denominated in such a currency in the planned course of business.

- 16 -

*SGVFS019856*

The following table demonstrates the sensitivity to a reasonably possible change in French PacificFranc (XPF) and Singapore Dollar (SGD) of the Group’s financial performance (due to changes inthe fair value of monetary assets and liabilities) in 2015:

2015Percentage changein foreign currency

translation rateEffect on

income before taxXPF +1.37% $387XPF -1.37% (387)SGD +2.25% 9,900SGD -2.25% (9,900)

The foreign currency-denominated financial assets and financial liabilities in original currenciesand equivalents to the functional and presentation currency are as follows in 2015:

2015

XPF1 SGD2Equivalent

in US DollarsFinancial assetsCash in banks XPF8,785,200 S$475,739 $418,671

Financial liabilityAccounts payable and accrued expenses 5,675,693 36,658 91,053

XPF3,109,507 S$439,081 $347,3531 Exchange rate used - $0.0091 to XPF12 Exchange rate used - $0.7120 to S$1

As of December 31, 2016, there are no financial asset and financial liability that are denominatedin foreign currency.

Capital ManagementThe primary objective of the Group’s capital management is to ensure that it maintains a strongcredit rating and healthy capital ratios in order to support its business and maximize shareholders’value.The Group manages its capital structure and makes adjustments to it, in light of changes ineconomic conditions. To maintain or adjust the capital structure, the Group may adjust thedividend payment to shareholders or issue new shares. No changes were made in the objectives,policies or processes for the years ended December 31, 2016 and 2015.

14. Other Matters

On April 30, 2016, ARCC filed a claim with the International Court of Arbitration in London forthe RP2 Naphtha and Aromatics Package Project in respect of the delay, disruption andacceleration of works to complete the Project. Subsequently, additional claim ofSR100.00 million ($26.66 million) has been submitted to the main contractor, Snamprogetti, forthe associated prolongation cost for further extension of Mechanical Completion fromApril 30, 2016 to August 25, 2016 due to continuing delays attributable to Snamprogetti.

On May 31, 2016, ARCC entered into a settlement agreement with Snamprogetti wherein thelatter will pay the former SR141.00 million ($37.59 million) for the aforementioned claims.

- 17 -

*SGVFS019856*

On October 26, 2016, ARCC submitted a claim of SR166.00 million ($44.26 million) of theprolongation and disruption cost due to the continued failures and delays attributable to the maincontractor Snamprogetti.

As of March 10, 2017, ARCC and Snamprogetti have not agreed on the final settlement amount.

PHFS (rev 2006)

FAX NO.:

PSIC:

2016 2015( in P'000 ) ( in P'000 )

A. 20,203,094 22,471,733

13,568,191 14,800,386

1,029,018 1,270,242

1,903 4,176

1,025,999 1,264,988

1,116 1,078

6,806,956 6,414,500

6,806,956 6,414,500

A.1.2.1.1 5,815,626 5,301,391

A.1.2.1.2 79,415 74,552

A.1.2.1.3 980,036 1,138,436

A.1.2.1.3.1 568,641 738,101

A.1.2.1.3.2 305,946 289,689

A.1.2.1.3.3 14,795 20,191

A.1.2.1.3.4 Others 90,654 90,455

A.1.2.1.4 (68,121) (99,879)

- -

A.1.2.2.1

A.1.2.2.2

A.1.2.2.3

A.1.2.2.4

4,750,988 6,394,822

79,521 35,969

34,971 33,896

81,539 28,405

4,192,251 5,946,504

362,706 350,048

A.1.3.6.1 362,706 350,048

A.1.3.6.2

- -

- -

A.1.4.1.1A.1.4.1.2A.1.4.1.3A.1.4.1.4A.1.4.1.5

- -

A.1.4.2.1

A.1.4.2.2

A.1.4.2.3

A.1.4.2.4

A.1.4.2.5

Public Non-Financial Institutions

Public Non-Financial Institutions

A.1.4

A.1.4.1

Spare parts and supplies

This special form is applicable to Investment Companies and Publicly-held Companies (enumerated in Section 17.2 of the Securities Regulation Code (SRC), except

banks and insurance companies). As a supplemental form to PHFS, it shall be used for reporting Consolidated Financial Statements of Parent corporations and their

subsidiaries.

Domestic corporations are those which are incorporated under Philippine laws or branches/subsidiaries of foreign corporations that are licensed to do business in the

Philippines where the center of economic interest or activity is within the Philippines. On the other hand, foreign corporations are those that are incorporated abroad,

including branches of Philippine corporations operating abroad.

Financial Institutions are corporations principally engaged in financial intermediation, facilitating financial intermediation, or auxiliary financial services. Non-Financial

institutions refer to corporations that are primarily engaged in the production of market goods and non-financial services.

National GovernmentPublic Financial Institutions

NOTE:

Held to Maturity Investments - issued by domestic entities:

(A.1.4.2.1 + A.1.4.2.2 + A.1.4.2.3 + A.1.4.2.4 + A.1.4.2.5)

National Government

Private Non-Financial Institutions

635-0861635-0843

Financial Assets other than Cash/Receivables/Equity investments (A.1.4.1 + A.1.4.2 + A.1.4.3

+ A.1.4.4 + A.1.4.5 + A.1.4.6)

Private Financial Institutions

Private Financial InstitutionsPrivate Non-Financial Institutions

A.1.4.2

A.1.3.6 Others, specify (A.1.3.6.1 + A.1.3.6.2)

Public Financial Institutions

Table 1. Consolidated Balance Sheet

F I N A N C I A L D A T A

Financial Assets at Fair Value through Profit or Loss - issued by domestic entities:

(A.1.4.1.1 + A.1.4.1.2 + A.1.4.1.3 + A.1.4.1.4 + A.1.4.1.5)

TEL. NO.:

COMPANY TYPE : CONSTRUCTION

Real estate inventories

Control No.:

Form Type:

SPECIAL FORM FOR FINANCIAL STATEMENTS OF PUBLICLY-HELD AND INVESTMENT COMPANIES

NAME OF CORPORATION: EEI Corporation

No. 12 Manggahan St. Bagumbayan, Quezon CityCURRENT ADDRESS:

ASSETS (A.1 + A.2 + A.3 + A.4 + A.5 + A.6 + A.7 + A.8 + A.9 + A.10)

A.1 Current Assets (A.1.1 + A.1.2 + A.1.3 + A.1.4 + A.1.5)

A.1.2 Trade and Other Receivables (A.1.2.1 + A.1.2.2)

A.1.2.1 Due from domestic entities (A.1.2.1.1 + A.1.2.1.2 + A.1.2.1.3 + A.1.2.1.4)

If these are based on consolidated financial statements, please so indicate in the caption.

Allowance for doubtful accounts (negative entry)

A.1.2.2 Due from foreign entities, specify

(A.1.2.2.1 + A.1.2.2.2 + A.1.2.2.3 + A.1.2.2.4)

Others, specify (A.1.2.1.3.1 + A.1.2.1.3.2)

Advances to officers and employees

Cash equivalents

Advances to suppliers and subcontractors

Due from customers (trade)

Due from related parties

A.1.3.5 Cost and estimated earnings in excess of billings on uncompleted contracts

A.1.3

In domestic banks/entities

A.1.1.1

A.1.1.3

Inventories (A.1.3.1 + A.1.3.2 + A.1.3.3 + A.1.3.4 + A.1.3.5 + A.1.3.6)

A.1.3.1 Merchandise

Consultancy fees

A.1.3.4 Merchandise/Goods in transit

A.1.1 Cash and cash equivalents (A.1.1.1 + A.1.1.2 + A.1.1.3)

On hand

A.1.1.2

A.1.3.3 Construction materials

Allowance for doubtful accounts (negative entry)

A.1.3.2

Page 1

PHFS (rev 2006)

FAX NO.:

PSIC:

2016 2015( in P'000 ) ( in P'000 )

A.1.4.3 - -

A.1.4.3.1A.1.4.3.2A.1.4.3.3A.1.4.3.4A.1.4.3.5

A.1.4.4 - -

A.1.4.4.1A.1.4.4.2A.1.4.4.3A.1.4.4.4A.1.4.4.5

A.1.4.5 - - A.1.4.5.1A.1.4.5.2A.1.4.5.3A.1.4.5.4

981,229 720,822

A.1.5.1 45,266 117,361 A.1.5.2 285,948 452,810 A.1.5.3 Miscellaneous deposits 49,071 50,102 A.1.5.4 Prepaid expenses 36,575 84,310 A.1.5.5 Receivable from customers 380,297 - A.1.5.6 Creditable withholding taxes 177,888 11,851 A.1.5.7 6,184 4,388

4,481,549 4,357,138

4,580,494 4,160,011

990,849 985,553 680,548 659,981 940,130 689,432

9,066 6,961 A..2.5.1 9,066 6,961 A..2.5.2A..2.5.3A..2.5.4A..2.5.5

- - A..2.6.1A..2.6.2A..2.6.3A..2.6.4A..2.6.5

(2,719,538) (2,144,800) A.2.8 Impairment Loss or Reversal (if loss, negative entry)

1,299,936 2,265,941 1,299,936 2,265,941

- - A.3.3.1A.3.3.2A.3.3.3A.3.3.4A.3.3.5

Investment Property 203,480 231,228 Biological AssetsIntangible Assets

- - A.6.1.1A.6.1.2

Others, specify (A.6.2.1 + A.6.2.2) - - A.6.2.1A.6.2.2

A.7A.8

Assets Classified as Held for SaleAssets included in Disposal Groups Classified as Held for Sale

A.6A.5A.4

A.6.2

A.6.1 Major item/s, specify (A.6.1.1 + A.6.1.2)

A.3.3 Others, specify (A.3.3.1 + A.3.3.2 + A.3.3.3 + A.3.3.4 + A.3.3.5)

Control No.:

Form Type:



No. 12 Manggahan St. Bagumbayan, Quezon CityCURRENT ADDRESS:

635-0861

A.2.2

Receivable from EEI Retirement Fund,Inc.Input VAT

Others, specify (A.2.5.1 + A.2.5.2 + A.2.5.3 + A.2.5.4 + A.2.5.5)

TEL. NO.:

Financial Assets issued by foreign entities: (A.1.4.5.1+A.1.4.5.2+A.1.4.5.3+A.1.4.5.4)

Available-for-sale financial assets

Others

A.3 Investments accounted for using the equity method (A.3.1 + A.3.2 + A.3.3 + A.3.4)

Appraisal increase, specify (A.2.6.1 + A.2.6.2 + A.2.6.3 + A.2.6.4 + A.2.6.5)

635-0843

A.2.6


Held-to-maturity investmentsLoans and Receivables

Transportation and service equipment

Machinery, tools and construction equipment

Land, buildings and improvements

Property, plant, and equipment (A.2.1 + A.2.2 + A.2.3 + A.2.4 + A.2.5 + A.2.6 + A.2.7+ A.2.8)

A.2.4A.2.5

Construction in progress

A.3.2 Equity in foreign branches/subsidiaries/affiliatesA.3.1 Equity in domestic subsidiaries/affiliates

A.2.7 Accumulated Depreciation (negative entry)

A.2.1

A.1.4.6 Allowance for decline in market value (negative entry)

A.2.3 Furniture, fixtures, and office equipment

A.2

A.1.5

Loans and Receivables - issued by domestic entities:

(A.1.4.3.1 + A.1.4.3.2 + A.1.4.3.3 + A.1.4.3.4 + A.1.4.3.5)National Government

National GovernmentPublic Financial InstitutionsPublic Non-Financial InstitutionsPrivate Financial InstitutionsPrivate Non-Financial Institutions


Public Financial Institutions



Other Current Assets (state separately material items) (A.1.5.1 + A.1.5.2 +

A.1.5.3+A.1.5.4+A.1.5.5+A.1.5.6+A.1.5.7)

Public Non-Financial InstitutionsPrivate Financial InstitutionsPrivate Non-Financial Institutions

Financial Assets at fair value through profit or loss

Available-for-sale financial assets - issued by domestic entities:

(A.1.4.4.1 + A.1.4.4.2 + A.1.4.4.3 + A.1.4.4.4 + A.1.4.4.5)

Page 2

PHFS (rev 2006)

FAX NO.:PSIC:

2016 2015( in P'000 ) ( in P'000 )

Long-term receivables (net of current portion) (A.9.1 + A.9.2 + A.9.3) - - - -

A.9.1.1A.9.1.2A.9.1.3

- - A.9.2.1A.9.2.2A.9.2.3

Allowance for doubtful accounts, net of current portion (negative entry)Other Assets (A.10.1 + A.10.2 + A.10.3 + A.10.4 + A.10.5) 649,938 817,040

83,999 109,692

565,939 707,348 A.10.4.1 368,031 370,456 A.10.4.2 2,073 6,141 A.10.4.3 - 162,326 A.10.4.4 178,000 156,000 A.10.4.5 17,835 12,425

B. 14,359,369 15,690,490 13,073,090 14,059,391 13,069,418 14,051,629

B.1.1.1 Loans/Notes Payables 2,950,000 3,330,000 B.1.1.2 Trade Payables 4,882,317 5,168,743

B.1.1.3 Payables to Related Parties 164,538 156,583 B.1.1.4 Advances from Directors, Officers, Employees and Principal Stockholders B.1.1.5 Accruals, specify material items (B.1.1.5.1 + B.1.1.5.2 + B.1.1.5.3) 117,305 108,368

B.1.1.5.1 117,305 108,368 B.1.1.5.2B.1.1.5.3

B.1.1.6 4,955,258 5,287,935 B.1.1.6.1 16,641 18,903 B.1.1.6.2 4,652,903 4,983,318 B.1.1.6.3 285,714 285,714

- - B.1.2.1B.1.2.2B.1.2.3

- -

B.1.4.1 B.1.4.2 B.1.4.3 B.1.4.4 B.1.4.5

B.1.5 3,672 7,762 B.1.6

- -

B.1.7.1 Dividends declared and not paid at balance sheet dateB.1.7.2 Deferred Income (Unearned tuition fees)B.1.7.3 Lease liability - current portionB.1.7.4 Portion of long-term debt due within one yearB.1.7.5B.1.7.6 - -

B.1.7.6.1B.1.7.6.2B.1.7.6.3

Any other current liability in excess of 5% of Total Current Liabiilities, specify:

Others, specify (If material, state separately; indicate if the item is payable to public/private or

financial/non-financial institutions) (B.1.7.1 + B.1.7.2 + B.1.7.3 + B.1.7.4 + B.1.7.5 + B.1.7.6)

Deferred Tax Liabilities

LIABILITIES (B.1 + B.2 + B.3 + B.4 + B.5)

A.10.3


A.10.5


A.10.4 Others, specify (A.10.4.1 + A.10.4.2 + A.10.4.3 + A.10.4.4+A.10.4.5)

Trade and Other Payables to Foreign Entities (specify) (B.1.2.1 + B.1.2.2 + B.1.2.3)

Control No.:

Form Type:

SPECIAL FORM FOR CONSOLIDATED FINANCIAL STATEMENTS OF PUBLICLY-HELD AND INVESTMENT COMPANIESNAME OF CORPORATION: EEI Corporation

No. 12 Manggahan St. Bagumbayan, Quezon City

TEL. NO.:


A.9

From foreign entities, specify (A.9.2.1 + A.9.2.2 + A.9.2.3)A.9.2

A.9.1 From domestic entities, specify (A.9.1.1 + A.9.1.2 + A.9.1.3)

635-0861


Financial Liabilities (excluding Trade and Other Payables and Provisions)

(B.1.4.1 + B.1.4.2 + B.1.4.3 + B.1.4.4 + B.1.4.5)

B.1.3 Provisions

Allowance for write-down of deferred charges/bad accounts (negative entry)

B.1.1 Trade and Other Payables to Domestic Entities

(B.1.1.1 + B.1.1.2 + B.1.1.3 + B.1.1.4 + B.1.1.5 + B.1.1.6)

B.1

B.1.7

CURRENT ADDRESS:635-0843

Liabilities for Current Tax

Deferred charges - net of amortization

Accrued expenses

Receivable from customerReceivable from EEI Retirement Fund, Inc.

Billings in excess of costs and estimated earnings on uncompleted Current portion of long-term debt

Others, specify (B.1.1.6.1 + B.1.1.6.2 + B.1.1.6.3)

Deferred Income Tax

Current Liabilities (B.1.1 + B.1.2 + B.1.3 + B.1.4 + B.1.5 + B.1.6 + B.1.7)

B.1.4

A.10.2

Customers' deposits

B.1.2

A.9.3

A.10.1A.10

Others

Advance/Miscellaneous deposits

Available-for-sale securitiesSoftware cost

Page 3

PHFS (rev 2006)

FAX NO.:PSIC:

2016 2015( in P'000 ) ( in P'000 )

1,214,286 1,500,000

1,214,286 1,500,000

Indebtedness to Affiliates and Related Parties (Non-Current)

B.4

Other Liabilities (B.5.1 + B.5.2) 71,993 131,099

71,993 131,099

B.5.2.1 71,993 131,099

B.5.2.2 - -

B.5.2.3

B.5.2.4

B.5.2.5

C. 5,843,725 6,781,243

2,000,000 2,000,000

Common shares 2,000,000 2,000,000

Subscribed Capital Stock (no. of shares, par value and total value) (C.2.1 + C.2.2 + C.2.3) 1,053,266 1,053,266

1,053,266 1,053,266

Paid-up Capital Stock (C.3.1 + C.3.2) 1,036,401 1,036,401

Common shares 1,036,401 1,036,401

Preferred Shares

Additional Paid-in Capital / Capital in excess of par value / Paid-in Surplus 477,037 477,037

Noncontrolling Interest

Others, specify (C.6.1 + C.6.2 + C.6.3) 187,431 69,992

4,054 6,479

183,377 63,513

- -

Appraisal Surplus/Revaluation Increment in Property/Revaluation Surplus

Retained Earnings (C.8.1 + C.8.2) 4,146,577 5,201,534

Appropriated

Unappropriated 4,146,577 5,201,534

Head / Home Office Account (for Foreign Branches only)

Cost of Stocks Held in Treasury (negative entry) (3,721) (3,721)

20,203,094 22,471,733





CURRENT ADDRESS: No. 12 Manggahan St. Bagumbayan, Quezon City

TEL. NO.: 635-0843 635-0861

Control No.:

Form Type:

SPECIAL FORM FOR FINANCIAL STATEMENTS OF PUBLICLY-HELD AND INVESTMENT COMPANIESNAME OF CORPORATION: EEI Corporation

B.5.1 Deferred tax liabilities

B.3

B.5

B.2.5

Liabilities Included in the Disposal Groups Classified as Held for Sale

B.5.2 Others, specify (B.5.2.1 + B.5.2.2 + B.5.2.3 + B.5.2.4 + B.5.2.5)

C.1.1 2,000,000,000 authorized shares, P1 par value

Retirement Liability

Others

Authorized Capital Stock (no. of shares, par value and total value; show details) (C.1.1+C.1.2+C.1.3)C.1

B.2

B.2.2 Domestic Public Non-Financial Institutions

Foreign Financial Institutions

B.2.1 Domestic Public Financial Institutions

Long-term Debt - Non-current Interest-bearing Liabilities (B.2.1 + B.2.2 + B.2.3 + B.2.4 + B.2.5)

Domestic Private Financial Institutions B.2.3

B.2.4 Domestic Private Non-Financial Institutions

C.3.2

C.3

EQUITY (C.3 + C.4 + C.5 + C.6 + C.7 + C.8 + C.9+C.10)

C.1.2

C.1.3

C.2.1 1,053,266,000 subscribed shares, P1 par value

C.2.2

C.3.1

C.2.3

C.2

Preferred Shares

C.8

C.4

C.6

C.7

C.6.1

C.6.2

C.6.3

C.5

TOTAL LIABILITIES AND EQUITY (B + C)

C.9

C.8.1

C.8.2

C.10

Actuarial losses on retirement liability

Unrealized gain on available-for-sale securities

Other comprehensive income

Others

Others

Preferred Shares

Common shares

Page 4

PHFS (rev 2006)

FAX NO.:

PSIC:

2016 2015 2014( in P'000 ) ( in P'000 ) ( in P'000 )

A. 13,590,054 18,402,164 17,580,977

14,835,592 18,978,928 17,079,887

A.2 (1,316,130) (676,309) 423,796

70,592 99,545 77,294 61,329 28,751 35,082

9,263 70,794 42,212

A.3.5.1 14,791 5,702 7,407 A.3.5.2 - - 6,000 A.3.5.3 7,929 5,141 6,030 A.3.5.4 - 6,901 - A.3.5.5 11,417 5,390 - A.3.5.6 - - - A.3.5.7 - - 116 A.3.5.8 Income from reversal of payables 5,459 28,523 - A.3.5.9 - -

A.3.5.10 (30,333) 19,137 22,659 - - -

- - -

A.4.3.1A.4.3.2A.4.3.3A.4.3.4

- - -

A.4.4.1A.4.4.2A.4.4.3A.4.4.4

B. - - -

C. 142,659 134,382 151,571

128,723 128,776 136,923

13,936 5,606 14,648

- - -

D. COST OF SERVICES AND CONSTRUCTION CONTRACTS 12,816,868 16,608,262 15,198,735

E. 630,527 1,659,520 2,230,671

Gain / (Loss) from selling of Assets, specify

(A.4.3.1 + A.4.3.2 + A.4.3.3 + A.4.3.4)

Commision income

GROSS PROFIT (A - B - C - D)

C.2 Real estate sales

Cost of Goods Manufactured (B.1.1 + B.1.2 + B.1.3 + B.1.4 + B.1.5)B.1.1 Direct Material Used

C.3

B.1.2 Direct Labor

Finished Goods, Beginning

Goods in Process, End (negative entry)

Other Manufacturing Cost / OverheadGoods in Process, Beginning

B.1.3B.1.4

COST OF GOODS SOLD (B.1 + B.2 + B.3)

B.1

Tax refund/discount

A.4.4 Others, specify

(A.4.4.1 + A.4.4.2 + A.4.4.3 + A.4.4.4)

Recoveries from sale of obsolete inventory

Technical fees

Reversal of provision for lossesRental incomeIncome from defaultsGain on sale of assets

Other Income (non-operating) (A.4.1 + A.4.2 + A.4.3 + A.4.4)

A.4.1 Interest Income

Net Sales or Revenue / Receipts from Operations (manufacturing,

mining,utilities, trade, services, etc.) (from Primary Activity)

Other Revenue (A.3.1 + A.3.2 + A.3.3 + A.3.4 + A.3.5)

Others, specify (A.3.5.1 + A.3.5.2 + A.3.5.3 + A.3.5.4 + A.3.5.5 +

A.3.5.6 + A.3.5.7 + A.3.5.8 + A.3.5.9 + A.3.5.10)

A.3.2

A.3.4

Control No.:

Form Type:


TEL. NO.: 635-0861

CURRENT ADDRESS:

635-0843




Dividend Income

A.3.1

Table 2. Consolidated Income Statement


A.3

A.4

Interest Income

A.3.3

A.3.5

REVENUE / INCOME (A.1 + A.2 + A.3 + A.4)

NOTE: Pursuant to SRC Rule 68.1 (as amended in Nov. 2005), for fiscal years ending December 31, 2005 up to November 30, 2006,

a comparative format of only two (2) years may be filed to give temporary relief for covered companies as the more complex PFRSs

will be applied for the first time in these year end periods. After these first time applications, the requirement of three (3) year

comparatives shall resume for year end reports beginning December 31, 2006 and onwards.

C.1 Merchandise sales

A.1

Others


Share in the Profit or Loss of Associates and Joint Ventures accounted for

using the Equity Method

A.4.3

A.4.2

COST OF SALES (C.1 + C.2 + C.3)

B.3 Finished Goods, End (negative entry)

B.1.5B.2

Page 5

PHFS (rev 2006)

FAX NO.:

PSIC:

2016 2015 2014( in P'000 ) ( in P'000 ) ( in P'000 )

F. 1,089,878 886,763 788,657

F.1 Selling or Marketing Expenses

F.2 General and Administrative Expenses 1,086,420 856,638 788,776

F.3 3,458 30,125 (119)

F.3.1 3,458 30,125 (119)

F.3.2 - - -

G. 162,773 136,426 123,683

G.1 162,773 136,421 123,594

G.2

G.3

G.4 - 5 89

G.5 Other interests, specify (F.5.1 + F.5.2 + F.5.3 + F.5.4 + F.5.5) - - -

G.5.1

G.5.2

G.5.3

G.5.4

G.5.5

H. (622,124) 636,331 1,318,331

I. INCOME TAX EXPENSE (negative entry) (225,577) (433,597) (400,057)

J. (847,701) 202,734 918,274

K.

K.1

K.2

L.

M. (847,701) 202,734 918,274

N.

N.1 (0.8180) 0.1956 0.8861

Foreign exchange (gains) losses - net

Other Expenses, specify (F.3.1 + F.3.2)

Recovery on damaged properties




OPERATING EXPENSES (F.1 + F.2 + F.3 + F.4)

Table 2. Consolidated Income Statement


Control No.:

Form Type:


TEL. NO.:


635-0861

CURRENT ADDRESS:

635-0843

Amount of (i) Post-Tax Profit or Loss of Discontinued Operations; and (ii)

Post-Tax Gain or Loss Recognized on theMeasurement of Fair Value less

Cost to Sell or on the Disposal of the Assets or Disposal Group(s)

constituting the Discontinued Operation (if any)

INCOME AFTER TAX

PROFIT OR LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

PROFIT OR LOSS ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT

Basic and diluted

NET INCOME BEFORE TAX (E - F - G)

EARNINGS PER SHARE

FINANCE COSTS (G.1 + G.2 + G.3 + G.4 + G.5)

Others

Interest expense - finance lease

Interest on bonds, mortgages and other long-term loans

Interest on Short-Term Promissory Notes

Interest on Long-Term Promissory Notes

Page 6

PHFS (rev 2006)

FAX NO.:

PSIC:

2016 2015 2014( in P'000 ) ( in P'000 ) ( in P'000 )

(622,124) 636,331 1,318,331

633,612 520,729 407,908 Amortization, specify: - - -

Others, specify: 162,773 136,426 123,683 Loss on write-off of subsidiaries 26,174

(66) (7,873) (24) Equity in net earnings of asscoiate and joint venture 1,316,130 676,309 (423,796) Unrealized foreign exchange gain (loss)- net (777) 39,623 3,875 Interest income (61,329) (28,750) (35,082) Gain on sale of investment properties (11,707) (5,390)

291 Movements in retirement liabities (47,702) (14,132) 5,894

- -

Decrease (Increase) in:Receivables (367,467) (373,007) (2,244,858) Inventories (110,419) (11,357) (17,862) Due from related parties 23,590 (15,279) (9,434) Others, specify: 1,733,563 (1,899,331) (2,448,952)

45,956 17,264 (286,727) Increase (Decrease) in:

Accounts payables and accrued expenses (272,647) 686,531 1,856,010

Others, specify: 14,301 26,644 3,679 (2,262) (26,693) 11,076

Billings in excess of costs and and estimated earnings (330,415) 1,942,619 1,952,787 Pension assets and liabilities

Interest received 61,668 35,060 29,336 Interest paid (164,920) (133,625) (115,330) Income taxes paid (374,231) (420,708) (423,966)

1,651,992 1,781,391 (293,452)

Proceeds from disposals of :Investment properties 33,916 26,134 - Property and equipment 2,749 5,466 5,936 Available-for-sale securities - -

Net reduction in (additions to) :Property and equipment (734,971) (1,136,775) (497,959)

(12,200) Investment in associate and joint venture (294,869) (901,277) (122,250) Available for sale securities (167,505) - Software costs - (2,463) (3,325) Other noncurrent assets (32,750) (44,640) 30,203

Dividends received 67 7,874 233,223

(1,025,858) (2,213,186) (366,372)

Long-term debt - 1,500,000 442,454 Others, specify: 9,875,000 10,970,000 6,655,000

Bank Loans (10,255,000) (10,465,000) (6,502,000) Long-term Debt (285,714) (678,626) (53,571)

(207,256) (207,280) (207,280) - (282) (3,519)

(872,970) 1,118,812 331,084 EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 5,612 19,376 (5,266)

(241,224) 706,393 (334,006)

1,270,242 563,849 897,855 1,029,018 1,270,242 563,849

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from:

CASH FLOWS FROM FINANCING ACTIVITIESB. Net Cash Used in Investing Activities (sum of above rows)

Investment properties

A. Net Cash Provided by (Used in) Operating Activities (sum of above rows)

Customers' depositsDue to related parties

Other current assetsCosts and estimated earnings in excess of billings

Interest expense

Write-down of Property, Plant, and EquipmentChanges in Assets and Liabilities:

Depreciation

Dividend Income

Loss on sale of property and equipment

CASH FLOWS FROM OPERATING ACTIVITIES

CONSTRUCTION

Net Income Before Tax and Extraordinary Items

Table 3. Consolidated Cash Flow Statements

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities

Control No.:

Form Type:


EEI Corporation


635-0861

NAME OF CORPORATION:


CURRENT ADDRESS:

635-0843


COMPANY TYPE

TEL. NO.:

Bank loans

C. Net Cash Provided by (Used in) Financing Activities (sum of above rows)

Payments of:

NOTE: Pursuant to SRC Rule 68.1 (as amended in Nov. 2005), for fiscal years ending December 31, 2005 up to November 30, 2006, a

comparative format of only two (2) years may be filed to give temporary relief for covered companies as the more complex PFRSs will be

applied for the first time in these year end periods. After these first time applications, the requirement of three (3) year comparatives shall

resume for year end reports beginning December 31, 2006 and onwards.

Dividends paid

Others, specify :

Cash and Cash EquivalentsBeginning of yearEnd of year

NET INCREASE IN CASH AND CASH EQUIVALENTS (A + B + C)

Decrease in other noncurrent liabilities

Page 7

PHFS (rev 2006)

FAX NO.:

PSIC:

Capital StockAdditional

Paid-in Capital

Cumulative

Translation

Adjustment

Retained

Earnings

Actuarial

losses on

retirement

liability

Net Unrealized

Gain (Loss) on

Available for

Sale Securities

Treasury Stock TOTAL

A. Balance, 2014 1,036,401 477,037 17,423 5,206,080 (83,134) 9,372 (3,721) 6,659,458 B. Restated Balance 1,036,401 477,037 17,423 5,206,080 (83,134) 9,372 (3,721) 6,659,458 C. - - 160,874 - (31,651) (2,893) - 126,330

- -

- - 160,874 - (31,651) (2,893) - 126,330

C.4.1 - - 160,874 - - - - 160,874

C.4.2 - - - - (31,651) - - (31,651)

C.4.3 - - - - - (2,893) - (2,893)

C.4.4

C.4.5D. - - - 202,734 - - - 202,734

E. - - - (207,280) - - - (207,280) F. - - - - - - - -

G. - - - - - - - -

G.2G.3 -

H. - I. Net additions during the yearJ. Balance, 2015 1,036,401 477,037 178,297 5,201,534 (114,785) 6,479 (3,721) 6,781,242 L. Restated Balance 1,036,401 477,037 178,297 5,201,534 (114,785) 6,479 (3,721) 6,781,242 M. - - 110,021 - 9,843 (2,425) - 117,439

- -

- - 110,021 - 9,843 (2,425) - 117,439 M.4.1 - - - - - (2,425) - (2,425) M.4.2 - - - - 9,843 - - 9,843 M.4.3 - - 110,021 - - - - 110,021

M.4.4

M.4.5N. - - - (847,701) - - - (847,701) O. - - - (207,256) - - - (207,256)

P. - - - - - - - -

Q. - - - - - - - -

Q.2Q.3 -

R. - S. Net additions during the yearT. Balance, 2016 1,036,401 477,037 288,318 4,146,577 (104,942) 4,054 (3,721) 5,843,724

Preferred StockDeposit for future stock subscription

Reissuance of treasury stock

Net Income for the PeriodDividends (negative entry)

Appropriation for (specify)

P.1

P.2

Issuance of Capital Stock

P.3

Q.1 Common Stock

P.4P.5

Actuarial losses

Cumulative translation adjustment

M.4 Other Surplus (specify)Net unrealized gain(loss) on

M.2 Surplus (Deficit) on Revaluation of M.3 Currency Translation Differences


M.1 Surplus (Deficit) on Revaluation of

Treasury Stock

F.3

Preferred StockDeposit for future subscription

Issuance of Capital Stock

G.1 Common Stock

Surplus

(Amount in P'000)

F.2

F.4F.5

Net Income for the Period

Dividends (negative entry)Appropriation for (specify)

Actuarial losses

Net unrealized gain(loss) on

Surplus

Other Surplus (specify)

Surplus (Deficit) on Revaluation of

Control No.:

Form Type:


NAME OF CORPORATION:

Table 4. Consolidated Statement of Changes in Equity

C.2


Surplus (Deficit) on Revaluation of C.1

C.4C.3 Currency Translation Differences

F.1

Cumulative translation adjustment

EEI Corporation


635-0843 635-0861

CONSTRUCTION COMPANY TYPE :

CURRENT ADDRESS:

TEL. NO.:

Page 8

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