about the cover “…building is not about...homes, dmci mining and maynilad. from p12.3 billion,...

“…building is not about making money but putting up structures, making buildings, real things that brought real benefits to other people.”

Engr. David M. ConsunjiFounding Chairman

ABOUT THE COVER

After more than twenty years, we continue to be driven and inspired by our vision to be a world-class company delivering real and tangible benefits to millions of Filipinos.

This year’s annual report concept highlights this through split portraits, emphasizing how the different DMCI companies are changing the lives of their stakeholders for the better, through responsible leadership and high-quality products and services.

6 Who we are 7 Our strategy 9 Consolidated financial highlights10 Letter to shareholders 16 Business review 16 Construction 24 Real estate 32 Coal energy

64 Corporate sustainability and responsibility82 Board of Directors 84 Corporate governance 134 Awards and recognition

138 Statement of management’s responsibility for the consolidated financial statements

139 Statement of Board of Directors’ responsibility for internal controls and risk management systems

140 Audit committee report to the Board of Directors for the year ended 31 December 2016

142 Internal auditor’s report149 Consolidated financial statements157 Notes to consolidated financial statements

298 Further information on Board of Directors303 Further information on key officers304 Business structure305 Shareholding statistics306 Effective percentages of ownership 308 Subsidiaries and affiliate key officers

The DMCI DifferenceDMCI Holdings is a diversified engineering conglomerate, primarily engaged in general construction, real estate development, power generation, mining, water distribution and manufacturing.

Among the publicly-listed holding companies in the Philippines, it is the only one that has construction as its core investment.

40 Off-grid power 48 Nickel mining 56 Water distribution

Contents

Strategic Report

Environment, Social and Governance

Financial Statements

Additional Information

2 DELIVERING REAL BENEFITS 3INTEGRATED ANNUAL REPORT 2016

The DMCI Creed WE BELIEVE:

That construction is a noble profession whose activities are vital to economic development and national progress; That fair competition is essential to the growth and stability of the construction industry;

That a contractor’s primary responsibility to his client is to give his best in faithful compliance with their agreement;

That labor and capital should cooperate with one another so that labor may live with dignity and capital may find its just rewards;

That the ill-gotten violates business ethics and the ill-conceived wreaks havoc on the public good;

That the ultimate objectives are to serve not only man but humankind, and to build not only an enterprise but an institution that will serve society.

Vision We are the leading integrated engineering and management conglomerate in the Philippines. Through our investments, we are able to do the following:

D eliver exceptional shareholder value

M otivate and provide employees with opportunities and just

rewards

C ultivate growth in remote areas and key sectors

I ntegrate sustainable development with superior business results

Mission To invest in engineering and construction-related businesses that bring real benefits to the people and to the country

Values Our actions and behavior are guided by the following values:

� Integrity

� Fairness

� Customer Focus

� Teamwork

� Accountability

� Innovation

� Sustainability


Our StrategyAs builders, we have a different approach to investing.

1choose

We choose industries that allow us to leverage our engineering and management expertise and construction resources, while promoting development.

2engage

3 4We engage and retain our employees by investing in skills development and career opportunities.

pursue manage

We pursue businesses with unrealized value that could be unlocked through innovative engineering and management.

We manage our businesses in accordance with relevant government standards on environment, safety, quality and corporate governance practices.

Who We Are DMCI Holdings, Inc. was listed in the Philippine Stock Exchange on December 18, 1995 to extract greater value from the engineering expertise and construction resources of D.M. Consunji, Inc., the pioneering contractor behind some of the biggest and most complex infrastructures in the Philippines.

Our businesses are key players in industries that promote economic growth and social development: construction, real estate, energy, mining and water distribution.

Our ability to generate construction-related projects allows us to deliver superior gross profit margins and more predictable revenue streams.

Our expertise, scale and allied investments enable us to deliver products, services and returns that meet, and even exceed, market standards.

7INTEGRATED ANNUAL REPORT 20166 DELIVERING REAL BENEFITS

Key Figures

P12.2 BNet Income

P25.6 BEBITDA

32%EBIT Margin

19%Return on Parent Equity

22%Net Debt to Equity Ratio

P67.6 BEquity Attributable to Parent

P0.92Earnings Per Share

50%Total Dividend Payout

P176 BMarket Capitalization

As of and for the period ending 31 December 2016

Consolidated Financial Highlights(amounts in millions of Philippine Peso except earnings per share)

2016 2015 % ChangeTotal Assets 158,034 148,557 6%

Total Liabilities 74,685 73,782 1%

Total Equity 83,349 74,775 11%

Revenue 64,899 57,204 13%

Cost of Sales and Services

38,371 31,804 21%

Gross Profit 26,528 25,400 4%

Operating Expenses 6,967 6,751 3%

Government share 2,650 1,796 48%

Income Before Income Tax

19,805 20,528 -4%

Provision for Income Tax 2,278 3,605 -37%

Net Income Before Non-controlling Interest

17,527 16,923 4%

Net Income After Non-controlling Interest

12,185 12,835 -5%

One-time Investment Gains

111 530 -79%

Net Income Excluding One-time Investment Gain

12,074 12,305 -2%

As of and for the period ending 31 December


Letter toShareholders

Fellow Shareholders, 2016 was a particularly difficult year for our Company. Our two major income drivers—real estate and water services—were pulled down by accounting and taxation issues while another subsidiary was sidelined by indefinite suspensions.

Despite these business challenges, we were able to avert a steep decline in core profitability because of the banner performances of our construction and energy businesses.

In this report, we provide a detailed discussion of our financial results, and outline how our diversified businesses performed during the year. We also highlight our dividend and corporate governance milestones, and 2017 outlook for our Company.

Flat Growth In line with our earlier forecast, our Company recorded flat core net income growth in 2016 due to lower contributions from DMCI Homes, DMCI Mining and Maynilad. From P12.3 billion, our core net income dropped 2 percent to P12.1 billion.

Including a one-time gain of P530 million for the sale of our 25.11 percent share in Private Infra Dev Corporation (PIDC) in 2015 and a one-time gain of P111 million on the partial sale of our stake in Subic Water in 2016, our consolidated net income slipped 5 percent year-on-year from P12.8 billion to P12.2 billion.

Major Contributors Higher coal and power sales pushed the consolidated net income of Semirara Mining and Power Corporation (SMPC) to an all-time high level of P12 billion. This led to a 43 percent year-on-year improvement in net income contribution to the Parent, from P4.8 billion to P6.9 billion.

Net income contribution from DMCI Homes and Maynilad fell 46 percent and 19 percent, respectively. Both firms contributed P1.9 billion.


6.91SMPC

0.42DMCI POWER

1.92DMCI HOMES

0.94DMCI

1.87MAYNILAD

0.08PARENT AND OTHERS

-0.07DMCI MINING

Core Net Income Contribution (in billion pesos)

4.81

3.59

MAYNILAD

2.311.87

DMCI MINING

DMCI POWER

SMPC

DMCI HOMES

DMCI

0.50-0.07

0.380.42

6.91

1.92

0.630.94

Core Net Income Contribution per Company(in billion pesos)

2015 2016

PARENT AND OTHERS

0.080.08

The deferred recognition of revenues from its completed high-rise projects led to the earnings slump of DMCI Homes while the expiration of Maynilad’s income tax holiday in December 2015 pulled down the water company’s profitability.

Robust Performance D.M. Consunji, Inc. made a strong comeback in 2016, earning P938 million or 49 percent more than P628 million the previous year. Higher revenues and improved margins accounted for the strong performance of the construction segment.

Off-grid supplier DMCI Power Corporation continued to churn steady growth, netting an 11 percent increase from P382 million to P424 million. Higher electricity sales in Masbate and Palawan, coupled with the full-year operations of its 15.6MW bunker-fired plant in Oriental Mindoro accounted for the growth.

“Our total dividend payout over the past five years has amounted to P31.3 billion.”Stalled Operations The suspensions of DMCI Mining’s nickel assets—combined with receding nickel prices and sluggish demand for lower-grade nickel—led to a dramatic decline in its profitability. From a full-year net income of P501 million in 2015, it posted a full-year net loss of P65 million in 2016.

The Department of Environment and Natural Resources ordered the suspension of Berong Nickel Corporation in June because of the alleged discoloration of Barangay Berong’s river system and tributaries. The following month, Zambales Diversified Metals Corporation was served a suspension order due to alleged “social issues”.

Strong Dividend Commitment We are strongly committed to provide reasonable economic returns to our shareholders, even as we invest in projects that will create and sustain value over time.

On 11 May 2016, the Board of Directors declared regular and special cash dividends of P0.24 each, for a combined dividend of P0.48 per common share. The payout totaled P6.37 billion out of our unrestricted retained earnings as of 31 December 2015, in favor of the common stockholders of record as of 27 May 2016.


In the last five years, we have distributed regular cash dividends of at least 25 percent of the preceding year’s consolidated core net income, in accordance with our dividend policy.

On top of our regular cash dividends, we also paid out special cash dividends amounting to 25 percent of the previous year’s income.

In effect, our total dividend payout over the past five years has amounted to P31.3 billion, making us one of the best dividend-paying companies in the Philippines.

Corporate Governance Our Company has been steadily improving its corporate governance framework as a way to enhance our business sustainability and stakeholder accountability.

To monitor our progress, we adopted the ASEAN Corporate Governance Scorecard (ACGS) as an assessment tool. The ACGS is a corporate governance rating of a publicly-listed company’s (PLC) governance policies and practices.

The scorecard was developed by the ASEAN Capital Markets Forum and Asian Development Bank in 2011, in preparation for the ASEAN economic integration.

In the last four years, the ACGS score of our Company has nearly doubled from 43.94 points in 2013 to 87.66 points in 2016. We are encouraged by these results and commit to further improving our corporate governance principles and practices moving forward.

Year Ahead We expect to post better financial results in 2017 with the continued expansion of SMPC, strong rebound of DMCI Homes and higher electricity sales from DMCI Power.

The growth of DMCI will likely be moderated by legal and regulatory issues arising from delays in project bidding, contract awarding and right-of-way acquisition.

Unfortunately, the challenging regulatory landscape of DMCI Mining will likely persist in 2017. Cost restructuring will be key to minimizing the financial impact of such a scenario. In the meantime, we will exhaust all legal remedies, including appealing directly to the Office of the President, to resume the operations of Berong Nickel Corporation and Zambales Diversified Metals Corporation.

While we foresee a favorable resolution of Maynilad’s arbitration claims, we cannot discount the possibility of further delays in the implementation of its tariff adjustment because of the change in leadership and management at the Metropolitan Waterworks and Sewerage System (MWSS).

“We expect to post better financial results in 2017.”

Comparative ACGS score (2013 and 2016)

43.942013

87.662016

Real Benefits In 2016, we delivered real benefits to millions of Filipinos through our affordable, high-quality products and services. We also generated employment, livelihood and educational opportunities in remote areas where they are most needed.

On behalf of the Board and our employees, I would like to extend our sincerest gratitude to our shareholders, customers, public sector partners, host communities and other stakeholders for making all these possible.

Your support and confidence in our Company has allowed us to create value, achieve milestones and leave a positive impact on our country. With our continued partnership, we can deliver real benefits to even more Filipinos throughout the years, whatever the circumstances may be.

Isidro A. ConsunjiChairman of the Board and President


D.M. Consunji, Inc. A Partner in Nation Building and

A Solution Provider in the Construction Industry

What is your company’s outlook for 2017? We are projecting modest revenue improvement based on our 2016 order book and new projects to be awarded during the year.

Our Building and Infrastructure business units will be our main growth drivers in 2017. We expect an upturn for the Infrastructure Business Unit once the government starts rolling out their planned mega infrastructure projects starting this year.

We also expect some growth from our Energy and Utilities & Plants business units, but this will likely be moderated by project bidding delays.

What is your growth strategy for 2017? Building projects remain a strong market for contractors, and DMCI has been aggressive in bagging such contracts to secure our 2017 and 2018 revenues and profitability.

We will also aggressively pursue infrastructure projects both from government and private investors.

DMCI continuously invests in the training and upgrading of skills and technical excellence to ensure that the manpower complements the needs of the anticipated projects.

We are also implementing a cost reduction program to further improve our cost-efficiency and profitability levels.

What do you see as the principal risks of the company in 2017? We consider operational risk as our principal risk. Internal and external factors play a big part in our ability to initiate and complete projects on time. From securing right-of-way to manpower efficiency to increased materials costs, we have to carefully monitor and manage all these things.

DMCI has always worked fairly with different parties in order to mitigate our project risks. We work closely with the project owners, concerned government agencies, qualified subcontractors and service providers to facilitate compliance with agreed conditions. We also capitalize on the use of technology to manage costs and schedules.

Jorge A. Consunji President and CEO

Interview with the President Business Review


D.M. Consunji, Inc. (DMCI) is one of the leading engineering and construction firms in the country. It operates in four key construction segments: building, energy, infrastructure, and utilities and plants.

Over the years, its pioneering methodologies and expertise have allowed it to complete close to a thousand projects of varying scale and complexity in the Philippines and abroad.

From high-rise, commercial and residential buildings, institutional facilities to heavy civil works, elevated and at grade roads, bridges, power plants, industrial plants, water and sewer facilities, DMCI is a major contributor in changing the domestic infrastructure landscape to improve the lives of millions of Filipinos.

Completed Work Major infrastructure and industrial projects coupled with a considerable volume of high-rise building projects dominated the construction contracts of DMCI in 2016.

The infrastructure projects completed during the year include the Advance Works of the Metro Manila Skyway Stage 3 Project, NAIA Expressway - At Grade Works and the NAIA IPT3 Apron Rehabilitation.

Completed Energy projects include the Unit 2x135MW South Luzon Thermal Energy Corporation Power Plant, 2x150MW Southwest Luzon Power Generation Corporation Power Plant and 3.69MW Sultan Kudarat Diesel Plant.

DMCI also completed a number of building projects, namely the Eastern Visayas Regional Medical Center – Mother and Child Hospital in Tacloban, TV5 Sheridan Phase 2 Project and the Makati Diamond Residences.

The company likewise completed the following utilities and plant projects: Ammonia Mitigation Water Treatment Plant, La Farge Norzagaray Cement Grinding Plant, Tirona Pumping Station and Reservoir Project and Quirino Pipelaying Project in Novaliches.

62Years of Activity

765Technical Personnel

14,114Skilled Workforce (estimated)

38,580,950Safe Man Hours


Business Review

Balance of Work Newly-awarded projects during the year totaled P8.2 billion, bringing DMCI’s total order book (balance of work) to P20.1 billion at the end of December 2016.

Buildings accounted for a big majority (76%) of the new projects, followed by Infrastructure (13%), Utilities and Plants (7%), and Energy (4%). The awarded projects include Six Senses Resort Phase 2 of Federal Land Inc., Spectrum BPO Building of Griffinstone Inc., NCCC Mall of NCCC Group of Companies, and LRT Line 2 East Masinag Stations.

Ongoing projects in the order book include Metro Manila Skyway Stage 3 Project (S1 and S2), NAIA Expressway, LRT Line 2 East Masinag Viaduct, Emperador Distillers Inc. (various civil structures), The Viridian, The Royalton, The Imperium, Oxford Parksuites, Princeview Parksuites, Ecoprime Tower, Makati North Gateway, The Arete, Radiance Manila Bay, Paranaque Sewer Network, Sacred Heart and Victoria Homes Reservoir, among others.

Revenuesin billion pesos

Order Book in billion pesos

Total Construction Costs in billion pesos

464 628

Net Income in million pesos

938

Total Assetsin billion pesos

Return on Assetin %

22

11.9 13.2 13.8

18.5 29.2 20.1 11.3 12.3 12.5

14.7 14.7 12.8 3.2 4.3 6.8

Profitability DMCI reported a full-year net income of P938 million in 2016, a 49 percent jump from P628 million the previous year. Higher revenues and improved margins accounted for the upturn.

Construction revenues from external customers improved by 5 percent to P13.8 billion mainly coming from infrastructure and building projects.

Meanwhile, total construction costs (under cost of services and operating expenses) grew at a slower pace of 2% reaching P12.5 billion in 2016 from P12.3 billion in 2015 due to better cost control on its construction projects.

2014 2015 2016 2014 2015 2016

2014 2015 2016 2014 2015 2016

2014 2015 2016 2014 2015 2016

Net income (in billion Pesos)

0.90.60.5

1.3

20132012 201620152014

1.3

Business Review

DELIVERING REAL BENEFITS 23INTEGRATED ANNUAL REPORT 2016

DMCI HomesLeading Mid-Income Residential Developer in the Philippines

Interview with the President

What is your company’s outlook for 2017? We are maintaining our rosy outlook for 2017 as we expect to launch more projects in key locations and continue to build upon our impressive sales performance last year.

We are anticipating that our unit sales this year will still be led by our actively-selling and newly-launched projects in proven, sought-after locations such as Pasig, Mandaluyong and Quezon City.

Investors can look forward to the consistent performance of DMCI Homes in terms of sales, timely project completion and quality of projects completed.

How do you intend to grow the business? We want to intensify our efforts in property acquisition, which will enable us to enter new market segments and locations, and introduce new product formats. We are also exploring possible partnerships to widen our opportunities and augment our capabilities.

Internally, we will continue to strengthen our organizational capabilities so we can consistently deliver on our commitments. We want to be more than ready for the said growth opportunities once they materialize.

What do you see as the principal risks of DMCI Homes in the coming year? As with other developers, we are always monitoring and anticipating market conditions, and things like interest rates, government policies, and cost of raw materials.

To ensure maximum market acceptability in a hyper-competitive environment, it is our objective to always offer housing options that are of superior overall value given the prevailing market and economic conditions.

We manage these risks through prudent, flexible project planning and market research.

Alfredo R. Austria President

Business Review


80,464Residential Units and Parking Slots Sold since 1999

P3.1 BTotal Landbank Cost

53 SQMAverage Unit Area

1,090Total Employees

Initially a housing division under D.M. Consunji, Inc., DMCI Homes was spun off in 1999 to address the surge in demand for urban homes.

Since then, the company has made high-quality living available to average Filipino families through its innovative designs, proprietary technologies and cost-efficient methodologies.

Its core products include larger-than-usual condominium units with resort-inspired amenities in mid-rise and high-rise developments in Metro Manila, Baguio City and Davao City.

Sales and Reservations DMCI Homes registered 8,236 residential units in sales and reservations in 2016, a 55 percent increase from 5,325 units the previous year.

The double-digit growth pushed unit and parking space sales and reservations of DMCI Homes to jump 65 percent to P31.2B from P18.8B in 2015. Top-selling projects include Brixton Place, Lumiere Residences and Oak Harbor Residences.

Current and Future Offerings To expand its project offerings, DMCI Homes launched seven new projects during the year. These projects include Alea Residences in Bacoor City; Brixton Place in Pasig City; Verdon Parc in Davao City; Calathea Place in Parañaque City; and The Celandine and Infina Towers in Quezon City. Rounding up the list is Oak Harbor Residences, a luxury waterfront property in Bay City Parañaque.

In all, the launched units of DMCI Homes increased nearly threefold (266%) from 2,902 in 2015 to 10,611 the following year. The total approximate sales value of the launched units reached P38 billion, more than double (234%) the P11.4 billion recorded in 2015.


Business Review

Residential Turnoversin actual units

Residential Launchesin actual units

Revenuesin billion pesos

19 18.8

Sales and Reservations in billion pesos

31.2

Net Income in billion pesos

Return on Assetsin %

30

5,155 2,230 2,732

2,830 2,902 10,611 12.5 13.7 10.4

3.2 3.6 2.0* 8 8 4

Budgeted capital expenditures in 2017 is estimated at P11.7 billion which is 45 percent higher compared to the P8.1 billion the previous year. Over P8.4 billion will be used to cover development cost for projects located in Mandaluyong City, Quezon City and Taguig City while P3 billion will be used to fund land acquisitions across Metro Manila and key cities in the country. The rest will go to existing buildings and improvements.

Profitability DMCI Homes recognized a 46 percent drop in net income to P1.9 billion due to the deferred recognition of revenues from its completed high-rise projects, which normally take three to four years to complete.

Contrary to local industry practice, the mid-range property developer realizes sales earnings only when the unit is fully completed and at least 15 percent of the contract price has been collected.

Revenues also dropped by 24 percent from P13.7 billion to P10.4 billion.

Cost of real estate sales dropped nearly 20 percent from P6.8 billion to P5.5 billion due to decrease in revenue. Meanwhile, operating expenses grew by 14 percent from P2.4 billion to P2.8 billion as a result of increase in taxes and licenses, marketing and selling and salaries and wages.

2014 2015 2016 2014 2015 2016

2014 2015 2016 2014 2015 2016

2014 2015 2016 2014 2015 2016


2.0

3.63.2

2.7

2013 201620152014

*includes gain on partial sale of Subic Water

2.1

2012

Business Review


Semirara Mining And Power CorporationThe Only Vertically Integrated Power Producer in the Philippines


What is your company’s outlook for 2017? We expect our coal segment to perform even better than last year because of our expanding production capacity and improving market conditions.

We are also anticipating higher domestic coal sales because of the new coal plants that will be commissioned and operational during the year, and the scheduled capacity expansion of cement plants.

Our outlook for the power segment is likewise positive as we expect Unit 1 of Sem-Calaca Power Corporation (SCPC) to perform better after undergoing some boiler enhancements. Both units of South Luzon Power Generation Corp. are likely to secure their Turnover Certificates by second or third quarter of the year.

What is your growth strategy for 2017? We will focus on steadily increasing our coal production capacity to a maximum of 16 million MT to take advantage of favorable coal prices and local market demand.

Operational improvement and expansion will be key to growing our power segment. Late last year, we embarked on a 3-year life extension program that will increase the generation capacity of SCPC’s Unit 1 by 50MW to 70MW.

At the same time, the 2x23MW gas turbine of SLPGC is set to provide ancillary services the National Grid Corporation of the Philippines. Commissioning of the facility is scheduled by second or third quarter of 2017.

What do you see as the principal risks of the company in 2017? We consider compliance and reputation risk as our principal risk. Aside from ensuring strict compliance to legal and regulatory standards, we are continuously improving our compliance risk management processes to better handle this risk.

We are also stepping up our community and stakeholder relations initiatives to strengthen our external engagements. We believe that our strong partnerships with our host communities and public sector partners is key to our sustainable growth.

Victor A. ConsunjiPresident and COO

Business Review


900 MWInstalled Capacity

16 M Mining Capacity in Metric Tons

25,065Safety Training Hours

4,427Operating Workforce

Semirara Mining and Power Corporation (SMPC) is the largest coal producer in the Philippines, and the only power generation company in the country that owns and mines its own fuel source (coal).

It accounts for around 97 percent of the national coal production, and supplies to local power plants and cement manufacturers. A significant portion of its mined coal is also exported to China and Thailand.

SMPC provides baseload power to the Luzon and Visayas grids through bilateral contracts and spot market sales.

Coal Favorable weather conditions and expanded mining capacity allowed SMPC to produce 11.9 million metric tons (MT) of clean coal in 2016, a 33 percent jump from the nearly 8 million MT the previous year.

Its coal sales likewise increased by 52 percent from 8.4 million MT to 12.8 million MT during the same period.

Foreign exports accounted for majority of the coal sales at 59 percent or 7.6 million MT. Meanwhile, domestic coal sales reached 5.2 million MT, a slight decrease (1 %) compared to the previous year.

Composite average free on board (FOB) price per MT decreased 3 percent year-on-year to P1,885 from 1,943, as more lower-priced, lower-grade coal were sold to its subsidiary power plants.


Business Review

Energy Sales in GWH

Net Profit Margin in %

Consolidated Net Income in billion peso

8.89 8.43

Coal Sales in MT

12.81

Cash Dividend Payout Ratio in %

Total Assets in billion peso

38

3.383 3,963 4,800

24 34 33 6.9 8.5 12.0

57 62 50 51.9 57.2 65.8

2014 2015 2016 2014 2015 2016

2014 2015 2016 2014 2015 2016

2014 2015 2016 2014 2015 2016

Average price for bilateral contracts dipped 1 percent from P3.33/kWh to P3.29/kWh due to declining coal prices (Newcastle coal index) in the first three quarters of the year. Meanwhile, composite average price per kWh in the electricity spot market fell 11 percent from P5.05/kWh in 2015, to P4.48/kWh the following year.

SLPGC sold most (81%) of its generated power through bilateral contracts. Its total energy sales reached 1,478 GWh, which were sold at an average composite price of P4.42/kWh. Of the total energy sold 79 percent was sourced from its own plants while the remaining 21 percent was purchased from the spot market.

Profitability Consolidated net income after tax surged 42 percent to P12 billion from P8.5 billion in 2015. Net of eliminations, the coal segment generated a net income of P5.4 billion, while SCPC and SLPGC generated P2.9 billion and P3.7 billion, respectively.

Consolidated revenues climbed 48 percent to P36.6 billion in 2016 from P24.7 billion the previous year. Consolidated cost of sales soared 78 percent to P18.7 billion from P10.5 billion the year before.

As a result, consolidated gross profit expanded 26 percent from P14.1 billion to P17.9 billion, with the coal and power segments contributing P9.1 billion and P8.8 billion, respectively. Last year, the coal segment contributed P5.4 billion while the power segment supplied P8.7 billion.

Consolidated operating expenses grew 14 percent from P4.4 billion to P5 billion due mainly to higher government royalties recorded by the coal segment.

Net income contribution to the Parent Company improved 43 percent from P4.8 billion in 2015 to P6.9 billion in 2016.

Power Technical problems led to the prolonged maintenance shutdown of Sem-Calaca Power Corporation (SCPC), causing its total gross generation to fall 27 percent to 2,909 GWhr from 3,959 GWhr last year.

Southwest Luzon Power Generation Corporation (SLPGC) recorded a full year of operations in 2016. This pushed its total gross generation to rise more than fivefold (555%) from 211 GWh to 1,383 GWh, effectively registering total availability of 69 percent.

Power sales of SCPC decreased 12 percent to 3,322 GWh in 2016 from 3,754 GWh the year earlier. Nearly all of the total energy sold (99%) or 3,276 GWh were sold to bilateral contracts while the rest were sold to the spot market.


12.08.5

6.97.5

20132012 201620152014

6.4

Business Review


DMCI Power Corporation Energizing Missionary Areas in the Philippines

Nestor D. Dadivas President


What is your company’s outlook for 2017? DMCI Power Corporation (DPC) is expecting a continued “double digit” market growth due to the accelerating economies of Palawan and Masbate. The province of Mindoro is stymied by the effects of the past typhoons which cut the 69kv transmission lines in Oriental Mindoro. However, as of early 2017, 90% of the lines have been restored. Thereby, an increase in growth is also expected in Oriental Mindoro starting the summer months.

2017 is also a year for consolidating our Operations and Maintenance programs to improve efficiencies of our power plants. Most if not all major repairs and maintenance will be completed in the early part of the year. We will also work with the Masbate Electric Cooperative (MASELCO) on a program that will minimize distribution line trippings in their service area.

What is your growth strategy for 2017? Maximize potentials of the three areas with better operating efficiency and reliability of the plants.

DPC is again investing in a 3x6.3MW bunker-fired plant in Palawan to improve plant reliability and augment the hi-speed engines. The impact of this however, can only be felt in 2018.

We will put up additional capacity of 3MW in Masbate to cope and take advantage of the accelerating growth being observed in the province.

Unless we are able to supply part of Occidental Mindoro’s power supply requirement, we do not expect any significant growth in the island, but we will continue to work with the Oriental and Occidental Mindoro electric cooperatives to resolve this matter.

What do you see as the principal risks of the company in 2017 and how do you plan to manage these risks? The unscheduled shutdowns of the engines and power plants have to be avoided. This is manageable with improved operating protocols of the different generating sets and a strict and efficient maintenance programs.

The poor condition of the distribution lines in Masbate has to be addressed. We are prepared to assist MASELCO in the repair and rehabilitation of their distribution system.

The transmission lines of Mindoro have to be fully restored so as to maximize our plant’s dispatch. DPC will keep working with the National Power Corporation (NPC), the local government units and ORMECO to complete the restoration of the transmission lines.

Business Review


96.84 MWInstalled Capacity

56.00 MWContracted Capacity

P4.1 BTotal Assets

276Total Employees

DMCI Power Corporation was established in 2006 to provide sufficient and reliable electricity to remote islands and areas in the country.

It operates and maintains bunker-fired power plants and diesel generating sets in parts of Masbate, Oriental Mindoro, Palawan and Sultan Kudarat.

The company provides off-grid power to missionary areas through long-term power supply agreements with local electric cooperatives.

Capacity and Dispatch DMCI Power Corporation (DPC) has a total installed rated capacity of 96.84 MW. Nearly half of the total capacity (47.98 MW) is deployed to Palawan while the rest are installed in Masbate (29.61 MW), Oriental Mindoro (15.56 MW) and Sultan Kudarat (3.69 MW).

DPC has long-term power supply agreements with Masbate Electric Cooperative (MASELCO), Oriental Mindoro Electric Cooperative (ORMECO), Palawan Electric Cooperative (PALECO) and Sultan Kudarat Electric Cooperative (SUKELCO).

Total sales volume of the company rose due to increased energy dispatch across all cooperatives. Power sales to MASELCO advanced by 11 percent from 86 GWh to 95 GWh while energy volume sold to PALECO increased 17 percent from 78 GWh to 91 GWh.

Full year operations in Oriental Mindoro generated 52 GWh in energy sales while Sultan Kudarat energy sales reached 2 GWh. In effect, total power sales in 2016 grew by 14 percent from 210 GWh to 240 GWh.


Business Review

Power Sales in GWh

Composite Average Price in Philippine peso/kWh

Return on Asset in percentage

135 216

Generated Power in GWh

242

EBITDA in million Philippine peso

Net Income in million Philippine peso

46

132 210 240

13.52 10.33 9.36* 9 14 13

335 554 633 243 382 424

2014 2015 2016 2014 2015 2016

2014 2015 2016 2014 2015 2016

2014 2015 2016 2014 2015 2016

*excluding Sultan Kudarat (with Fixed Fee Agreement)

Price and Cost Average price/kWh in Masbate, Palawan, Oriental Mindoro and Sultan Kudarat stood at P11.23/kWh, P8.08/kWh, P8.76/kWh and P27.50/kWh, respectively.

All tariffs of the company are reviewed and approved by the Energy Regulatory Commission (ERC) prior to implementation. Fuel cost is a pass through cost, subject to the fuel efficiency consumption cap set by ERC.

Cost of sales and operating expenses in 2016 increased 5 percent to P1.9 billion from P1.8 billion the year before. This was due mainly to full-year operations in Oriental Mindoro.

Profitability Higher electricity sales in Masbate and Palawan coupled with the full-year operations of its 15.6MW bunker-fired plant in Oriental Mindoro pushed net profit from off-grid power generation to grow by 11 percent from P382 million to P424 million.

Accounting for most of the revenues is Masbate at P1,065 million (46%), followed by Palawan at P738 million (32%), Oriental Mindoro at P453 million (20%) and Sultan Kudarat at P46 million (2%).

Meanwhile, total cost and expenses increased by 5 percent from P1.8 billion in 2015 to P1.9 billion the following year.

*includes one-time gain of P72M from the retroactive adjustment of the tariff for Masbate

Net income (in million Pesos)424

382

243249*

20132012 201620152014

89

Business Review


DMCI Mining Corporation Extracting for Growth


What is your company’s outlook for 2017? The latest developments in the nickel commodities market looks very positive for the nickel ore mining business. Despite the very challenging and adversarial regulatory environment, we believe our mines stand on strong legal, technical and ethical grounds to continue operations. Assuming we will get our permits to operate, the current market conditions should be advantageous for the company.

What is your growth strategy for 2017? With the current regulatory issues, generating growth will be a challenge for the nickel mining business. Nonetheless, we see the current opportunities available in chromite, which is more prevalent in the Zambales area. Other nickel mine sites in Zambales and Berong, Palawan also present opportunities for further expansion.

Our mining assets in Zambales and Palawan indicate good chromite reserves. We believe that the regulatory risks—though significant, only stands to delay the realization of these growth opportunities for the company.

What do you see as the principal risks of the company in 2017? Despite current regulatory conditions, we consider market risk as our main risk in the nickel mining business. We believe it is more direct, and far outweighs our regulatory risks.

Unfortunately, we can only manage those factors that we can control like operations and compliance, specifically by maintaining optimal operating and production costs and complying with the legal and technical requirements of the government. There is little we can do to manage our market risks.

Cesar F. SimbulanPresident and COO

Business Review


13,353 HATotal Mineable Area

361 MT**Total Resource

0.8–2.0%Nickel Grade

295Total Employees

In 2007, DMCI Mining Corporation was established to engage in ore and mineral mining and exploration.

It has two nickel mining assets, namely Berong Nickel Corp (BNC) and Zambales Diversified Metals Corp (ZDMC). The former operates in Berong, Long Point, Moorsom and Ulugan, all in the province of Palawan, while the latter is located in Acoje, Zambales.

DMCI Mining took over the operations of BNC and ZDMC in 2014 and 2013, respectively. Both mining companies use open pit technique to extract nickel, chromite and iron laterite for direct shipping to China and Japan.

Stalled Operations DMCI Mining registered a drastic drop in overall nickel output as both of its subsidiaries were suspended for the most part of 2016.

The Department of Environment and Natural Resources (DENR) ordered the suspension of BNC in June because of the alleged discoloration of Barangay Berong’s river system and tributaries. The following month, ZDMC was served a suspension order due to alleged “social issues”.

As a result, total nickel production during the year plunged 42 percent from 1.51 WMT in 2015 to 0.88 WMT the following year. Most of the production volume (0.71 WMT) came from BNC.

Nickel ore shipments likewise declined 35 percent year-on-year from 1.65 WMT to 1.08 WMT. Meanwhile, average selling price per wet metric ton in 2016 fell 26 percent from US$ 42 to US$ 31.

**as of December 2016 per government estimates


Business Review

Nickel Production in million WMT

Average Selling Price/WMT in USD

Total Cash Cost/WMT in USD

1.21 1.65

Nickel Shipment in million WMT

Revenuein billion pesos

Net Incomein million pesos

54

1.57 1.51 0.88

48 42 31 34 20 22

2.6 3.1 1.6 362 501 (65)

2014 2015 2016 2014 2015 2016

2014 2015 2016 2014 2015 2016

2014 2015 2016 2014 2015 2016

all figures consolidated at parent level

Profitability The suspensions, coupled with receding nickel prices and sluggish demand for lower-grade nickel, led to a drastic decline in profitability for DMCI Mining. From a net income of P501 million in 2015, it posted a full-year net loss of P65 million in 2016.

During the same period, its EBITDA fell 74 percent from P1.7 billion to P444 million. Consolidated revenues contracted 50 percent year-on-year from P3.1 billion to 1.6 billion because of the sharp decline in nickel ore shipments.

Total depletion, depreciation and amortization declined 30 percent to P307 million from P437 million in 2015 since the company is using units of output method.

Sales and Operating Costs Cost of sales and operating expenses fell 26 percent from P1.59 billion to P1.17 billion.

However, in terms of cash cost per MT it actually increased by 13 percent year-on-year from P961/WMT (US$20) to P1,085/WMT (US$22) due to lower nickel ore shipments brought by operational suspensions.

To control costs, the company was forced to implement retrenchment of regular and project employees and discontinue contracts with agencies. The mine sites were also put under care and maintenance mode to minimize operating costs.

Net income (in million Pesos)

(65)

501

362

170

20132012 201620152014

341

1.08

Business Review


Maynilad Water Services, Inc.The Largest Water Concessionaire

in Terms of Customer Base in the Philippines


What is your company’s outlook for 2017? The delayed implementation of our tariff adjustment affects our ability to meet our service level obligations. Nonetheless, we have done a major reorganization in 2016 to enhance our ability to fully address our commitments.

The success of our new business model and organizational structure will be put to the test in 2017, when we need to complete the capital expenditure projects at double the rate we have done in the past, in order for us to meet our service obligations.

We hope to finally put a closure to our arbitration concerns so we can efficiently execute the expansion programs we have planned for our customers. We are optimistic that the new MWSS Board can be a real partner in our effort to further improve the water supply situation in our concession area and beyond.

What is your growth strategy for 2017? Our growth strategy will be four-fold. First, we will focus on meeting our water, sewerage, sanitation and customer service obligations. Second, we will continue to enhance our operational efficiency. Third, we will pursue business growth within and outside the West concession and collaborate with Metro Pacific Water Investments Corporation. Lastly, we will establish a cohesive organization to ensure efficiency and effectiveness by rationalizing processes, improving succession planning, and strengthening coordination between the divisions and departments in our organization.

What do you see as the principal risks of the company in 2017? Year 2017 will continue to be a challenging one for Maynilad due to our water supply constraints, which has been exacerbated by the effects of climate change.

While we have programs in place to address unprecedented raw water quality issues and increasing customer demand, the solutions are long term, so the benefits are not immediately forthcoming.

There is also the possibility that we will still not get the tariff adjustment that we are entitled to. At that point, we have to recalibrate and become more mindful of projects that have to be prioritized, without sacrificing service levels for our customers.

To manage these risks, we will upgrade our facilities and accelerate our CAPEX program.

Ramoncito S. Fernandez President and CEO

Business Review


540 KM2

Concession Area

1,312,223Service Accounts

9.3 MConstrained Population Served

2,229Total Employees

Maynilad provides water and wastewater services to the 17 cities and municipalities that comprise the West Zone of the Greater Metro Manila area.

With over 1.3 million water service connections, it is the largest private water concessionaire in terms of customer base in the Philippines.

DMCI Holdings has indirect ownership in Maynilad through a 27 percent stake in Maynilad Holdings, which owns 93 percent of the water concessionaire.

Expansion and Growth Maynilad installed 62 kilometers of new pipes in 2016, slightly expanding (0.8%) its water distribution network from 7,575 kilometers the previous year. The network expansion served to connect communities in Las Piñas, Bacoor City, and Kawit in Cavite.

This allowed the company to grow its water service connections by 3.68 percent from 1,265,625 to 1,312,223. The additional customers pushed billed volume to rise 3.5 percent from 481.5 MCM to 498.60 MCM.

Total pipe replacement and leak repairs during the year reached 196 kilometers and 27,936, respectively. Active management of the distribution network reduced the company’s average non-revenue water to 29.9 percent from 31 percent the year before.

Higher Costs Cash operating expenses grew 12 percent from P5.1 billion to P 5.7 billion due to higher personnel, water treatment chemicals, outside services and repairs and maintenance costs. These four cost elements account for 60 percent of total cash expenses.

Personnel costs increased 8 percent to P2 billion from P1.8 billion due mainly to headcount increase from 2,147 employees in 2015 to 2,229 in 2016. Water treatment chemicals grew 30.2 percent to P245 million due to higher consumption resulting from the increased production in Putatan and the additional treatment needed to address the poor raw water quality experienced in La Mesa and Putatan during the period.

Outside services rose by 19 percent to P672 million as Maynilad intensified its sanitation services using a specialized service contractor. Meanwhile, repairs and maintenance surged by nearly 33 percent to P511 million from


Business Review

The company reviewed its tax position and determined that it was more beneficial to elect the OSD in computing its income taxes for the year as opposed to the more traditional itemized deduction.

Total revenue from operations grew 5.8 percent year-on-year to P20 billion from P18.9 billion. The growth was primarily driven by higher billed volume and increased average effective tariff.

After adjustments at the consortium company level, its net income contribution to DMCI Holdings dropped 19 percent from P2.3 billion to P1.9 billion year-on-year.

P385 million due to delayed accruals from 2015 that were only reported in 2016. Excluding these delayed accruals, the increase would only be around 17 percent or P395 million.

Tax expenses jumped 57 times to nearly P3.2 billion with the expiration of the company’s income tax holiday in December 2015.

Profitability Despite higher billed volume and a 3 percent increase in average tariff, core income dropped nearly 26 percent from P9.65 billion to P7.18 billion due to higher tax and operating expenses.

Net income dropped even more sharply (28.8%) from P9.5 billion to P6.78 billion due to write-off of deferred tax assets related to the adoption of Optional Standard Deduction (OSD).


6.789.528.276.85

20132012 201620152014

6.39

Billed VolumeWest Zone, in MCM

Average Non Revenue WaterWest Zone, in %

Cash Operating Expenses in billion pesos

8.87 9.17

Population ServedWest Zone, in millions

9.3

Net Income Contribution*in billion pesos

Capital Expenditurein billion pesos

463.2 481.5 498.6

33.9 31 29.9 5.24 5.08 5.70

P1.97 P2.31 P1.87 P4.3 P8 P9.5

2014 2015 2016 2014 2015 2016

2014 2015 2016 2014 2015 2016

2014 2015 2016 2014 2015 2016

*at DMCI Holdings level

Business Review


Corporate Sustainability and Responsibility

Sustainability and social development are at the core of our businesses. Our businesses operate in industries that create shared value for millions of Filipinos.

Through our subsidiaries and affiliate, we provide key stakeholders and marginalized sectors with the assistance and opportunities they need to improve their living standards and empower them for the future.

Our operating companies also strive to address the environmental issues that are most relevant to them. Their programs, projects and initiatives are geared towards the protection and judicious use of natural resources.

This section includes some of the Corporate Sustainability and Responsibility (CSR) programs and activities undertaken by our subsidiaries and affiliate in 2016.

Our Focus Areas

Education and Training

Infrastructure Emergency

Preparedness and Disaster Relief

Environmental Stewardship

Welfare and Livelihood

Our CSR Strategy To optimize the impact of our CSR efforts across the group, we concentrate on five key areas where our expertise, resources and partnerships can contribute in a meaningful way.

P150 MTotal housing donation of DMCI Homes since 2012

10,000+Tons of fish caught by fishermen supported by SMPC

3,200 Students who attended the travelling science exhibit of Sem-Calaca Power Corporation

40 Beneficiaries of the swine stock dispersal project of DMCI Power

30,000 Seedlings planted by Zambales Diversified Metals Corporation in 2016

110,000 Maynilad Daloy Dunong beneficiaries



DMCI Homes Bata, TARA Na (Towards A Reading Adventure) aims to promote the value of reading books to children living in less privileged communities near the developments of DMCI Homes.

In partnership with Books for A Cause, Department of Social Welfare and Development, Philippine Daily Inquirer, Rotary Club of South Triangle and Siena Park Residences, DMCI Homes was able to reach out to over 500 children in Caloocan City, Parañaque City, Quezon City, and Makati City.

Together with the Philippine Foundation for Science and Technology, the company conducted a seminar on how to teach science through interactive approaches. 48 Science teachers from Calaca and Semirara Island attended the activity.

Knowledge and skills development are critical to improving employability and earning potential.

Education and Training

Semirara Mining and Power Corporation To enable locals to qualify for high-value jobs, SMPC maintains a partnership with Semirara Training Center, Inc. (STCI). The training center offers courses on welding, automotive servicing, mobile equipment servicing technology, among others. In 2016, STCI received a total of 135 trainees/enrollees.

P25Mtuition fees and other expenses

Dependents of SMPC workers go to Divine Word School of Semirara Island Inc. (DWSSII) for free. For SY 2016-2017, total enrolment at the school reached 1,006 students. Nearly P25 million was spent to cover the student tuition fees, school personnel salaries, equipment and facility maintenance, among others.

Run by the SVD religious community, DWSSII is K12 compliant and works hand-in-hand with STCI to provide hands-on training to the 87 who students enrolled in Grade 11 and chose Science, Technology, Engineering and Mathematics (STEM) academic track.

In partnership with DWSSII, SMPC conducts outreach activities in less fortunate communities in Sitio Balibago in Barangay Semirara every Saturday. Teachers and students visit the community and offer tutorials, bible studies and free food to the children.

Sem-Calaca Power Corporation The company sponsored a series of lectures on how to become better learners. 200 public school students from Saint Raphael Archangel Parochial School, Calaca Academy, St. Paul Balayan, Immaculate Concepcion College Balayan and Our Lady of Caysasay Academy benefited from the lectures.

English Proficiency

Lectures for

160public school teachers

SCPC sponsored English Proficiency lectures at Balayan West Central School for 160 public school teachers.

To encourage students to explore and pursue science courses, the company partnered with the Philippine Foundation for Science and Technology to bring a travelling science exhibit in various schools in Balayan and Calaca. Over 3,200 students attended the exhibits.

SCPC conducted Shielded Metal Arc Welding Skills Trainings to provide local residents with the necessary skills to secure employment with the company. Of the 46 who joined the training, 38 were employed by year-end.

135trainees/enrollees

38employed after Shielded Metal Arc Welding Skills Trainings



Berong Nickel Corporation BNC supported 181 college students from Barangays Aramaywan and Berong in Palawan. Aside from tuition fees, the company awarded its scholars with allowances, educational trips, books, among others.

Support for

181college students from Palawan

The company provided 23 para-teachers, six alternative learning system facilitators and five day care workers in Barangays Aramaywan and Berong with supplementary allowances. These teaching personnel served over 500 learners.

The allowances are meant to augment their existing salaries, to encourage them to stay at the local schools.

Around 1,200 students from Barangay Berong benefited from the educational transport service extended by the company. With the free school bus service, BNC hoped to encourage students to continue their schooling.

Zambales Diversified Metals Corporation ZDMC provided scholarships to 41 college students, 96 high school students and 1 special education student from Barangays Lucapon South, Uacon, Sinabacan, Malimanga, Malabon, Pamibian, Taposo, Yamot and Pinagrealan.

The company provided five day care workers in Barangays Lucapon South, Uacon, Yamot, Pinagrealan and Sitio Acoje with supplemental honorarium. The five personnel took care of 150 day care students in the said areas.

Maynilad Water Services, Inc. The award-winning water education program Daloy Dunong has taught more than 14,000 elementary and high school students about the importance of water, good hygiene and environmental responsibility.

Since its inception in 2012, Daloy Dunong has visited more than 350 schools and was conducted in more than 50 activities outside of campuses, converting close to 110,000 kids into champions for water, health and the environment.

14,000students who learned from Daloy Dunong

Maynilad customers in Muntinlupa City, Parañaque City and Quezon City were taught how clean water and proper hygiene could help prevent dengue infestation in their homes. A total of 8 barangays were included in the campaign.

Participants were taught how to assemble an Anti-Dengue Mosquito Trap—a simple, innovative and affordable way to fight dengue. Around 2,000 residents attended the trainings.

DMCI group DMCI Holdings and its subsidiaries donated P23 million to help build the country’s largest drug rehabilitation center in Nueva Ecija. Inaugurated in November 2016, the mega facility can accommodate around 10,000 drug surrenderees.

P23 Mdonated to help build the country’s largest drug rehabilitation center

Infrastructure improves quality of life and economic performance.

Infrastructure

DMCI Homes Through its Kaakbay ng Pamayanan program, DMCI Homes supports non-government organizations and city governments in providing decent homes to less fortunate families who were either displaced by LGU relocation programs or affected by natural disasters.

Since 2012, it has donated nearly P150 million to construct homes for 942 families in Bohol, Bulacan, Cebu, Davao, Laguna, Mandaluyong City, Parañaque City, Pasig City and Quezon City.

Semirara Mining and Power Corporation Since 1999, Semirara Mining and Power Corporation (SMPC) has been providing reliable electricity to the whole island of Semirara. In 2016, the company’s electricity subsidy totaled 7,382,973 kilowatt-hours or nearly P9 million. Around 3,000 houses were energized by the company during the same year.

P9 Msubsidy to the whole island of Semirara

SMPC provided all construction materials and technical support while the barangay provided four skilled carpenters and subsistence allowance to the beneficiaries. A total of 21 houses were constructed for the indigent residents in Sitio Villaresis. The total cost of the materials for the houses reached nearly P3.3 million.

Scholarships for

41 college students

96 high school students

01 SPED student



The company also completed the construction of one classroom, and repair of the Kinder School of Bunlao Elementary School in 2016. Two more classrooms are under construction and due for completion by first quarter of 2017.

SMPC maintains the only infirmary in Semirara Island, with 27 personnel running the facility. In 2016, infirmary conducted 11,616 consultations. 120 infants were successfully delivered at the infirmary during the year.

The company acquired the Mobillette Mira Digital X-ray Machine to help improve the infirmary’s services. Once a month, a sinologist from Manila also came to the island to conduct ultrasounds.

11,616 consultations conducted in Semirara infirmary

DMCI Power Corporation The company helped in the rehabilitation of the library and canteen of Simaron Elementary School in Sta. Isabel, Calapan, Oriental Mindoro, after it was devastated by a typhoon. The facilities are used by around 300 students.

Berong Nickel Corporation BNC is constructing one classroom in Barangay Berong in Palawan, which will eventually be used by 150 students and 10 teachers in the area.

The company is working to improve the Tagbunsaing farm-to-market road in Barangay Berong. Once completed, the road will help improve the livelihood opportunities of 150 local farmers.

Zambales Diversified Metals Corporation The company improved the water system in Lucapon South Elementary School and provided electricity connection in Acoje Day Care Center. Around 535 elementary and day care students benefited from the school infrastructure projects.

535elementary and day care students benefited from school infrastructure projects

Maynilad Water Services, Inc. Samahang Tubig Maynilad (STM) was established to help informal settler communities overcome the social, financial and technical hurdles to gaining access to affordable potable water.

Under the program, informal settler families are formed into a cooperative-based organization so they can effectively manage the water system installed by Maynilad in their communities. In 2016, around 60 informal settler families in Barangay Batasan Hills benefited from STM.

Pag-asa sa Patubig Partnership (P3) is implemented in tandem with social business Tubig Pag-asa. Maynilad installs the community water system, which is then managed by Tubig Pag-asa.

Around 150 informal settler families residing in Upper Sucat, Muntinlupa City benefited from P3 in 2016. A “ginhaWASHarea” communal toilet-and-bath facility was also constructed in the area to give the residents access to a sanitation facility and allow the company to collect their septage properly.

Through its Lingkod Eskwela Program, Maynilad continued to provide more students with access to potable water by installing drink-wash facilities in the most populous and resource-deficient public schools in the West Zone. In 2016, 52 drink-wash stations were installed in 46 public schools.

Employee-volunteers participated in the Brigada Eskwela program of the Department of Education (DepEd) by refurbishing classrooms, as well as upgrading water and sanitation facilities in 30 public schools throughout its concession area.

Under its GinhaW.A.S.H. program, Maynilad installed bidets in select public schools and government establishments to reinforce better hygienic behaviour using this simple sanitation tool. Ten drinking fountains were also set up in transport terminals, including six LRT stations, for the benefit of commuters.

52drink-wash stations in 46 public schools



Berong Nickel Corporation To encourage community-based livelihood and enterprises, BNC provided farming materials and equipment to the farmers’ federation in Barangay Aramaywan in Palawan. 75 farmers benefited from the project.

The company also distributed fishing supplies to some 30 fishermen in Barangay Berong.

BNC supplied seaweed seedlings to 90 seaweed farmers and 179 kilos of rice seeds to 75 farmers, both in Barangay Aramaywan.

Semirara Mining and Power Corporation 200 Semirara Island fishermen benefited from the livelihood support provided by SMPC. In 2016, the Semirara Fishermen Association (SEMFA) caught nearly 105 tons of fish while the community fishing group caught over 10,000 tons of fish.

SMPC also donated P2 million to purchase one fishing boat with complete fishing gear and paraphernalia to support the fishermen in Banwa (Barangay Proper), Barangay Semirara.

Protecting the health and livelihood of marginalized groups is a solid step towards alleviating poverty.

Welfare and Livelihood

DMCI Homes To aid and promote the growing bike-sharing community at the University of the Philippines Diliman, DMCI Homes donated 40 bicycles to UP Bike Share, a student advocacy group that aims to develop a point-to-point public transportation system inside the UP Diliman campus using bicycles.

All bicycles can be used by students free of charge. At least 250 students per day benefit from the bike-sharing program.

250UP Diliman students benefit daily from the bicycles donated by DMCI Homes to UP Bike Share

Sem-Calaca Power Corporation In partnership with the Philippine Foundation for Science and Technology and Children’s Hour, SCPC conducted a feeding program for malnourished schoolchildren in its host communities. 60 students from Calaca Central School and 40 students from Madalunot Elementary School benefited from the program.

SCPC held medical missions and free clinics in Barangays Baclaran, Dacanlao, Sampaga and San Rafael. The outreach activities were conducted together with the Philippine Air Force, Knight of Columbus – Balayan Chapter and Daughters of Mary Immaculate - Balayan Chapter, Junior Chamber International (JCI) and barangay health workers. Around 2,200 patients benefited from the medical missions and free clinics.

DMCI Power Corporation DMCI Power provides indigent residents in Palawan with livelihood opportunities through a swine stock dispersal project. In 2016, 40 members of the Sipag Pa Aborlan Organization benefited from the project.

The company engaged the services of a medical doctor who regularly visits and provides medical assistance to residents of Barangay Irawan, Puerto Princesa City in Palawan. Around 5,000 residents benefit from the free medical consultations.

5,000residents of Barangay Irawan benefit from free medical consultations

In line with its goal of improving the health conditions in its host community, BNC worked to enhance the capacity of local health personnel by providing comprehensive training to barangay health workers, facilitators and volunteers. 71 people attended the training.

The company also provides supplemental honorarium and support to the nurses, midwife and community health workers and volunteers who serve around 3,400 residents in Barangay Berong.

3,400Brgy. Berong residents served by community health workers



Zambales Diversified Metals Corporation ZDMC provided 28 barangay health workers in Barangays Yamot and Pinagrealan with supplemental honorarium. The health workers served nearly 600 households during the year.

To provide female residents of Barangay Uacon with sustainable livelihood opportunities, the company sponsored bagoong-making and meat processing projects in the area. Over 210 women benefited from the project.

Tata Raul Funilas, the sculptors produced exquisite wine holders that eventually became part of Maynilad’s 2016 Christmas giveaways. Nine Dumagat sculptors benefited from the program, with each one earning P6,000 to P12,000 from their Christmas handiworks.

Habing Buhay is a skills training program for indigent residents in Brgy. Putatan, Muntinlupa. Participants were trained by the Department of Science and Technology - Forest Products Research and Development Institute in advanced water lily crafts like leatherizing, dyeing and producing more intricate

patterns. 30 weavers completed the training in 2016.

In partnership with the Parañaque City government, Maynilad promoted urban gardening by inaugurating 12 FAITH (Food Always In The Home) Gardens and conducting Ginhawa Gardening Workshops in various barangays.

FAITH Gardens is a home food security program that aims to provide a steady source of fresh vegetables to marginalized groups in the city. Under the partnership, Maynilad installed 260-gallon overhead water tanks and drip irrigation systems and provided technical assistance in setting up each community garden.

Ginhawa Gardening Workshops were conducted to equip residents with the right skills to start their own backyard gardens– with or without a plot of land. Over 3,000 Parañaque residents participated in the workshops.

Employee-coaches reached out to some 200 youths from poor families in 10 communities by teaching them ultimate frisbee and the values inherent in the sport. The initiative also served as a vehicle for Maynilad to update barangay officials and customers on ongoing service concerns in their areas. A total of 2,000 youths participated in the sports activities.

210female residents of Barangay Uacon provided with sustainable livelihood opportunities

Maynilad Water Services, Inc. Sining Ipo aims to empower the Dumagat sculptors of Ipo Watershed through art. After the success of the Sungka Series and the mentorship under artist



DMCI Homes DMCI Homes, in partnership with the Department of Environment and Natural Resources – Environment Management Bureau and the Department of Public Works and Highways, helped in the annual clean-up of the 1.3 kilometer stretch of Pasong Tamo Creek in Visayas Avenue, Quezon City. This is the fourth year that DMCI Homes supported DENR in its aim to rehabilitate polluted waterways in the metro.

1,819,045hills reforested since year 2000

Semirara Mining and Power Corporation From 2000 to 2016, SMPC reforested 1,819,045 hills with indigenous, flowering and agro-forest species. Over 421 hectares or 943,418 hills were located

outside the mine area while over 288 hectares or 893,489 hills were in the mined area.

The Semirara Marine Hatchery and Laboratory successfully propagated seven species of giant clams during the year. Eight sessions of in-situ and ten sessions of ex-situ induced spawning of giant clams at Tabunan Beach Front were likewise conducted. In March 2016, the marine hatchery also did the first cross-breeding of Tridacna gigas and Tridacna squamosa.

The Semirara Marine Hatchery and Laboratory (SMHL) transferred 3,720 pieces of

juvenile giant clams from concrete slabs to the Ocean Nursery Garden of Aplaya Cove.

In line with SMPC’s reef rehabilitation program, three batches of coral fragment transplantation were conducted by SMHL personnel in 2016. Over 720 coral fragments were transplanted, of which 135 were stocked in the raceway.

587 pieces were already transferred from the raceway to Tabunan Cove, increasing the total number of reseeded or stocked coral fragment to 1,196 pieces.

SMHL personnel also conducted seagrass transplantation of two different species of seagrass, the

Responsible and judicious use of natural resources helps ensure sustainable development.

Environmental Stewardship

Enhalus acoroides and Thalassia hempricii. Both are very common seagrasses found in Semirara Island.

Sem-Calaca Power Corporation SCPC planted 3,345 seedlings along Dacanlao River in Barangay Baclaran and donated 1,300 seedlings to CENRO Calaca and TESDA Calabarzon. It also seeded 50 pieces of giant clams along the shoreline of the power plant complex.

DMCI Power Corporation DMCI Power planted 15,000 mangrove propagules along the coastline of its power plant compound in Mobo, Masbate, as part of its efforts to protect the environment.

Zambales Diversified Metals Corporation The company planted 30,000 seedlings in Barangays Lomboy and Guinabon in Sta.Cruz, Zambales. The reforestation project led to the provision of jobs for 20 personnel.

Maynilad Water Services, Inc. Maynilad has been actively working to protect the quality and volume of raw water inside Ipo Dam through its Ipo Watershed Rehabilitation and Reforestation program. Since 2007, the company has reforested approximately 350 hectares of the watershed with 488,300 trees.

The company launched its Cavite Mangrove Rehabilitation program in 2013 to protect and restore the mangroves in the coastal areas of Bacoor, Cavite City, Kawit, Noveleta and Rosario. Since the launch of its mangrove program, Maynilad has planted around 95,000 propagules, covering 150 hectares of coastal areas.

This feat was accomplished in partnership with the Department of Environment and Natural Resources Provincial Environment and Natural Resources Office – Cavite, Bureau of Jail Management and Penology, Philippine Coast Guard - Coast Guard Station of Cavite, among others.

350hectares of Ipo Watershed reforested

3,345seedlings planted along Dacanlao River



Semirara Mining and Power Corporation The company co-managed the continuing capability training of Semirara Island Emergency Action Group (SIEAG) management teams and responders.

It also activated the Incident Command Post for Semirara Island which was headed by a representative of the Municipal Mayor of Caluya. Responsibilities of the Barangay Disaster Risk Reduction Management Councils (BDRRM) were also revisited during the year.

In December 2016, Barangay Semirara won first place as the best barangay disaster risk reduction and management committee (BDRRMC) Urban Barangay Category during the 2016 Regional Serach for Excellence in Disaster Risk Management and Humanitarian Assistance (“Gawad Kalasag”) by the Office of the Civil Defense.

A First Responders team was trained on Water Search and Rescue Operations (WASAR). Drills on how to respond to a fire, earthquake and storm surge were likewise conducted. 57 representatives from SMPC, host barangays and local government units participated in the training, while 165 volunteers attended the workshop and drills.

Sem-Calaca Power Corporation SCPC sponsored a training program for local government unit representatives on how to use the Rapid Earthquake Damage Assessment System (REDAS) software. With this software, users can predict the extent of damage of an earthquake on a particular area. Trainees came from the first district and coastal municipalities of Batangas.

Disaster mitigation, management and response helps reduce injuries, health problems, loss of lives and damage to properties.

Emergency Preparedness and Disaster Relief

Representatives from Brgy. Baclaran, Brgy. San Rafael and the Municipality of Calaca attended a Disaster Preparedness and Emergency Response Seminar sponsored by the company. Attendees learned basic knowledge and skills on how to prepare and respond to emergency and disaster situations. 25 trainees from 4 impact Barangays and 2 host LGUs 17 trainees out of 19 were employed as of December 31, 2016

Maynilad Water Services, Inc. Mission Ginhawa is the year-long disaster response program of Maynilad. It provides much-needed potable water to survivors recovering from natural and man-made calamities. In 2016, the company was able to reach out to over 13,000 disaster-stricken families.

Maynilad responded to at least 12 fire incidents. It also partnered with the MVP CSR Council in its El Nino relief efforts in Mindanao.

After super typhoon Lawin hit Kalinga, Apayao, Tuguegarao and Penablanca in Cagayan, Maynilad sent a team of personnel to bring water relief and teach affected communities how to use the water filters donated by Maynilad.

Mission Ginhawa reached out to over

13,000disaster-stricken families in 2016

57 SMPC representatives participated in the Water Search and Rescue Operations training

Local government unit representatives were trained to use

REDAS(Rapid Earthquake Damage Assessment System ) software



Board ofDirectors

Herbert M. ConsunjiExecutive Director

Victor A. ConsunjiNon-Executive Director

Luz Consuelo A. Consunji Non-Executive Director

Honorio O. Reyes-LaoIndependent Director

Isidro A. ConsunjiChairman

David M. ConsunjiChairman Emeritus

Cesar A. BuenaventuraVice-Chairman

Ma. Edwina C. LaperalExecutive Director

Jorge A. ConsunjiNon-Executive Director

Antonio Jose U. PeriquetIndependent Director

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Corporate Governance

Ensuring the Basis for an Effective Corporate Governance Framework

ComplianceSecurities Regulation and

ReportingEnvironment, Health and Safety

Rights and Equitable Treatment of Shareholders and Key Ownership Functions

Institutional InvestorsRight to VoteRight to Participate in the ProfitsOther Shareholder RightsNotice of Annual Shareholders’

MeetingAnnual Shareholders’ Meeting

Institutional Investors, Stock Markets and Other Intermediaries

Proportionate VotingInsider TradingConflict of InterestCompany LoanRelated Party TransactionsShare Repurchases

Role of Stakeholders

EmployeesCustomersSuppliers and ContractorsCreditorsGovernmentCommunity and EnvironmentStakeholder CommitmentAnti-Corruption and Ethics

ProgramConflict of InterestWhistleblowing

Disclosure and Transparency

Ownership TransparencyInformation PolicyInvestor RelationsMedia Engagement

Responsibilities of the Board of Directors

Strategy and OversightBoard CharterBoard Structure and CompositionBoard Competency and DiversityBoard and Director DevelopmentChairman and Chief Executive

Officer (CEO)Regular DirectorsIndependent DirectorsBoard MeetingsCorporate SecretaryDirector RemunerationExecutive Succession PlanningCEO Performance EvaluationBoard Performance EvaluationBoard Committees and AppraisalAudit CommitteeNomination CommitteeRemuneration CommitteeRisk Oversight CommitteeCorporate Governance

CommitteeInternal Controls and Risk

OversightEnterprise Risk Management

(ERM) PolicyRisk Management FrameworkKey Risk Management Areas External Audit

We believe that a well-functioning corporate governance system leads to economic efficiency, sustainable growth and financial stability.

In this report, we outline our corporate governance framework and how it governs the performance of our Board of Directors, management, officers and employees, with respect to their duties and responsibilities to our stakeholders.

The discussion is organized according to the Principles of Corporate Governance of the Organization for Economic Cooperation and Development (OECD), a global standard for good governance policies and best practices.



Good Governance RecognitionIn 2011, the ASEAN Capital Markets Forum (ACMF) launched the ASEAN Corporate Governance Scorecard (ACGS) in preparation for the ASEAN economic integration in 2015.

The ACGS is a corporate governance rating of a publicly-listed company’s (PLC) governance policies and practices based on the five (5) OECD Principles of Corporate Governance, namely: Rights of Shareholders, Equitable Treatment of Shareholders, Role of Stakeholders, Disclosure and Transparency, and Responsibilities of the Board.

A firm advocate of corporate governance, our Company has been steadily enhancing its system of rules, practices and processes to balance the interests of its many stakeholders. It has also committed to adopting the ACGS as an assessment methodology.

In the last four years, the ACGS score of our Company has nearly doubled from 43.94 points in 2013 to 87.66 points in 2016.

The ACGS score of our Company also outpaced the average score of the 38 publicly-listed Holding Firms in the country for the past three years.

Ensuring the Basis for an Effective Governance FrameworkOur Board of Directors (Board) and Management commit to promoting transparency and fairness within financial markets, while supporting the efficient allocation of resources.

They ensure that our corporate governance framework is in accordance with legislation, regulation, self-regulatory arrangements, voluntary commitments and ethical business practices.

ComplianceWe strive to build a strong compliance mindset among our officers, employees, subsidiaries and affiliate by promptly apprising them of compliance requirements and procedures.

Regular consultations are also done across the group to facilitate alignment and understanding of our Company’s corporate governance practices.

Securities Regulation and ReportingWe comply with the regulatory and reportorial requirements of the Securities and Exchange Commission (SEC) and Philippine Stock Exchange (PSE).

Comparative ACGS scores of DMC and Other Holding Firms

63.5384.57

2015

DMCI HOLDINGS (PSE: DMC)

OTHER HOLDING FIRMS

201352.01

43.94

201456.42

63.96

87.662016

64.01



Every year, we report our full compliance to the SEC Revised Code of Corporate Governance (SEC Code), and disclose our level of adoption of the PSE Corporate Governance Guidelines for Listed Companies.

In 2016, the Company distributed a Self-Assessment Compliance Checklist to the Directors, Officers and employees, which was attested to and certified by the Chief Compliance Officer that the Company is in full compliance with its Manual on Corporate Governance, Code of Business Conduct and Ethics, and Company policies.

Aside from advising and orienting Directors, Officers and employees of their respective duties under the SEC Code, we also have internal mechanisms for ensuring their compliance to this Code.

Employee Health and Safety Initiatives

Health care maintenance coverage

Group term life and accident insurance coverage

Annual physical examinations, free medical consultations and health facilities

Access to wellness facilities, i.e. gym, basketball and badminton courts

Sports and recreation programs

Nature of Company Disclosures

Board Attendance and Changes

Annual and Quarterly Financial Reports

Change in Shareholdings of Directors, Principal Officers and Beneficial Owners

Information Statement

Dividend Notice

General Information Sheet

Notice of Annual/Special Stockholders’ Meeting

List of Top 100 Stockholders

Compliance Reports on Corporate Governance

Public Ownership Report

Other material information/transactions

Environment, Health and Safety Sustainability is embedded in the way we conduct our business. In generating positive social and economic value for our stakeholders, we make sure that our procedures and practices are environmentally-friendly.

To contribute to the overall sustainability of the physical environment where we operate, we comply with all applicable environmental laws and regulations. We also reduce our environmental footprint through energy conservation, responsible water use, recycling, among others.

We recognize the importance of health and safety in the workplace, and commit to continually improving the health and safety performance of our Company, subsidiaries and affiliate.

Towards this end, the Board shall periodically review the policies requiring each subsidiary Board to formulate policies relating to the health, safety and welfare of its respective employees.

Each subsidiary is expected to adopt high safety standards in their individual work environments, as well as a system for measuring the performance and results of their health and safety programs.

We have also adopted a number of programs for the health and safety of our employees, in addition to facilitating their participation in emergency preparedness drills.

Through these initiatives, we hope to provide our people with an environment that fosters good health, safety and well-being.

Disclosures. To protect our shareholders and contribute to the development of the Philippine capital market, we promptly disclose structured and non-structured reports and material information about our Company.

Transactions involving the trading of our shares by our Directors and Officers are disclosed and reported to the PSE and SEC within three (3) trading days, which is stricter than the prescribed reporting period of five (5) trading days.

Compliance Officer. The Board has designated Executive Vice President and Chief Finance Officer Herbert M. Consunji as Chief Compliance Officer, to ensure adherence to corporate governance principles, best practices, the SEC Code and our Company’s Revised Code of Corporate Governance.



Rights and Equitable Treatment of Shareholders and Key Ownership FunctionsOur corporate governance framework is designed to protect and facilitate the exercise of shareholders’ rights, while ensuring the equitable treatment of our retail and institutional investors.

To ensure that the rights and interests of our retail and institutional investors are protected, we uphold policies and practices that accord equal voting rights, reasonable economic returns, unrestricted access to material information and appropriate safeguards against discriminatory and abusive conduct.

It is also our policy to keep our openly traded shares above the 10% minimum public float requirement of the PSE.

Institutional InvestorsBeing a listed company, we recognize our contributory role in the development of the Philippine capital market and the advantages of having well-resourced, professional shareholders (institutional investors).

In this regard, we are committed to facilitating the entry, participation and fair treatment of institutional investors.

Right to VoteWe respect and uphold our shareholders’ right to participate, be informed and vote on fundamentally important matters during our ASM.

At least 21 business days before our ASM, we send our shareholders a formal notice (Notice of Annual Shareholders Meeting) to advise them on the ASM date, location, agenda, rules and voting procedures.

The Information Statement (IS) and other related materials were distributed to our stockholders of record on 27 June 2016, which was 30 days prior to the 27 July 2016 ASM.

With such information, we hope to facilitate their attendance and encourage their participation in our annual meeting.

Our non-controlling shareholders have the right to nominate candidates for Board directorships as part of the nomination process and procedures.

In 2016, such nomination for Independent Directors by a minority shareholder was appropriately disclosed in our Company’s SEC 20-IS.

Right to Participate in the ProfitsShareholders have the primary financial right to participate in our profits, and we are fully committed to upholding this right by providing them reasonable economic returns on their stock investments.

Our policy aims for a dividend payout ratio of at least 25% of the preceding year’s Consolidated Core Net Income.

Matters of Fundamental Importance

Fundamental corporate changes and governance matters requiring approval during shareholder meetings include, among others:

Amendments to the Company’s constitution and similar governing documents

Appointment, re-appointment of external auditor

Authorization of additional shares

Extraordinary transactions, including transfer or sale of all or substantially all of the Company’s assets, sale of a business unit or subsidiary that accounts for a majority portion of the Company’s assets

Nomination by non-controlling shareholders of candidates for Board Directors

EntryWe encourage the entry of institutional investors holding more than 5 percent of Company shares (as per PSE Disclosure 17-12 Top 100 Stockholders List) by providing them with sufficient rights and access to information.

Fair TreatmentWe uphold the principle of fair treatment of all shareholders on all matters of importance to all investors, particularly institutional investors, such as decisions related to mergers and acquisitions

ParticipationTo facilitate the attendance and participation of institutional investors in our Annual Shareholders’ Meeting (ASM), we furnish them with timely and sufficient information regarding such meetings. We also hold the ASM at a venue that is easily accessible to retail and institutional investors.

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In the last five years, our total dividend payout has amounted to P31.3 billion, which makes us one of the best dividend-paying companies in the Philippines.

Type Amount/Share Declaration Date Payment Date Record Date Total Amount Paid

Regular Php 0.10 June 15, 2006 June 20, 2006 June 30, 2006 245,549,400

Regular Php 0.10 April 13, 2007 May 28, 2007 April 30, 2007 245,549,400

Regular Php 0.10 April 24, 2008 May 30, 2008 May 12, 2008 245,549,400

Regular Php 0.20 May 21, 2009 June 30, 2009 June 5, 2009 531,098,800

Regular Php 0.50 June 4, 2010 July 15, 2010 June 18, 2010 1,327,747,000

Regular Php 1.00 May 31, 2011 July 7, 2011 June 15, 2011 2,655,494,000

Regular Php 1.20 May 15, 2012 July 5, 2012 June 15, 2012 3,186,592,800

Regular Php 1.20 April 11, 2013 May 10, 2013 April 26, 2013 3,186,592,800

Special Php 1.00 April 11, 2013 May 10, 2013 April 26, 2013 2,655,494,000

Special Php 1.20 November 14, 2013 December 13, 2013 November 29, 2013 3,186,592,800

Regular Php 1.20 May 15, 2014 June 13, 2014 May 30, 2014 3,186,592,800

Special Php 1.20 May 15, 2014 June 13, 2014 May 30, 2014 3,186,592,800





Consolidated Core Net Income is currently defined as reported net income excluding all foreign exchange, mark-to-market gains and losses and non-recurring items.

In the last five years, our total dividend payout has amounted to P31.3 billion, which makes us one of the best dividend-paying companies in the Philippines.

From time to time, our Company may declare special dividends as a return of excess funds to shareholders, as determined by the Board of Directors.

Cash Dividend. On 11 May 2016, the Board declared regular and special cash dividends of P0.24 each, for a combined dividend of P0.48 per common share.

The payout totaled P6.37 billion out of the unrestricted retained earnings of the Company as of 31 December 2015, in favor of the common stockholders of record as of 27 May 2016.

All shareholders were treated equitably in the payout of dividends, and were fully paid the declared cash dividends by 10 June 2016, or within thirty (30) days from the declaration date.

Shareholders are entitled to inspect the corporate books and records to determine the financial condition of the Company, and understand how the corporate affairs are being managed. In so doing, they can take the appropriate measures to protect their investment.

1 Right to Inspection

Shareholders have the right to dissent and demand payment of the fair value of their stocks, subject to the instances provided for in the Corporation Code.

2 Appraisal Right

Shareholders have the right to receive periodic reports which disclose personal and professional information about the Directors, Officers and certain other matters such as their shareholdings in the Company, material transactions with the Company, relationship with other Directors and Officers and the aggregate compensation of Directors and Officers.

3 Right to Information

Other Shareholder RightsWe respect other shareholder rights, as provided for in the Corporation Code of the Philippines.

Cash Dividend History (Since 2006)



The key items which required shareholder disposition in the Notice of 2016 ASM included the following:

Ratification of all Acts of the Board of Directors and Officers during the preceding year

Appointment of IndependentAuditor

Election of Directors, including two Independent Directors

Amendment of the Corporation By-Laws, specifically the following:(a) Article II, Section 1(b) Article VI, Section 1 (c) Article VI, Section 6

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Shareholders’ ParticipationAfter discussion of the Management Report, the shareholders and other attendees were given the opportunity to ask and/or make clarifications on the performance and prospects of the Company.

The questions and corresponding answers were duly recorded in the Minutes of the 2016 ASM, and subsequently disclosed in the relevant section of the Annual Corporate Governance Report.

VenueTurf Room, Manila Polo Club, Forbes Park, Makati City. The venue is an accessible location to our shareholders.

Voting in Person or in AbsentiaWe respect the rights of our shareholders to participate and vote in our ASM.

We allow voting in absentia via proxy to give shareholders who are unable to attend our ASM, the opportunity to participate and vote.

Whether made in person or in absentia, their votes carry equal effect. The following Poll Voting procedures were observed during the 2016 ASM:

• Poll voting was conducted, as opposed to by show of hands, for all resolutions• Appointment of SGV & Co. as independent body to count and validate the votes

by the shareholders for items stated in the agenda requiring approval and/or ratification

• Votes were counted for each agenda item• Voting results were presented for each agenda item during the meeting to inform

the participants of the outcome

AgendaThere was due observance of the agenda items as indicated and disclosed in the Notice of 2016 ASM.

The Corporate Secretary discussed and explained the rationale of the agenda items requiring shareholders’ approval.

In compliance with regulatory rules, there was also no added agenda item or amendment to material information without prior shareholder notice.

DisclosureResults as to approving, dissenting and/or abstaining votes of shareholders taken for all resolutions were publicly disclosed to the SEC and PSE on the same day as the ASM. The same information was posted on our website a day after the ASM or on 28 July 2016.

The list of Board Directors who attended the 2016 ASM were reported and disclosed to PSE and SEC.

The Minutes of the 2016 ASM were uploaded in our corporate website on 28 July 2016, or one day after the meeting.

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Notice of Annual Shareholders’ MeetingOur Notice of 2016 Annual Shareholders’ Meeting (ASM) with corresponding details and rationale for each agenda item was disclosed to the PSE and uploaded on our website on 23 May 2016.

On 2 June 2016, we likewise filed our SEC 20-IS (Definitive Information Statement) with detailed agenda and relevant information for our shareholders’ guidance pursuant to the SEC rules that include proxy form, management report, and financial statements.

The Notice of 2016 ASM and the Definitive Information Statement were issued sixty-four (64) days and fifty-four days (54), respectively, before the regular ASM on 27 July 2016, exceeding the prescribed period of twenty-eight (28) and twenty-one (21) days by the ACGS, respectively.

Annual Shareholders’ MeetingEvery year, the Company holds an ASM to report on its performance and provide an opportunity for shareholders to ask the Board for updates or clarification on certain issues. Decisions made by the Board over the previous year that require shareholder approval and ratification are likewise subjected to a vote.

In the 2016 ASM, the stockholders approved the amendment of Article II, Sec. 1 of the Company By-Laws, changing the ASM schedule from the last Wednesday of July to the third Tuesday of May of each year.

The amendment was made to enable the Company to be at par with the ASM schedules of other publicly-listed companies.

In the 2016 ASM, all shareholders were notified and were able to participate and vote on fundamental corporate changes and major decisions, such as the amendments in the Company’s By-Laws.

The Corporate Secretary explained the details of such amendments and the poll voting procedures as indicated in the Agenda.

Present during the 2016 ASM to address queries from the shareholders were the Chairman of the Board and President, other Directors, Corporate Secretary, Officers and external auditor (Sycip Gorres Velayo & Co). The Presidents and CFOs of the subsidiary companies were also in attendance.

In our 2016 ASM, the Company adopted several best practices such as, but not limited to the following:



Institutional Investors, Stock Markets and Other IntermediariesWe provide our shareholders with the necessary safeguards, information, opportunities and incentives so they can exercise their rights and effectively manage their investments.

We are likewise committed to providing our minority shareholders with adequate protection from abusive and inequitable conduct of majority shareholders, Directors, Officers and employees of the Company.

Proportionate VotingWe maintain a share structure of “one vote per one common share”, and have no current practice that have led us to award disproportionate voting rights to select shareholders.

In the event that extraordinary circumstances necessitate further special arrangements where we issue special cases of shares, thus, resulting in disproportionate claim on voting rights, we shall issue a full disclosure and detailed justification of such action.

Before taking such an extraordinary action, we shall seek the requisite approval from our shareholders.

Insider TradingOur Insider Trading policy explicitly prohibits insider trading to prevent conflict of interest and benefiting from insider information or knowledge not available to the general public.

Directors, Officers and all Covered Persons are strictly prohibited from trading during the following periods:

Structured Disclosures. Within five (5) trading days before and within three (3) trading days after the disclosure of quarterly (SEC17Q) and annual (SEC 17A) financial results

Non-Structured Disclosure. Within three (3) trading days after the disclosure of any material information other than the abovementioned structured disclosure

Directors and Officers as defined in the By-laws and Board Charter are required to report their trades of the Company’s shares within three (3) business days to the Office of the Compliance Officer for eventual compliance reporting to PSE and SEC.

All other Covered Persons are required to report their trades to the Office of the Compliance Officer on a quarterly basis.

In 2016, there were no complaints received regarding misuse of insider information committed by any Director, Officer or Covered Person.

The table below summarizes the trading of Company shares by our Directors and Officers in 2016.

Definition of Covered Persons

Members of the Board of Directors and the Corporate Secretary of the Company and its subsidiaries;

Officers as defined in the by-laws of the Company and its subsidiaries, whether owned directly or indirectly, who are or may be in possession of material nonpublic information about the Company because of their responsibilities;

Consultants and Advisers of the Company;

Any person who possesses material non-public information regarding the Company is an Insider for so long as the information is not publicly known.

Any employee can be an Insider from time to time, and would at those times be subject to this Policy; and

Members of the immediate families of Directors, Officers and all other Covered Persons who are living in the same household as the abovementioned Covered Persons.

2016 Summary of Trading of DMC Shares by the Board of Directors

Beginning Share Balance (As of Jan. 1, 2016)

Acquired Disposed Nature of Ownership

Ending Share Balance (As of Dec. 31, 2016)

Isidro A. Consunji 65,000 - - Direct 65,000 20,950,385 96,305 - Indirect 21,046,690

Cesar A. Buenaventura 900,000 - - Direct 900,000 5,700,000 - - Indirect 5,700,000

Victor A. Consunji 5,000 - - Direct 5,000 54,588,045 - - Indirect 54,588,045

Jorge A. Consunji 5,000 - - Direct 5,000 551,710 - - Indirect 551,710

Herbert M. Consunji 23,000 - - Direct 23,000 - - - Indirect -

Ma. Edwina C. Laperal 3,315,000 - - Direct 3,315,000 82,646,835 195,000 - Indirect 82,841,835

Luz Consuelo A. Consunji 1,000 - - Direct 1,000 250,000 - 250,000 Indirect -

Antonio Jose U. Periquet 125,000 - - Direct 125,000 3,251,850 - - Indirect 3,251,850

Honorio O. Reyes-Lao 175,000 - - Direct 175,000 - - - Indirect -

*Resigned as Chairman and Director on November 18, 2014, and appointed as Chairman Emeritus by the Board of Directors



Conflict of InterestUnder our Code of Business Conduct and Ethics, our Directors, Officers and employees are required to act in the best interest of the Company.

As such, they should avoid actual and potential conflicts of interest or otherwise identify, disclose, and explain in sufficient detail such conflicts, to enable valid judgments to be made on their adverse impact.

Those who are conflicted are prohibited from participating in the discussion and evaluation of the issue in question, nor are they entitled to vote on any resolution where they are conflicted. Related party contracts are also disclosed in the annual report.

Company LoanPursuant to our amended Related Party Transactions Policy, the Company prohibits the grant of personal loans, advances, guarantees and securities, in any manner, to its Directors, including their spouses and other dependents.

Related Party Transactions Our Related Party Transaction (RPT) Policy requires any transaction with related parties to be made on terms equivalent to those that prevail in an arm’s length transaction.

The policy also sets the thresholds and categories for disclosure and approval of RPTs, the amount of which shall be considered for purposes of applying these thresholds.

As defined under its Board-approved Charter, the Audit Committee shall oversee and review the propriety of RPTs and their required reporting disclosures.

Before the committee undertakes the review, all Independent Directors review and recommend to the Audit Committee the merits of any material RPT, taking into account the best interest of the Company.

In its own review, the Audit Committee shall take into account, among other factors it deems appropriate, whether the terms of the RPT are no less favorable to the concerned company than terms generally available to an unaffiliated third-party under the same or similar circumstances. The extent of the related parties’ interest in the transaction is also reviewed by the Committee.

The Audit Committee assists the Board in its oversight of RPTs. Our quarterly and annual review of the financial statements include related party accounts and ensures RPTs are disclosed for the information of the investing public.

Below are the significant related party transactions of the Parent Company in 2016. Related Party

Transaction Thresholds

Less than three percent (3%) of Total Assets based on the Audited Financial Statements of the previous year of Parent or Subsidiary requires approval of the concerned entity’s CEO or President

Three percent (3%) and above of Total Assets based on the Audited Financial Statements of the previous year of Parent or Subsidiary requires approval of concerned entity’s Board of Directors

Twenty percent (20%) and above of Total Assets based on the Audited Financial Statements of the previous year of Parent or Subsidiary requires approval of concerned entity’s Shareholders

Related parties Nature Amount/Voume(in million pesos)

Due From (Due To)(in million pesos)

Subsidiaries

Semirara Mining and Power Corporation Dividend income 2,408 -

DMCI Mining Corporation Dividend income 1,800 -

Assignment of receivables - 2,1118

DMCI Project Developers Dividend income 1,371 100

Management fee 4 -

Future dividends - (15)

D.M. Consunji, Inc. Dividend income 255 -

Wire Rope Corporation of the Philippines Dividend income 4 -

Associate

Maynilad Water Holding Company, Inc. Dividend income 511 -

Affiliate

Asia Industries Office space rent 3 -

2016 Summary of Trading of DMC Shares by the Officers

Officer Beginning Share Balance (As of Jan. 1, 2016)

Acquired Disposed Nature of Ownership

Ending Share Balance (As of Dec. 31, 2016)

Cristina C. Gotianun 5,500 - - Direct 5,500

103,895,000 11,000 - Indirect 103,906,000

Victor S. Limlingan 5,000 - - Direct 5,000

- - - Indirect -

Noel A. Laman 100,000 - - Direct 100,000

- - - Indirect -

Ma. Pilar P. Gutierrez - - - Direct -

- - - Indirect -

Brian T. Lim - - - Direct -

- - - Indirect -

Cherubim O. Mojica - - - Direct -

- - - Indirect -

Tara Ann C. Reyes - - - Direct -

- - - Indirect -

Share repurchasesThere were no share repurchases made in 2016.



Role of StakeholdersOur stakeholders may not have equity stakes in our Company but we are committed to protecting their rights and interests, as defined by the law or through mutual agreements.

We encourage their active cooperation and recognize their contributory role in creating wealth, generating jobs and ensuring the sustainability of the Company.

EmployeesProtecting the welfare and rights of our employees is among our foremost concerns. We strive to provide our people with the safeguards, opportunities and platforms they need to deliver superior performance and achieve work-life balance.

Remuneration and Benefits. Our compensation structure is set at levels that are appropriately competitive in attracting, motivating and retaining competent individuals.

We also provide variable cash incentives based on the performance of the employee and the Company, to support a high-performance culture that actively strives to grow the business and increase shareholder value.

Culture. We invest in talent development to empower our employees and prepare them for progressively challenging work. Our goal is to create a culture of excellence where employees can prosper and achieve their full potential.

Equality. We foster the fair treatment of employees and do not tolerate unlawful discrimination and harassment of any nature on the basis of sex, race, religion, age, color or disability.

Our Code of Business Conduct and Ethics provides a clear system of policies, processes and controls, while our whistleblowing mechanism provides a confidential venue for employees to raise valid, fact-based ethical concerns.

Whistleblowers may report such concerns through our dedicated email address at [email protected].

Safety and Health. We are committed to providing our employees with a workplace that protects their safety, health and welfare.

To continually improve the health and safety of our people and those working in our subsidiaries, our Board periodically reviews the policies requiring each subsidiary Board to formulate its own employee health, safety and welfare policy.

All managers are also expected to actively support the Board in the development and proper implementation of their particular Safety and Health Policy. The Management must likewise ensure that the necessary resources of staff, facilities and finance are provided to implement this policy.

General Welfare. Annual team building and socialization events form part of our employee engagement program. This is to promote camaraderie and positive interaction among our employees and subsidiaries.

Employees are likewise provided internal and external trainings to further develop their skills.

To strengthen their industry knowledge, they are encouraged to join and participate in professional clubs and organizations outside the Company.



Customers We are committed to meeting customer requirements in a mutually fair and satisfactory manner. Through our subsidiaries, we aim to provide construction, real estate, power, mining and water clients/consumers with superior quality products and services at a reasonable price, as provided for in our Code of Business Conduct and Ethics.

To protect customer safety and welfare, we abide by the relevant laws, rules and regulations set by the Philippine government, which include, but are not limited to, the Condominium Act (RA 4726), Electric Power Industry Reform Act (RA 9136), Mining Act (RA 7942), National Water Crisis Act (RA 8041).

We also strive to innovate and adopt global standards wherever applicable and possible. Our construction, coal mining and water businesses have been awarded ISO certifications for Quality and Management, Health and Safety, among others.

Through our subsidiaries and affiliates, we implement mechanisms, programs and activities that further promote customer welfare and engagement. These efforts include, but are not limited to, customer hotlines, site and home visits, appreciation events, client consultations and customer surveys.

On Supplier/Contractor SelectionOur Company, Directors, Officers and employees shall:

seek and maintain mutually beneficial relationships with suppliers and contractors that uphold the principles of fairness, accountability, integrity and transparency;

give qualified suppliers and contractors adequate, fair, and equal opportunity to bid on goods and services for the Company’s projects or requirements;

select suppliers and contractors based on organizational needs, quality requirements, cost, track record and ability to deliver according to set deadlines;

as a general rule, choose suppliers and contractors on the basis of Competitive Bidding. Negotiated contracts may be applied, provided that it is in the best interest of the Company to enter into such a strategic engagement;

avoid adopting and/or requiring specifications of products and services that either favors a particular supplier or contractor, or limits competitive sourcing; and

seek the best value for money from the suppliers and contractors, and avoid compromising the quality standards of the Company.

On Supplier/Contractor TreatmentOur Company, Directors, Officers and employees shall:

hold in confidence all dealings with bidders and suppliers;

ensure that suppliers abide by the policies, practices and standards of the Company;

facilitate payment disbursements committed to suppliers and contractors in a prompt manner and in accordance with the applicable contract provision;

promote and observe ethical conduct in their relationships, actions, and communications with suppliers and contractors at all times. Actions, speech or behavior that in any way diminishes open, honest and fair treatment of suppliers shall be avoided;

not solicit, accept or attempt to accept any bribe in exchange for being awarded a contract declare their personal relationships and/or previous business and official dealings and relationships with any of the owners, officers, and representatives ofthe supplier or contractor they are dealing with when dealing or transacting directly or indirectly, with such parties; and

be vigilant against any irregular, illegal, or unethical conduct of suppliers, contractors and/or fellow directors, officers and employees. The Company encourages everyone to report any such violations based on the existing Whistleblowing Policy.

Customer Welfare Mandate

Our Directors, Officers and employees are mandated to:

treat customers and other stakeholders with respect, integrity and professionalism at all times;

deal with customers, suppliers, business partners, creditors and government representatives in a fair and reasonable manner; and

refer complaints of unfair, deceptive and fraudulent business practices of subsidiaries and affiliates to the Chief Compliance Officer.

Suppliers and ContractorsOur Code of Business Conduct and Ethics outlines our Supplier/Contractor Relations procedures, which guide and govern the business relationships of our Company, Directors, Officers and employees, including their decisions and actions when dealing with our suppliers and contractors.1

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CreditorsWe value the contributions of our creditors to our growth, development and sustainability. As we work towards improving our stakeholder value, so does our focus on strengthening our relationships with our creditors.

To service our maturing debts and finance our capital requirements, we seek to manage our liquidity profile in a prudent and proactive manner, as provided for in our Safeguarding Creditors’ Rights Policy. We also maintain a level of cash and cash equivalents deemed sufficient to finance our operations.

It is our policy to disclose information on whether we have complied with our loan covenants with our lenders and all collaterals and guarantees of the loans. Such information is part of our audited financial statements, which is attested to by an independent external auditor.

We also regularly examine and monitor our debt servicing ability and financial position using relevant financial ratios. These ratios are disclosed in our annual and quarterly reports to the SEC and PSE. Among the ratios we closely monitor are current ratio, debt to equity ratio and interest coverage ratio.

GovernmentIn support of the government’s Philippine Development Plan, we invest in businesses that contribute to the sustainable economic growth and development of the country, while improving the quality of life of Filipinos.

We comply with relevant laws, rules and regulations set by the Philippine government, and deal with their representatives in a fair, reasonable and ethical manner.

Equally important, our income tax, royalty and license payments provide the government with significant and stable revenues to support its socio-economic programs.

In 2016, our income tax, royalties and licenses due to the government amounted to P5.1 billion.

Community and EnvironmentSustainability is embedded in the way we conduct our business. In generating positive social and economic value for our stakeholders, we make sure that our procedures and practices are environmentally-friendly.

To contribute to the overall sustainability of the physical environment where we operate, we comply with all applicable environmental laws and regulations. We also reduce our environmental footprint through energy conservation, responsible water use, recycling, among others.

We consider our host community as our growth partner, and contribute to its social development programs by paying appropriate taxes and complying with relevant laws, regulations, resolutions and ordinances.

Through our subsidiaries, we also empower the local communities where they operate by providing employment, livelihood opportunities and basic services that will help improve their quality of life.



Disclosure and TransparencyWe uphold the principle of transparency and commit to a system of timely disclosure of material information, including our financial situation, performance, ownership and corporate governance.

Our Annual Report, Annual Corporate Governance Report, disclosures, regulatory filings and website provide full details regarding our governance structure, objectives, key risks, financial and non-financial performance indicators, systems and policies.

Ownership TransparencyWe promptly report the significant ownership, including direct and indirect beneficial ownership of our shares, relationships of related companies, and structure of crossholdings, as well as the extent of our ownership and interests in our subsidiaries.

As of 31 December 2016, the members of the Board directly and indirectly owned 4,614,000.00 shares and 168,889,485 shares, respectively. Further details are provided in the succeeding table.

We believe that bribery and corruption are unethical, unacceptable and inconsistent with our founding principles.

In our operations, we seek to avoid even the appearance of impropriety with respect to the actions of our Directors, Officers and employees.

We are committed to maintaining the highest possible ethical standards and complying with all applicable laws.

Our policy prohibits corrupt payments in all circumstances when dealing with government officials or private sector individuals, and provides the following guidelines for strict observance by our Directors, Officers and employees:

• act lawfully, ethically and in the public interest;

• prohibit bribery and corruption in our corporate dealings;

• deter illegal or unethical behavior by clients, suppliers or government officials; and

• report any such violations based on the existing Whistleblowing Policy of the Company

Our Code of Business Conduct and Ethics explicitly provides guidelines on conflict of interest, fair dealings, among others.

These guidelines apply to all Directors, Officers and employees.

Conflict of interest situations refer to ownership of a part of another company or business having interests adverse to our Company, and accepting commissions or share in profits from any supplier, customer or creditor.

We do not seek competitive advantages through illegal, unethical or unfair dealing practices.

Directors, Officers and employees are expected to deal with our customers, service providers, suppliers, and competitors in a fair manner.

They are likewise barred from taking unfair advantage of anyone through manipulation, concealment, abuse of privilege information, misrepresentation of material facts, or any other unfair dealing practice.

We are committed to providing our stakeholders with a safe reporting channel, where they can raise serious concerns about a perceived wrongdoing or malpractice involving our Company.

Our Whistleblower Policy outlines the mechanism, safeguards, reporting channel and investigation process for serious concerns that stakeholders might have, while providing them with protection from victimization, harassment, retaliation or disciplinary proceedings.

Whistleblowers may raise their concerns through regular mail, email, telephone, fax or in-person with the Chief Compliance Officer of the Company or his designated alternate officer.

Mail: Office of the Chief Compliance Officer3F Dacon Building, 2281 Don Chino Roces Avenue Extension, Makati CityEmail: [email protected]: (632) 888 3462Fax: (632) 816 7362

If the subject of the report is the Chief Compliance Officer, his designated alternate officer, the Chief Executive Officer or a member of the Board of Directors, the whistleblower should direct the concern to the Vice Chairman of the Board for appropriate action.

Mail: Office of the Vice Chairman3F Dacon Building, 2281 Don Chino Roces Avenue Extension, Makati CityEmail: [email protected]: (632) 888 3000Fax: (632) 816 7362

1 Conflict of Interest 2 Whistleblowing 3 Anti-

Corruption and Bribery

Stakeholder CommitmentWe uphold all laws concerning the proper and fair treatment of our internal and external stakeholders.

While we put a premium on profit maximization and shareholder value optimization, we also recognize our duty to strike a proper balance between purely short-term financial performance and long-term overall corporate performance.

To achieve long-term sustainability and strength, we will secure the loyalty, commitment and support of our internal and external stakeholders through our policies.



We likewise disclose the direct and indirect shareholdings of our Directors and senior management in the SEC Forms 20-IS, 17-A, 17-C and Annual Corporate Governance reports.

Information PolicyCorporate information is disclosed in a timely and transparent manner to individual and institutional shareholders using a number of communication channels.

Announcements and Updates. We release announcements or disclosures on material business developments and updates, as needed.

Investor Relations. We conduct and/or participate in investor relations activities such as analyst briefings, investor conferences, among others.

Periodic Reporting. We practice the timely issuance of quarterly and annual structured reports, including financial statements that are prepared in accordance with financial reporting and accounting standards.

Company Website. Our website (www.dmciholdings.com) provides up-to-date financial and business information about our investments, organization structure, corporate governance documents and policies, disclosures, among others.

Investor RelationsWe recognize our duty to advance the interests of our investors. Our goal is to provide the investment community with timely, relevant and accurate information about our financial performance, operating highlights, strategic direction, growth prospects and potential risks.

We demonstrate our commitment to the investing public by adopting a policy of open and constant communication, subject to insider information guidelines and other pertinent company policies.

Institutional and prospective investors, investment analysts, fund managers and the financial community are provided material information about the Company during conference calls, investor conferences, analyst briefings, non-deal roadshows, among others.

Highlights and Activities.

Investor/Analyst briefings were conducted on April 25, August 12 and November 16 to discuss the 2015 full year and 2016 quarterly results of the Company. The Company also participated in a number of investor relations activities.

Name of Director Number of Direct shares Number of Indirect shares % of Capital Stock

Isidro A. Consunji 65,000.00 21,046,690 0.1590%

Cesar A. Buenaventura 900,000.00 5,700,000 0.0497%

Herbert M. Consunji 23,000.00 0 0.0000%

Ma. Edwina C. Laperal 3,315,000.00 83,134,335 0.6511%

Victor A. Consunji 5,000.00 54,588,045 0.4112%

Jorge A. Consunji 5,000.00 1,168,565 0.0045%

Luz Consuelo A. Consunji 1,000 0 0.0019%

Honorio O. Reyes-Lao 175,000.00 0 0.0000%

Antonio Jose U. Periquet 125,000.00 3,251,850 0.0245%

TOTAL 4,614,000.00 168,889,485 1.3068%

Date Venue Event

January 25-26, 2016 Manila JP Morgan Philippine Conference

February 16-17, 2016 Hong Kong dbAccess Philippines Corporate Day

February 18-19, 2016 Singapore dbAccess Philippines Corporate Day

March 2-3, 2016 Manila UBS Philippines CEO-CFO Forum

August 17-18, 2016 Singapore/Hong Kong UBS Philippines Corporate Day

September 5-6, 2016 London dbAccess Philippines Corporate Day

October 5-7, 2016 Manila dbAccess Philippines Corporate Day

Contact Information. Investor Relations concerns may be directed to:

Dr. Victor S. Limlingan Managing Director

Tara Ann C. Reyes Investor Relations OfficerTel: (632) 888 3000 local 1023Fax: (632) 816 7362Email: [email protected] Floor DACON Building2281 Chino Roces Avenue ExtensionMakati City, Philippines 1231



Media EngagementThe media plays an important role in promoting broader awareness and better understanding of the Company’s objectives, financial targets, business prospects and other material developments.

Responsibilities of the Board of DirectorsOur corporate governance framework helps ensure the strategic guidance of our Company, the effective managerial performance monitoring by the Board, and the accountability of the Board to our Company and its shareholders.

In our Board Charter, the roles, duties and responsibilities of the Board are defined in accordance with relevant Philippine laws, rules and regulations, and in full compliance with the principles of corporate governance.

Strategy and OversightThe Board establishes and approves the vision, mission, strategic objectives and key policies of the Company.

It reviews the vision and mission of the Company every five (5) years or as often as deemed necessary, as provided in the Board Charter.

On 10 August 2016, the Board approved the revised Vision Statement and adapted the Company’s Mission Statement, Corporate Values and Strategies, all of which are detailed at the beginning of this annual report.

On 10 November 2016, the Board reviewed the Vision Statement to incorporate specific tasks that the Corporation will target, making the vision/mission measurable and attainable.

2015 Full Year Financial Results and business updates

Wolfgang’s Steakhouse, March 31, 2016 2/F Resorts World Manila, Pasay City

2016 First Quarter Results and business updates

DMCI Holdings, Inc Office, May 11, 2016Board Room, 3/F Dacon Bldg. 2281 Chino Roces Avenue, Makati City

Annual Stockholders Meeting

Turf Room, Manila Polo Club, July 27, 2016 McKinley Road, Forbes Park, Makati City

2016 First Half Results and business updates

Mangetsu Japanese Restaurant, August 10, 2016 38 Jupiter St., Bel-Air Village Makati City

2016 Third Quarter Results and business updates

Jade Garden Restaurant, November 11, 20162nd Level Glorietta 2, Palm Drive Corner, West Drive, Ayala Center, Makati City

Familiarization tours

Emails and correspondence

Others

Press releases and statements

Interviews and media appearances

Media briefings

Our media engagement program is designed to provide media professionals with the information they need to accurately and effectively report on business and investment stories that directly or indirectly concern the Company.

In 2016, we conducted the following media briefings to enhance media engagement:



The Board likewise establishes decision-making authority policies, levels, limits and guidelines for Management, according to its risk appetite level and required Board approvals for governance matters.

On a continuing basis, the Board likewise conducts the following duties and responsibilities, among others:

• Reviews, monitors and oversees the implementation of the corporate strategy at least once a year

• Implements a process for the selection of Directors who can add value and contribute independent judgment to the formulation of sound corporate strategies and policies

• Reviews, evaluates and approves, on a regular basis, the long-range plans for the Company

• Reviews and approves the Company’s budget and forecasts

• Conducts annual performance assessment of the Chairman, President/CEO and Board members

• Evaluates and approves major resource allocations and capital investments

• Reviews the Corporation’s material controls and risk management systems

Board CharterThe Board Charter (“Charter”) governs the relationship between the Board committees and the Board, as contained in the charters of the committees which have been approved and adopted by the Board.

The Charter is intended to complement or supplement the Corporation Code of the Philippines, the Corporation’s articles of incorporation and by-laws, SEC and PSE issuances and other applicable laws, rules and regulations.

All Directors are expected to fully adhere to the principles and provisions set forth in the Charter.

During the year, the Board approved the adoption of, and the amendments to the following:

Date Item

10 August 2016 • Vision Statement• Mission Statement• Corporate Values• Corporate Strategy

10 March 2016 • Manual on Corporate Governance• Code of Business Conduct and Ethics• Related Party Transactions Policy• Community Interaction Policy• Environmentally Friendly Value Chain Policy• Supplier and Contractor Policy

31 March 2016 • Conflict of Interest Policy

Nomination. In consultation with the Nomination Committee, the Board reviews its profile, size and composition, taking into account the nature of its business, subsidiaries, desired expertise and Board member backgrounds.

The Committee reviews and pre-screens the qualifications of each Board candidate in accordance to the qualifications and disqualifications set in the Corporation’s By-Laws and Manual on Corporate Governance.

This is to ensure that the qualifications of the candidates are aligned with the strategic direction of the Company. The shortlist of candidates are disclosed in the Definitive Information Statement to be distributed to the stockholders.

In identifying and recommending candidates for election or appointment as directors, the Committee also reviews the effectiveness and implementation of the Diversity Policy of the Board. The committee likewise recommends any revisions that may be required.

Directorships. Our executive directors do not serve on more than two (2) boards of listed companies outside of our Company.

The Company does not set a limit on the number of board seats that an individual director may hold simultaneously in other companies. However, it ensures that the members of the board are committed to exercising their roles and responsibilities as directors regardless of the number of board seats they may have in other companies.

Non-Executive Independent Directors

Regular Executive Directors

Regular, Non-Executive Directors

4

2

3

Board Structure and CompositionThe full Board consists of nine (9) Directors, three (3) of whom are regular executive directors, four (4) are regular non-executive directors and two (2) are non-executive Independent Directors.



Based on the 2016 Board Attendance filed with the SEC and PSE, none of the incumbent directors were absent for more than 50% of the board meetings, both regular and special, in any twelve month period during their incumbency.

Our Board profile, with concurrent directorships held, are likewise disclosed in the SEC 20-IS (Definitive Information Statement), Annual Corporate Governance Report and Integrated Annual Report.

Board Competency and DiversityWe recognize the value of a diverse Board, and commit to creating and maintaining an inclusive and collaborative governance culture that will help sustain the growth of our organization.

The Company has a Board Diversity Policy that fosters differences in skills, regional and industry experience, professional background, race, gender, among others.

These differences are considered in determining the optimum composition of the Board and are balanced appropriately when possible.

The policy also reiterates that all Board appointments are made based on merit, in the context of the skills, experience, independence and knowledge which the Board as a whole requires to be effective.

Upon election, each Director participates in an induction program that covers the Company’s strategy, general financial and legal affairs, financial reporting, compliance programs, Code of Business Conduct and Ethics, Board Charter, among others.

In order to facilitate the fulfillment of their responsibilities, Directors are given access to, or notice of, continuing educational programs regarding corporate governance and critical issues relating to the operation of public company boards.

Directors are also encouraged to periodically visit our construction projects, mine sites, power plants, real estate developments and water facilities, to update their knowledge and understanding of our businesses.

Chairman and President The Chairman and President roles are unified to ensure strong, central leadership and increase efficiency.

To foster an appropriate balance of power, the functions of the two positions are clearly delineated in the Board Charter, Manual on Corporate Governance and By-Laws of the Company.

To ensure that the Board gets the benefit of independent views and perspectives, the Chairman and CEO does not sit on any of the board committees. Board resolutions are also decided upon by at least two-thirds (2/3) of the board members.

Board committees are mainly composed of independent and non-executive directors and are tasked to recommend and report to the Board any major business decisions.

Regular DirectorsA Director’s office is one of trust and confidence. Directors are expected to act in the best interest of the corporation in a manner characterized by transparency, accountability and fairness. They should also exercise leadership, prudence and integrity in directing the corporation towards sustained progress.

Directors must conduct fair business transactions for the Company and ensure that his personal interest does not conflict with the interests of the Company. They should also act judiciously, exercise independent judgment, and follow the norms of conduct outlined in the Amended Manual on Corporate Governance.

Board and Director DevelopmentTo raise the quality of our Board operations, we provide our Directors with orientation, training, continuing education, committee assignments and evaluations, among others.



Independent DirectorsAn Independent Director (ID) is defined as one who apart from his fees and shareholdings, is independent of management and substantial shareholders free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director of the Corporation.

Our IDs possess the qualifications and none of the disqualifications under existing Philippine regulatory rules and requirements for IDs. They have been nominated by a non-controlling shareholder during the nomination process, and are independent of management and major shareholders of the Company. More importantly, they bring objectivity to Board deliberations and discussions.

The number of IDs is in compliance with the Philippine regulatory requirement for boards of publicly-listed companies. Their cumulative tenure complies with the SEC’s prescribed ten (10) year-limit for Independent Directors, and their election as such in no more than five (5) companies in each conglomerate, both terms effective 2012.

Board MeetingsIn 2016, the Board had thirteen (13) meetings. The SEC minimum board meeting attendance requirement is 50%.

To strengthen board participation, the Company set the quorum for Board meetings and decisions to at least 2/3 of the Board members.

All Directors fully complied with the SEC and Company attendance requirement in 2016.

Board Name Date of Election

No. of Meetings Held during the year*

No. of Meetings Attended

%

Member Isidro A. Consunji 27 July 2016

13 13 100%

Member Cesar A. Buenaventura 13 13 100%

Member Herbert M. Consunji 13 13 100%

Member Ma. Edwina C. Laperal 13 13 100%

Member Victor A. Consunji 13 12 92.31%

Member Jorge A. Consunji 13 13 100%

Member Luz Consuelo A. Consunji 13 13 100%

Independent Honorio O. Reyes-Lao 13 12 92.31%

Independent Antonio Jose U. Periquet 13 13 100%

Corporate SecretaryThe Corporate Secretary provides a schedule of regular Board meetings and Board committee meetings, in line with our regulatory reporting dates. Special Board meetings may be called as the need arises.

The Corporate Secretary assists the Chairman in setting the Board agenda and provides Directors with meeting agenda and related materials at least five (5) days in advance of the Board meeting date. This is to provide Directors with accurate and sufficient information to make educated decisions during the Board Meeting.

The Corporate Secretary likewise provides guidance on the correct legal procedures to ensure that the Board complies with its obligations under the law and the Company’s Articles of Incorporation.

In addition, the Corporate Secretary maintains the integrity of the minutes of Board meetings, and provides updates to the Directors and Management regarding statutory and regulatory changes.

Our Corporate Secretary is Atty. Noel A. Laman, a founder and Senior Partner at Castillo Laman Tan Pantaleon & San Jose. Serving as Assistant Corporate Secretary is Atty. Ma. Pilar P. Gutierrez, a partner at the same law firm.

Both possess the legal qualifications and competencies to effectively perform the corporate secretarial and related duties of the position.



Director RemunerationEach director shall receive a reasonable per diem for his attendance at every Board meeting.

On 31 March 2016, the Board of Directors approved the increase in per diem for Board meetings (from P10,000 to P80,000) and Committee meetings (from P10,000 to P40,000). This is the first time that the per diem was increased since the Company went public in 1995.

Subject to the approval of the stockholders owning at least a majority of the outstanding capital stock, Directors may also be granted such compensation (other than per diems) provided however, that the total yearly compensation of directors, as such Directors, shall not exceed ten percent (10%) of the net income before income tax of the Corporation during the preceding year.

The form and amount of Directors’ compensation will be determined and approved by the Compensation and Remuneration Committee in accordance with the policies and principles set forth in its Charter.

In 2016, the aggregate amount of cash bonus variable pay related to the preceding year’s financial performance and total compensation package received by executive and non-executive Directors, including Independent Directors and the CEO, did not exceed the abovementioned limits set by the Company’s Amended By-laws.

Remuneration Item Executive Directors

Non-Executive Directors(Other than Independent Directors)

IndependentDirectors

Fixed Remuneration 5.039,699.26

Variable Remuneration

Per diem Allowance 1,170,000.00 2,540,000.00 1,380,000.00

Bonuses

Stock Options and/or other financialinstruments

Others (Specify)

Total 6,193,550.00 2,540,000.00 1,380,000.00

As of 31 December 2016

Details regarding Director compensation and other benefits are also disclosed in relevant sections of our SEC 20-IS (Information Statement), Form 17-A (Annual Report) and Annual Corporate Governance Report.

Executive Succession PlanningOur commitment to leadership continuity is embodied in our Executive Succession Plan Policy, which ensures the stability and accountability of our Company to its stakeholders.

Under the policy, the Board will assess the permanent leadership needs of the Company to help ensure the selection of a qualified and capable leader.

While the Board assesses the leadership needs and recruits a permanent executive officer, the Board will appoint interim executive leadership to ensure that our Company’s operations are not interrupted.

The interim Chief Executive Officer (CEO) shall ensure that our Company continues to operate without disruption and that all Company commitments previously made are adequately executed, including but not limited to, loans approved, reports due, contracts, licenses, certifications, obligations to lenders or investors of the Company and others.

It is also the policy of our Company to develop a pool of candidates and consider at least three finalist candidates for its permanent CEO position.

The Company shall consider an external recruitment and selection process, while at the same time encouraging the professional development and advancement of current employees.

The interim CEO and any other interested internal candidates are encouraged to submit their qualifications for review and consideration by the Transition Committee for recommendation to the Nomination and Election Committee according to the guidelines established for the search and recruitment process.



Chief Executive Officer Performance EvaluationThe Board conducts annual performance reviews of the CEO based on key result areas, which consist of Board-approved financial and non-financial performance metrics.

The Chief Compliance Officer oversees the performance evaluation process while the Corporate Secretary tabulates the rating results and summarizes the evaluation comments. Evaluation results are then submitted to and/or discussed with the CEO, for proper disposition or action.

The Board evaluated the performance of the CEO for fiscal year 2016.

Board Performance EvaluationThe Company adopted an annual performance evaluation of the Board providing their insights on their overall performance. The annual performance assessment are divided into four sets:

Board Committees and AppraisalTo support the performance of its fiduciary functions, the Board has five (5) good governance Committees: (1) Audit, (2) Nomination and Election, (3) Compensation and Remuneration, (4) Risk Oversight and (5) Corporate Governance.

The members of the Audit, Nomination, Remuneration, Risk Oversight and Corporate Governance committees were appointed by the Board during its regular meeting on 11 May 2016. All Committees are chaired by an Independent Director.

Chairman Members

Audit Honorio O. Reyes-Lao (ID)

Cesar A. Buenaventura (NED)

Antonio Jose U. Periquet (ID)

Nomination and Election

Honorio O. Reyes-Lao (ID)

Jorge A. Consunji* (NED)


Remuneration Antonio Jose U. Periquet (ID)

Ma. Edwina C. Laperal* (ED)


Risk Oversight Antonio Jose U. Periquet (ID)

Herbert M. Consunji (ED)




Cesar A. Buenaventura (NED)


Independent Director (ID) Executive Director (ED) Non-Executive Director (NED)

Committee Performance. The Committees are guided by Board-approved Charters in the discharge of their roles and oversight responsibilities. These Charters are disclosed in our corporate website (www.dmciholdings.com).

The Board Committees conduct annual reviews of the effectiveness of the Committees’ performance using formal self-assessment questionnaires. The results of the review are discussed by the Committee, and handled accordingly.

In 2016, all Chairmen and Members of the Board Committees attended the Annual Shareholders’ Meeting (ASM) to address possible queries on matters relating to their respective Committees.

Audit CommitteeThe Audit Committee shall consist of at least three (3) members, who shall preferably have accounting and finance backgrounds, the majority of whom shall be Independent Directors.

The Chairman of the Audit Committee shall be an Independent Director, and the members will be appointed annually by the Board.

Full Board Review

The Full Board Review covers the Board activities, mission and purpose, governance, board organization, meetings and membership, and management support.

Peer Board Review

The Peer Board Review allows each director to assessment their co-directors in terms of leadership, interpersonal skills, strategic thinking and their contribution to the board.

CEO Appraisal

The Board will assess separately the performance of the Chief Executive Officer to rate his financial, strategic, governance, internal processes and business development capacities.

Audit Committee Assessment

In compliance with SEC Memorandum Circular No. 4 Series of 2012 Guidelines for the Assessment of the Performance of the Audit Committee of listed companies, the Company adapted the Audit Committee Assessment which contains the oversight responsibilities under the Code of Corporate Governance: financial reporting, risk management, internal control, management, and internal and external audit.

For the 2016 Assessment, the performance evaluation forms were distributed in March 2017 and received by the end of April 2017.

The Nomination and Election Committee will tally and review the results in May, in time before the end of the term of Directors in May (the month of the ASM which directors are reelected for another term).



The Committee assists the Board in the discharge of its oversight responsibilities over the financial reporting, external audit performance, internal audit function, internal control and risk management processes of the Company. It also helps the Board ensure compliance with reporting, legal and regulatory requirements.

The Audit Committee has reviewed the effectiveness and adequacy of the internal control and risk management systems from the reports provided by internal and external auditors, management’s assessment of internal controls and its own evaluation.

The appointment, re-appointment and removal of the external auditor is a primary responsibility of the Committee.

In 2016, the Committee convened four (4) times, with the following attendance record:

Position Name Appointment Date*

Attendance** No. of Meetings Held**

Chairman Honorio O. Reyes-Lao (ID)

11 May 2016 4 4

Member Cesar A. Buenaventura (NED)

11 May 2016 4 4

Member Antonio Jose U. Periquet (ID)

11 May 2016 4 4

*Re-appointed as member of the Audit Committee **January-December 2016

Nomination and Election CommitteeThe Nomination Committee has three (3) members, chaired by an Independent Director (ID).

The main function of the Committee is to review, recommend and promulgate guidelines involving the nomination process and criteria for the Board of Directors, as stated in the Amended By-Laws, Revised Code of Corporate Governance and pertinent SEC rules.

It reviews each Director’s continuation on the Board every year, taking into account meeting attendance, participation and contribution to the Board. The Committee also oversees executive succession planning for the Company and its subsidiaries.

The Committee is tasked with identifying individuals who are qualified to become Directors of the Company. It undertakes the process of identifying the quality of Directors aligned with the strategic directions of the Company.

In identifying and recommending candidates for election or appointment as Directors, the Committee: a) considers individuals recommended by shareholders; b) reviews the effectiveness and implementation of the Diversity Policy of the Board and recommends any revisions that maybe required; and c) if necessary, use professional search firms or other external sources of candidates (such as a pool of qualified corporate directors who are members of the professional organizations with director database available) when searching for candidates to the Board of Directors.

In 2016, the Committee convened twice (2), with complete member attendance during both meetings.

Position Name Appointment Date

Attendance* No. of Meetings Held**

Chairman Antonio Jose U. Periquet (ID)

11 May 2016 2 2

Member Ma. Edwina C. Laperal (ED)

11 May 2016 2 2

Member Honorio O. Reyes-Lao (ID)

11 May 2016 2 2

*Re-appointed as member of the Compensation and Remuneration Committee **January-December 2016

Compensation and Remuneration CommitteeThe Remuneration Committee has at least three (3) Board Directors, chaired by an Independent Director (ID).

The main function of the Committee is to establish a formal and transparent procedure for developing a remuneration policy for Directors, officers and employees, consistent with the Company’s culture, strategy and control environment.

In 2016, the Committee convened twice (2), with complete member attendance during both meetings.


Attendance* No. of Meetings Held**

Chairman Antonio Jose U. Periquet (ID) 11 May 2016 2 2

Member Ma. Edwina C. Laperal (ED) 11 May 2016 2 2

Member Honorio O. Reyes-Lao (ID) 11 May 2016 2 2

*Re-appointed as member of the Compensation and Remuneration Committee **January-December 2016



Risk Oversight CommitteeThe Risk Oversight Committee is composed of at least three (3) members, majority of whom are independent directors. It is chaired by an independent director.

Among the duties and responsibilities of the committee is to promote an open discussion and awareness on the risks faced by the Company and its subsidiaries, which may have a potential impact on the Company’s operations.

It is also tasked with reviewing the Company’s risk management function to ensure that senior management has the proper position, staff and resources to manage such risks.

The committee met twice in 2016.

Position Name Appointment Date* Attendance** No. Of Meetings Held**

Chairman Antonio Jose U. Periquet (ID)

11 May 2016 2 2

Member Herbert M. Consunji (ED)

11 May 2016 2 2

Member Honorio O. Reyes-Lao (ID)

11 May 2016 2 2

*Re-appointed as member of the Risk Oversight Committee**January-December 2016

Corporate Governance CommitteeFormed on 31 March 2016 by the Board and approved by the stockholders on 27 July 2016, the Corporate Governance Committee has been included in the Corporation’s Manual on Corporate Governance, Board Charter and Amended By-Laws.

On 11 May 2016, the Board appointed the following as members of the Corporate Governance Committee:


Attendance No. Of Meetings Held*

Chairman Honorio O. Reyes-Lao (ID)

11 May 2016 1 1

Member Cesar A. Buenaventura (NED)

11 May 2016 1 1

Member Antonio Jose U. Periquet (ID)

11 May 2016 1 1

*27 July-December 2016

Internal Controls and Risk OversightOur internal control process is designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting and compliance.

Everyone within the Company is responsible for the effective implementation of internal controls.

The Board is responsible for the Company’s governance and oversight function and holds management accountable for the internal control system.

Management owns the internal control system and is responsible for instituting robust internal control policies and procedures.

The internal audit function independently evaluates the soundness of the Company’s key risks and organizational and procedural controls, which assists the Board, through the audit committee, and management assesses whether the internal control system is effectively designed and implemented.

Punongbayan & Araullo, a member firm of Grant Thornton International, Ltd., is the internal auditor of the Company.

The Board, through the Audit Committee, and management’s criteria for evaluating the soundness of internal control include a review of its control environment, risk assessment, control activities, information and communication, and monitoring activities.

In 2016, the Audit Committee reviewed the effectiveness of the internal control system based on its assessment, from the reports provided by internal and external auditors, and from management’s assessment of internal controls.



Enterprise Risk Management PolicyOur Enterprise Risk Management Policy provides the framework for managing risks across our Company, while striving to create more value for our stakeholders.

The risk management process starts from the Board, through the Risk Oversight Committee, which oversees and monitors the adoption of our risk management policies and procedures.

The Committee overseas and works with our Chief Risk Officer, General Counsel, Chief Compliance Officer and other senior management in ensuring that risk management responsibilities are effectively carried out.

The Chief Executive Officer meets regularly with the Executive and Management Committees of the operating subsidiaries to discuss strategies, key result areas and critical enterprise-level risks to ensure a decisive response to their respective opportunities and challenges.

Our Chief Risk Officer leads the entire risk management function and spearheads the implementation, maintenance and continuous improvement of our ERM. He also advocates the adoption of the same by our subsidiaries.

Our subsidiaries, through their business units and divisions, employ a pragmatic approach to risk management seeking to deliver our trademark operating efficiency while ensuring adherence to regulatory, contractual, health, safety and quality standards and managing risks from planning to day-to-day operations.

Risk Management Framework

Key Risk Management Areas

1. Portfolio ManagementFinancial stability of the holding company. As a holding company, it is our primary responsibility to deliver value to our shareholders by ensuring the financial stability of the Company. We continue to maintain a strong balance sheet that will provide support for growth and cushion for economic uncertainties.

Our cash flows are dependent on the ability of our subsidiaries and affiliate to pay dividends. These are used to pay dividends to our shareholders and to fund new investments.

The senior management of the holding company participates in the strategic planning process of the subsidiaries and affiliates to align their strategic goals and actions with the holding company, to unlock synergies within the Group and to ensure that their capital allocation decisions will allow the holding company to deliver on its dividend commitment.

AssessEstablish risk

management goals and objectives and oversight

structure; and assess business risk

ImproveDevelop risk management strategies and action plans

MonitorMonitor, report and

continuosly improve the ERM process



Entering into new or allied investments. We recognize that identifying and pursuing strategic business opportunities as they arise is critical for the creation of long term value for the holding company.

A gating process is established wherein all new business opportunities are evaluated based on highly selective criteria identified by the Board and senior management. This is conducted to minimize the time and resources of evaluating potential investments that may not be pursued eventually.

In making investment decisions, management considers investments in industries that will leverage the company’s engineering and management expertise and construction resources along with the risk adjusted returns of the potential investments and specific measures to manage these identified risks.

Upon the Board’s decision to pursue the investment, a technical working group is established to perform due diligence covering the financial, operational, regulatory and risk management of the investment. Once the holding company has invested, a post implementation review is performed to evaluate if project objectives are met and to identify improvements for mitigating future risks.

2.Compliance and Reputation RisksThe Group operates in highly regulated, contract-based industries. Compliance with applicable laws, regulations, contractual obligations and stakeholder covenants is key to sustaining its businesses.

To manage our compliance risks, we have dedicated compliance and regulatory teams in our operating subsidiaries that coordinate with the different business units to ensure conformity to applicable laws and regulations and ISO standards. They also monitor emerging laws and regulations affecting the industries.

3. Key People Movement and Talent ManagementThe DMCI group strives to motivate and provide employees with growth opportunities and just reward. It provides formal lectures, on-the-job trainings, mentoring and feedback on a continuous basis to facilitate their development. A Management Development Program was also established to further hone the skills of junior and mid-level managers.

At the subsidiary level, succession planning programs are undertaken to identify future leaders and potential successors for critical positions. Qualified successors are chosen based on relevant experience, education and critical understanding of the business. Successors must also fit the strategic needs of the company and have a strong sense of integrity, leadership and passion for the business.



External AuditWe have an external auditor that examines our accounting records to make sure that our financial statements meet government and regulatory requirements.

The Audit Committee oversees the external audit function on behalf of the Board.

Its oversight covers the review and approval of the appointment, reappointment or replacement of external auditor, audit work engagement, scope and related fees, among others.

SyCip, Gorres, Velayo & Co. (SGV) served as our external auditor in 2016. Since 2013, Ms. Cyril Jasmin B. Valencia has been assigned as the Assurance Partner-In-Charge, in compliance with SEC regulatory policy requiring audit partner rotation every five years to ensure independence.

No Director or Officer is a former employee or partner of the current external auditor in the past two years.

Total fees for audit and non-audit services paid to our external auditor in 2016 are as follows:

Name of auditor Audit Fee Non-audit Fee

SGV & Co. P3,112,095.00 P450,000.00

Liquidity riskEach subsidiary manages its liquidity profile in order to service its maturing debts, pay dividends and finance its capital requirements.

Cash flows are forecasted and regularly monitored to ensure that appropriate cash levels are maintained to finance operations.

Market price riskThe Company is exposed to fluctuations in market prices in its coal and nickel businesses.

To mitigate the risk on changes in coal prices, the Company continues to improve the quality of its coal and diversify its market from power industry, cement industry, other local industries and export market. The Company also sets minimum contracted volume for customers with long term supply contracts for each given period (within the duration of the contract) and pricing is negotiated on a monthly basis to even out the impact of any fluctuation in coal prices, thus, protecting its target margin.

Market price risk in nickel is managed as the Company ensures to maintain optimal level of operating cost as well as production volume. The Company also adopts selective mining on nickel grades which are saleable under prevailing market conditions.

Foreign currency riskForeign currency risk exists as certain transactions entered into by the Company are denominated in a currency other than the functional currency.

The Company manages this risk by matching receipts and payments in the same currency.

Interest rate riskExposure to changes in interest rates primarily relates to long term debt obligations of the Company.

Management considers interest rate forecasts and ensures that debt financing matches the relevant cash flows of the project to be funded. Interest rate exposure is also managed by using a mix of fixed and variable rate debt. Prepayment and refinancing options are considered whenever favorable market conditions exist during the term of the loan.

Credit riskCredit risk management involves dealing only with recognized, creditworthy third parties.

Credit risk in real estate business are managed through credit reviews and an analysis of receivables on a continuous basis.

The Company’s power business earns substantially all of its revenue from bilateral contracts and WESM and from various electric companies who are committed to pay for the energy generated by the power plant facilities.

Risk on collection are mitigated by the mining business as export sales are covered by sight letters of credit issued by foreign banks subject to the Company’s approval, hence, mitigating the risk on collection.

The credit risk for construction receivables is mitigated as the Company can resort to carry out its contractor’s lien over the project with varying degrees of effectiveness depending on the jurisprudence applicable on location of the project.

4. Financial Risk Management in the Holding Company and Operating SubsidiariesAs part of its financial discipline, the holding company has no debt since all of its funding requirements are taken from the dividends paid by the subsidiaries. In case of new investments, the Board decides on the financing – debt and/or equity – by taking into account the attractiveness and the capital requirement of the target business and the overall financial position of the Company. The operating subsidiaries raise the necessary debt financing for their own operations and capital expenditures.

The financial risks encountered across the businesses are liquidity risk, market price risk, interest rate risk, foreign currency risk and credit risk, all of which are reviewed and monitored on a regular basis by the Board of each company.



DMCI HoldingsEngr. Isidro A. Consunji Most Distinguished UP Engineering

AlumnusUniversity of the Philippines Alumni

Engineers

Top 50 Highest Scoring Philippine Publicly-Listed Companies 2016 ASEAN Corporate Governance

Scorecard Philippines

Gold Anvil Award for Hard Hat Newsletter51st Anvil Awards, Public Relations

Society of the Philippines

D.M. Consunji, Inc. Contractor of the YearMaynilad Top Achievement for Partners

Outstanding Performance in Major Water FacilitiesMaynilad Top Achievement for Partners

Outstanding Performance in Waster Water Conveyance, Maynilad Top Achievement for Partners

Safety Award for 1000 Man-hours without Loss Time IncidentRepublic Cement & Building Materials,

Inc.

DMCI Homes BCI Asia Awards for 2016 (5th time/5th

year)Reader’s Digest Most Trusted Brand (5th

year/5 consecutive years)1st ULI Philippines Healthy Places Award

in the Residential Condo Category

Awards and Recognition

Semirara Mining and Power Corporation Titanium Award, Excellence in Corporate Governance and Investor RelationsThe Asset Corporate Awards 2016

Top 50 Highest Scoring Philippine Publicly-Listed Companies 2016 ASEAN Corporate Governance

Scorecard Philippines

Top 30 Highest Scoring Philippine Publicly-Listed Companies 2016 PSE Bell Awards for Corporate

Governance, Phase 1 Philippines

Silver Award for the 2014 Integrated Annual Report51st Anvil Awards, Public Relations

Society of the Philippines

Integrated Management System Recertification ISO 9001:2008 Quality Management

SystemISO 14001:2004 Environmental

Management SystemOHSAS 18001:2007 Safety Management

System

SEM-Calaca Power Corporation Quality Management System Recertification ISO 9001:2008 Quality Management

System

Maynilad Water Services, Inc. Anvil Awards, Public Relations Society of the PhilippinesMaynilad Simpleng GinhawaThink Maynilad InnofestGrabe ang Maynilad Audio Visual

Presentation Our Valued Connections: 2013–2014

Sustainability ReportOur Backstory: 2013 Annual Report

Philippine Quill Awards, International Association of Business CommunicatorsMaynilad Simpleng Ginhawa ProgramMaynilad Pipe Realignment Information

CampaignOur Valued Connections”: 2013-2014

Sustainability ReportOur Backstory: 2013 Annual ReportGrabe ang Maynilad Audio Visual

PresentationThink Maynilad InnoFestSining IpoTop Achievement for Partners Awards

Gawad Kalikasan at Kalusugan (GKK) Awards, Department of Labor and EmploymentChampion in the Regional Level for the

Institutional Category (Maynilad Central Depot, La Mesa Treatment Plant and Fairview-Commonwealth Business Area)

Champion in the Regional Level for the Individual Category (Engr. Conrad Soriano)

Gold Award in the National Level for the Individual Category (Engr. Conrad Soriano)

Gold and Silver Award in the National Level for the Institutional Category (Maynilad Central Depot - Silver, La Mesa Treatment Plant - Gold and Fairview-Commonwealth Business Area - Silver)

Gawad Maestro Awards, Philippine Society for Training and DevelopmentMaynilad 8 Key Steps for Service

Excellence

Safety Awards, Safety Organization of the PhilippinesAward of Excellence (for achieving 20

Million Man-Hours without Lost Time Accident) (2016)

Don Emilio Abello Energy Efficiency Award, Department of EnergyMaynilad Energy Management SystemAsia Sustainability Reporting Awards,

CSR WorksOur Valued Connections – The Maynilad

2013-2014 Sustainability Report on “Best Stakeholder Reporting Category”

Our Valued Connections – The Maynilad 2013-2014 Sustainability Report on “Best Environmental Reporting Category”

Global CSR Awards, Pinnacle Group InternationalBest Environmental Excellence Category

(Platinum Award) for “Sanitation Safety Plan”, “Greenhouse Gas and Air Pollutants Inventory”, and “Energy Management System”

Best Community Program Category (Gold Award) for Twinning Partnership with Nepal for Non-Revenue Water Management

ADFIAP Development Awards, Association of Development Funding Institutions in Asia and the PacificOutstanding Development Project Award

Category for the Maynilad Talayan STP

ASEAN Corporate Sustainability Summit and Awards, Asia Society for Social Improvement and Sustainable Transformation (ASSIST)Resource Efficiency Category for

Maynilad Energy Management System

ASEAN Red Ribbon for Outstanding Workplace (ARROW) Award, Association of Southeast Asian Nations – Business CoalitionOutstanding Workplace for Central

Materials Depot, La Mesa Treatment Plant 2, and Fairview-Commonwealth Business Area

Asia Corporate Excellence & Sustainability Awards, MORS GroupTop Green Companies in Asia


Financial Statements

Statement of Board of Directors’Statement of Board of Directors’Responsibility for Internal Controls Responsibility for Internal Controls and Risk Management Systemsand Risk Management Systems

Statement of Management’s Responsibility for Statement of Management’s Responsibility for Consolidated Financial StatementsConsolidated Financial Statements

The Board of Directors (“Board”) of DMCI HOLDINGS, INC. is responsible for the internal controls and risk management systems. The Board’s Audit Committee assists in the oversight of the internal controls, financial reporting process, internal audit, external audit and compliance functions, while the Risk Committee assists in the oversight of the risk management process.

During the year, Management has established adequate and effective internal controls and risk management systems to provide reasonable assurance that:

• financial transactions are properly authorized, recorded and maintained to enable the preparation of financial statements that give a true, fair and transparent view of the Company’s financial position and operating results; and

• governance processes and internal controls are strengthened, and significant risks are managed to ensure the achievement of the Company’s business objectives.

Based on the assurance work performed by the internal and external auditors and the oversight duties performed by the Board’s Audit Committee and Risk Committee, the Board is of the opinion that the Company’s internal controls and risk management systems are adequate and effective.

March 16, 2017

Isidro A. ConsunjiChairman and President

The management of DMCI HOLDINGS, INC. AND SUBSIDIARIES is responsible for the preparation and fair presentation of the financial statements including the schedules attached therein, for the years ended December 31, 2016 and 2015, in accordance with the prescribed financial reporting framework indicated therein, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable matters related to going concern and using the going conern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors is responsible for overseeing the Company’s financial reporting process.

The Board of Directors reviews and approves the financial statements including the schedules attached therein, and submits the same to the stockholders or members.

SyCip Gorres Velayo & Co., the independent auditor appointed by the stockholders, has audited the financial statements of the company in accordance with Philippine Standards on Auditing, and in its report to the stockholders or members, has expressed its opinion on the fairness of presentation upon completion of such audit.

Isidro A. ConsunjiChairman of the Board and Chief Executive Officer

Signed this March 16, 2017

Herbert M. ConsunjiChief Financial Officer

Herbert M. ConsunjiExecutive Vice President and Chief Finance Officer


Audit Committee Report to the Board of Directors Audit Committee Report to the Board of Directors for the Year Ended December 31, 2016for the Year Ended December 31, 2016

The Audit Committee Charter defines the ultimate responsibility of the Audit Committee for policies and practices relating to integrity of the financial and regulatory reporting of the Company. It assists the Board in fulfilling its oversight functions with respect to:

a. support the Board of Directors in meeting its responsibilities to shareholders;

b. enhance the independence of the external auditor;

c. facilitate effective communications between management and the external auditor and provide a link between the external auditor and the Board of Directors;

d. Increase the credibility and objectivity of the Company’s financial reports and public disclosure.

In 2016, the Audit Committee accomplished the following in compliance with its Charter:

1. The members of the Audit Committee are composed of two (2) Independent Directors and one (1) Non-executive director.

2. The Chairman of the Audit Committee is an Independent Director.

3. The Committee convened four (4) meetings in 2016.

4. The Committee had an executive meeting with the external and internal auditors.

5. Recommended the appointment of the external auditors to the Board.

6. Reviewed the external auditor’s audit plans, fees and schedules and any related services proposals

7. Reviewed and pre-approved the non-audit services provided to the Company by its external auditor prior to Board approval.

8. Ensured that the external auditor met the rotation requirements for handling partners pursuant to SRC Rule 68(3)(b)(iv) and SEC Memorandum Circular No. 8 Series of 2003.

9. Reviewed and discussed with the management and external auditors the consolidated financial statements ended December 31, 2016 including audit and accounting issues of the Company’s subsidiaries, material transactions with related parties, accounting policies, and audit results prior to recommendation to Board for approval and to dissemination to

stockholders and the public.

10. Assessed the integrity and independence of external auditors and exercising effective oversight in reviewing and monitoring the external auditor’s independence and objectivity and the effectiveness of the audit process

11. Reviewed and discussed the external auditor’s audit plans for the year ending December 31, 2016, which focus on (1) engagement team, (2) the scope of work, (3) enhancement to the auditor’s report, (4) preliminary focus areas, (5) management letter points, (6) tax updates, and (7) group audit timetable

12. Reviewed and recommended the appointment of Punongbyana & Araullo as the Company’s internal auditor, including its plans and Charter prior to Board approval.

13. Reviewed and discussed the internal auditor’s plans for the year ending December 31, 2016, which include (1) review of internal audit mandate. (2) business development, (3) financial consolidation and reporting, (4) treasury and cash disbursement, (5) governance, risk and compliance, and (6) 2016 year-end report.

14. The Committee reviewed the adequacy and effectiveness of the internal control and risk management system based on its assessment, from the reports provided by internal and external auditors, and from management’s assessment of internal controls.

15. Reviewed and discussed with the management the quarterly financial reports which include changes in accounting policies and practices, significant adjustments resulting from the audit, compliance with accounting standards, material transactions and accounting issues of the Company’s subsidiaries.

16. Reviewed the Management Discussion and Analysis of the annual and quarterly financial statements prior to public disclosures.

17. Reviewed the propriety of related party transactions (RPTs) and the required reporting disclosures, considered the terms are on arm’s length and fair to the Company; determined if the significant RPTs were in the best interests of the company and the shareholders; whether the RPT met the prescribed threshold set in Company’s policy and by the Securities and Exchange Commission (SEC).

18. The Committee Chairman and members attended the Annual Stockholders’ Meeting on July 27, 2016.

March 16, 2017

Honorio O. Reyes-LaoChairman, Audit Committee


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INDEPENDENT AUDITOR’S REPORT

The Stockholders and the Board of DirectorsDMCI Holdings, Inc.3rdFloor, Dacon Building2281 Don Chino Roces AvenueMakati City

Opinion

We have audited the consolidated financial statements of DMCI Holdings, Inc. and its subsidiaries(the Group), which comprise the consolidated statements of financial position as at December 31, 2016 and 2015, and the consolidated statements of comprehensive income, consolidated statements ofchanges in equity and consolidated statements of cash flows for each of the three years in the periodended December 31, 2016, and notes to the consolidated financial statements, including a summary ofsignificant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all materialrespects, the consolidated financial position of the Group as at December 31, 2016 and 2015, and itsconsolidated financial performance and its consolidated cash flows for each of the three years in theperiod ended December 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 theAudit of the Consolidated Financial Statements section of our report. We are independent of theGroup in accordance with the Code of Ethics for Professional Accountants in the Philippines (Code ofEthics) together with the ethical requirements that are relevant to our audit of the consolidatedfinancial statements in the Philippines, and we have fulfilled our other ethical responsibilities inaccordance with these requirements and the Code of Ethics. We believe that the audit evidence wehave obtained is sufficient 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 inour audit of the consolidated financial statements of the current period. These matters were addressedin the context of our audit of the consolidated financial statements as a whole, and in forming ouropinion thereon, and we do not provide a separate opinion on these matters. For each matter below,our description of how our audit addressed the matter is provided in that context.

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

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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 assessmentof the risks of material misstatement of the consolidated financial statements. The results of our auditprocedures, including the procedures performed to address the matters below, provide the basis for ouraudit opinion on the accompanying consolidated financial statements.

Estimation of Decommissioning and Site Rehabilitation Costs

As disclosed in Notes 3 and 20 to the consolidated financial statements, the Group has recognizedprovision for decommissioning and site rehabilitation for its open pit mines totaling P=1,632 million asof December 31, 2016. This matter is important to our audit because the amount involved is materialand the estimation of the provision requires the exercise of significant management judgment andestimation, including the use of assumptions, such as the costs of backfilling, reforestation,rehabilitation activities on marine and rainwater conservation and maintenance of the rehabilitatedarea, inflation rate, and discount rate.

Audit response

We obtained an understanding of management’s processes and controls in the estimation of futuredecommissioning and site rehabilitation costs, which involved the Group’s engineers. We performedtests of controls on the management processes and controls. We evaluated the competence,capabilities and objectivity of the engineers and reviewed the comprehensive mine rehabilitation plansprepared by the Group’s Reforestation Department. We obtained an understanding of the specialist’sbases for identifying and estimating the costs for various mine rehabilitation and closure activities,such as costs of backfilling, reforestation, rehabilitation activities on marine and rainwaterconservation and maintenance of the rehabilitated area. We compared the cost estimates to billings,invoices and official receipts. We also evaluated the discount and inflation rates used by comparingthese to external data.

Estimation of Mineable Ore Reserves

As discussed in Notes 3 and 13 to the consolidated financial statements, the Group’s mining propertiestotaling P=5,183 million as of December 31, 2016 are amortized using the units of production method.Under this method, management is required to estimate the volume of mineable ore reserves for theremaining life of the mine which is a key input to the amortization of mining properties. This matter issignificant to our audit because the estimation of the mineable ore reserves for the Group’s Narra andMolave mines for the remaining life of the mines requires significant estimation from management’sspecialist.



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Audit response

We obtained an understanding of management’s processes and controls in the estimation of mineableore reserves. We performed tests of controls on the management processes and controls. Weevaluated the competence, capabilities and objectivity of the external specialist engaged by the Groupto perform an independent assessment of the ore reserves. We reviewed the specialist’s report andobtained an understanding of the nature, scope and objectives of their work and basis of estimatesincluding any changes in the reserves during the year. We also tested the application of the estimatedore reserves in the amortization of mining properties.

Revenue and Cost Recognition based on Percentage of Completion

The Group derives 21% and 32% of its revenues and costs, respectively, from construction contractswhich are material to the consolidated financial statements. Revenues and costs from constructioncontracts are determined using the percentage of completion measured principally on the basis of theactual cost incurred as of a reporting date over the estimated total cost of the project. This matter isimportant to our audit because the revenue and cost recognition process requires significantmanagement estimation, particularly with respect to the projects’ estimated total cost, stage ofcompletion, contract price variations and settlement compensation which requires the technicalexpertise of the Group’s project engineers. Note 3 to the consolidated financial statements provide therelevant discussion regarding this matter.

Audit Response

We obtained an understanding of the Group’s processes to accumulate actual costs incurred and toestimate the costs to complete, and tested the relevant controls. We considered the competence,capabilities and objectivity of the Group’s engineers with reference to their professional qualifications,experience and reporting responsibilities. We compared the contract price used in recognizingrevenue to the original signed customer contracts and approved change orders. We examined thesigned supplemental agreements and purchase orders with the customers for additional costs incurred,such as those arising from project extensions and changes in plan. We examined the approved totalestimated completion costs, any revisions to the job order sheets, and the cost variance analysis againstthe supporting details. On a test basis, we examined the invoices and other supporting third partycorrespondence for the actual costs incurred. We conducted ocular inspections on selected projectswhere we inquired of the status of the projects under construction with the Group’s engineers. We alsoinspected the associated project documentation, such as the S-curve schedule and bill of quantities,and inquired about the significant deviations against plans.


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Recoverability of goodwill, property and equipment and mining properties

Under PFRS, the Group is required to annually test goodwill for impairment. In addition, if there areindicators of impairment, the Group tests the recoverability of property and equipment and miningproperties. As of December 31, 2016, the Group has goodwill that is attributable to ZambalesDiversified Metals Corporation (ZDMC) and Zambales Chromite Mining Company (ZCMC)amounting to P=1,637 million, and property and equipment and mining properties amounting toP=1,120 million, which are considered significant to the consolidated financial statements. As disclosedin Notes 3, 13 and 33 to the consolidated financial statements, ZCMC has applied for renewal of itsMineral Production Sharing Agreement (MPSA) before its term ended in 2016, while both ZDMCand Berong Nickel Corporation received suspension orders in 2016 and Notice of Issuance of an Orderin February 2017. The assessment of recoverability of goodwill, property and equipment and miningproperties requires significant management judgment and is based on assumptions, such as estimatedtiming of resumption of operations, mine production, nickel prices, price inflation and discount rate.

Audit Response

We obtained an understanding of the Group’s impairment assessment process and the related controls.We performed tests of controls on the management processes and controls. We involved our internalspecialist in evaluating the methodologies and the assumptions used, which include the estimatedtiming of resumption of operations, mine production, nickel prices, price inflation and discount rate.With respect to mineral production, we compared the forecasted mine production with the three-yearwork program submitted by the Group to the Mines and Geosciences Bureau and with the historicalmine production output. We compared the nickel prices, price inflation and discount rate withexternally published data. We also reviewed the Group’s disclosures about those assumptions to whichthe outcome of the impairment test is most sensitive, specifically those that have the most significanteffect on the determination of the recoverable amount of goodwill, property and equipment andmining properties. We discussed with management the status of renewal of the MPSA and alsoobtained management assessment, as supported by its internal legal counsel’s opinion, of the potentialimpact of the suspension orders on the Group’s mining operations, particularly the recoverability ofthe affected assets and any potential liabilities.

Investment in Associates

The Group’s investment in Maynilad Water Holdings Company, Inc. (MWHCI) comprise 97% of itsinvestments in associates, while the Group’s equity in net earnings of MWHCI represents 15% of theGroup’s net income attributable to the parent company, which are material to the consolidatedfinancial statements. Maynilad Water Services, Inc. (MWSI) is the main source of MWHCI’s netincome and MWSI’s net income is affected by (a) the recognition and measurement of provisionsrelated to ongoing regulatory proceedings and disputes and tax assessments for local and nationaltaxes, and (b) the amortization of service concession assets using the units of production method.These matters are significant to our audit because the estimation of the potential liability resultingfrom these proceedings, disputes and tax assessments, and the amortization of the service concessionassets, particularly in determining the total estimated volume of billable water over the remainingperiod of the concession agreement require significant management judgment and estimates. Note 11to the consolidated financial statements provide the relevant discussion regarding this matter.



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Audit Response

Our audit procedures included, among other things, obtaining the relevant financial information fromMWHCI for the purpose of determining the Group’s equity in net earnings reflected in theconsolidated financial statements. On the provisions, we involved our internal specialists in evaluatingmanagement’s assessment on whether provisions on the contingencies should be recognized, and theestimation of such amount. We also discussed with management and obtained their assessment on theexpected outcome and the status of the regulatory proceedings and dispute arbitration. In addition, weobtained correspondences with relevant government agencies and tax authorities and replies fromexternal legal counsels. On the amortization of concession assets using the units of productionmethod, we reviewed the report of the management’s specialist and gained an understanding of themethodology and the basis of computing the estimated billable water volume.

Other Information

Management is responsible for the other information. The other information comprises theinformation included in the SEC Form 20 IS (Definitive Information Statement), SEC Form 17 A andAnnual Report for the year ended December 31, 2016, but does not include the consolidated financialstatements and our auditor’s report thereon. The SEC Form 20 IS (Definitive Information Statement),SEC Form 17 A and Annual Report for the year ended December 31, 2016 are expected to be madeavailable to us after the date of this auditor’s report.

Our opinion on the consolidated financial statements does not cover the other information and we willnot express 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 theother information is materially inconsistent with the consolidated financial statements or ourknowledge obtained 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 theGroup’s ability to continue as a going concern, disclosing, as applicable, matters related to goingconcern and using the going concern basis of accounting unless management either intends to liquidatethe Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.


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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 statementsas a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’sreport that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with PSAs will always detect a material misstatementwhen it exists. Misstatements can arise from fraud or error and are considered material if, individuallyor in the aggregate, they could reasonably be expected to influence the economic decisions of userstaken on the basis 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 riskof not detecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.

· Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness 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 accountingand, based on the audit evidence obtained, whether a material uncertainty exists related to eventsor conditions that may cast significant doubt on the Group’s ability to continue as a going concern.If we 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 upto the date of our auditor’s report. However, future events or conditions may cause the Group tocease to 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 theunderlying transactions 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.



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We communicate with those charged with governance regarding, among other matters, the plannedscope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control 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 andother matters that may reasonably be thought to bear on our independence, and where applicable,related safeguards.

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 periodand are therefore the key audit matters. We describe these matters in our auditor’s report unless law orregulation 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 consequencesof doing so would reasonably be expected to outweigh the public interest benefits of suchcommunication.

The engagement partner on the audit resulting in this independent auditor’s report is Cyril Jasmin B.Valencia.

SYCIP GORRES VELAYO & CO.

Cyril Jasmin B. ValenciaPartnerCPA Certificate No. 90787SEC Accreditation No. 1229-AR-1 (Group A), May 12, 2015, valid until May 11, 2018Tax Identification No. 162-410-623BIR Accreditation No. 08-001998-74-2015, February 27, 2015, valid until February 26, 2018PTR No. 5908770, January 3, 2017, Makati City

March 16, 2017


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DMCI HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL POSITION(Amounts in Thousands)

December 312016 2015

ASSETS

Current AssetsCash and cash equivalents (Notes 4 and 36) P=18,738,106 P=19,150,603Receivables - net (Notes 7, 21 and 36) 15,529,156 12,836,956Costs and estimated earnings in excess of billings on uncompleted

contracts (Note 8) 1,753,204 2,015,033Inventories (Note 9) 38,235,004 34,407,763Available-for-sale financial assets (Notes 6 and 36) 85,255 76,900Other current assets (Notes 10 and 36) 6,895,033 7,030,352

Total Current Assets 81,235,758 75,517,607

Noncurrent AssetsNoncurrent receivables (Notes 7 and 36) 2,183,424 3,162,701Investments in associates and joint ventures (Note 11) 12,761,044 11,457,732Investment properties (Note 12) 209,141 288,542Property, plant and equipment (Note 13) 55,751,702 49,440,223Exploration and evaluation asset (Note 14) 224,645 3,238,442Goodwill (Notes 2 and 33) 1,637,430 1,637,430Deferred tax assets - net (Note 29) 416,017 543,859Pension assets - net (Note 23) 893,764 958,979Other noncurrent assets (Notes 14 and 36) 2,721,166 2,311,660

Total Noncurrent Assets 76,798,333 73,039,568P=158,034,091 P=148,557,175

LIABILITIES AND EQUITY

Current LiabilitiesShort-term debt (Notes 15 and 36) P=2,621,109 P=3,707,354Current portion of liabilities for purchased land (Notes 16 and 36) 906,622 2,201,291Accounts and other payables (Notes 17, 21 and 36) 18,078,802 15,393,747Billings in excess of costs and estimated earnings

on uncompleted contracts (Note 8) 2,311,377 2,095,481Customers’ advances and deposits (Note 18) 8,280,132 5,692,271Current portion of long-term debt (Notes 19 and 36) 3,193,487 11,291,955Income tax payable 359,237 448,439

Total Current Liabilities 35,750,766 40,830,538

(Forward)

DMCI Holdings, Inc. and SubsidiariesDMCI Holdings, Inc. and Subsidiaries

Consolidated Statements of Financial PositionConsolidated Statements of Financial Position(Amounts in Thousands)(Amounts in Thousands)


*SGVFS022831*

- 2 –

December 312016 2015

Noncurrent LiabilitiesLong-term debt - net of current portion (Notes 19 and 36) P=31,070,773 P=25,763,651Liabilities for purchased land - net of current portion

(Notes 16 and 36) 623,151 816,135Deferred tax liabilities - net (Note 29) 4,271,567 3,629,076Pension liabilities - net (Note 23) 217,470 142,200Other noncurrent liabilities (Notes 20 and 36) 2,751,734 2,600,395

Total Noncurrent Liabilities 38,934,695 32,951,457Total Liabilities 74,685,461 73,781,995

Equity (Note 22)Equity attributable to equity holders of the Parent Company:

Paid-in capital 17,949,868 17,949,868Retained earnings 49,521,603 43,709,847Premium on acquisition of non-controlling interests (522,903) (161,033)Remeasurements on retirement plans - net of tax (Note 23) 624,130 699,491Net accumulated unrealized gains on AFS financial assets 27,211 21,435Cumulative translation adjustment (Note 34) − 285,105

67,599,909 62,504,713Non-controlling interests 15,748,721 12,270,467

Total Equity 83,348,630 74,775,180P=158,034,091 P=148,557,175

See accompanying Notes to Consolidated Financial Statements.

*SGVFS022831*

DMCI HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(Amounts in Thousands, except for Earnings Per Share figures)

Years Ended December 312016 2015 2014

REVENUECoal mining P=20,079,462 P=11,781,825 P=16,276,930Electricity sales 18,807,365 15,067,372 14,136,842Construction contracts 13,816,649 13,247,380 11,852,523Real estate sales 10,369,924 13,676,990 12,493,636Nickel mining 1,573,086 3,138,852 1,516,461Merchandise sales and others 252,290 291,502 284,562

64,898,776 57,203,921 56,560,954

COSTS OF SALES AND SERVICES (Note 24)Coal mining 11,013,500 6,318,151 9,930,220Electricity sales 9,082,981 5,559,033 10,015,060Construction contracts 12,096,004 11,977,790 10,980,312Real estate sales 5,475,896 6,803,570 6,524,383Nickel mining 527,325 916,460 354,312Merchandise sales and others 175,362 228,762 193,680

38,371,068 31,803,766 37,997,967

GROSS PROFIT 26,527,708 25,400,155 18,562,987

OPERATING EXPENSES (Note 25) 9,616,862 8,546,868 8,090,22316,910,846 16,853,287 10,472,764

OTHER INCOME (EXPENSES)Equity in net earnings of associates and

joint ventures (Note 11) 1,926,337 2,376,424 2,015,703Gain on sale of investments (Note 11) 131,498 562,727 −Finance income (Notes 4, 14 and 26) 446,325 467,506 438,148Gain on remeasurement of previously

held interest (Note 33) − − 261,084Gain on bargain purchase (Note 33) − − 257,497Foreign exchange gains (losses) (406,511) (188,615) 395,213Finance costs (Note 27) (954,982) (545,716) (467,088)Other income - net (Note 28) 1,751,539 1,002,033 1,517,455

INCOME BEFORE INCOME TAX 19,805,052 20,527,646 14,890,776

PROVISION FOR INCOME TAX (Note 29) 2,277,522 3,604,830 1,088,276

NET INCOME (Note 35) P=17,527,530 P=16,922,816 P=13,802,500

NET INCOME ATTRIBUTABLE TO: Equity holders of the Parent Company P=12,184,942 P=12,834,666 P=10,775,334 Non-controlling interests 5,342,588 4,088,150 3,027,166

P=17,527,530 P=16,922,816 P=13,802,500

Basic/diluted earnings per share attributable toequity holders of the Parent Company(Note 30) P=0.92 P=0.97 P=0.81



Consolidated Statements of IncomeConsolidated Statements of Income(Amounts in Thousands, except for Earnings Per Share figures)(Amounts in Thousands, except for Earnings Per Share figures)


*SGVFS022831*

DMCI HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Amounts in Thousands)


NET INCOME P=17,527,530 P=16,922,816 P=13,802,500

OTHER COMPREHESIVEINCOME

Items to be reclassified subsequently toprofit or loss

Cumulative translation adjustment (Note 34) − 24,853 292,628Changes in fair values of AFS financial assets (Note 6) 5,730 8,600 6,589

5,730 33,453 299,217Items not to be reclassified to profit or loss

in subsequent periodsRemeasurement gains (losses) on pension plans

(Note 23) (85,373) (212,035) 405,519Income tax effect 12,523 25,611 (40,195)

(72,850) (186,424) 365,324

OTHER COMPREHENSIVEINCOME (LOSS) (67,120) (152,971) 664,541

TOTAL COMPREHENSIVE INCOME P=17,460,410 P=16,769,845 P=14,467,041

TOTAL COMPREHENSIVE INCOMEATTRIBUTABLE TO:

Equity holders of the Parent Company 12,115,357 P=12,689,614 P=11,435,288Non-controlling interests 5,345,053 4,080,231 3,031,753

P=17,460,410 P=16,769,845 P=14,467,041



Consolidated Statements of Comprehensive IncomeConsolidated Statements of Comprehensive Income(Amounts in Thousands)(Amounts in Thousands)

*SGVFS022831*

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*SGVFS022831*

- 2 -

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DM

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*SGVFS022831*

DMCI HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in Thousands)


CASH FLOWS FROM OPERATINGACTIVITIES

Income before income tax P=19,805,052 P=20,527,646 P=14,890,776Adjustments for:

Depreciation, depletion and amortization(Notes 12, 13, 14, 24 and 25) 5,392,822 3,634,594 3,887,077

Finance costs (Note 27) 954,982 545,716 467,088Provisions for doubtful accounts, probable

losses and loss on sale ofassets (Note 25) 217,632 960,954 514,248

Loss on write-down of property, plant andequipment (Notes 13 and 25) 14,316 16,088 111

Gain on remeasurement of previouslyheld interest − – (261,084)

Gain on sale of property, plant and equipment and investment properties - net (Note 28) (390) (90,922) (127,201)Dividend income (Notes 5, 6, 11 and 28) (4,282) (4,288) (7,000)Net unrealized foreign exchange loss (gain) (29,873) 214,450 116,919Write-off of accrued expenses (Note 28) (40,925) – –Net movement in net pension asset (59,742) (49,421) (16,637)Gain on sale of undeveloped

land (Notes 9 and 28) (73,182) – (284,287)Gain on sale of investments (Note 11) (131,498) (562,727) –Finance income (Note 26) (446,325) (467,506) (438,148)Equity in net earnings of associates and

joint ventures (Note 11) (1,926,337) (2,376,424) (2,015,703)Gain on bargain purchase (Note 33) – – (257,497)Unrealized market loss on financial assets

at FVPL (Note 5) – – 2,520Operating income before changes in working

capital 23,672,250 22,348,160 16,471,182Decrease (increase) in:

Receivables (1,939,475) (1,098,032) 4,266,347Inventories (3,073,719) (4,824,339) (4,599,476)Costs and estimated earnings in excess of

billings on uncompleted contracts 261,829 52,484 (1,081,158)Other current assets 200,080 2,002,045 (1,683,488)

(Forward)


Consolidated Statements of Cash FlowsConsolidated Statements of Cash Flows(Amounts in Thousands)(Amounts in Thousands)

*SGVFS022831*

- 2 -


Increase (decrease) in:Accounts and other payables P=1,684,220 (P=1,637,690) P=2,898,977Billings in excess of costs and estimated

earnings on uncompleted contracts 215,896 (458,333) (1,126,951)Liabilities for purchased land (1,487,653) 838,241 806,709Customers’ advances and deposits 2,587,861 85,242 677,327

Cash generated from operations 22,121,289 17,307,778 16,629,469Interest received 440,942 405,224 456,317Income taxes paid (1,694,289) (2,723,212) (1,317,699)Interest paid and capitalized as cost of

inventory (Notes 9 and 19) (770,700) (856,620) (936,344)Net cash provided by operating activities 20,097,242 14,133,170 14,831,743

CASH FLOWS FROM INVESTINGACTIVITIES

Additions to:Investment properties (Note 12) – (77,869) (49,008)Exploration and evaluation asset (Note 14) (1,933,949) (718,652) (1,566,287)Property, plant and equipment (Notes 3 and 13) (6,691,397) (6,327,499) (14,168,994)Investments in associates and joint ventures

(Note 11) (58,500) – (517,013)Available-for-sale financial assets (Note 6) (3,500) − −

Proceeds from disposals of:Property, plant and equipment 3,348 166,341 305,060Investments in associates and joint ventures

(Note 11) 210,672 76,835 1,569Undeveloped land (Note 9) 246,431 – 747,639Investment properties (Note 12) 3,150 – –

Dividends received 568,723 562,710 284,280Interest paid and capitalized as cost of

property, plant and equipment (Note 13) (112,939) (455,707) (304,367)Decrease (increase) in other noncurrent assets (460,058) 303,758 (77,894)Acquisition of a business - net of cash

acquired (Notes 11 and 33) − – (2,027,381)Deposit received for future sale of

investment (Note 11) − – 1,758,651Net cash used in investing activities (8,228,019) (6,470,083) (15,613,745)

(Forward)


*SGVFS022831*

- 3 -


CASH FLOWS FROM FINANCINGACTIVITIES

Proceeds from availment of:Long-term debt P=7,327,976 P=7,475,784 P=10,173,755Short-term debt 9,160,557 8,313,038 1,658,753

Payments of:Long-term debt (8,347,806) (5,859,510) (9,119,799)Short-term debt (11,814,390) (6,632,891) (2,050,842)Dividends paid to equity holders of the

Parent Company (6,373,759) (6,373,185) (6,366,867)Dividends paid to non-controlling interests (Note 22) (1,841,122) (2,213,937) (1,871,130)Interest (934,276) (589,982) (169,072)Stock issue costs − – (92,923)

Purchase of non-controlling interest (387,547) − −Increase (decrease) in:

Payable to related parties (Note 21) 761,745 (44,162) 227,798Other noncurrent liabilities 276,659 2,120,741 (1,146,633)

Net cash used in financing activities (12,171,963) (3,804,104) (8,756,960)

EFFECT OF EXCHANGE RATECHANGES ON CASH AND CASHEQUIVALENTS (109,757) 61,852 (5,765)

NET INCREASE (DECREASE) IN CASHAND CASH EQUIVALENTS (412,497) 3,920,835 (9,544,727)

CASH AND CASH EQUIVALENTS ATBEGINNING OF YEAR 19,150,603 15,229,768 24,774,495

CASH AND CASH EQUIVALENTS ATEND OF YEAR (Note 4) P=18,738,106 P=19,150,603 P=15,229,768


*SGVFS022831*

DMCI HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information

DMCI Holdings, Inc. (the Parent Company) was incorporated on March 8, 1995 and is domiciledin the Philippines. The Parent Company’s registered office address and principal place of businessis at 3rd Floor, Dacon Building, 2281 Don Chino Roces Avenue, Makati City.

The Parent Company and its subsidiaries (collectively referred to herein as the Group) is primarilyengaged in general construction, coal and nickel mining, power generation, infrastructure, realestate development, water concession and manufacturing.

The Parent Company’s shares of stock are listed and are currently traded at the Philippine StockExchange (PSE).

The accompanying consolidated financial statements were approved and authorized for issue bythe Board of Directors (BOD) on March 16, 2017.

2. Summary of Significant Accounting Policies

Basis of PreparationThe consolidated financial statements of the Group have been prepared using the historical costbasis, except for available-for-sale (AFS) financial assets that have been measured at fair value.The Group’s presentation currency is the Philippine Peso (P=). All amounts are rounded to thenearest thousand (P=000), unless otherwise indicated.

Statement of ComplianceThe consolidated financial statements of the Group have been prepared in compliance withPhilippine Financial Reporting Standards (PFRSs).

Basis of ConsolidationThe consolidated financial statements comprise the financial statements of the Group as ofDecember 31, 2016 and 2015, and for each of the three years in the period endedDecember 31, 2016.

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:· Power over the investee (i.e., existing rights that give it the current ability to direct the relevant

activities of the investee)· Exposure, or rights, to variable returns from its involvement with the investee, and· The ability to use its power over the investee to affect its returns


Notes to Consolidated Financial StatementsNotes to Consolidated Financial Statements


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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:· The contractual arrangement with the other vote holders of the investee· Rights arising from other contractual arrangements· 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 or excluded in the consolidated financial statements fromthe date the Group gains control or until the date the Group ceases to control the subsidiary.

Non-controlling interests (NCI) pertain to the equity in a subsidiary not attributable, directly orindirectly to the Parent Company. NCI represent the portion of profit or loss and net assets insubsidiaries not wholly owned by the Group and are presented separately in the consolidatedstatement of income, consolidated statement of comprehensive income and consolidated statementof changes in equity and within equity in the consolidated statement of financial position,separately from equity holders’ of the Parent Company.

Any equity instruments issued by a subsidiary that are not owned by the Parent Company are non-controlling interests including preferred shares.

Profit or loss and each component of other comprehensive income (OCI) are attributed to theequity holders of the Parent Company and to the NCI, even if this results in the NCI having adeficit balance. The consolidated financial statements are prepared using uniform accountingpolicies for like transactions and other similar events. When necessary, adjustments are made tothe financial statements of subsidiaries to bring their accounting policies into line with the Group’saccounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flowsrelating to transactions between members of the Group are eliminated in full on consolidation.

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 NCI· 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· Reclassifies the Parent Company’s share of components previously recognised in OCI to

profit or loss or retained earnings, as appropriate, as would be required if the Group haddirectly disposed of the related assets or liabilities

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The consolidated financial statements include the financial statements of the Parent Company andthe following subsidiaries (which are all incorporated in the Philippines, except for ENK Plc. andsome of ENK’s related entities which are incorporated in England, Wales and Netherlands):

2016 2015

Direct IndirectEffectiveInterest Direct Indirect

EffectiveInterest

(In percentage)General Construction:D.M. Consunji, Inc. (DMCI) 100.00 – 100.00 100.00 – 100.00 Beta Electric Corporation (Beta Electric) 1 – 53.95 53.95 – 53.95 53.95 Raco Haven Automation Philippines, Inc. (Raco) 1 – 50.14 50.14 – 50.14 50.14

Manufacturing and others: Oriken Dynamix Company, Inc. (Oriken) 1* – 89.00 89.00 – 89.00 89.00 DMCI Technical Training Center (DMCI Training) 1 – 100.00 100.00 – 100.00 100.00

Real Estate Development:DMCI Project Developers, Inc. (PDI) 100.00 – 100.00 100.00 – 100.00 Hampstead Gardens Corporation (Hampstead) 2 – 100.00 100.00 – 100.00 100.00 Riviera Land Corporation (Riviera) 2 – 100.00 100.00 – 100.00 100.00 DMCI-PDI Hotels, Inc. (PDI Hotels) 2 – 100.00 100.00 – 100.00 100.00 DMCI Homes Property Management Corporation (DPMC) 2 – 100.00 100.00 – 100.00 100.00 Zenith Mobility Solutions Services, Inc.2 – 51.00 51.00 – 51.00 51.00

Marketing Arm: DMCI Homes, Inc. (DMCI Homes) 2 – 100.00 100.00 – 100.00 100.00

Coal MiningSemirara Mining and Power Corporation (SMPC) 56.51 – 56.51 56.32 – 56.32

On-Grid Power Sem-Calaca Power Corporation (SCPC) 3 – 56.51 56.51 – 56.32 56.32 Southwest Luzon Power Generation Corporation

(SLPGC) 3 –56.51 56.51

– 56.32 56.32 Sem-Calaca RES Corporation (SCRC) 3* – 56.51 56.51 – 56.32 56.32 SEM-Cal Industrial Park Developers, Inc.

(SIPDI) 3* –56.51 56.51

– 56.32 56.32 Semirara Energy Utilities, Inc. (SEUI) 3* – 56.51 56.51 – 56.32 56.32 Southeast Luzon Power Generation Corporation

(SeLPGC) 3*** –56.51 56.51

– 56.32 56.32 St. Raphael Power Generation Corporation

(SRPGC)** – − − – 56.32 56.32

Manufacturing Semirara Claystone, Inc. (SCI) 3* – 56.51 56.51 – 56.32 56.32

Off-Grid PowerDMCI Power Corporation (DPC) 100.00 – 100.00 100.00 – 100.00 DMCI Masbate Power Corporation

(DMCI Masbate) 4 – 100.00 100.00 – 100.00 100.00 DMCI Palawan Power Corporation

(DMCI Palawan) 4 – 100.00 100.00 – 100.00 100.00

Nickel Mining:DMCI Mining Corporation (DMC) 100.00 – 100.00 100.00 – 100.00 Berong Nickel Corporation (BNC) 5 – 74.80 74.80 – 74.80 74.80 Ulugan Resouces Holdings, Inc. (URHI) 5 – 30.00 30.00 – 30.00 30.00 Ulugan Nickel Corporation (UNC) 5 – 58.00 58.00 – 58.00 58.00 Nickeline Resources Holdings, Inc. (NRHI) 5 – 58.00 58.00 – 58.00 58.00 TMM Management, Inc. (TMM) 5 – 40.00 40.00 – 40.00 40.00 Zambales Diversified Metals Corporation (ZDMC) 5 – 100.00 100.00 – 100.00 100.00 Zambales Chromite Mining Company Inc. (ZCMC) 5 – 100.00 100.00 – 100.00 100.00 Fil-Asian Strategic Resources & Properties Corporation (FASRPC) 5 – 100.00 100.00 – 100.00 100.00

(Forward)


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2016 2015

Direct IndirectEffectiveInterest Direct Indirect

EffectiveInterest

(In percentage) Montague Resources Philippines Corporation (MRPC) 5 – 100.00 100.00 – 100.00 100.00 Montemina Resources Corporation (MRC) 5 – 100.00 100.00 – 100.00 100.00 Mt. Lanat Metals Corporation (MLMC) 5 – 100.00 100.00 – 100.00 100.00

Fil-Euro Asia Nickel Corporation (FEANC) 5 – 100.00 100.00 – 100.00 100.00 Heraan Holdings, Inc. (HHI) 5 – 100.00 100.00 – 100.00 100.00 Zambales Nickel Processing Corporation (ZNPC) 5 – 100.00 100.00 – 100.00 100.00 Zamnorth Holdings Corporation (ZHC) 5 – 100.00 100.00 – 100.00 100.00 ZDMC Holdings Corporation (ZDMCHC) 5 – 100.00 100.00 – 100.00 100.00

ENK Plc. (ENK)**** − – − 100.00 – 100.00 European Nickel Iberia SL (EN Iberia) 6 – – – – 100.00 100.00 European Nickel Spain SL (EN Spain) 6 – – – – 100.00 100.00 Rusina Mining Ltd. (Rusina) 6 – – – – 100.00 100.00 European Nickel Holland BV (EN Holland) 6 – – – – 100.00 100.00 European Nickel Philland BV (EN Philland) 6 – – – – 100.00 100.00 European Nickel PLC - Regional Operating Headquarters (EN ROHQ) 6 – –

–– 100.00 100.00

Enickel Holdings, Inc. (EHI) 6* – – – – 100.00 100.00 Enickel Berhold, Inc. (EBI) 6 – – – – 100.00 100.00

Manufacturing:Semirara Cement Corporation (SemCem) * 100.00 – 100.00 100.00 – 100.00Wire Rope Corporation of the Philippines

(Wire Rope) 45.68 16.02 61.70 45.68 16.02 61.70

*Have not yet started commercial operations as of December 31, 2016 and 2015** Has not yet started commercial operations and treated as joint-venture starting May 23, 2016.***Previously named SEM-Balayan Power Generation Corporation (SBPGC), was changed to

Southeast Luzon Power Generation Corporation (SeLPGC) effective July 12, 2016.****ENK and its subsidiaries were liquidated in 2016.1 DMCI’s subsidiaries2 PDI’s subsidiaries3 SMPC’s subsidiaries4 DPC’s subsidiaries5 DMC’s subsidiaries6 ENK’s subsidiaries

General ConstructionDMCIDMCI was incorporated in the Philippines on December 24, 1954 primarily to engage in and carryon the trade and business of engineering, general building and contracting. DMCI’s secondarypurpose, among others, is to engage in the real estate business.

Beta ElectricBeta Electric is a domestic corporation incorporated and registered with the Securities andExchange Commission (SEC) on March 21, 1973. Beta Electric is primarily engaged in theinstallation of electrical backbone and related systems thereto for building construction. It is alsoengaged in the general business of trading, buying or selling of electrical equipment items andcommodities related thereto.

Manufacturing and othersOrikenOriken Dynamix Company, Inc. (Oriken) was registered with the SEC on September 16, 2005.Orikens’s primary purpose is to manufacture, buy and sell ready mix concrete of every class anddescription. As of December 31, 2016 and 2015, Oriken is non-operational.

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DMCI TrainingDMCI Training was registered with the SEC on August 15, 2006. The primary purpose of DMCITraining is to establish, promote, and operate training centers and or institutions in the field ofscience, technology, vocational and other apprenticeable trades and occupations in which qualifiedand deserving persons regardless of gender may be taught, developed and trained in a well-rounded theoretical and practical method.

Real estate developmentPDI PDI was incorporated and registered with the SEC on April 27, 1995. PDI is organized to deal andengage in the development of residential subdivisions and construction of condominium andhousing units. PDI offers range of products from middle-income to high-end housing andcondominium projects.

Below are the subsidiaries of PDI and the nature of their operations:

a) Hampstead Gardens Corporation - real estate developerb) DMCI Homes, Inc. - real estate brokeragec) Riviera Land Corporation - real estate developerd) DMCI Homes Property Management Corporation - real estate developere) DMCI-PDI Hotels, Inc. - hotel operatorf) Zenith Mobility Solution Services, Inc. - mobility services provider of the Group.

Coal MiningSMPCSMPC was incorporated and domiciled in the Philippines on February 26, 1980 primarily tosearch for, prospect, explore, dig and drill, mine, exploit, extract, produce, mill, purchase orotherwise acquire, store, hold transport, use experiment with, market, distribute, exchange, selland otherwise dispose of, import, export and handle, trade, and generally deal in, ship coal, coke,and other coal products of all grades, kinds, forms, descriptions and combinations and in generalthe products and by-products which may be derived, produced, prepared, developed, compounded,made or manufactured there; to acquire, own, maintain and exercise the rights and privileges underthe coal operating contract within the purview of Presidential Decree No. 972, “The CoalDevelopment Act of 1976”, and any amendments thereto. SMPC is a publicly listed entity in thePhilippines. It has coal mining operations in Semirara Island in Caluya, Antique.

On-Grid PowerSCPCSCPC, a wholly owned subsidiary of SMPC, was registered with the SEC on November 19, 2009.It is primarily engaged to acquire, expand, rehabilitate and maintain power generating plants,develop fuel for generation of electricity and sell electricity to any person or entity throughelectricity markets among others. It currently operates 2 units of coal-fired power plants located inCalaca, Batangas with a combined operating capacity of 600 MW.

SLPGCOn August 31, 2011, SLPGC, a wholly owned subsidiary of SMPC, was incorporated to operateelectric power plants and to engage in business of a power generation company. Its 2x150 MWplant is located in Calaca, Batangas and started commercial operations on April 1, 2016.


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SCRCSCRC is a stock corporation registered with the SEC on September 14, 2009, primarily to sellelectricity to any person or entity through electricity markets, by trading, or by contract, toadminister, conserve and manage the electricity generated by power-generating plants, owned byits affiliates or by a third party, to invest in or acquire corporations or entities engaged in any ofthe foregoing activities.

SIPDIOn April 24, 2011, SIPDI was incorporated to acquire, develop, construct, invest in, operate andmaintain an economic zone capable of providing infrastructures and other support facilities forexport manufacturing enterprises, information technology enterprises, tourism economic zoneenterprises, medical tourism economic zone enterprises, retirement economic zone enterprisesand/or agro-industrial enterprises, inclusive of the required facilities and utilities, such as light andpower system, water supply and distribution system, sewerage and drainage system, pollutioncontrol devices, communication facilities, paved road network, and administration building as wellas amenities required by professionals and workers involved in such enterprises, in accordancewith R.A. No. 7916, as amended by R.A. No. 8748, otherwise known as the Special EconomicZone Act of 1995.

SEUIOn February 18, 2013, SEUI was incorporated to perform Qualified Third Party (QTP) functionspursuant to Section 9 of Republic Act 9136, otherwise known as the Electric Power IndustryReform Act (EPIRA) and its “Implementing Rules & Regulations”. DOE-Circular No. 2004-06-006 of the Department of Energy defines QTP as an alternative service provider authorized toserve remote and unviable areas pursuant to Section 59 of the EPIRA Law. SEUI intends to act asthe QTP over Barangays of Semirara, Tinogboc and Alegria, all located at Semirara Island,Caluya, Antique.

SeLPGCOn September 9, 2013, SBPGC was incorporated to acquire, construct, erect, assemble,rehabilitate, expand, commission, operate and maintain power-generating plants and relatedfacilities for the generation of electricity, including facilities to purchase, manufacture, develop orprocess fuel for the generation of such electricity, to sell electricity to any person or entity throughelectricity markets, by trading, or by contract, to administer, conserve and manage the electricitygenerated by power-generating plants, owned by SBPGC or by a third party, to invest in oracquire corporations or entities engaged in any of the foregoing activities. On July 12, 2016, SECapproved the change in the corporate name from Sem-Balayan Power Generation Corporation toSoutheast Luzon Power Generation Corporation.

SRPGCOn September 10, 2013, SRPGC was incorporated to acquire, construct, erect, assemble,rehabilitate, expand, commission, operate and maintain power-generating plants and relatedfacilities for the generation of electricity, including facilities to purchase, manufacture, develop orprocess fuel for the generation of such electricity; to sell electricity to any person or entity throughelectricity markets, by trading, or by contract; to administer, conserve and manage the electricitygenerated by power-generating plants, owned by SRPGC or by a third party, to invest in or acquirecorporations or entities engaged in any of the foregoing activities.

In 2016, SRPGC become a 50% owned joint venture when Meralco PowerGen Corporationsubscribed to the remaining unissued capital stock of SRPGC (see Note 11). SRPGC has not yetstarted commercial operations as of December 31, 2016.

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ManufacturingSCIOn November 29, 2012, SCI was incorporated to engage in, conduct, and carry on the business ofmanufacturing, buying, selling, distributing, marketing at wholesale and retail insofar as may bepermitted by law, all kinds of goods, commodities, wares and merchandise of every kind anddescription including pottery earthenware, stoneware, bricks, tiles, roofs and other merchandiseproduce from clay; to enter into all contracts for export, import, purchase requisition, sale atwholesale or retail and other disposition for its own account as principal or in representativecapacity as manufacturer’s representative, merchandise broker, indentor, commission merchant,factors or agents, upon consignment of all goods, wares, merchandise or products natural orartificial.

Off-Grid PowerDPCDPC was incorporated and registered with the SEC on October 16, 2006 to engage in acquiring,designing, constructing, investing in and operating electric power plants, and engaging in thebusiness of a generation company in accordance with Republic Act (RA) No. 9136 otherwiseknown as the EPIRA of 2001. It currently has 29.45 MW modular diesel generation sets and2x4.95 MW bunker-fired power plant in Palawan, 4x3.889 MW bunker-fired power plant inMindoro and 3x1.23 MW diesel-fired generation sets in Sultan Kudarat.

DMCI MasbateDMCI Masbate was incorporated and registered with the SEC on November 13, 2007 primarily toacquire, design, develop, construct, invest in and operate power generating plants in the provinceof Masbate and engage in the business of a generation company in accordance with RA No. 9136otherwise known as the EPIRA and its implementing rules and regulations, and to design, develop,assemble and operate other power related facilities, appliances and devices. It currently has 24.4MW diesel-powered power plant in Mobo, Masbate, 4.23 MW diesel-powered generation sets inAroroy, Masbate, 4.23 MW diesel-powered generation sets in Cataingan, Masbate, 1 MW diesel-powered generation sets in Cawayan, Masbate and 0.75 MW diesel-powered generation sets inBalud, Masbate.

DMCI PalawanDMCI Palawan was incorporated and registered with the SEC on September 12, 2012 primarily toacquire, design, develop, construct, invest in and operate power generating plants in the provinceof Palawan and engage in the business of a generation company in accordance with RA No. 9136,otherwise known as EPIRA and its implementing rules and regulations, and to design, develop,assemble and operate other power related facilities, appliances and devices. At a meeting of thestockholders and Board of Directors held on July 27, 2016, the amendment of the By-Laws andArticles of Incorporation of DMCI Palawan to shorten its term to end on December 29, 2016 wasduly adopted and approved. The net assets of DMCI Palawan as of December 29, 2016 amountedto P=0.70 million.

Nickel MiningDMCDMC was incorporated on May 29, 2007 primarily to carry on the business of mining, developing,exploiting, extracting, milling, concentrating, preparing for market, manufacturing, buying,shipping and transporting, all kinds of ores, metals and minerals. It involves surface mining anddirect shipping of nickel laterite ore and is conducted through simple benching operation usingexcavators and trucks in Sta. Cruz and Candelaria, Zambales.


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Toledo Mining Corporation (TMC)In October 2012, DMC acquired the 17.01% ownership interest of Daintree Resources Limited inTMC for GBP3.4 million. Such investment was accounted for as an associate as of December 31,2012.

In 2013, DMC increased its ownership interest in TMC by acquiring additional shares through amandatory cash offer to TMC’s shareholders representing additional 81.05% ownership interest.

On December 20, 2013, after establishing the 98.06% voting rights and gaining majority seats inthe BOD of TMC, DMC obtained control over TMC. TMC subsequently delisted on the LondonStock Exchange - Alternative Investment Market (AIM) after the resolution for the matter hasbeen approved on the General Meeting of Shareholders.

As of December 31, 2013, DMC holds 49.15 million shares and voting rights representing 98.06%of voting rights and the remaining 1.94% is covered by mandatory call option. In 2014, theremaining price for the 1.94% of TMC was paid by DMC. In 2013, the business combinationtransaction was initially accounted provisionally as allowed under PFRS 3. The businesscombination of the purchase of TMC shares was finalized in 2014 (see Note 33).

As of June 18, 2014, the Group (through combined TMC and DMC ownerships) has the followinginvestments in associates (collectively called mining entities).

a) Ulugan Resources Holdings, Inc. (URHI) - 30% direct interestb) Nickeline Resources Holdings, Inc. (NRHI) - 58% effective interest (40% direct, 18%

through URHI)c) Ulugan Nickel Corporation (UNC) - 58% effective interest ( 40% direct, 18%

through URHI)d) Berong Nickel Corporation (BNC) - 74.80% effective interest (40% direct,

34.80% through URHI and NRHI)e) TMM Management, Inc. (TMM) - 40% direct interestf) Ipilan Nickel Corporation (INC) - 52% effective interest (40% direct , 12%

through NLRI)g) Nickel Laterite Resources, Inc. (NLRI) - 20% direct interest

The remaining ownership of the above associates are owned by Atlas Consolidated Mining Corp.(Atlas), a third party.

In June 2014, organizational meetings were held for the above entities, wherein the voting rightsheld by Atlas were assigned to the representative of the Group. In that same meeting,management team from the Group were assigned as key officers of the above entities. Further, onJuly 11, 2014, a Memorandum of Agreement (MOA) was entered between TMC and Atlas, whichset out the material terms under which the parties have agreed to hold their respective investmentsin respect of the exploration, development and utilization of Berong Mineral Properties [miningtenements or Mineral Production Sharing Agreement (MPSA) applications underlying the BerongNickel Project, as well as all surface rights or rights of way and easements within or around theBerong Nickel Project necessary for operations] defined in the joint venture agreement datedJanuary 9, 2005. The said MOA sets out the rights of each of Atlas and TMC including theassignment of board seats, majority of which were assigned to TMC and delegation to TMC of theday to day operations and critical decision making in running the mining operations.

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Due to these factors, the Group believes that they have control over the above mining entities andwere accounted for as subsidiaries, instead of associates. Consequently, Atlas deconsolidated theabove entities. Gain on bargain purchase recognized from the business combination amounted toP=257.50 million (see Note 33).

On August 8, 2014, the following shares of mining entities owned by TMC were transferred toDMC as part of the re-organization:a) 40% of BNCb) 30% of URHIc) 40% of UNCd) 9% of NRHIe) 40% of TMM

On December 1, 2014, TMC transferred the following shares to DMC:1. 40% of INC2. 20% of NLRI

The above re-organization effectively transferred all the investments in shares of mining entitiesby TMC to DMC and did not change the existing total and effective ownership of the Group.

On December 1, 2014, DMC sold the following to Southeast Palawan Nickel Ventures, Inc. (anoutside party):1) Sale of 40% shares of INC and 20% shares of NLRI at book value of P=1.50 million.2) Sale of receivables from INC and NLRI with proceeds amounting to P=617.30 million.

On December 19, 2014, DMC sold its investment in TMC to a third party individual withproceeds amounting to GBP1,000.

As of December 31, 2015, the Deeds of Transfer and payment of corresponding DocumentaryStamp Tax (DST) have been already completed and paid. DMC obtained the CertificateAuthorizing Registration (CAR) in 2015.

Below are the nature of operations of the nickel mining subsidiaries:

Berong Nickel Corporation (BNC)BNC was registered with the SEC on September 27, 2004, for the purpose of exploring,developing and mining the Berong Mineral Properties located in Barangay Berong, Quezon,province of Palawan. BNC shall have the exclusive privilege and right to explore, develop, mine,operate, produce, utilize, process and dispose of all the minerals and the products or by-productsthat may be produced, extracted, gathered, recovered, unearthed or found within the MineralProperties, inclusive of Direct Shipping Project, under the MPSA with the Government of thePhilippines or under any appropriate rights granted by law or the Government of the Philippines.

On June 28, 2016, BNC, received an indefinite Regional Suspension Order from Regional OfficeNo. IV-B of MGB in connection with the discoloration of the Llabongan River which extendedtowards the surrounding area of the causeway within Berong Bay (see Note 38).

Ulugan Resources Holdings, Inc. (URHI)URHI was registered with the SEC on June 23, 2005 for the purpose of generally dealing in andwith personal properties and securities of every kind and description of any government,municipality, political subdivision or agency, corporation, association or entity; exercising any and


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all interest in respect of any of such securities; and promoting, managing, and participating in andact as agent for the purchase and sale of any securities as may be allowed by law.

Ulugan Nickel Corporation (UNC)UNC was registered with the SEC on June 23, 2005 for the purpose of exploring, developing andmining Ulugan Mineral Properties and the exclusive privilege and right to explore, develop, mine,operate, produce, utilize, process and dispose of all the minerals and the products or by-productsthat may be produced, extracted, gathered, recovered, unearthed, or found within the mineralproperties, inclusive of direct shipping project, under the MPSA with the Government of thePhilippines or under any appropriate rights granted by law or the Government of the Philippines.

Nickeline Resources Holdings, Inc. (NRHI)NRHI was registered with the SEC on August 15, 2005 primarily to subscribe for, receive,purchase or otherwise acquire, obtain an interest in, own, hold, pledge, hypothecate, mortgage,assign, deposit, create trusts with respect to, deal in, exchange, sell and otherwise dispose of, aloneor in syndicates or otherwise in conjunction with others, and generally deal in and with any kindof shares and securities and to exercise all the rights, powers and privileges of ownership orinterest in respect to them.

TMM Management Inc. (TMM)TMM was registered with the SEC on September 28, 2004, primarily to act as managers ormanaging agents of persons, firms, associations, corporations, partnership and other entities, toprovide management, investment and technical advice for commercial, industrial, manufacturingand other kinds of enterprises, and to undertake, carry on or participate in the promotion,organization, management, liquidation or reorganization of operations, partnerships and otherentities, except the management of funds, securities, portfolios and other similar assets of themanaged entity.

ENK Plc. (ENK)ENK (an entity incorporated in London, United Kingdom) was previously treated as a jointventure investment between the Parent Company and D&A Income Ltd (D&A). The ParentCompany owns 60% of ENK as of December 31, 2013. ENK has the following 100% ownedforeign and local subsidiaries:

The foreign wholly owned subsidiaries include: (a) European Nickel Iberia SL; (b) EuropeanNickel Spain SL; (c) Rusina Mining Ltd. (Rusina); (d) European Nickel Holland BV; and (e)European Nickel Philland BV.

The local wholly owned subsidiaries include: (a) European Nickel PLC-Regional OperatingHeadquarters; (b) Enickel Holdings, Inc.; (c) Enickel Berhold, Inc.; (d) Heraan Holdings, Inc.; (e)Asian Nickel Research and Technology Corporation; (f) Zambales Nickel Processing Corporation;(g) Zamnorth Holdings Corporation; (h) ZDMC Holdings Corporation; (i) Fil-Euro Asia NickelCorporation; (j) Fil-Asian Strategic Resources & Properties Corporation; (k) MonteminaResources Corporation; (l) Montague Resources Philippines Corporation; (m) Mt. Lanat MetalsCorporation; (n) Zambales Chromite Mining Company, Inc.; and (o) Zambales Diversified MetalsCorp.

On March 25, 2014, the Parent Company purchased from D&A the remaining 40% interest inENK and its subsidiaries for approximately P=3.12 billion, making ENK and its wholly ownedforeign and local subsidiaries, wholly owned subsidiaries of the Parent Company. The businesscombination was completed on April 3, 2014 when the Board seats were occupied by the

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representatives of the Parent Company. Goodwill recognized from the business combinationamounted to P=1,637.43 million (see Note 33).

Below are the nature of operations of the subsidiaries:

Foreign SubsidiariesThe following entities were acquired in 2014 and were organized primarily to participate in, tocooperate with, to manage or finance other enterprises and to have an interest, in whatever way, inother enterprises, as well as guarantee the debts of third parties:(a) European Nickel Iberia SL(b) European Nickel Spain SL(c) Rusina Mining Ltd.(d) European Nickel Holland BV (Netherlands)(e) European Nickel Philland BV (Netherlands)

Local Subsidiaries(a) European Nickel PLC-ROHQ (EN ROHQ)The EN ROHQ was established to engage in general administration and planning; businessplanning and coordination; sourcing/procurement of raw materials and components; corporatefinance advisory services; marketing control and sales promotion; training and personnelmanagement; logistic services; research and development services and product development;technical support and maintenance; data processing and communication; and businessdevelopment, solely for its own affiliates, subsidiaries or branches in the Philippines and otherforeign markets as declared in its registration with the SEC. The SEC registration does not allowthe EN ROHQ to directly or indirectly engage in the sale and distribution of goods and services ofits mother company, branches, affiliates, subsidiaries or any other company.

(b) Enickel Holdings, Inc. (EHI)EHI was incorporated in the Philippines and registered with the SEC on April 28, 2008 inaccordance with the Corporation Code of the Philippines and the Foreign Investment Act of 1991,as amended. Its primary purpose is to operate as a domestic market enterprise which producesgoods for sale, or renders services or otherwise engages in any business in the Philippines. As atDecember 31, 2015, EHI has not yet started commercial operations.

(c) Enickel Berhold, Inc. (EBI)EBI was registered with the SEC on October 14, 2008 in accordance with the Corporation Code ofthe Philippines and the Foreign Investments Act of 1991, primarily to invest in, purchase, orotherwise acquire and own, hold, sell, assign, transfer, mortgage, pledge, exchange, or otherwisedispose of properties of every kind and description, except land, including shares of stock,membership certificates, bonds, debentures, notes, evidences of indebtedness, and other securitiesof obligations of any domestic or foreign corporations, for whatever lawful purposes.

(d) Heraan Holdings, Inc. (HHI)HHI was registered with the SEC on February 27, 2008 to invest in, purchase, or otherwiseacquire and own, hold, sell, assign, transfer, mortgage, pledge, exchange, or otherwise dispose ofreal and personal property of every kind and description, including shares of stock, membershipcertificates, bonds, debentures, notes, evidences of indebtedness, and other securities, provided,that the corporation shall not engage in the business of a stock broker or dealer in securities.

(e) Asian Nickel Research and Technology Corporation (ANRTC)ANRTC was incorporated and registered with the SEC on October 9, 2007 to operate a researchlaboratory and nickel and cobalt enrichment demonstration facility, to engage in the processing,


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milling, crushing, refining, smelting, concentrating, amalgamating, and beneficiating mineralresources, and the products or by-products thereof and to buy, sell at wholesale, and exchangingmineral resources and the products or by-products thereof, without engaging in mining.

(f) Zambales Nickel Processing Corporation (ZNPC)ZNPC was incorporated in the Philippines and registered with the SEC on October 21, 2009primarily to own, hold, sell, exchange, lease, mortgage or otherwise dispose of, deal in, andoperate plants for processing, reducing, concentrating, smelting, converting, refining, preparing formarket, or otherwise treating metals, minerals and mined products to be used in the production ofnickel and cobalt products, and any and all ingredients, products and by-products of any thereof,and to produce, manufacture, process, refine, treat, sell, use, deal in, distribute, market andotherwise turn to account nickel and cobalt products and all ingredients, products and by-productsof any thereof.

(g) Zamnorth Holdings Corporation (ZHC)ZHC was incorporated in the Philippines and registered with the SEC on June 19, 2009 and startedcommercial operations on July 1, 2009. ZHC is primarily engaged in acquiring and disposinginvestments and exercise in respect thereof all the rights, powers and privileges of ownership.ZHC is also engaged in acquiring real properties and obtaining contracts, franchises and licensesfrom the government, corporation or person as may deemed conducive to the objects of thecorporation.

(h) ZDMC Holdings Corporation (ZDMCHC)ZDMCHC was incorporated and registered with the SEC on August 28, 2006. ZDMCHC isprimarily engaged in acquiring and disposing investment and exercise in respect thereof all therights, powers and privileges of ownership. ZDMCHC is also engaged in acquiring real propertiesand obtaining contracts, franchises and licenses from the government, corporation or person asmay deemed conducive to the objects of the corporation.

(i) Fil-Euro Asia Nickel Corporation (FEANC)FEANC was incorporated in the Philippines and registered with the SEC on November 7, 2008and started operations immediately thereafter. FEANC is primarily engaged in exploring for andevaluation of mining resources. FEANC also renders financial assistance to individuals,partnerships, corporations and associations engaged in mining and to local mineral or explorationenterprises.

(j) Fil-Asian Strategic Resources & Properties Corporation (FASRPC)FASRPC was incorporated and registered in the SEC on May 15, 2006 with the primary purposeof engaging in mining activities including the acquisition, exploration and evaluation ofopportunities in gold, bale metals, other minerals and diatomaceous earth.

(k) Montemina Resources Corporation (MRC)MRC was incorporated in the Philippines and registered with the SEC on August 11, 2008 andstarted operations immediately thereafter. MRC is primarily engaged in exploring for andevaluation of mining resources in the Philippines. MRC also renders application of mineralproduction sharing agreements or financial assistance to individuals, partnerships, corporationsand associations engaged in mining and to give financial assistance to local mineral or explorationenterprises.

(l) Montague Resources Phil. Corp. (MRPC)MRPC was incorporated in the Philippines and registered with the SEC on April 9, 2002. Itsprimary purpose is to carry out the business of operating mines, and of prospecting, exploration

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and of mining, milling, concentrating, converting, smelting, treating, refining, preparing formarket, manufacturing, buying, selling and exchanging ores and mineral resources and to enterinto contracts with local mineral tenement owners, mineral exploration enterprises and miningenterprises in connection with the mining activities.

(m) Mt. Lanat Metals Corp. (MLMC)MLMC was incorporated in the Philippines and registered with the SEC on November 4, 2008 andstarted operations immediately thereafter. MLMC is primarily engaged in exploring for andevaluation of mining resources here in the Philippines. MLMC also renders application of mineralproduction sharing agreements or financial assistance to individuals, partnerships, corporationsand associations engaged in mining and to give financial assistance to local mineral or explorationenterprises.

(n) Zambales Chromite Mining Company, Inc. (ZCMC)ZCMC was incorporated and registered in the Philippines with the Philippine Securities andExchange Commission (SEC) on May 21, 1935 with its corporate life renewed in 1985. ZCMC isprimarily engaged in exploring for and evaluation of mining resources in the Philippines.

(o) Zambales Diversified Metals Corp. (ZDMC)ZDMC was incorporated and registered with the SEC on September 14, 2007. ZDMC is primarilyengaged in rendering exploration work for the purpose of determining and evaluating the existenceof mineral resources, development potential, extent, quality and quantity and the feasibility ofmining them for profit or of applying for exploration permit, mineral processing permit, mineralproduction sharing agreements, and financial or technical assistance agreement, to individuals,partnerships, associations and corporations engaged in mining; or, in any manner, to engage in theacquisition, conveyance, storage, marketing, processing, refining and distribution of minerals; togive financial assistance to local mining enterprises or corporations; to extend financial assistanceto local mineral exploration enterprises and mineral tenement owners through contracts withoutengaging in financing activity as defined in Republic Act No. 5980; and to acquire an interest in orshares of stocks of mining companies, to lease, option, locate or otherwise deal in mines, miningclaims, and other property except lands to the extent allowed by law; to enter into contracts withlocal mineral tenement owners, mineral exploration enterprises, mining and mineral processingenterprises in connection with the above activities; and to provide technical and/or financialassistance for the large-scale exploration, development and utilization of minerals, petroleum andother mineral oils under Mineral Production Sharing Agreements (MPSA) or Financial orTechnical Assistance Agreements with the government of the Philippines; and to carry on, eithersolely or in co-venture with others, mining, milling, concentrating, converting, smelting, treating,refining, preparing for market, manufacturing, buying, selling, exchanging and otherwiseproducing and dealing in all kinds of ores, metals, minerals, hydrocarbons,' acids and, chemicals,and in the products and by-products of every kind and description and by whatsoever process, thesame can be or may hereafter be produced.

On February 8, 2017, DENR issued an order cancelling the ZDMC’s MPSA, based among others,on the suspension imposed on the ZDMC on July 7, 2016 (see Note 28).


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After the acquisition, the following re-organization was implemented in various dates in 2014 and2015:

a) In 2014, 100% of ZCMC was transferred from ZNHC and FEANC to DMCb) In 2014, 100% of ZDMC was transferred from ZDMCHC and FEANC to DMCc) In 2014, 100% of FASRPC was transferred from Rusina to DMCd) In 2014, 99% of MRC was transferred from third party sellers to DMCe) In 2015, 100% of FEANC was transferred from Rusina and EHI to DMC.

On August 18, 2014, ANRTC was sold to third parties resulting to a gain of P=55.55 million whichis presented net of the loss on sale of investments under Operating expenses in the consolidatedstatements of income (Note 25).

On March 31, 2016, the BOD of the Parent Company approved the restructuring of ENK. Thedissolution and liquidation of ENK is part of the ongoing restructuring of the Parent Company’snickel mining subsidiaries in order to simplify the structure of the nickel segment and liquidatenon-operating subsidiaries. On July 1, 2016, the Parent Company has completed the restructuringof ENK and ENK was subsequently sold to a third party liquidator. The local subsidiaries whichcontrols the mining assets are now owned by DMCI Mining.

ManufacturingSemCemSemirara Cement Corporation was registered with the Philippine Securities and ExchangeCommission (SEC) on January 29, 1998. SemCem is primarily engaged in the manufacturing,marketing, distribution and trading of cement and related products. As of December 31, 2016,SemCem has not yet started commercial operations.

Wire RopeWire Rope was incorporated in the Philippines and registered with the Securities and ExchangeCommission (SEC) on September 22, 1960 to produce, manufacture, fabricate, sell, distribute orotherwise deal in, wires, wire ropes and cables of all kinds and descriptions.

Changes in Accounting Policies and DisclosuresThe accounting policies adopted are consistent with those of the previous financial year, except forthe adoption of the following amended standards and improvements to PFRS which the Group hasadopted starting January 1, 2016. Unless otherwise indicated, the adoption did not have anysignificant impact on the consolidated financial statements of the Group.

· Amendments to PFRS 10, PFRS 12 and Philippine Accounting Standards (PAS) 28,Investment Entities: Applying the Consolidation 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

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· Amendment to PFRS 7, Applicability of the Amendments to PFRS 7 to Condensed InterimFinancial 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 EffectiveThe Group has not applied the following PFRS, PAS and Philippine Interpretations which are notyet effective as of December 31, 2016. This list consists of standards and interpretations issued,which the Group reasonably expects to be applicable at a future date. The Group intends to adoptthose standards when they become effective. Unless otherwise indicated, adoption of thesestandards and interpretations are not expected to have any significant impact on the consolidatedfinancial statements of the Group.

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)The amendments clarify that the disclosure requirements in PFRS 12, other than those relatingto summarized financial information, apply to an entity’s interest in a subsidiary, a jointventure or an associate (or a portion of its interest in a joint venture or an associate) that isclassified (or included in a disposal group that is classified) as held for sale.

· 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 not requiredto provide comparative information for preceding periods. Early application of theamendments is permitted.

Application of amendments will result in additional disclosures in the consolidated financialstatements of the Group.

· Amendments to PAS 12, Income Taxes, Recognition of Deferred Tax Assets for UnrealizedLossesThe amendments clarify that an entity needs to consider whether tax law restricts the sourcesof taxable profits against which it may make deductions on the reversal of that deductibletemporary difference. Furthermore, the amendments provide guidance on how an entityshould determine future taxable profits and explain the circumstances in which taxable profitmay include the recovery of some assets for more than their carrying amount.

Entities are required to apply the amendments retrospectively. However, on initial applicationof the amendments, the change in the opening equity of the earliest comparative period maybe recognized in opening retained earnings (or in another component of equity, asappropriate), without allocating the change between opening retained earnings and othercomponents of equity. Entities applying this relief must disclose that fact. Early applicationof the amendments is permitted. The Parent Company is currently assessing the impact ofthese amendments on its consolidated financial statements.


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· Amendments to PFRS 2, Share-based Payment, Classification and Measurement of Share-based Payment TransactionsThe amendments to PFRS 2 address three main areas: the effects of vesting conditions on themeasurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; andthe accounting where a modification to the terms and conditions of a share-based paymenttransaction changes its classification from cash settled to equity settled.

On adoption, entities are required to apply the amendments without restating prior periods, butretrospective application is permitted if elected for all three amendments and if other criteriaare met. Early application of the amendments is permitted.

This is not applicable to the Group because it does not have share-based paymentarrangements.

· Amendments to PFRS 4, Insurance Contracts, Applying PFRS 9, Financial Instruments, withPFRS 4The amendments address concerns arising from implementing PFRS 9, the new financialinstruments standard before implementing the forthcoming insurance contracts standard. Theyallow entities to choose between the overlay approach and the deferral approach to deal withthe transitional challenges. The overlay approach gives all entities that issue insurancecontracts the option to recognize in other comprehensive income, rather than profit or loss, thevolatility that could arise when PFRS 9 is applied before the new insurance contracts standardis issued. On the other hand, the deferral approach gives entities whose activities arepredominantly connected with insurance an optional temporary exemption from applyingPFRS 9 until the earlier of application of the forthcoming insurance contracts standard orJanuary 1, 2021.

The overlay approach and the deferral approach will only be available to an entity if it has notpreviously applied PFRS 9.

The amendments are not applicable to the Group since none of the entities within the Grouphave activities that are predominantly connected with insurance or issue insurance contracts.

· PFRS 15, Revenue from Contracts with CustomersPFRS 15 establishes a new five-step model that will apply to revenue arising from contractswith customers. Under PFRS 15, revenue is recognized at an amount that reflects theconsideration to which an entity expects to be entitled in exchange for transferring goods orservices to a customer. The principles in PFRS 15 provide a more structured approach tomeasuring and recognizing revenue.

The new revenue standard is applicable to all entities and will supersede all current revenuerecognition requirements under PFRSs. Either a full or modified retrospective application isrequired for annual periods beginning on or after January 1, 2018.

The standard is expected to significantly impact contracts entered into by the construction,coal mining, on-grid power generation and real estate development segments of the Group.Particularly for real estate sales which is currently accounted for at completed contractmethod, revenue and cost recognition will now be based on percentage of completion method.

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This will significantly impact revenue, cost of sales, inventory, receivables, customer’sdeposits and deferred tax accounts previously reported. The Group is currently quantifyingthe impact of the adoption of the new standard.

· PFRS 9, Financial InstrumentsPFRS 9 reflects all phases of the financial instruments project and replaces PAS 39, FinancialInstruments: Recognition and Measurement, and all previous versions of PFRS 9. Thestandard introduces new requirements for classification and measurement, impairment, andhedge accounting. PFRS 9 is effective for annual periods beginning on or after January 1,2018, with early application permitted. Retrospective application is required, but providingcomparative information is not compulsory. For hedge accounting, the requirements aregenerally applied prospectively, with some limited exceptions.

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 have noimpact on the classification and measurement of the Group’s financial liabilities. Theadoption is expected to impact the assessment of the Group’s credit losses amount.The Group 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)The amendments clarify that an entity that is a venture capital organization, or other qualifyingentity, may elect, at initial recognition on an investment-by-investment basis, to measure itsinvestments in associates and joint ventures at fair value through profit or loss. They alsoclarify that if an entity that is not itself an investment entity has an interest in an associate orjoint venture that is an investment entity, the entity may, when applying the equity method,elect to retain the fair value measurement applied by that investment entity associate or jointventure to the investment entity associate’s or joint venture’s interests in subsidiaries. Thiselection is made separately for each investment entity associate or joint venture, at the later ofthe date on which (a) the investment entity associate or joint venture is initially recognized; (b)the associate or joint venture becomes an investment entity; and (c) the investment entityassociate or joint venture first becomes a parent. The amendments should be appliedretrospectively, with earlier application permitted. The Group is currently assessing theimpact of adopting this standard.

· 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 state that achange in use occurs when the property meets, or ceases to meet, the definition of investmentproperty and there is evidence of the change in use. A mere change in management’sintentions for the use of a property does not provide evidence of a change in use. Theamendments should be applied prospectively to changes in use that occur on or after thebeginning of the annual reporting period in which the entity first applies the amendments.Retrospective application is only permitted if this is possible without the use 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 date of thetransaction is the date on which an entity initially recognizes the nonmonetary asset or non-


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monetary liability arising from the advance consideration. If there are multiple payments orreceipts in advance, then the entity must determine a date of the transactions for each paymentor receipt of advance consideration. The interpretation may be applied on a fully retrospectivebasis. Entities may apply the interpretation prospectively to all assets, expenses and income inits scope that are initially recognized on or after the beginning of the reporting period in whichthe entity first applies the interpretation or the beginning of a prior reporting period presentedas comparative information in the consolidated financial statements of the reporting period inwhich 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-assetmodel. Under this model, lessees will recognize the assets and related liabilities for mostleases on their balance sheets, and subsequently, will depreciate the lease assets and recognizeinterest on the lease liabilities in their profit or loss. Leases with a term of 12 months or lessor for which the underlying asset is of low value are exempted from these requirements.

The accounting by lessors is substantially unchanged as the new standard carries forward theprinciples of lessor accounting under PAS 17. Lessors, however, will be required to disclosemore information in their financial statements, particularly on the risk exposure to residualvalue.

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 new standard isexpected to impact the Group’s leasing arrangement as a lessee.

The Group is currently quantifying the impact of adopting PFRS 16.

Deferred effectivity

· Amendments to PFRS 10 and PAS 28, Sale or Contribution of Assets between an Investor andits Associate or Joint VentureThe amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss ofcontrol of a subsidiary that is sold or contributed to an associate or joint venture. Theamendments clarify that a full gain or loss is recognized when a transfer to an associate orjoint venture involves a business as defined in PFRS 3, Business Combinations. Any gain orloss resulting from the sale or contribution of assets that does not constitute a business,however, is recognized only to the extent of unrelated investors’ interests in the associate orjoint venture.

On January 13, 2016, the Financial Reporting Standards Council postponed the originaleffective date of January 1, 2016 of the said amendments until the International AccountingStandards Board has completed its broader review of the research project on equity accountingthat may result in the simplification of accounting for such transactions and of other aspects ofaccounting for associates and joint ventures.

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Significant Accounting Policies

Current and Noncurrent ClassificationThe Group presents assets and liabilities in consolidated statement of financial position based oncurrent/noncurrent classification. An asset is current when:

· 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 12 months after reporting date; or· Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for

at least 12 months after reporting date.

All other assets are classified as noncurrent.

A liability is current when:

· It is expected to be settled in the normal operating cycle;· It is held primarily for the purpose of trading;· It is due to be settled within 12 months after reporting date; or· There is no unconditional right to defer the settlement of the liability for at least 12 months

after reporting date.

The Group classifies all other liabilities as noncurrent.

Deferred tax assets and liabilities are classified as noncurrent assets and liabilities, respectively.

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 ofthree (3) months or less from the date of placement and that are subject to an insignificant risk ofchanges in value.

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.

Initial Recognition of Financial InstrumentsAll financial assets and financial liabilities are initially recognized at fair value. Except forfinancial assets at FVPL, the initial measurement of financial assets includes transaction costs.The Group classifies its financial assets in the following categories: financial assets at FVPL, held-to-maturity (HTM) investments, AFS financial assets, and loans and receivables. The Groupclassifies its financial liabilities as financial liabilities at FVPL and other financial liabilities. Theclassification depends on the purpose for which the investments were acquired and whether theseare quoted in an active market. Management determines the classification of its investments atinitial recognition and, where allowed and appropriate, re-evaluates such designation at everyreporting date.


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Financial instruments are classified as liabilities 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.

The Group’s financial instruments are classified as AFS financial assets, financial assets at FVPL,loans and receivables and other financial liabilities.

Fair Value MeasurementThe Group measures AFS financial assets and financial assets at FVPL at fair value at eachreporting date. Also, fair values of loans and receivables, other financial liabilities and non-financial assets measured at cost such as investment properties are disclosed in Notes 12 and 36.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in anorderly 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 by 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 consolidated financialstatements are categorized within the fair value hierarchy based on the lowest level input that issignificant 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· 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 consolidated financial statements on a recurringbasis, the Group determines whether transfers have occurred between Levels in the hierarchy byre-assessing categorization (based on the lowest level input that is significant to the fair valuemeasurement as a 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.

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‘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 statement ofincome under “Finance income” and “Finance costs” unless it qualifies for recognition as someother type of asset or liability. In cases where the valuation technique used is made of data whichis not observable, the difference between the transaction price and model value is only recognizedin the consolidated statement of income when the inputs become observable or when theinstrument is derecognized. For each transaction, the Group determines the appropriate method ofrecognizing the ‘Day 1’ difference amount.

Financial Assets and Financial Liabilities at FVPLFinancial assets and financial liabilities at FVPL include financial assets and financial liabilitiesheld for trading and financial assets and financial liabilities designated upon initial recognition asat FVPL.

Financial assets are classified as held for trading if they are acquired for the purpose of selling orrepurchasing in the near term. Financial assets or financial liabilities held for trading are recordedin the consolidated statement of financial position at fair value. Changes in fair value relating tothe held for trading positions are recognized in “Other income - net” account in the consolidatedstatement of income. Interest earned or incurred is recorded in interest income or expense,respectively, while dividend income is recorded when the right to receive payment has beenestablished.

Financial assets may be designated at initial recognition as at FVPL if any of the following criteriaare met:· The designation eliminates or significantly reduces the inconsistent treatment that would

otherwise arise from measuring the assets or liabilities or recognizing gains or losses on themon a different basis; or

· The assets are part of a group of financial assets which are managed and their performanceevaluated on a fair value basis, in accordance with a documented risk management orinvestment strategy; or

· The financial instrument contains an embedded derivative that would need to be separatelyrecorded.

The Group’s financial asset at FVPL pertains to investment in quoted equity securities (Note 5).The Group does not have any financial liability at FVPL.

Loans and ReceivablesLoans and receivables are nonderivative financial assets with fixed or determinable payments andfixed maturities that are not quoted in an active market. These are not entered into with theintention of immediate or short-term resale and are not designated as financial assets at FVPL orAFS financial assets. These are included in current assets if maturity is within 12 months from thereporting date; otherwise, these are classified as noncurrent assets. This accounting policy relatesto the consolidated statement of financial position captions “Cash and cash equivalents”,“Receivables”, “Noncurrent receivables” and refundable and security deposits included under“Other current assets” and “Other noncurrent assets”.


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After initial measurement, 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 (EIR) and transaction costs. The amortization is included in “Financeincome” in the consolidated statement of income. The losses arising from impairment of suchloans and receivables are recognized under “Other expenses” in the consolidated statement ofincome.

AFS Financial AssetsAFS financial assets are those which are designated as such or do not qualify to be classified ordesignated as at FVPL, HTM or loans and receivables. After initial measurement, AFS financialassets are measured at fair value with unrealized gains or losses being recognized in theconsolidated statement of comprehensive income and are reported as “Net accumulated unrealizedgains (losses) on AFS financial assets” in equity. When the investment is disposed of, thecumulative gain or loss previously recorded in equity is recognized in the consolidated statementof income. Interest earned or paid on the investments is reported as interest income or expenseusing the EIR. Dividends earned on investments are recognized in the consolidated statement ofincome when the right to receive payment has been established. The losses arising fromimpairment of such investments are recognized under “Other income - net” in the consolidatedstatement of income.

AFS financial assets are classified as current asset if verified to be realized within 12 months fromreporting date.

When the fair value of AFS financial assets cannot be measured reliably because of lack ofreliable estimates of future cash flows and discount rates necessary to calculate the fair values ofunquoted equity instruments, then instruments are carried at cost less any allowance forimpairment losses.

The Group’s AFS financial assets pertain to quoted and unquoted equity securities (Note 6).

Other Financial LiabilitiesIssued financial instruments or their components, which are not designated as at FVPL areclassified as other financial liabilities where the substance of the contractual arrangement results inthe Group having an obligation either to deliver cash or another financial asset to the holder, or tosatisfy the obligation other than by the exchange of a fixed amount of cash or another financialasset for a fixed number of own equity shares. The components of issued financial instrumentsthat contain both liability and equity elements are accounted for separately, with the equitycomponent being assigned the residual amount after deducting from the instrument as a whole theamount separately determined as the fair value of the liability component on the date of issue.

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 integral parts of the EIR. Any effects ofrestatement of foreign currency-denominated liabilities are recognized in the consolidatedstatement of income.

Other financial liabilities relate to the consolidated statement of financial position captions,“Accounts and other payables”, “Liabilities for purchased land”, “Payable to related parties”,“Short-term and Long-term debt” and “Other noncurrent liabilities”.

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Deferred Financing CostsDeferred financing costs represent debt issue costs arising from the fees incurred to obtain projectfinancing. This is included in the initial measurement of the related debt. The deferred financingcosts are treated as a discount on the related debt and are amortized using the effective interestmethod over the term of the related debt.

Impairment of Financial AssetsThe Group assesses at each reporting date whether there is objective evidence that a financial assetor group of financial assets is impaired. A financial asset or a group of financial assets is deemedto be impaired if, and only if, there is objective evidence of impairment as a result of one or moreevents that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and thatloss event (or events) has an impact on the estimated future cash flows of the financial asset or thegroup of financial assets that can be reliably estimated. Evidence of impairment may includeindications that the borrower or a group of borrowers is 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.

Loans and ReceivablesFor loans and receivables carried at amortized cost, the Group first assesses whether objectiveevidence of impairment exists individually for financial assets that are individually significant, orcollectively for financial assets that are not individually significant. If the Group determines thatno objective evidence of impairment exists for individually assessed financial asset, whethersignificant or not, it includes the asset in a group of financial assets with similar credit riskcharacteristics and collectively assesses for impairment. Those characteristics are relevant to theestimation of future cash flows for groups of such assets by being indicative of the debtors’ abilityto pay all amounts due according to the contractual terms of the assets being evaluated. Assetsthat are individually assessed for impairment and for which an impairment loss is, or continues tobe, recognized are not included in a collective assessment for impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss ismeasured as the difference between the asset’s carrying amount and the present value of theestimated future cash flows (excluding future credit losses that have not been incurred) discountedat the financial assets’ original EIR (i.e., the EIR computed at initial recognition). The carryingamount of the asset is reduced through the use of an allowance account and the amount of loss ischarged to the consolidated statement of income during the period in which it arises. Interestincome continues to be recognized based on the original EIR of the asset. Receivables, togetherwith the associated allowance accounts, are written off when there is no realistic prospect of futurerecovery and all collateral has been realized.

If, in a subsequent year, the amount of the estimated impairment loss decreases because of anevent occurring 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 its amortizedcost at the reversal date.

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basisof such credit risk characteristics as industry, customer type, customer location, past-due statusand term. Future cash flows in a group of financial assets that are collectively evaluated forimpairment are estimated on the basis of historical loss experience for assets with credit riskcharacteristics similar to those in the group. Historical loss experience is adjusted on the basis of


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current observable data to reflect the effects of current conditions that did not affect the period onwhich the historical loss experience is based and to remove the effects of conditions in thehistorical period that do not exist currently. The methodology and assumptions used forestimating future cash flows are reviewed annually by the Group to reduce any differencesbetween loss estimates and actual loss experience.

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 case of equity investments classified as AFS financial assets, impairment 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 income, is removed from equity and recognized in theconsolidated statement of income under “Other income - net” account. Impairment losses onequity investments are not reversed through the consolidated statement of income. Increases infair value after impairment are recognized directly in the consolidated statement of comprehensiveincome.

Financial Assets Carried at CostIf there is an objective evidence that an impairment loss has been incurred on an unquoted equityinstrument that is not carried at fair value because its fair value cannot be reliably measured, theamount of the loss is measured as the difference between the carrying amount and the presentvalue of estimated future cash flows discounted at the current market rate of return for a similarfinancial asset.

Derecognition of Financial Assets and LiabilitiesFinancial AssetA financial asset (or, where applicable a part of a financial asset or part of a group of similarfinancial assets) is derecognized when:· the rights to receive cash flows from the asset have expired;· the Group has transferred its rights to receive cash flows from the asset and either has assumed

an obligation to pay them in full without material delay to a third party under a ‘pass through’arrangement; or: (a) has transferred substantially all the risks and rewards of the asset, or (b)has neither transferred nor retained substantially all the risks and rewards of the asset, but hastransferred 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 risk and rewards of the asset nor transferred control ofthe asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset.Continuing involvement that takes the form of a guarantee over the transferred asset is measuredat the lower of the carrying amount of the asset and the maximum amount of consideration that theGroup could be required to repay.

Financial LiabilityA financial liability is derecognized when the obligation under the liability is discharged orcanceled or has expired.

Where an existing financial liability is replaced by another from the same lender on substantiallydifferent terms, or the terms of an existing liability are substantially modified, such an exchange ormodification is treated as a derecognition of the original liability and the recognition of a new

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liability, and the difference in the respective carrying amounts is recognized in the consolidatedstatement of income.

Offsetting Financial InstrumentsFinancial assets and financial liabilities are only offset and the net amount reported in theconsolidated statement of financial position when there is a legally enforceable right to set off therecognized amounts and the Group intends to either 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.

Embedded DerivativeThe Group assesses the existence of an embedded derivative on the date it first becomes a party tothe contract, and performs re-assessment where there is a change to the contract that significantlymodifies the cash flows.

Embedded derivatives are bifurcated from their host contracts and carried at fair value with fairvalue changes recognized in the consolidated statement of income, when the entire hybridcontracts (composed of both the host contract and the embedded derivative) are not accounted foras financial instruments designated at FVPL; when their economic risks and characteristics are notclearly and closely related to those of their respective host contracts; and when a separateinstrument with the same terms as the embedded derivative would meet the definition of aderivative.

As of December 31, 2016 and 2015, the Group’s identified embedded derivatives consists ofprepayment options for the loan agreements that are not required to be bifurcated from the hostinstruments as these were assessed to be clearly and closely related to the host contracts.

Customers’ Advances and DepositsCustomers’ advances and deposits represent payment from buyers which have not yet reached theminimum required percentage for recording real estate transactions. When the level of requiredpayment is reached and the revenue recognition criteria is met, sales are recognized and thesedeposits and downpayments will be applied against the related receivables. This account alsoincludes advance payment of customers for coal and nickel ore purchases which will be appliedagainst the receivable upon consummation of the related sales transaction.

InventoriesReal Estate Held for Sale and DevelopmentReal estate held for sale and development consists of condominium units and subdivision land forsale and development.

Condominium units and subdivision land for sale are carried at the lower of aggregate cost and netrealizable value (NRV). Costs include acquisition costs of the land plus costs incurred for theconstruction, development and improvement of residential units. Borrowing costs are capitalizedwhile the development and construction of the real estate projects are in progress, and to the extentthat these are expected to be recovered in the future. NRV is the estimated selling price in theordinary course of business, less estimated costs of completion and the estimated costs necessaryto make the sale.

Undeveloped land is carried at lower of cost and NRV.


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The costs of inventory recognized in profit or loss on disposal is determined with reference to thespecific costs incurred on the property sold and an allocation of any non-specific costs based onthe relative size of the property sold.

Valuation allowance is provided for real estate held for sale and development when the NRV ofthe properties are less than their carrying amounts.

Coal InventoryThe cost of coal inventory is carried at the lower of cost and NRV. NRV is the estimated sellingprice in the ordinary course of business, less estimated costs necessary to make the sale for coalinventory. Cost is determined using the weighted average production cost method.

The cost of extracted coal includes all stripping costs and other mine related costs incurred duringthe period and allocated on per metric ton basis by dividing the total production cost with the totalvolume of coal produced. Except for shiploading cost, which is a period cost, all other productionrelated costs are charged to production cost.

Nickel Ore InventoryNickel ore inventories are valued at the lower of cost and NRV. Cost of beneficiated nickel ore ornickeliferous laterite ore is determined by the moving average production cost and comprise ofoutside services, production overhead, personnel cost and depreciation, amortization and depletionthat are directly attributable in bringing the beneficiated nickel ore or nickeliferous laterite ore inits saleable condition. NRV for beneficiated nickel ore or nickeliferous laterite ore is theestimated selling price in the ordinary course of business, less estimated costs of completion andthe estimated costs necessary to make the sale. Stockpile tonnages are verified by periodicsurveys.

Materials in TransitCost is determined using the specific identification basis.

Equipment Parts and SuppliesThe cost of equipment parts, materials and supplies is determined principally by the average costmethod (either by moving average or weighted average production cost).

Equipment parts and supplies are transferred from inventories to property, plant and equipmentwhen the use of such supplies is expected to extend the useful life of the asset and increase itseconomic benefit. Transfers between inventories to property, plant and equipment do not changethe carrying amount of the inventories transferred and they do not change the cost of thatinventory for measurement or disclosure purposes.

Equipment parts and supplies used for repairs and maintenance of the equipment are recognized inthe consolidated statements of income when consumed.

NRV for supplies and fuel is the current replacement cost. For supplies and fuel, cost is alsodetermined using the moving average method and composed of purchase price, transport, handlingand other costs directly attributable to its acquisition. Any provision for obsolescence isdetermined by reference to specific items of stock. A regular review is undertaken to determine theextent of any provision or obsolescence.

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Investments in Associates and Joint VenturesAn associate is an entity in which the Group has significant influence and which is neither asubsidiary nor a joint venture. Significant influence is the power to participate in the financial andoperating policy decisions of the investee, but is not control or joint control over those policies.

A joint venture is a type of joint arrangement whereby the parties that have joint control of thearrangement have rights to the net assets of the joint venture. Joint control is the contractuallyagreed sharing of control of an arrangement, which exists only when decisions about the relevantactivities require unanimous consent of the parties sharing control.

The considerations made in determining significant influence or joint control are similar to thosenecessary to determine control over subsidiaries. The Group’s investments in associates and jointventures are accounted for using the equity method.

Under the equity method, the investments in associate or joint venture is initially recognized atcost. The carrying amount of the investment is adjusted to recognize changes in the Group’s shareof net assets of the associate or joint venture since the acquisition date. Goodwill relating to theassociate or joint venture is included in the carrying amount of the investment and is neitheramortized and is not tested for impairment individually.

The consolidated statement of income reflects the Group’s share of the results of operations of theassociate or joint venture. Any change in OCI of those investees is presented as part of theGroup’s OCI. In addition, when there has been a change recognized directly in the equity of theassociate or joint venture, the Group recognizes its share of any changes, when applicable, in theconsolidated statement of changes in equity. Unrealized gains and losses resulting fromtransactions between the Group and the associate or joint venture are eliminated to the extent ofthe interest in the associate or joint venture.

The aggregate of the Group’s share of profit or loss of an associate and joint venture is shown onthe face of the consolidated statement of income outside operating profit and represents profit orloss after tax and non-controlling interests in the subsidiaries of the associate or joint venture. Ifthe Group’s share of losses of an associate or a joint venture equals or exceeds its interest in theassociate or joint venture, the Group discontinues recognizing its share to the extent of the interestin associate or joint venture.

The financial statements of the associate or joint venture are prepared for the same reportingperiod as the Group. When necessary, adjustments are made to bring the accounting policies inline with those of the Group.

After application of the equity method, the Group determines whether it is necessary to recognizean impairment loss on its investment in its associate or joint venture. At each reporting date, theGroup determines whether there is objective evidence that the investment in the associate or jointventure is impaired. If there is such evidence, the Group calculates the amount of impairment asthe difference between the recoverable amount of the associate or joint venture and its carryingvalue, then recognizes the loss as ‘Equity in net earnings of associates and joint ventures’ in theconsolidated statement of income.

Upon loss of significant influence over the associate or joint control over the joint venture, theGroup measures and recognizes any retained investment at its fair value. Any difference betweenthe carrying amount of the associate or joint venture upon loss of significant influence or jointcontrol and the fair value of the retained investment and proceeds from disposal is recognized inconsolidated statement of income.


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Investment PropertiesInvestment properties comprise completed property and property under construction orredevelopment that are held to earn rentals or capital appreciation or both and that are notoccupied by the Group.

Investment properties are measured initially at cost, including transaction costs. Subsequent toinitial recognition, investment properties, except land, are stated at cost less accumulateddepreciation and amortization and any impairment in value. Land is stated at cost less anyimpairment in value. The carrying amount includes the cost of replacing part of an existinginvestment property at the time that cost is incurred if the recognition criteria are met and excludesthe costs of day-to-day servicing of an investment property.

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. The difference between the net disposal proceeds and the carryingamount of the asset is recognized in the consolidated statement of income in the period ofderecognition.

Depreciation and amortization is calculated on a straight-line basis using the following estimateduseful lives (EUL) from the time of acquisition of the investment properties:

YearsBuildings and building improvements 5-20Condominium units 25

The assets’ residual value, useful life and depreciation and amortization methods are reviewedperiodically to ensure that the period and method of depreciation and amortizations are consistentwith the expected pattern of economic benefits from items of investment properties.

A transfer is made to investment property when there is a change in use, evidenced by ending ofowner-occupation, commencement of an operating lease to another party or ending of constructionor development. A transfer is made from investment property when and only when there is achange in use, evidenced by commencement of owner-occupation or commencement ofdevelopment with a view to sale. A transfer between investment property, owner-occupiedproperty and inventory does not change the carrying amount of the property transferred nor does itchange the cost of that property for measurement or disclosure purposes.

Exploration and Evaluation Asset and Mining PropertiesExploration and evaluation activity involves the search for mineral resources, the determination oftechnical feasibility and the assessment of commercial viability of an identified resource.

Exploration and evaluation activity includes:· Researching and analyzing historical exploration data· Gathering exploration data through geophysical studies· Exploratory drilling and sampling· Determining and examining the volume and grade of the resource· Surveying transportation and infrastructure requirements· Conducting market and finance studies

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License costs paid in connection with a right to explore in an existing exploration area arecapitalized and amortized over the term of the permit. Once the legal right to explore has beenacquired, exploration and evaluation expenditure is charged to consolidated statement of incomeas incurred, unless the Group’s management concludes that a future economic benefit is morelikely than not to be realized. These costs include materials and fuel used, surveying costs,drilling costs and payments made to contractors.

In evaluating whether the expenditures meet the criteria to be capitalized, several different sourcesof information are used. The information that is used to determine the probability of futurebenefits depends on the extent of exploration and evaluation that has been performed.

Expenditure is transferred from ‘Exploration and evaluation asset’ to ‘Mining properties’ which isa subcategory of ‘Property, plant and equipment’ once the work completed to date supports thefuture development of the property and such development receives appropriate approvals.After transfer of the exploration and evaluation asset, all subsequent expenditure on theconstruction, installation or completion of infrastructure facilities is capitalized in ‘Miningproperties’. Development expenditure is net of proceeds from the sale of ore extracted during thedevelopment phase.

Stripping CostsAs part of its mining operations, the Group incurs stripping (waste removal) costs both during thedevelopment phase and production phase of its operations. Stripping costs incurred in thedevelopment phase of a mine, before the production phase commences (development stripping),are capitalized as part of the cost of mining properties and subsequently amortized over its usefullife using units of production method. The capitalization of development stripping costs ceaseswhen the mine/component is commissioned and ready for use as intended by management.

After the commencement of production further development of the mine may require a phase ofunusually high stripping that is similar in nature to development phase stripping. The costs ofsuch stripping are accounted for in the same way as development stripping (as discussed above).

Stripping costs incurred during the production phase are generally considered to create twobenefits, being either the production of inventory or improved access to the coal body to be minedin the future. Where the benefits are realized in the form of inventory produced in the period, theproduction stripping costs are accounted for as part of the cost of producing those inventories.

Where the benefits are realized in the form of improved access to ore to be mined in the future, thecosts are recognized as a noncurrent asset, referred to as a stripping activity asset, if the followingcriteria are met:· Future economic benefits (being improved access to the coal body) are probable;· The component of the coal body for which access will be improved can be accurately

identified; and· The costs associated with the improved access can be reliably measured.

If all of the criteria are not met, the production stripping costs are charged to the consolidatedstatement of income as operating costs as they are incurred.

In identifying components of the body, the Group works closely with the mining operationsdepartment for each mining operation to analyze each of the mine plans. Generally, a componentwill be a subset of the total body, and a mine may have several components. The mine plans, andtherefore the identification of components, can vary between mines for a number of reasons.


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These include, but are not limited to: the type of commodity, the geological characteristics of theore/coal body, the geographical location, and/or financial considerations.

The stripping activity asset is initially measured at cost, which is the accumulation of costsdirectly incurred to perform the stripping activity that improves access to the identified componentof ore/coal body, plus an allocation of directly attributable overhead costs. If incidental operationsare occurring at the same time as the production stripping activity, but are not necessary for theproduction stripping activity to continue as planned, these costs are not included in the cost of thestripping activity asset. If the costs of the inventory produced and the stripping activity asset arenot separately identifiable, a relevant production measure is used to allocate the productionstripping costs between the inventory produced and the stripping activity asset. This productionmeasure is calculated for the identified component of the ore/coal body and is used as abenchmark to identify the extent to which the additional activity of creating a future benefit hastaken place.

The stripping activity asset is accounted for as an addition to, or an enhancement of, an existingasset, being the mine asset, and is included as part of ’Mining properties’ under ‘Property, plantand equipment’ in the consolidated statement of financial position. This forms part of the totalinvestment in the relevant cash generating unit (CGU), which is reviewed for impairment if eventsor changes of circumstances indicate that the carrying value may not be recoverable.

The stripping activity asset is subsequently depreciated using the units of production method overthe life of the identified component of the coal body that became more accessible as a result of thestripping activity. Economically recoverable reserves, which comprise proven and probablereserves, are used to determine the expected useful life of the identified component of the ore/coalbody. The stripping activity asset is then carried at cost less depreciation and any impairmentlosses.

Property, Plant and EquipmentProperty, plant and equipment, except land, are stated at cost less accumulated depreciation,depletion and amortization, and any impairment in value. Land is stated at cost, less anyimpairment in value.

The initial cost of property, plant and equipment comprises its purchase price, including importduties, taxes and any directly attributable costs of bringing the asset to its working condition andlocation for its intended use. Costs also include decommissioning and site rehabilitation cost.Expenditures incurred after the property, plant and equipment have been put into operation, suchas repairs and maintenance and overhaul costs, are normally charged to operations in the period inwhich the costs are incurred. In situations where it can be clearly demonstrated that theexpenditures have resulted in an increase in the future economic benefits expected to be obtainedfrom the use of an item of property, plant and equipment beyond its originally assessed standard ofperformance, the expenditures are capitalized as additional cost of property, plant and equipment.

Construction in progress included in property, plant and equipment is stated at cost. This includesthe cost of the construction of property, plant and equipment and other direct costs. Constructionin progress is not depreciated until such time that the relevant assets are completed and put intooperational use.

Depreciation, depletion and amortization of assets commences once the assets are put intooperational use.

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Depreciation, depletion and amortization of property, plant and equipment are calculated on astraight-line basis over the following EUL of the respective assets or the remaining contractperiod, whichever is shorter:

YearsLand improvements 5-17Power plant, buildings and building improvements 5-25Construction equipment, machinery and tools 5-10Office furniture, fixtures and equipment 3-5Transportation equipment 4-5Coal mining equipment 2-13Nickel mining equipment 2-5Leasehold improvements 5-7

The EUL and depreciation, depletion and amortization methods are reviewed periodically toensure that the period and methods of depreciation, depletion and amortization are consistent withthe expected pattern of economic benefits from items of property, plant and equipment.

An item of property, plant and equipment is derecognized upon disposal or when no futureeconomic benefits are expected to arise from the continued use of the asset. Any gain or lossarising on derecognition of the asset (calculated as the difference between the net disposalproceeds and the carrying amount of the item) is included in the consolidated statement of incomein the year the item is derecognized.

Coal and nickel mining properties are amortized using the units of production method. Coal andnickel mining properties consists of mine development costs, capitalized cost of minerehabilitation and decommissioning (refer to accounting policy on “Provision for minerehabilitation and decommissioning”), stripping costs (refer to accounting policy on “strippingcosts”) and mining rights. Mine development costs consist of capitalized costs previously carriedunder “Exploration and Evaluation Asset”, which were transferred to property, plant andequipment upon start of commercial operations. Mining rights are expenditures for the acquisitionof property rights that are capitalized.

The net carrying amount of mining properties is depleted using unit-of-production method basedon the estimated economically recoverable mining reserves of the mine concerned and are written-off if the property is abandoned.

Mineable Ore ReservesMineable ore reserves are estimates of the amount of coal that can be economically and legallyextracted from the Group’s mining properties. The Group estimates its mineable ore reservesbased on information compiled by appropriately qualified persons relating to the geological dataon the size, depth and shape of the coal body, and require complex geological judgments tointerpret the data. The estimation of recoverable reserves is based upon factors such as estimatesof foreign exchange rates, commodity prices, future capital requirements, and production costsalong with geological assumptions and judgments made in estimating the size and grade of thecoal body. Changes in the reserve or resource estimates may impact the amortization of mineproperties included as part of ‘Coal mining properties and equipment’ under ‘Property, plant andequipment’.

Intangible AssetsIntangible assets and software costs acquired separately are capitalized at cost and are shown aspart of the “Other noncurrent assets” account in the consolidated statement of financial position.


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Following initial recognition, intangible assets are measured at cost less accumulated amortizationand provisions for impairment losses, if any. The useful lives of intangible assets with finite lifeare assessed at the individual asset level. Intangible assets with finite life are amortized over theirEUL. The periods and method of amortization for intangible assets with finite useful lives arereviewed annually or earlier where an indicator of impairment exists.

Costs incurred to acquire and bring the computer software (not an integral part of its relatedhardware) to its intended use are capitalized as part of intangible assets. These costs are amortizedover their EUL ranging from 3 to 5 years. Costs directly associated with the development ofidentifiable computer software that generate expected future benefits to the Group are recognizedas intangible assets. All other costs of developing and maintaining computer software programsare recognized as expense when incurred.

Gains or losses arising from the derecognition of an intangible asset are measured as the differencebetween the net disposal proceeds and the carrying amount of the asset and are recognized in theconsolidated statement of income when the asset is derecognized.

Research and development costsResearch costs are expensed as incurred. Development expenditures on an individual project arerecognized as an intangible asset when the Group can demonstrate:· The technical feasibility of completing the intangible asset so that the asset will be available

for use or sale· Its intention to complete and its ability to use or sell the asset· How the asset will generate future economic benefits· The availability of resources to complete the asset· The ability to measure reliably the expenditure during development· The ability to use the intangible asset generated

Following initial recognition of the development expenditure as an asset, the asset is carried atcost less any accumulated amortization and accumulated impairment losses. Amortization of theasset begins when development is complete and the asset is available for use. It is amortized overthe period of expected future benefit. Amortization is recorded as part of cost of sales in theconsolidated statement of comprehensive income. During the period of development, the asset istested for impairment annually.

The Group has assessed the useful life of the development costs based on the expected usage ofthe asset. The useful life of capitalized development costs for clay business is twenty (20) years.

Impairment of Nonfinancial AssetsThis accounting policy applies primarily to the Group’s property, plant and equipment, investmentproperties, investments in associates and joint ventures and intangible assets.

Property, Plant and Equipment, Investment Properties and Intangible AssetsThe Group assesses at each reporting date whether there is an indication that these assets may beimpaired. If any such indication exists, or when an annual impairment testing for an asset isrequired, the group makes an estimate of the asset’s recoverable amount. An asset’s recoverableamount is the higher of an asset’s or cash generating unit’s fair value less cost to sell and its valuein use and is determined for an individual asset, unless the asset does not generate cash inflowsthat largely independent of those from other assets or group of assets. Where the carrying amountof an asset exceeds its recoverable amount, the asset is considered impaired and is written down toits recoverable amount. In assessing value in use, the estimated future cash flows are discounted

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to their present value using a pre-tax discount rate that reflects current market assessments of thetime value of money and the risks specific to the asset.

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, net of depreciation, depletion and amortization, had no impairment loss beenrecognized for the asset in prior years. Such reversal is recognized in the consolidated statementof income unless the asset is carried at revalued amount, in which case the reversal is treated as arevaluation increase.

InventoriesNRV tests are performed at least annually and represent the estimated sales price based onprevailing price at reporting date, less estimated cost necessary to make the sale for coal inventoryor replacement costs for spare parts and supplies. If there is any objective evidence that theinventories are impaired, impairment losses are recognized in the consolidated statement ofincome, in those expense categories consistent with the function of the assets, as being thedifference between the cost and NRV of inventories.

Exploration and evaluation assetsExploration and evaluation assets should be assessed for impairment when facts and circumstancessuggest that the carrying amount of an exploration and evaluation asset may exceed its recoverableamount. Under PFRS 6 one or more of the following facts and circumstances could indicate thatan impairment test is required. The list is not intended to be exhaustive: (a) the period for whichthe entity has the right to explore in the specific area has expired during the period or will expirein the near future, and is not expected to be renewed; (b) substantive expenditure on furtherexploration for and evaluation of mineral resources in the specific area is neither budgeted norplanned; (c) exploration for and evaluation of mineral resources in the specific area have not led tothe discovery of commercially viable quantities of mineral resources and the entity has decided todiscontinue such activities in the specific area; and (d) sufficient data exist to indicate that,although a development in the specific area is likely to proceed, the carrying amount of theexploration and evaluation asset is unlikely to be recovered in full from successful development orby sale.

Investment in associates and joint venturesFor investments in associates and joint ventures, after application of the equity method, the Groupdetermines whether it is necessary to recognize any additional impairment loss with respect to theGroup’s net investment in the investee companies. The Group determines at each reporting datewhether there is any objective evidence that the investment in associates or jointly controlledentities is impaired. If this is the case, the Group calculates the amount of impairment as being thedifference between the fair value and the carrying value of the investee company and recognizesthe difference in the consolidated statement of income.

Liabilities for Purchased LandLiabilities for purchased of land represents unpaid portion of the acquisition costs of raw land forfuture development, including other costs and expenses incurred to effect the transfer of title of theproperty. Noncurrent portion of the carrying amount is discounted using the applicable interestrate for similar type of liabilities at the inception of the transactions.


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Other AssetsOther assets pertain to resources controlled by the Group as a result of past events and from whichfuture economic benefits are expected to flow to the Group.

EquityCapital stock is measured at par value for all shares issued. When the Group issues more than oneclass of stock, a separate account is maintained for each class of stock and the number of sharesissued.

When the shares are sold at a premium, the difference between the proceeds and the par value iscredited to “Additional paid-in capital” account. When shares are issued for a consideration otherthan cash, the proceeds are measured by the fair value of the consideration received.

Direct cost incurred related to the equity issuance, such as underwriting, accounting and legal fees,printing costs and taxes are charged to “Additional paid-in capital” account.

Retained earnings represent accumulated earnings of the Group, and any other adjustments to it asrequired by other standards, less dividends declared. The individual accumulated earnings of thesubsidiaries are available for dividend declaration when these are declared as dividends by thesubsidiaries as approved by their respective Board of Directors.

Dividends on common shares are deducted from retained earnings when declared and approved bythe BOD or shareholders of the Parent Company. Dividends payable are recorded as liability untilpaid. Dividends for the year that are declared and approved after the reporting date, if any, aredealt with as an event after the reporting date and disclosed accordingly.

Redeemed shares represent own equity instruments which are reacquired and are subsequentlyretired by the Group. No gain or loss is recognized in the consolidated statement of income uponretirement of the own equity instruments. When the assets are retired, the capital stock account isreduced by its par value and the excess of cost over par value is debited to additional paid-incapital recognized when the shares were issued and to retained earnings for the remaining balance.The Parent Company’s retained earnings available for dividend declaration as of December 31,2016 and 2015 amounted to P=4,836.59 million and P=7,438.63 million, respectively.

Business Combinations and GoodwillBusiness combinations are accounted for using the acquisition method. The cost of an acquisitionis measured as the aggregate of the consideration transferred, measured at acquisition date fairvalue and the amount of any NCI in the acquiree. For each business combination, the acquirermeasures the NCI in the acquiree either at fair value or at the proportionate share of the acquiree’sidentifiable net assets. Acquisition costs incurred are expensed and included in operatingexpenses. When the Group acquires a business, it assesses the financial assets and liabilitiesassumed for appropriate classification and designation in accordance with the contractual terms,economic circumstances and pertinent conditions as at the acquisition date. This includes theseparation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’spreviously held equity interest in the acquiree is remeasured to fair value at the acquisition datethrough consolidated statement of income. Any contingent consideration to be transferred by theacquirer will be recognized at fair value at the acquisition date. Subsequent changes to the fairvalue of the contingent consideration, which is deemed to be an asset or liability, will berecognized in accordance with PAS 39 either in consolidated statement of income or as a changeto OCI. If the contingent consideration is not within the scope of PAS 39, it is measured in

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accordance with the appropriate PFRS. Contingent consideration that is classified as equity is notmeasured and subsequent settlement is accounted for within equity.

Goodwill is initially measured at cost being the excess of the aggregate of the considerationtransferred and the amount recognized for NCI and any previous interest held over the netidentifiable assets acquired and liabilities assumed. If the consideration is lower than the fairvalue of the net assets of the subsidiary acquired, the difference is recognized in consolidatedstatement of income.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Forthe purpose of impairment testing, goodwill acquired in a business combination is, from theacquisition date, allocated to each of the Group’s cash-generating units that are expected to benefitfrom the combination, irrespective of whether other assets or liabilities of the acquiree areassigned to those units.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit isdisposed of, the goodwill associated with the operation disposed of is included in the carryingamount of the operation when determining the gain or loss on disposal of the operation. Goodwilldisposed of in this circumstance is measured based on the relative values of the operation disposedof and the portion of the cash-generating unit retained.

If the initial accounting for a business combination can be determined only provisionally by theend of the period in which the combination is effected because either the fair values to be assignedto the acquiree’s identifiable assets, liabilities or contingent liabilities or the cost of thecombination can be determined only provisionally, the acquirer shall account for the combinationusing those provisional values. The acquirer shall recognize any adjustments to those provisionalvalues as a result of completing the initial accounting within twelve months of the acquisition dateas follows: (i) the carrying amount of the identifiable asset, liability or contingent liability that isrecognized or adjusted as a result of completing the initial accounting shall be calculated as if itsfair value at the acquisition date had been recognized from that date; (ii) goodwill or any gainrecognized shall be adjusted by an amount equal to the adjustment to the fair value at theacquisition date of the identifiable asset, liability or contingent liability being recognized oradjusted; and (iii) comparative information presented for the periods before the initial accountingfor the combination is complete shall be presented as if the initial accounting has been completedfrom the acquisition date.

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. Revenue is measured at the fair value of theconsideration received or receivable, taking into account contractually defined terms of paymentand excluding taxes or duty. The Group assesses its revenue arrangements against specific criteriain order to determine if it is acting as principal or agent. The following specific recognitioncriteria must also be met before revenue is recognized:

Coal MiningRevenue from coal mining is recognized upon acceptance of the goods delivered upon which thesignificant risks and rewards of ownership of the goods have passed to the buyer and the amountof revenue can be measured reliably. Revenue from local and export coal sales are denominatedin Philippine Peso and US Dollar, respectively.

Cost of coal includes directly related production costs such as materials and supplies, fuel andlubricants, labor costs including outside services, depreciation and amortization, cost of


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decommissioning and site rehabilitation, and other related production overhead. These costs arerecognized when incurred.

Nickel MiningRevenue from sale of beneficiated nickel ore/nickeliferous laterite ore is recognized when thesignificant risks and rewards of ownership of the goods have passed to the buyer, which coincideswith the loading of the ores onto the buyer vessel.

Cost of nickel includes cost of outside services, production overhead, personnel cost anddepreciation, amortization and depletion that are directly attributable in bringing the inventory toits saleable condition. These are recognized in the period when the goods are delivered.

Construction ContractsRevenue from construction contracts is recognized using the percentage-of-completion method ofaccounting and is measured principally on the basis of the estimated proportion of costs incurredto date over the total budget for the construction (Cost-to-cost method). Contracts to manage,supervise, or coordinate the construction activity of others and those contracts wherein thematerials and services are supplied by contract owners are recognized only to the extent of thecontracted fee revenue using percentage of completion. Revenue from cost plus contracts isrecognized by reference to the recoverable costs incurred during the period plus the fee earned,measured by the proportion that costs incurred to date bear to the estimated total costs of thecontract. Contract revenue is comprised of amount of revenue agreed in the contract andvariations in contract work, claims and incentive payments.

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.

Electricity SalesRevenue from sale of electricity is derived from its primary function of providing and sellingelectricity to customers of the generated and purchased electricity. Revenue derived from thegeneration and/or supply of electricity is recognized based on the actual electricity nominated orreceived by the customer, net of adjustments, as agreed upon between parties.

Revenue from spot electricity sales is derived from the sale to the spot market of excess generatedelectricity over the contracted energy using price determined by the spot market, also known asWholesale Electricity Spot Market (WESM), the market where electricity is traded, as mandatedby Republic Act (RA) No. 9136 of the Department of Energy (DOE). Revenue is recognizedbased on the actual excess generation delivered to the WESM.

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Cost of electricity sales includes costs directly related to the production and sale of electricity suchas cost of coal, coal handling expenses, bunker, lube, diesel, depreciation and other relatedproduction overhead costs. Cost of electricity sales are recognized at the time the related coal,bunker, lube and diesel inventories are consumed for the production of electricity. Cost ofelectricity sales also includes electricity purchased from the spot market and the related marketfees. It is recognized as expense when the Group receives the electricity and simultaneously sellsto its customers.

Real Estate SalesReal estate sales are generally accounted for under the full accrual method. Under this method,revenue is recognized when: (a) the collectibility of the sales price is reasonably assured; (b) theearnings process is virtually complete; and (c) the seller does not have a substantial continuinginvolvement with the subject properties. The collectibility of the sales price is consideredreasonably assured when: (a) the buyers have actually confirmed their acceptance of the relatedloan applications after the same have been delivered to and approved by either the banks or otherfinancing institutions for externally-financed accounts; or (b) the full down payment comprising asubstantial portion of the contract price is received and the capacity to pay and credit worthiness ofbuyers have been reasonably established for sales under the deferred cash payment arrangement.

If the above criteria is not met, the deposit method is applied until all the conditions for recordinga sale are met. Pending recognition of sale, cash received from buyers are presented under the“Customers’ advances and deposits” account in the liabilities section of the consolidated statementof financial position.

Cost of real estate sales is recognized consistent with the revenue recognition method applied.Cost of real estate sales includes acquisition cost of land, amount paid to contractors, developmentcosts, capitalized borrowing costs and other costs attributable to bringing the real estateinventories to saleable condition.

Sales and servicesRevenue from room rentals, food and beverage sales and other departments are recognized whenthe related sales and services are rendered.

Merchandise SalesRevenue from merchandise sales is recognized upon delivery of the goods to and acceptance bythe buyer and when the risks and rewards are passed on to the buyers.

Income from commissioningIncome from commissioning pertains to the excess of proceeds from the sale of electricityproduced during the testing and commissioning of the power plant over the actual cost incurred toperform the testing and commissioning.

Dividend IncomeRevenue is recognized when the Group’s right to receive payment is established, which isgenerally when shareholders approve the dividend.

Rental IncomeRental income arising from operating leases on investment properties and construction equipmentis accounted for on a straight-line basis over the lease terms.

Interest IncomeRevenue is recognized as interest accrues using the effective interest method.


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Operating ExpensesOperating expenses are expenses that arise in the course of the ordinary operations of the Group.These usually take the form of an outflow or depletion of assets such as cash and cash equivalents,supplies, investment properties and property, plant and equipment. Expenses are recognized in theconsolidated statement of income when incurred.

Commission ExpenseCommission paid to brokers for the services rendered on the sale of pre-completed real estate unitsare deferred when recovery is reasonably expected and are charged to expense in the period inwhich the related revenue is recognized. Commission expense is recorded under “Operatingexpense” account in the consolidated statement of income.

Borrowing CostsBorrowing costs directly attributable to the acquisition, construction or production of an asset thatnecessarily takes a substantial period of time to get ready for its intended use or sale arecapitalized as part of the cost of the respective assets. All other borrowing costs are expensed inthe period they occur. Borrowing costs consist of interest that an entity incurs in connection withthe borrowing of funds.

The interest capitalized is calculated using the Group’s weighted average cost of borrowings afteradjusting for borrowings associated with specific developments. Where borrowings are associatedwith specific developments, the amounts capitalized is the gross interest incurred on thoseborrowings less any investment income arising on their temporary investment. Interest iscapitalized from the commencement of the development work until the date of practicalcompletion. The capitalization of borrowing costs is suspended if there are prolonged periodswhen development activity is interrupted. Borrowing costs are also capitalized on the purchasedcost of a site property acquired specially for development but only where activities necessary toprepare the asset for development are in progress.

Foreign Currency Translations and TransactionsThe consolidated financial statements are presented in Philippine Peso. Each entity in the Groupdetermines its own functional currency and items included in the consolidated financial statementsof each entity are measured using that functional 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 at the reporting date. All differences are takento consolidated statement of income. Non-monetary items that are measured in terms of historicalcost in foreign currency are translated using the exchange rates as at the dates of initialtransactions. Non-monetary 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 currency of ENK Plc. and its subsidiaries which were sold 2016, is in United StatesDollar. As at reporting date, the assets and liabilities of foreign subsidiaries are translated into thepresentation currency of the Parent Company (the Philippine Peso) at the closing rate as at thereporting date, and the consolidated statement of income accounts are translated at monthlyweighted average exchange rate. The exchange differences arising on the translation are takendirectly to a separate component of equity under “Cumulative translation adjustment” account.

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Upon disposal of ENK Plc. and its subsidiaries, the deferred cumulative amount previouslyrecognized in OCI is recognized in the consolidated statement of income.

Pension CostThe Group has a noncontributory defined benefit retirement plan.

The net defined benefit liability or asset is the aggregate of the present value of the defined benefitobligation at the end of the reporting period reduced by the fair value of plan assets (if any),adjusted for any effect of limiting a net defined benefit asset to the asset ceiling. The asset ceilingis the 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 defined benefit plans is actuarially determined using theprojected unit credit method.

Defined benefit costs comprise the following:· Service cost· Net interest on the net defined benefit liability or asset· 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. Past service costs are recognizedwhen plan amendment or curtailment occurs. These amounts are calculated periodically byindependent qualified actuaries.

Net interest on the net defined benefit liability or asset is the change during the period in the netdefined benefit liability or asset that arises from the passage of time which is determined byapplying the discount rate based on government bonds to the net defined benefit liability or asset.Net interest on the net defined benefit liability or asset is recognized as expense or income inprofit 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.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurancepolicies. Plan assets are not available to the creditors of the Group, nor can they be paid directlyto the Group. Fair value of plan assets is based on market price information. When no marketprice is available, the fair value of plan assets is estimated by discounting expected future cashflows using a discount rate that reflects both the risk associated with the plan assets and thematurity or expected disposal date of those assets (or, if they have no maturity, the expected perioduntil the settlement of the related obligations). If the fair value of the plan assets is higher than thepresent value of the defined benefit obligation, the measurement of the resulting defined benefitasset is limited to the present value of economic benefits available in the form of refunds from theplan or reductions in future contributions to the plan.

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.


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Termination BenefitTermination benefits are employee benefits provided in exchange for the termination of anemployee’s employment as a result of either an entity’s decision to terminate an employee’semployment before the normal retirement date or an employee’s decision to accept an offer ofbenefits in exchange for the termination of employment.

A liability and expense for a termination benefit is recognized at the earlier of when the entity canno longer withdraw the offer of those benefits and when the entity recognizes related restructuringcosts. Initial recognition and subsequent changes to termination benefits are measured inaccordance with the nature of the employee benefit, as either post-employment benefits, short-term employee benefits, or other long-term employee benefits.

Employee Leave EntitlementEmployee entitlements to annual leave are recognized as a liability when they are accrued to theemployees. The undiscounted liability for leave expected to be settled wholly before twelvemonths after the end of the annual reporting period is recognized for services rendered byemployees up to the end of the reporting period.

LeasesThe determination of whether an arrangement is, or contains, a lease is based on the substance ofthe arrangement at inception date whether the fulfillment of the arrangement is dependent on theuse of a specific asset or assets or the arrangement conveys a right to use the asset. Areassessment is made after inception of the lease only if one of the following applies:

(a) There is a change in contractual terms, other than a renewal or extension of the arrangement;(b) A renewal option is exercised or extension granted, unless the term of the renewal or

extension was initially included in the lease term;(c) There is a change in the determination of whether fulfillment is dependent on a specified asset;

or(d) There is substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when thechange in circumstances gave rise to the reassessment for scenarios (a), (c), or (d) and at the dateof renewal or extension period for scenario (b).

Operating Lease - Group as a LesseeLeases where the lessor retains substantially all the risks and benefits of ownership of the asset areclassified as operating lease. Operating lease payments are recognized as an expense in theconsolidated statement of income on a straight-line basis over the lease term.

Operating Lease - Group as a LessorLeases where the Group retains substantially all the risks and benefits of ownership of the asset areclassified as operating leases. Initial direct costs incurred in negotiating an operating lease areadded to the carrying amount of the leased asset and recognized over the lease term on the samebases as rental income. Contingent rents are recognized as revenue in the period in which they areearned.

Income TaxesCurrent TaxCurrent tax assets and liabilities for the current and prior periods are measured at the amountexpected to be recovered from or paid to the taxation authorities. The tax rates and tax laws usedto compute the amount are those that are enacted or substantively enacted at the reporting date.

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Deferred TaxDeferred tax is provided, using the liability method, on all temporary differences, with certainexceptions, at the reporting date between the tax bases of assets and liabilities and their carryingamounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences with certain exception.Deferred tax assets are recognized for all deductible temporary differences, carryforward benefitof unused tax credits from excess minimum corporate income tax (MCIT) over the regularcorporate income tax (RCIT) and net operating loss carryover (NOLCO), to the extent that it isprobable that taxable income will be available against which the deductible temporary differencesand carryforward benefits of unused tax credits from MCIT and NOLCO can be utilized.Deferred tax liabilities are not provided on nontaxable temporary differences associated withinvestments in domestic associates and investments in joint ventures.

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 income will be available to allow all orpart of the deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed ateach reporting date and are recognized to the extent that it has become probable that future taxableincome will allow all or part of the deferred tax assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rate that is expected to apply to theperiod when the asset is realized or the liability is settled, based on tax rate and tax laws that havebeen enacted or substantially enacted at the financial reporting date. Movements in the deferredincome tax assets and liabilities arising from changes in tax rates are charged against or credited toincome for the period.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to setoff current tax assets against current tax liabilities and the deferred tax assets relate to the sametaxable entity and the same taxation authority.

For periods where the income tax holiday (ITH) is in effect, no deferred taxes are recognized inthe consolidated financial statements as the ITH status of the subsidiary neither results in adeductible temporary difference or temporary taxable difference. However, for temporarydifferences that are expected to reverse beyond the ITH, deferred taxes are recognized.

Earnings Per Share (EPS)Basic EPS is computed by dividing the net income for the year attributable to commonshareholders (net income for the period less dividends on convertible redeemable preferred shares)by the weighted average number of common shares issued and outstanding during the year andadjusted to give retroactive effect to any stock dividends declared during the period.

Diluted EPS is computed by dividing the net income for the year attributable to commonshareholders by the weighted average number of common shares outstanding during the yearadjusted for the effects of dilutive convertible redeemable preferred shares. Diluted EPS assumesthe conversion of the outstanding preferred shares. When the effect of the conversion of suchpreferred shares is anti-dilutive, no diluted EPS is presented.

Operating SegmentThe Group’s operating businesses are organized and managed separately according to the natureof the products and services provided, with each segment representing a strategic business unitthat offers different products and serves different markets. The Group generally accounts forintersegment revenues and expenses at agreed transfer prices. Income and expenses from


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discontinued operations are reported separate from normal income and expenses down to the levelof income after taxes. Financial information on operating segments is presented in Note 35 to theconsolidated financial statements.

ProvisionsProvisions are recognized only when the Group has: (a) a present obligation (legal or constructive)as a result of a past event; (b) it is probable that an outflow of resources embodying economicbenefits will be required to settle the obligation; and (c) a reliable estimate can be made of theamount of the obligation. If the effect of the time value of money is material, provisions aredetermined by discounting the expected future cash flows at a pre-tax rate that reflects currentmarket assessments of the time value of money and, where appropriate, the risks specific to theliability. Where discounting is used, the increase in the provision due to the passage of time isrecognized as an interest expense. Provisions are reviewed at each reporting date and adjusted toreflect the current best estimate.

Provision for Decommissioning and Site Rehabilitation CostsThe Group records the present value of estimated costs of legal and constructive obligationsrequired to restore operating locations in the period in which the obligation is incurred. The natureof these restoration activities includes closure of plants, dismantling and removing of structures,backfilling, reforestation, rehabilitation activities on marine and rainwater conservation andmaintenance of rehabilitated area.

The obligation generally arises when the asset is installed or the ground environment is disturbedat the production location. When the liability is initially recognized, the present value of theestimated cost is capitalized by increasing the carrying amount of the related mining assets. Overtime, the discounted liability is increased for the change in present value based on the discountrates that reflect current market assessments and the risks specific to the liability. The periodicunwinding of the discount is recognized in the consolidated statements of income as a financecost. Additional disturbances or changes in rehabilitation costs will be recognized as additions orcharges to the corresponding assets and rehabilitation liability when they occur. For closed sites,changes to estimated costs are recognized immediately in the consolidated statement of income.

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 but are disclosed in the consolidated financialstatements when an inflow of economic benefits is probable.

Events After the Reporting PeriodPost year-end events up to the date of the auditors’ report that provide additional informationabout the Group’s position at reporting date (adjusting events) are reflected in the consolidatedfinancial statements. Any post year-end events that are not adjusting events are disclosed in theconsolidated financial statements when material.

3. Significant Accounting Judgments and Estimates

The preparation of the accompanying consolidated financial statements in conformity with PFRSrequires management to make judgments, estimates and assumptions that affect the amountsreported in the financial statements and accompanying notes. The judgments, estimates andassumptions used in the accompanying consolidated financial statements are based uponmanagement’s evaluation of relevant facts and circumstances as of the date of the consolidatedfinancial statements. Actual results could differ from such estimates.

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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. Actual results could differ for such estimates.

JudgmentsIn the process of applying the Group’s accounting policies, management has made the followingjudgments, apart from those involving estimations which have the most significant effect on theamounts recognized in the consolidated financial statements:

Real Estate Revenue RecognitionSelecting an appropriate revenue recognition method for a real estate sale transaction requirescertain judgments about the buyer’s commitment to continue the sale which may be ascertainedthrough the significance of the buyer’s initial payments and completion of development. Thebuyers’ commitment is evaluated based on collections, credit standing and historical collectionfrom buyers. In determining whether the sales prices are collectible, the Group considers thatinitial and continuing investments by the buyer of about 15% would demonstrate the buyer’scommitment to pay.

Exploration and evaluation expenditureThe application of the Group’s accounting policy for exploration and evaluation asset requiresjudgment to determine whether future economic benefits are likely, from either future exploitationor sale, or whether activities have not reached a stage that permits a reasonable assessment of theexistence of reserves. The criteria used to assess the start date of a mine are determined based onthe unique nature of each mine development project. The Group considers various relevantcriteria to assess when the mine is substantially complete, ready for its intended use and movesinto the production phase.

Some of the criteria include, but are not limited to the following:· the level of capital expenditure compared to construction cost estimates; · completion of a reasonable period of testing of the property and equipment; · ability to produce ore in saleable form; and · ability to sustain ongoing production of ore.

When a mine development project moves into the production stage, the capitalization of certainmine construction costs ceases and costs are either regarded as inventory or expensed, except forcapitalizable costs related to mining asset additions or improvements, mine development ormineable reserve development. It is also at this point that depreciation or depletion commences.

In 2016, the Group has assessed that it has completed all the activities necessary to commencecommercial operations, including appropriate regulatory approvals, for the Narra and Molaveminesites and has reclassified all the related exploration and evaluation asset to ‘Property, plantand equipment’ (see Notes 13 and 14).

Determination of components of ore bodies and allocation of measures for stripping costallocationThe Group has identified that each of its two active mine pits, Narra and Molave, is a wholeseparate ore component and cannot be further subdivided into smaller components due to thenature of the coal seam orientation and mine plan.


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Judgment is also required to identify a suitable production measure to be used to allocateproduction stripping costs between inventory and any stripping activity asset(s) for eachcomponent. The Group considers that the ratio of the expected volume of waste to be stripped foran expected volume of ore to be mined for a specific component of the coal body (i.e.strippingratio) is the most suitable production measure. The Group recognizes stripping activity asset bycomparing the actual stripping ratio during the year for each component and the component’s minelife stripping ratio.

Evaluation and Reassessment of ControlThe Group refers to the guidance in PFRS 10 when determining whether the Group controls aninvestee. Particularly, the Group controls an investee when it is exposed, or has rights, to variablereturns from its involvement with the investee and has the ability to affect those returns through itspower over the investee. The Group considers the purpose and design of the investee, its relevantactivities and how decisions about those activities are made and whether the rights give it thecurrent ability to direct the relevant activities.

The Group controls an investee if and only if it has all the following:a. power over 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 the amount of the investor's returns.

On January 18, 2008, DMCI has entered into a Joint Venture (JV) Agreement withFirst Balfour, Inc. with 51% interest. DMFB Joint Venture, an incorporated joint venture, wasformed for the construction of the Light Rail Transit (LRT) Line 1 North Extension Project (theProject). The Project was started on June 7, 2008 and was completed on October 23, 2010.DMCI’s interest in DMFB Joint Venture is a joint arrangement accounted for as joint venturebecause the significant activities of the JV will require unanimous consent from both parties.

As of December 31, 2016 and 2015, ownership interests in URHI and TMM represent 30% and40%, respectively but were accounted for as subsidiaries because the Group has established thatthrough the Memorandum of Understanding (MOU) signed with Atlas, the Group has existingrights that give it the current ability to direct the relevant activities of the investee and it has theability to use its power over the investees to affect its returns considering that critical positions areoccupied by the representatives of the Group (see Note 2).

Management’s Use of EstimatesThe key assumptions concerning the future and other 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 discussed below:

a. MiningRevenue Recognition - CoalThe Group’s revenue recognition policies require management to make use of estimates andassumptions that may affect the reported amounts of the revenues and receivables. TheGroup’s coal sales arrangement with its customers includes reductions of invoice price to takeinto consideration charges for penalties and upward adjustments due to quality of coal. Theseprice adjustments may arise from the actual quantity and quality of delivered coal.There is no assurance that the use of estimates may not result in material adjustments in futureperiods. Revenue from coal mining amounted to P=20,079.46 million, P=11,781.83 million andP=16,276.93 million in 2016, 2015 and 2014, respectively.

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Estimating Mineable Ore ReservesThe Group uses the estimated minable ore reserve in the determination of the amount ofamortization of mining properties using units of production method. The Group estimates itsmineable ore reserves by using estimates provided by third party, and professionally qualifiedmining engineers and geologist (specialists). These estimates on the mineable ore reserves aredetermined based on the information obtained from activities such as drilling, core logging orgeophysical logging, coal sampling, sample database encoding, coal seam correlation andgeological modelling.

The carrying values of mining properties and mining rights, included in property, plant andequipment as presented in the consolidated statements of financial position amounted toP=13,703.83 million and P=7,748.38 million in 2016 and 2015, respectively (see Note 13).

Estimating Coal Stock Pile Inventory QuantitiesThe Group estimates the stock pile inventory of clean and unwashed coal by conducting atopographic survey which is performed by in-house and third party surveyors. The survey isconducted on a monthly basis with a reconfirmatory survey at year end. The process ofestimation involves a predefined formula which considers an acceptable margin of error ofplus or minus 5%. Thus, an increase or decrease in the estimation threshold for any periodwould differ if the Group utilized different estimates and this would either increase ordecrease the profit for the year. The coal inventory as of December 31, 2016 and 2015amounted to P=1,821.98 million and P=1,647.63 million, respectively (see Note 9).

Estimating Decommissioning and Mine Site RehabilitationThe Group is legally required to fulfill certain obligations under its Department ofEnvironment and Natural Resources (DENR) issued Environmental Compliance Certificatewhen its activities have ended in the depleted mine pits. In addition, the Group assesses itsmine rehabilitation provision annually. Significant estimates and assumptions are made indetermining the provision for decommissioning, mine rehabilitation, and site rehabilitation asthere are numerous factors that will affect the ultimate liability. These factors includeestimates of the extent and costs of rehabilitation activities (e.g., cost of backfilling,reforestation, rehabilitation activities on marine and rainwater conservation and maintenanceof the rehabilitated area), technological changes, regulatory changes, cost increases, andchanges in inflation rates and discount rates. Those uncertainties may result in future actualexpenditure differing from the amounts currently provided. An increase in decommissioningand site rehabilitation costs would increase the carrying amount of the related assets andincrease noncurrent liabilities. The provision at reporting date represents management’s bestestimate of the present value of the future rehabilitation costs required. Assumptions used tocompute the decommissioning and site rehabilitation costs are reviewed and updated annually.

As of December 31, 2016 and 2015, the provision for decommissioning and site rehabilitationfor coal mining activities amounted to P=1,592.57 million and P=501.11 million, respectively(see Note 20). As at December 31, 2016 and 2015, provision for decommissioning andrehabilitation for the nickel mining activities amounted to P=25.87 million and P=26.00 million,respectively (see Note 20).

b. ConstructionRevenue Recognition - Construction ContractsThe Group’s construction revenue is based on the percentage of completion measuredprincipally on the basis of total actual cost incurred to date over the estimated total cost of theproject. Actual cost incurred to date includes labor, materials and overhead which are billedand unbilled by contractors. The Group also updates the estimated total cost of the project


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based on latest discussions with customers to include any revisions to the job order sheets andthe cost variance analysis against the supporting details. The percentage of completion isapplied to the contract price after considering approved change orders.

When it is probable that total contract costs will exceed total contract revenue, the expectedloss shall be recognised as an expense immediately. The amount of such a loss is determinedirrespective of:(a) whether work has commenced on the contract;(b) the stage of completion of contract activity; or(c) the amount of profits expected to arise on other contracts which are not treated as a single

construction contract.

The Group regularly reviews its on-going construction projects and used the above guidancein determining whether there are projects with contract cost exceeding contract revenues.Based on the best estimate of the Group, adjustments were made in the books for thoseprojects with expected losses in 2016 and 2015. There is no assurance that the use ofestimates may not result in material adjustments in future periods. Revenue from constructioncontracts amounted to P=13,816.65 million, P=13,247.38 million and P=11,852.52 million in2016, 2015 and 2014, respectively.

c. Real estateRevenue Recognition - Real Estate SalesSelecting an appropriate revenue recognition method for a particular real estate saletransaction requires certain judgments based on the following, among others:· Buyer’s commitment to continue the sale which may be ascertained through the

significance of the buyer’s initial investment· Stage of full completion of the project.

Management regularly evaluates the historical cancellations and back-outs if it would stillsupport its current threshold of initial investment before allowing revenue recognition. Theassessment of whether the project is fully completed is based on the inputs of constructionengineers based on the physical completion of work.

Evaluation of Net Realizable Value of InventoriesInventories are valued at the lower of cost and NRV. This requires the Group to make anestimate of the inventories’ selling price in the ordinary course of business, cost of completionand costs necessary to make a sale to determine the NRV.

For real estate inventories, the Group adjusts the cost of its real estate inventories to netrealizable value based on its assessment of the recoverability of the real estate inventories. Indetermining the recoverability of the inventories, management considers whether thoseinventories are damaged or if their selling prices have declined.

For inventories such as equipment parts, materials in transit and supplies, the Group’s estimateof the NRV of inventories is based on evidence available at the time the estimates are made ofthe amount that these inventories are expected to be realized. These estimates consider thefluctuations of price or cost directly relating to events occurring after the end of the reportingperiod to the extent that such events confirm conditions existing at reporting date. The amountand timing of recorded expenses for any period would differ if different judgments were madeor different estimates were utilized.

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Likewise, management also considers whether the estimated costs of completion or theestimated costs to be incurred to make the sale have increased. In the event that NRV is lowerthan the cost, the decline is recognized as an expense. The amount and timing of recordedexpenses for any period would differ if different judgments were made or different estimateswere utilized.

Inventories carried at cost amounted to P=34,486.85 million and P=31,557.58 million as ofDecember 31, 2016 and 2015, respectively. Inventories carried at NRV amounted toP=3,748.16 million and P=2,850.18 million as of December 31, 2016 and 2015, respectively(see Note 9).

d. PowerEstimating Decommissioning and Site RehabilitationThe Group is contractually required to fulfill certain obligations under Section 8 of the LandLease Agreement (LLA) upon its termination or cancellation. Significant estimates andassumptions are made in determining the provision for site rehabilitation as there arenumerous factors that will affect the ultimate liability. These factors include estimates of theextent and costs of rehabilitation activities, technological changes, regulatory changes, costincreases, and changes in discount rates. Those uncertainties may result in future actualexpenditure differing from the amounts currently provided. An increase in decommissioningand site rehabilitation costs would increase the property, plant and equipment and increasenoncurrent liabilities. The provision at the reporting date represents management’s bestestimate of the present value of the future rehabilitation costs required. Assumptions used tocompute the decommissioning and site rehabilitation costs are reviewed and updated annually.

As of December 31, 2016 and 2015, the estimated provision for decommissioning and siterehabilitation amounted to P=13.72 million and P=12.59 million, respectively (see Note 20).

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 themanagement on the basis of factors that affect the collectibility of the accounts. These factorsinclude, but are not limited to, the debtors’ ability to pay all amounts due according to thecontractual terms of the receivables being evaluated, the length of relationship with the customer,the customer’s payment behavior and known market factors. The Group reviews the age andstatus of receivables, and identifies accounts that are to be provided with allowances on acontinuous basis. The Group provides full allowance for receivables that it deems uncollectible.

The amount and timing of recorded expenses for any period would differ if the Group madedifferent judgments or utilized different estimates. An increase in the allowance for doubtfulaccounts on receivables would increase recorded operating expenses and decrease total assets.

Provision for doubtful accounts of the Group amounted to P=162.40 million, P=925.15 million andP=40.88 million in 2016, 2015 and 2014, respectively (see Notes 7 and 25). Receivables of theGroup that were impaired and fully provided with allowance amounted to P=1,702.23 million andP=1,539.83 million as of December 31, 2016 and 2015, respectively (see Note 7).

Estimating Useful Lives of Property, Plant and Equipment (see ‘Estimation of Minable Ore” forthe Discussion of Amortization of Mining Properties)The Group estimated the useful lives of its property, plant and equipment based on the period overwhich the assets are expected to be available for use. The estimated useful lives of property, plantand equipment are reviewed at least annually and are updated if expectations differ from previous


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estimates due to physical wear and tear and technical or commercial obsolescence on the use ofthese assets.

It is possible that future results of operations could be materially affected by changes in theseestimates brought about by changes in factors mentioned above. A reduction in the estimateduseful lives of property, plant and equipment would increase depreciation expense and decreasenoncurrent assets.

The Group incurred a loss from property, plant and equipment write-down due to the replacementof generation units and retirement of mining equipment amounting to P=14.32 million, P=16.09 million and P=0.11 million in 2016, 2015 and 2014, respectively (Notes 13 and 25).

The carrying value of property, plant and equipment of the Group amounted to P=55,751.70 millionand P=49,440.22 million as of December 31, 2016 and 2015, respectively (see Note 13).

Impairment Testing of Goodwill and Nickel Mining Segment AssetsThe Group performed its annual impairment test of goodwill as of December 31, 2016. Thegoodwill of P=1,637 million is attributable to the acquisition of ZDMC and ZCMC (see Note 33).In addition, due to the suspension of certain Mineral Production Sharing Agreement (MPSA) ofthe Group and to the probability of renewal of ZDMC’s MPSA, the nickel mining segment assetswere also subjected to impairment testing in 2016 (see Note 38).

The recoverable amount of the CGUs and nickel mining segment assets have been determinedbased on a discounted cash flows (DCF) calculation using cash flow projections from financialbudgets approved by senior management. The projected cash flows have been developed toreflect the expected mine production over the life of the mine adjusted by the effects of otherfactors such as, timing of production, nickel prices and inflation rate. The pre-tax discount rateapplied to cash flow projections is 10.62%. As a result of this analysis, management concludedthat the goodwill and nickel mining segment assets are not impaired.

The calculation of DCF of the CGU is most sensitive to the following assumptions:(a) Mine production(b) Discount rates(c) Nickel prices(d) Price inflation(e) Timing of resumption of operations

(a) Mine ProductionMine production projections are based on the three-year work program prepared and developed bythe Group’s mining engineers and geologists (specialist) submitted to and approved by the Minesand Geosciences Bureau (MGB). The work program is updated regularly and would includedetailed forecast of mine production in wet metric tons.

(b) Discount RatesDiscount rates represent the current market assessment of the risks specific to each CGU, takinginto consideration the time value of money and individual risks of the underlying assets that havenot been incorporated in the cash flow estimates. The discount rate calculation is based on thespecific circumstances of the Group and its operating segments and is derived from its weightedaverage cost of capital (WACC). The WACC takes into account both debt and equity. The cost ofequity is derived from the expected return on investment by the Group’s investors. The cost ofdebt is based on the interest-bearing borrowings the Group is obliged to service.

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Specific risk is incorporated by applying individual beta factors. The beta factors are evaluatedannually based on publicly available market data. Adjustments to the discount rate are made tofactor in the specific amount and timing of the future tax flows in order to reflect a pre-taxdiscount rate.

(c) Nickel PricesThe Group considers the effect of commodity price changes for nickel ore. The Group consideredthe possible effects of the changes in the price of nickel ores as it relates to the revenues that maybe generated by the Group and the attainment of the cash flow projections. The Group used thedata from the London Metal Exchange (LME). The price is the function of a number of factors,which includes, among others, nickel grade, moisture content and factor rate.

Generally, a higher grade and lower moisture content would yield higher recoverable amount,otherwise lower which may indicate impairment. The Group expects that the overall price ofnickel ore will improve throughout the life of the mine.

(d) Price InflationForecast price inflation which impacts the forecast for costs of production and operating expenseslies within a range of 1.40% to 4.20% during the forecast period. If price increases greater thanthe forecast price inflation and the Group is unable to pass on or absorb these increases throughefficiency improvements, the recoverable value is affected.

(e) Timing of Resumption of OperationsThe mining operations of ZDMC and ZCMC are currently suspended and the Group estimated theresumption of operations of BNC, ZCMC, and ZDMC between 2018 to 2020. As discussed inNote 38, the MPSA of ZDMC was cancelled by the DENR and the operations of BNC wassuspended due to alleged violation certain mining laws, rules and regulations. Also, ZCMCapplied for the renewal of its MPSA before its term ended in 2016.

The cashflows prepared by the Group considered various scenarios as to the timing of theresumption of their operations. Management assessed that the quality of the ore remain the sameirrespective of the timing of extraction.

The sensitivity analysis below shows the reasonably possible changes in key assumptions thatwould cause the carrying values of the goodwill plus net assets amounts to exceed the recoverableamounts:

(a) Discount rates: a rise in pre-tax discount rate from 10.62% to 43.12%.(b) Nickel prices: a decline in LME by 16.45%.(c) Price inflation: a general price index inflation increase for specific various cost and expenses

exceeding the range of 5.49% to 11.84%.

Deferred Tax AssetsThe Group reviews the carrying amounts of deferred taxes at each reporting date and reducesdeferred tax assets to the extent that it is no longer probable that sufficient taxable income will beavailable to allow all or part of the deferred tax assets to be utilized. However, there is noassurance that the Group will generate sufficient taxable income to allow all or part of deferred taxassets to be utilized.


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The deferred tax assets recognized amounted to P=584.62 million and P=626.42 million as ofDecember 31, 2016 and 2015, respectively. The unrecognized deferred tax assets of the Groupamounted to P=3,712.68 million and P=3,705.36 million as of December 31, 2016 and 2015,respectively (see Note 29).

Estimating Pension Obligation and Other Retirement BenefitsThe cost of defined benefit pension plans and other employee benefits as well as the present valueof the pension obligation are determined using actuarial valuations. The actuarial valuationinvolves making various assumptions. These include the determination of the discount rates,future salary increases, mortality rates and future pension increases. Due to the complexity of thevaluation, the underlying assumptions and its long-term nature, defined benefit obligations arehighly sensitive to changes in these assumptions. All assumptions are reviewed at each reportingdate. The net pension liabilities as at December 31, 2016 and 2015 amounted to P=217.47 millionand P=142.20 million, respectively (see Note 23). Net pension assets amounted to P=893.76 millionand P=958.98 million as of December 31, 2016 and 2015, respectively (see Note 23).

In determining the appropriate discount rate, management considers the interest rates ofgovernment bonds that are denominated in the currency in which the benefits will be paid, withextrapolated maturities corresponding to the expected duration of the defined benefit liability.Future salary increases are based on expected future inflation rates and other relevant factors.

The mortality rate is based on publicly available mortality tables for the specific country and ismodified accordingly with estimates of mortality improvements. Future salary increases andpension increases are based on expected future inflation rates.

ContingenciesThe Group is currently involved in various legal proceedings and taxation matters. The estimateof the probable costs for the resolution of these claims has been developed in consultation withoutside counsel handling the defense in these matters and is based upon an analysis of potentialresults. The Group currently does not believe these proceedings will have a material effect on theGroup’s financial position. It is possible, however, that future results of operations could bematerially affected by changes in the estimates or in the effectiveness of the strategies relating tothese proceedings (see Notes 17 and 37).

4. Cash and Cash Equivalents

This account consists of:

2016 2015Cash on hand and in banks P=7,046,948 P=9,292,274Cash equivalents 11,691,158 9,858,329

P=18,738,106 P=19,150,603

Cash in banks earns interest at the respective bank deposit rates. Cash equivalents are short-termplacements made for varying periods of up to three (3) months depending on the immediate cashrequirements of the Group, and earn annual interest ranging from 0.13% to 3.00% and 0.13% to2.75% in 2016 and 2015, respectively.

Total finance income earned on cash in banks and cash equivalents amounted to P=229.04 million,P=170.25 million and P=215.37 million in 2016, 2015 and 2014, respectively (see Note 26).

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5. Financial Assets at FVPL

This account consists of peso-denominated investments in quoted securities of San Miguel PureFoods Company, Inc. acquired in 2011 with dividend yields ranging from 1.98% to 1.90%.

On March 2, 2015, the securities were redeemed at P=1,000 per share, for a total of P=70.00 millionrecognizing loss on sale of P=0.63 million.

In 2014, the Group recognized unrealized market loss amounting to P=2.52 million. Recorded lossis included in “Other income - net” account (see Note 28). Dividend income earned amounting tonil, P=1.40 million and P=7.00 million in 2016, 2015 and 2014, respectively, are included in “Otherincome - net” account in the consolidated statements of income (see Note 28).

6. Available-for-Sale Financial Assets


2016 2015Quoted securities

At beginning of year P=52,326 P=52,326Unrealized gain recognized in equity 27,813 22,083

80,139 74,409Unquoted securities - at cost

Acquisition costs 110,702 110,702Additions 3,500 −Write-off (875) −

113,327 110,702Less allowance for probable loss 108,211 108,211

5,116 2,491P=85,255 P=76,900

Quoted securitiesThe quoted securities include investments in golf and sports club shares. Movements in theunrealized gain follow:

2016 2015Balance at beginning of year P=22,083 P=13,483Changes in fair values of AFS financial assets 5,730 8,600Balance at end of year P=27,813 P=22,083

Unquoted securitiesThis account consists mainly of investments in the following shares of stock which are accountedfor at cost:

· Project Quest Corp. (PQC)· Universal Rightfield Property Holdings, Inc. (URPHI)· Celebrity Sports Plaza, Inc. (CSPI)· Unicorn First Properties, Inc. (UFPI)


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The aggregate cost of investments in the above entities amounted to P=108.21 million which werefully provided for with allowance for impairment as management assessed that investments onthese shares of stock are not recoverable as of December 31, 2016 and 2015.

In 2016, the Group acquired additional shares of CSPI for a total price of P=3.50 million and haswritten-off unquoted securities amounting to P=0.88 million.

7. Receivables


2016 2015Trade:

Real estate P=6,365,958 P=6,902,548Electricity sales 5,125,933 3,143,317General construction (including retention

receivables on uncompleted contractsof P=2,351.11 million in 2016 andP=1,563.01 million in 2015) 4,204,199 4,872,791

Coal mining 2,357,217 1,318,380Nickel mining 100,155 102,501Merchandising and others 58,582 63,460

18,212,044 16,402,997Receivables from related parties (Note 21) 130,614 143,642Other receivables 1,072,152 992,847

19,414,810 17,539,486Less allowance for doubtful accounts 1,702,230 1,539,829

17,712,580 15,999,657Less noncurrent receivables 2,183,424 3,162,701

P=15,529,156 P=12,836,956

Trade receivablesReal estateReal estate receivable consists of accounts collectible in equal monthly principal installments withvarious terms up to a maximum of ten (10) years. These are recognized at amortized cost usingthe EIR method. The corresponding titles to the residential units sold under this arrangement aretransferred to the buyers only upon full payment of the contract price. Installment contractsreceivable are collateralized by the related property sold. In 2016 and 2015, annual interest rateson installment contracts receivable range from 5.00% to 7.89% and 9% to 19%, respectively.Interest on real estate receivable amounted to P=205.92 million, P=288.26 million andP=216.09 million in 2016, 2015 and 2014, respectively (see Note 26).

In 2015, the Group entered into various receivable purchase agreements with BPI Family SavingsBank, China Bank, Land Bank of the Philippines, Security Bank and East West Bank whereby theGroup sold its installment contracts receivable on a with recourse basis in the aggregate creditfacility agreement totaling to P=3,617.60 million.

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The Group retains the assigned receivables in the “real estate receivable” account and records theproceeds from these sales as loans payable (see Note 19). The carrying value of installmentcontracts receivable sold with recourse amounted to P=1,310.90 million and P=2,365.57 million as ofDecember 31, 2016 and 2015, respectively. The installment contracts receivable on a withrecourse basis are used as collaterals for the bank loans obtained.

The non-current portion of trade receivable from real estate business is presented under Non-current receivables account in the consolidated statements of financial position. These are portionof the receivables which are expected to be collected beyond one year.

Electricity salesReceivables from electricity sales are claims from power distribution utilities, spot marketoperator and other customers for the sale of contracted energy and spot sales transactions. Theseare generally on a 30-day credit term and are carried at original invoice amounts less discounts andrebates.

General constructionGeneral construction receivables principally consist of receivables arising from third-partyconstruction projects. These receivables are based on progress billings provided to customers overthe period of construction and are normally collected on a 30 to 60 day term. Retention receivablepertains to the part of the contract which the contract owner retains as security and shall bereleased after the period allotted as indicated in the contract for the discovery of defects and othernon-compliance from the specifications indicated.

Coal and nickel miningReceivable from mining pertains to receivables from the sale of coal and nickel ore both todomestic and international markets. These receivables are noninterest-bearing and generally have30 to 45 days credit terms.

Merchandising and othersReceivable from merchandise sales and others pertains to receivables from the sale of wires,services rendered and others to various local companies. These receivables are noninterest-bearing and generally have 30 to 60 days credit terms.

Other receivablesOther receivables include the Group’s receivables from JV partners and condominiumcorporations. These receivables are noninterest-bearing and are generally collectible within one(1) year from the reporting date.

Allowance for doubtful accountsReceivables amounting to P=1,702.23 million and P=1,539.83 million as of December 31, 2016 and2015, respectively, were impaired and fully provided with allowance (see Note 38).

Movements in the allowance for impairment losses are as follow:

2016Trade Receivables

Real EstateGeneral

ConstructionCoal

MiningNickel

MiningElectricity

Sales TotalAt January 1 P=537 P=30,855 P=65,562 P=70,933 P=1,371,942 P=1,539,829Provision (Note 25) − 51,787 − − 140,417 192,204Reversal/write-off

(Note 25) − − (23,787) (6,016) − (29,803)At December 31 P=537 P=82,642 P=41,775 P=64,917 P=1,512,359 P=1,702,230


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8. Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts

The details of the costs, estimated earnings and billings on uncompleted contracts follow:

2016 2015Total costs incurred P=24,676,017 P=20,790,724Add estimated earnings recognized 2,813,034 2,197,981

27,489,051 22,988,705Less total billings (including unliquidated advances

from contract owners of P=2,793.99 million in2016 and P=2,294.50 million in 2015) 28,047,224 23,069,153

(P=558,173) (P=80,448)

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=1,753,204 P=2,015,033Billings in excess of costs and estimated earnings

on uncompleted contracts (2,311,377) (2,095,481)(P=558,173) (P=80,448)

9. Inventories


2016 2015At Cost:

Real estate held for sale and development P=31,272,985 P=28,132,821Coal inventory 1,821,981 1,647,625Equipment parts, materials in transit and

supplies 1,125,964 1,385,534Nickel ore 265,918 391,604

34,486,848 31,557,584At NRV:

Equipment parts, materials in transit andsupplies 3,748,156 2,850,179

P=38,235,004 P=34,407,763

2015Trade Receivables

Real EstateGeneral

ConstructionCoal

MiningNickel

MiningElectricity

Sales TotalAt January 1 P=537 P=30,855 P=35,558 P=70,933 P=476,794 P=614,677Provision (Note 25) – − 30,004 − 895,148 925,152At December 31 P=537 P=30,855 P=65,562 P=70,933 P=1,371,942 P=1,539,829

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Costs of equipment parts, materials in transit and supplies carried at NRV amounted toP=3,817.47 million and P=2,920.48 million as of December 31, 2016 and 2015, respectively.

Real estate inventories recognized as costs of sales amounted to P=5,313.54 million,P=6,673.50 million and P=6,412.31 million in 2016, 2015, and 2014, respectively (see Note 24).Costs of real estate sales includes acquisition cost of land, amount paid to contractors,development costs, capitalized borrowing costs and other costs attributable to bringing the realstate inventories to its intended condition. Borrowing costs capitalized in 2016 and 2015amounted to P=770.70 million and P=856.62 million, respectively. The capitalization rate used todetermine the amount of borrowing costs eligible for capitalization in 2016 and 2015 is 5.44% and5.91%, respectively.There are no real estate held for sale and development used as collateral or pledged as security tosecure liabilities.

A summary of the movement in real estate held for sale and development is set out below:

2016 2015Opening balance at January 1 P=28,132,821 P=24,105,136Construction/development cost incurred 7,229,608 6,680,486Land acquired during the year 647,298 3,159,888Borrowing costs capitalized 770,700 856,620Cost of undeveloped land sold during the year (173,248) −Recognized as cost of sales (Note 24) (5,313,539) (6,673,502)Other adjustment/reclassifications (20,655) 4,193

P=31,272,985 P=28,132,821

In 2016, the Group sold undeveloped land with a cost of P=173.25 million for P=246.43 million andrecognized gain on sale of undeveloped land amounting to P=73.18 million (see Note 28).

10. Other Current Assets


2016 2015Advances to suppliers and contractors P=2,321,593 P=2,089,921Creditable taxes withheld 1,804,908 941,721Input Value Added Tax (VAT) - net of allowance 1,197,271 2,218,536Prepaid commission 597,444 487,225Prepaid taxes 275,079 207,748Refundable deposits (Note 36) 259,756 291,902Advances to officers and employees 234,153 212,445Prepaid expenses 89,506 67,356Investment in sinking fund (Notes 14 and 19) 68,716 460,234Others 46,607 53,264

P=6,895,033 P=7,030,352

Advances to suppliers and contractorsAdvances to suppliers and contractors are recouped upon every progress billing paymentdepending on the percentage of accomplishment.


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Creditable taxes withheldCreditable taxes withheld are attributable to taxes withheld by third parties arising from sales andservices that will be applied to future taxes payable.

Input VATInput VAT is fully recoverable and can be applied against output VAT. In 2014, the Grouprecognized an impairment loss amounting to P=51.35 million upon assessment that the amountcannot be claimed against output VAT or recovered as tax credits against future income taxliability (see Note 25).

Prepaid commissionThis account pertains to commission paid in advance for uncompleted real estate projects.

Prepaid taxesPrepaid taxes represent prepayment for taxes as well as local business and real estate taxes.

Refundable depositsRefundable deposits pertain to bill deposits and guaranty deposits for utilities that will berecovered within one (1) year.

Advances to officers and employeesAdvances to officers and employees pertain to salary and other loans granted to the Group’semployees that are collectible through salary deduction. These are non-interest bearing and are duewithin one (1) year.

Prepaid expensesPrepaid expenses consist mainly of prepayments for rent and insurance.

Investment in sinking fundIn a special meeting of the BOD of the SCPC held on March 9, 2010, the BOD authorized theSCPC to establish, maintain, and operate trust and investment management accounts with Bancode Oro Unibank, Inc. (BDO) - Trust and Investment Group. The Omnibus Agreement(see Note 14) provided that the Security Trustee shall invest and reinvest the monies on deposit inCollateral Accounts. All investments made shall be in the name of the Security Trustee and forthe benefit of the Collateral Accounts. BDO Unibank, Inc. - Trust and Investment Group made aninvestment in Sinking Fund amounting P=68.72 million and P=460.23 million as of December 31,2016 and 2015, respectively.

Interest from sinking fund amounted to P=11.36 million, P=8.99 million and P=6.69 million in 2016,2015 and 2014, respectively (see Note 26).

OthersOthers mainly include deposits for escrow funds which will be recovered within one (1) year.

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11. Investments in Associates and Joint Ventures

The details of the Group’s investments in associates and joint ventures follow:

2016 2015Acquisition cost

Balance at beginning of year P=446,138 P=1,943,819Additions 52,385 −Disposals (9,155) (1,497,681)Balance at end of year 489,368 446,138

Accumulated impairment lossBalance at beginning and end of year (7,828) (7,828)

Accumulated equity in net earningsBalance at beginning of year 11,019,422 8,975,499Equity in net earnings 1,926,337 2,376,424Disposal (70,019) 233,921Dividends and others (596,236) (566,422)Balance at end of year 12,279,504 11,019,422

P=12,761,044 P=11,457,732

The details of the Group’s equity in the net assets of its associates and joint ventures and thecorresponding percentages of ownership follow:

Percentages ofOwnership Equity in Net Assets

2016 2015 2016 2015Associates:

Maynilad Water Holding Company, Inc.(formerly DMCI-MPIC Water Co. Inc.(DMWC)) (MWHCI) 27.19% 27.19% P=12,403,749 P=11,099,482Subic Water and Sewerage Company, Inc.

(Subic Water) 30.00 40.00 245,684 299,024Bachy Soletanche Philippines Corporation

(Bachy) 49.00 49.00 43,060 43,06012,692,493 11,441,566

Joint Ventures:DMCI-First Balfour Joint Venture (DMFB) 51.00% 51.00% P=15,320 P=15,320Beta-Micrologic JV Corporation 48.50 48.50 846 846St. Raphael Power Generation Corporation(SRPGC) 50.00 − 52,385 −

68,551 16,166Total P=12,761,044 P=11,457,732

Unless otherwise indicated, the principal place of business and country of incorporation of theGroup’s investments in associates and joint venture is the Philippines.

There have been no outstanding capital commitments in 2016 and 2015.


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The following table summarizes the significant financial information of the associates and jointventures that are material to the Group:

2016MWHCI Subic Water

Statement of financial positionCurrent assets P=14,048,842 P=365,450Noncurrent assets 84,205,598 1,273,280Current liabilities 14,329,728 167,083Noncurrent liabilities 33,899,394 315,316Non-controlling interests 2,808,422 −Equity attributable to parent company 47,216,896 1,156,331

Statement of incomeRevenue 20,223,746 640,674Costs and expenses 12,834,223 452,623Net income attributable to NCI 528,533 −Net income attributable to parent company 6,860,990 188,051

2015MWHCI Subic Water

Statement of financial positionCurrent assets P=14,869,003 P=273,204Noncurrent assets 77,767,444 1,288,275Current liabilities 14,726,877 164,931Noncurrent liabilities 33,229,890 328,269Non-controlling interests 2,421,437 −Equity attributable to parent company 42,258,243 1,068,279

Statement of incomeRevenue 19,098,238 616,791Costs and expenses 9,940,703 451,097Net income attributable to NCI 654,971 −Net income attributable to parent company 8,502,564 165,694

The Group’s dividend income from MWHCI amounted to P=510.54 million, P=505.74 million, andP=252.28 million in 2016, 2015 and 2014, respectively, while dividend income from Subic Wateramounted to P=35.00 million, P=40.00 million and P=32.00 million in 2016, 2015 and 2014,respectively.Equity in net earnings from MWHCI amounted to P=1,865.50 million, P=2,310.15 million andP=1,967.59 million in 2016, 2015 and 2014, respectively, while equity in net earnings from SubicWater amounted to P=60.83 million, P=66.28 million and P=69.11 million in 2016, 2015 and 2014,respectively. In 2014, the Group recorded equity in net losses from PIDC amountingP=180.30 million.

The aggregate carrying amount of the Group’s individually immaterial investments in associatesand joint ventures in 2016 and 2015 amounted to P=59.23 million and P=60.07 million, respectively.Equity in net earnings from individually immaterial associates amounted to P=159.30 million in2014.

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MWHCIMWHCI is a company incorporated in the Philippines. The primary contribution in theconsolidated net income of MWHCI is its 92.85% owned subsidiary, Manila Water Services, Inc.(MWSI). MWSI is involved in the operations of privatized system of waterworks and sewerageservices including the provision of allied and ancillary services. The Group’s equity in netearnings of MWHCI represents its share in the consolidated net income attributable to MWHCI.

Rollforward of the cost of investment in MWHCI follows:

2016 2015Acquisition cost

Balance at beginning and end of year P=390,428 P=390,428Accumulated equity in net earnings

Balance at beginning of year 10,709,054 8,925,330Equity in net earnings 1,865,503 2,310,146Dividends received and other adjustments (561,236) (526,422)Balance at end of year 12,013,321 10,709,054

P=12,403,749 P=11,099,482

Subic WaterOn January 22, 1997, PDI subscribed to 3.26 million shares at the par value of P=10 per share foran aggregate value of P=32.62 million in Subic Water, a joint venture company among Subic BayMetropolitan Authority (SBMA), a government-owned corporation, Olongapo City Water District,and Cascal Services Limited (a company organized under the laws of England).

On April 1, 2016, the PDI disposed its 915,580 shares of Subic Water with par value of P=10 pershare at P=190.45 million, net of capital gains tax of P=20.14 million. This resulted to decrease inGroup's percentage of ownership in the associate from 40% to 30%. The related gain on saleamounting to P=111.24 million is included in the “Other Income (Expenses)” account under the lineof “Gain on sale of investments”.

DMFBOn January 18, 2008, DMCI has entered into a Joint Venture Agreement with First Balfour, Inc.with 51.00% interest. DMFB Joint Venture, an incorporated joint venture, was formed for theconstruction of the Light Rail Transit (LRT) Line 1 North Extension Project (the Project). TheProject was started on June 7, 2008 and was completed on October 23, 2010.

DMCI’s interest in DMFB Joint Venture is a joint arrangement accounted for as joint ventureusing the equity method where the carrying amount of the investment is adjusted to reflect thechanges in the net assets of the joint venture from the acquisition date.

The joint venture had no contingent liabilities or capital commitments as of December 31, 2016and 2015.

SRPGCOn April 27, 2016, SMPC entered into a Joint Venture Agreement (JVA) with Meralco PowerGenCorporation (MGen), a wholly owned subsidiary of Meralco. MGen obtained 50% ownershipinterest on SRPGC through subscription of the remaining unissued capital stock of SRPGC. Thisresulted to SMPC’s loss of control on SRPGC effective May 23, 2016. The management assessedSRPGC was jointly controlled by SMPC and MGen and accounted SRPGC as a joint venture.The loss from loss of control amounted to P=6.12 million.


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*SGVFS022831*

On April 28, 2016, SMPC paid the remaining P=9.38 million of the previously subscribed9.38 million shares of stock with a par value of P=1.00 per share.

On May 27, 2016, SMPC paid a total of P=46.00 million where P=12.50 million as additionalinvestment and P=33.50 million as deposit for future subscription.

As of December 31, 2016, SRPGC has not yet started commercial operations.

PIDCPIDC is primarily engaged in the business of construction, development of various infrastructureprojects such as roads, highways, toll roads, freeways, skyways, flyovers, viaducts andinterchanges. On February 19, 2008, PIDC was awarded the contract for the financing, design,construction, operation and maintenance of the Tarlac-Pangasinan-La Union Expressway(TPLEX).

In 2014, PIDC increased its authorized capital stock. The Parent Company did not subscribe toadditional shares resulting to a dilution of its ownership interest.

On December 19, 2014, the Parent Company as well as its wholly owned subsidiary, DMCI, haveagreed to sell their respective shares in PIDC to Rapid Thoroughfares, Inc. (RTI), subject tocompliance with certain conditions and obtaining certain consents, including, among others, theconsent of the Toll Regulatory Board and the Department of Public Works and Highways,pursuant to the Toll Concession Agreement dated August 28, 2008. PIDC is the concessionaire ofthe Tarlac-Pangasinan-La Union Expressway (TPLEX). The consideration for the sale of sharesamounted to P=1,758.65 million for the Parent Company and P=68.84 million for DMCI, whichtotals to P=1,827.49 million or P=1,219.40 price per share. In 2014, the Parent Companyaccordingly received the deposit of the conditional sale amounting to P=1,758.65 million andrecorded the same as ‘Deposit received from future sale of investment’ under ‘Other NoncurrentLiabilities’ in the consolidated statements of financial position (see Note 20).

On September 21, 2015, the sale of investments in PIDC was finalized following approval of theDepartment of Trade and Industry (DTI) and Department of Transportation and Communications(DOTC) on August 27, 2015 consenting on the sale of the investments to RTI. The Grouprecorded gain from sale of investments amounting to P=562.73 million presented in “Other Income(Expenses)” account under the line “Gain on sale of investments”.

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12. Investment Properties

The movements in this account follow:

The aggregate fair values of the investment properties as of December 31, 2016 and 2015amounted to P=470.73 million and P=742.15 million, respectively.

The fair value represents the amount at which the assets could be exchanged betweenknowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction atthe date of valuation. The fair values of investment properties were determined using either thediscounted cash flow (DCF method) or by the market data approach. These are both categorizedwithin level 3 of the fair value hierarchy.

The fair value of investment properties, which has been determined using DCF method withdiscount rates ranging from 3.63% to 7.85%, exceeds its carrying cost. The fair values of theinvestment properties which was arrived at using the market data approach requires theestablishment of comparable property by reducing reasonable comparative sales and listings to acommon denominator. This is done by adjusting the differences between the subject property andthose actual sales and listings regarded as comparable. The properties used as basis of comparisonare situated within the immediate vicinity of the subject property.

2016

Land

Buildingsand Building

ImprovementsCondominium

Units TotalCostAt January 1 P=24,649 P=263,854 P=44,347 P=332,850Disposals (3,000) − − (3,000)Reclassifications − (54,356) − (54,356)At December 31 21,649 209,498 44,347 275,494

Accumulated Depreciation andAmortization

At January 1 – 34,351 9,957 44,308Depreciation and amortization (Note 24) − 20,020 2,025 22,045At December 31 − 54,371 11,982 66,353Net Book Value P=21,649 P=155,127 P=32,365 P=209,141

2015

Land

Buildingsand Building

ImprovementsCondominium

Units TotalCostAt January 1 P=47,796 P=208,773 P=44,347 P=300,916Additions – 77,869 − 77,869Disposals and write-off (23,147) (22,788) − (45,935)At December 31 24,649 263,854 44,347 332,850Accumulated Depreciation and

AmortizationAt January 1 – 50,248 7,878 58,126Depreciation and amortization (Note 24) – 6,891 2,079 8,970Disposals and write-off – (22,788) – (22,788)At December 31 – 34,351 9,957 44,308Net Book Value P=24,649 P=229,503 P=34,390 P=288,542


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Rental income from investment properties (included under ‘Other income - net’) amounted toP=86.60 million, P=72.26 million and P=75.88 million in 2016, 2015 and 2014, respectively(see Note 28). Direct operating expenses (included under ‘Cost of sales and services’ in theconsolidated statements of income) arising from investment properties amounted to P=22.15 million, P=8.97 million and P=8.85 million in 2016, 2015 and 2014, respectively(see Note 24).

In 2016 and 2015, the Group sold investment properties at a net gain included under theconsolidated statements of income caption “Other income - net” amounting to P=0.15 million andP=4.76 million, respectively (see Note 28).

There are no investment properties as of December 31, 2016 and 2015 that are pledged as securityagainst liabilities.

- 63

-

*SGVFS022831*

13.P

rope

rty,

Pla

nt a

nd E

quip

men

t

Th

e m

ovem

ents

in th

is ac

coun

t fol

low

:

2016

Land

and

Lan

dIm

prov

emen

ts

Pow

er P

lant

,B

uild

ings

and

Bui

ldin

gIm

prov

emen

ts

Con

stru

ctio

nE

quip

men

t,M

achi

nery

and

Too

ls

Off

ice

Furn

iture

,Fi

xtur

es a

ndEq

uipm

ent

Tra

nspo

rtat

ion

Equi

pmen

t

Coa

l Min

ing

Prop

ertie

san

d E

quip

men

tL

ease

hold

Impr

ovem

ents

Nic

kel M

inin

gPr

oper

ties a

ndEq

uipm

ent

Con

stru

ctio

nin

Pro

gres

sT

otal

Cos

tA

t Jan

uary

1P=2

,230

,514

P=24,

989,

626

P=9,5

21,9

80P=6

16,1

66P=5

35,8

01P=1

8,02

6,71

5P=2

07,8

38P=5

,647

,655

P=20,

429,

490

P=82,

205,

785

Add

ition

s15

,556

883,

729

−50

,063

138,

360

3,04

8,82

813

,441

−3,

374,

569

7,52

4,54

6Tr

ansf

ers(

Not

e 14

)−

21,2

92,6

24(8

2,69

9)−

−4,

967,

882

−(2

9,40

8)(2

1,20

0,65

3)4,

947,

746

Writ

e-do

wn,

tran

sfer

s and

disp

osal

s(6

06)

(382

,428

)(1

9,30

1)(6

,194

)(3

1,39

4)(1

3,67

5)−

(16,

139)

−(4

69,7

37)

Adj

ustm

ents

(Not

e 20

)−

−−

(1,0

53)

−(8

,770

)−

(1,2

60)

(171

,742

)(1

82,8

25)

At D

ecem

ber 3

12,

245,

464

46,7

83,5

519,

419,

980

658,

982

642,

767

26,0

20,9

8022

1,27

95,

600,

848

2,43

1,66

494

,025

,515

Acc

umul

ated

Dep

reci

atio

n,D

eple

tion

and

Am

ortiz

atio

nA

t Jan

uary

164

2,31

28,

682,

807

6,41

8,80

956

3,49

938

5,76

415

,384

,832

146,

382

541,

157

−32

,765

,562

Dep

reci

atio

n, d

eple

tion

and

amor

tizat

ion

(Not

es 2

4an

d 25

)82

,426

2,67

8,08

199

4,38

664

,615

86,0

141,

950,

123

31,9

8376

,044

−5,

963,

672

Writ

e-do

wn,

tran

sfer

s and

disp

osal

s(6

06)

(382

,407

)(1

9,27

6)(7

,245

)(3

3,56

2)(1

0,50

1)−

(1,8

24)

−(4

55,4

21)

At D

ecem

ber 3

172

4,13

210

,978

,481

7,39

3,91

962

0,86

943

8,21

617

,324

,454

178,

365

615,

377

−38

,273

,813

Net

Boo

k V

alue

P=1,5

21,3

32P=3

4,75

8,99

6P=2

,026

,061

P=38,

113

P=204

,551

P=8,6

96,5

26P=4

2,91

4P=5

,007

,308

P=3,4

55,9

01P=5

5,75

1,70

2


- 64

-

*SGVFS022831*

2015

Land

and

Lan

dIm

prov

emen

ts

Pow

er P

lant

,Bu

ildin

gsan

d Bu

ildin

gIm

prov

emen

ts

Con

struc

tion

Equi

pmen

t,M

achi

nery

and

Tool

s

Off

ice

Furn

iture

,Fi

xtur

es an

dEq

uipm

ent

Tran

spor

tatio

nEq

uipm

ent

Coa

l Min

ing

Prop

ertie

san

d Eq

uipm

ent

Leas

ehol

dIm

prov

emen

ts

Nic

kel M

inin

gPr

oper

ties a

ndEq

uipm

ent

Con

struc

tion

in P

rogr

ess

Tota

lC

ost

At J

anua

ry 1

P=2,1

27,0

05P=2

2,87

1,26

2P=8

,633

,328

P=554

,062

P=504

,787

P=16,

675,

715

P=167

,769

P=5,6

33,6

69P=1

9,25

7,68

5P=7

6,42

5,28

2A

dditi

ons

103,

509

826,

598

981,

859

63,4

8965

,015

2,09

1,54

640

,069

13,9

862,

540,

142

6,72

6,21

3Tr

ansf

ers

−1,

291,

766

−−

−15

,652

−−

(1,3

07,4

18)

−W

rite-

dow

n, tr

ansf

ers a

nddi

spos

als

−−

(93,

207)

(1,3

85)

(34,

001)

(813

,191

)−

−(6

0,91

9)(1

,002

,703

)A

djus

tmen

ts (N

ote

20)

−−

−−

−56

,993

−−

−56

,993

At D

ecem

ber 3

12,

230,

514

24,9

89,6

269,

521,

980

616,

166

535,

801

18,0

26,7

1520

7,83

85,

647,

655

20,4

29,4

9082

,205

,785

Acc

umul

ated

Dep

reci

atio

n,D

eple

tion

and

Am

ortiz

atio

nA

t Jan

uary

155

9,53

87,

405,

369

5,28

2,17

950

8,55

434

8,31

714

,925

,541

120,

924

394,

672

−29

,545

,094

Dep

reci

atio

n, d

eple

tion

and

amor

tizat

ion

(Not

es 2

4an

d 25

)82

,774

1,27

7,43

81,

181,

457

56,2

6067

,687

1,25

6,39

425

,458

146,

485

−4,

093,

953

Writ

e-do

wn,

tran

sfer

s and

disp

osal

s−

−(4

4,82

7)(1

,315

)(3

0,24

0)(7

97,1

03)

−−

−(8

73,4

85)

At D

ecem

ber 3

164

2,31

28,

682,

807

6,41

8,80

956

3,49

938

5,76

415

,384

,832

146,

382

541,

157

−32

,765

,562

Net

Boo

k V

alue

P=1,5

88,2

02P=1

6,30

6,81

9P=3

,103

,171

P=52,

667

P=150

,037

P=2,6

41,8

83P=6

1,45

6P=5

,106

,498

P=20,

429,

490

P=49,

440,

223

- 65 -

*SGVFS022831*

Construction in progressThere is a reclassification from construction in progress to power plant and building in the amountof P=21,292.62 million for the completion of construction of 2x150MW coal-fired thermal powerplant of SLPGC which started commercial operations on April 1, 2016, 1x15MW power plant ofSMPC which started commercial operations in August 2016, the completion of rehabilitation ofthe Unit 2 power plant of SCPC last April 2016 and additional diesel generating sets purchasedand installed in other areas of Palawan.

The capitalized borrowing cost included in the construction in progress account amounted toP=112.94 million and P=455.71 million in 2016 and 2015, respectively. The average capitalizationrate is 4.00% and 4.08% in 2016 and 2015, respectively.

Mining propertiesMining properties include the expected cost of decommissioning and site rehabilitation ofminesites and future clean-up of its power plants. The impact of annual re-estimation is shown inthe rollforward as an adjustment (see Note 20). Mining properties also includes the strippingactivity asset. In 2016, the amount of P=4,947.75 million was reclassified from exploration andevaluation assets to coal mining properties due to completion of development phase of Narra andMolave mines. As of December 31, 2016 and 2015, mining properties included in “Coal MiningProperties and Equipment” amounted to P=5,183.44 million and P=389.26 million, respectively.

The following nickel mining rights were acquired through business combination in 2014 and wererecognized at fair value at the date of acquisition (see Note 33).

Acoje projectThe project is within the Mineral Production Sharing Agreement (MPSA) No. 191-2004-III whichis located the Municipalities of Sta. Cruz and Candelaria, Province of Zambales.

Berong projectThe project is within the MPSA No. 235-2007-IVB covering a contract area of approximately 288hectares situated in Barangay Berong, Municipality of Quezon, Province of Palawan.

As of December 31, 2016 and 2015, mining properties included in “Nickel Mining Properties andEquipment” amounted to P=5,007.31 million and P=5,106.50 million, respectively.

The cost of fully depreciated assets that are still in use as of December 31, 2016 and 2015amounted to P=13,532.38 million and P=12,110.74 million, respectively.

In 2016, 2015 and 2014, the Group sold various equipment items at a net gain included under theconsolidated statements of income caption “Other income - net” amounting to P=0.24 million,P=86.16 million and P=127.20 million, respectively (see Note 28).

In 2016, 2015 and 2014, the Group incurred a loss on write-down of property, plant andequipment amounting to P=14.32 million, P=16.09 million and P=0.11 million, respectively, due tothe replacement of components of power plant and retirement of mining equipment (see Note 25).

As security for timely payment, discharge, observance and performance of the loan provisions,SCPC and SLPGC created, established, and constituted in favor of the Security Trustee, for thebenefit of all secured parties, a first ranking real estate and chattel mortgage on present and futurereal assets and chattels owned by SCPC and SLPGC. The carrying values of these mortgagedassets amounted to P=14,925.15 million and P=14,859.94 million as of December 31, 2016 and


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*SGVFS022831*

2015, respectively. On August 24, 2016 and February 24, 2017, Bank of Philippine Islands (BPI)and Banco de Oro Unibank, Inc. (BDO), respectively, approved SCPC’s release of all securityarrangements. However, Philippine National Bank (PNB) has not given its approval to SCPC.

14. Exploration and Evaluation Asset and Other Noncurrent Assets

Below are the details of exploration and evaluation asset:

2016 2015Coal P=− P=3,015,465Nickel - net 224,645 222,977

P=224,645 P=3,238,442

CoalThese costs are related to exploratory drilling and activities in Narra and Molave minesite whichhas started the development phase in 2013 and 2016, respectively. Both mines have startedcommercial operations in the last quarter of the year after the full depletion of Panian minesite onSeptember 26, 2016. The conclusion of the development phase of the Narra and Molave minesiteled to the reclassification of the account to ‘Coal mining properties and Equipment’ which isincluded in the ‘Property, plant and equipment’ (see Note 13).

Rollforward of exploration and evaluation asset related to coal follows:

2016 2015At January 1 P=3,015,465 P=1,914,438Addition 1,932,281 1,101,027Transfer to property, plant and equipment (Note 13) (4,947,746) −At December 31 P=− P=3,015,465

NickelMoorsom, Dangla and Longpoint projectThese costs pertain to exploration expenditures on the Moorsom, Dangla and Longpoint Project(adjacent area covering the Berong Project) amounting to P=49.25 million as of December 31, 2016and 2015.

Exploration Permit Application (EXPA)-000032VIP & N Mining and Development Corporation assigned the entire applied area underEXPA-000032VI comprising 1,296.0 hectares to Fil-Asian Strategic Resources and PropertiesCorporation (FASRPC), the assignee shall assume all obligation as stipulated in the saidassignment and the assigned EXPA shall be subject to further evaluation/processing as provided inChapter V, Department of Environment and Natural Resources (DENR) Administrative Order no.96-040, Series of 1996, as amended, and other pertinent rules and regulations.

Exploration Permit (EP) -006-2010-IIIEP covering an area of 856.42 hectares situated in the municipalities of Candelaria and Sta. Cruz,Zambales.

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*SGVFS022831*

EP-007-2010-IIIEP covering an area of 2,244.69 hectares situated in the municipalities of Candelaria andSta. Cruz, Zambales.

EP-008-2010-IIIEP covering an area of 4,493.82 hectares situated in the municipality of Candelaria, Zambales.

Acoje Chromite projectExploration and evaluation assets pertaining to Acoje chromite project (under ZCMC) arecapitalized expenditures that are directly related to the exploration and evaluation of the areacovered by the mining tenements. As of December 31, 2016, the Group is still conductingexploration activities and has not yet started commercial operation.

EP No. 05-001-I of BarloThe exploration permit covers an area of 4,360.71 hectares situated at Barangays Alilao, Malimpinand San Vicente, Municipality of Dasol and Barangays Barlo and San Pedro, Municipality ofMabini, all in the Province of Pangasinan.

The exploration permit expired on May 24, 2013. On March 25, 2014, the Group was in theprocess of renewing their exploration permit, the application for renewal of the permit was alreadysubmitted to Mines and Geosciences Bureau (MGB). However, on October 17, 2014, suchapplication for renewal was denied. In response to the denial, the Group sought reconsiderationthrough a letter sent to MGB on November 28, 2014

In 2014, the Group recorded full impairment on exploration and evaluation assets amounting to P=15.80 million (see Note 25).

Application for Production Sharing Agreement 000345 IIIMRC acquired from CRAU Mineral Resources Corporation (CRAU) the application for a MineralProduction Sharing Agreement (MPSA), designated as MA-P-III-01-02 (MPSA 000345 III),covering an area of 1,071.61 hectares located in the Municipality of Masinloc. The amountrecognized represents the amount paid to CRAU. No additional exploration and evaluationexpenditures were incurred related to the project in 2016 and 2015. In 2014, the Group recordedfull impairment on its exploration and evaluation asset on Masinloc (CRAU) amounting toP=14.12 million (see Note 25).

EXPA 000133 IIIThis pertains to the Limestone Project with a covered area of 115.6 hectares located in Zambales.The amount recognized represents the capitalized expenditure incurred in the project. Nocapitalized expenditures related to the project were incurred in 2016 and 2015. In 2014, the Groupprovided full impairment on its exploration and evaluation asset on Limestone amounting toP=0.40 million (see Note 25).

Palawan Initiative and F-AH Nickel EnvironmentPalawan Initiative and the F-AH Nickel Environment projects refer to capitalized costs incurredprior to the approval of permits to explore the locations, Palawan and Cabaluan, Leyte,respectively. In 2014, the Group recorded full impairment on its exploration and evaluation asseton F-AH Nickel Environment amounting to P=0.18 million (see Note 25).


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*SGVFS022831*

Rollforward of exploration and evaluation asset related to nickel follows:

2016 2015At January 1 P=222,977 P=222,397Addition 1,668 580At December 31 P=224,645 P=222,977

A valuation allowance is provided for unrecoverable exploration and evaluation assets based onthe Group’s assessment of the future prospects of the exploration project. Full provision is madefor the impairment as management assessed that it is no longer probable that such costs areexpected to be recouped through successful exploration and development of the area of interest, oralternatively, by its sale.

Other noncurrent assets consist of the following:

2016 2015Deferred input VAT P=1,947,190 P=1,570,072Claims for refunds and tax credits - net 183,975 175,209Capitalized development costs for clay business 156,069 128,171Fund for future investment 95,474 95,474Refundable deposits (Notes 10 and 36) 88,518 90,963Prepaid rent (Note 37) 77,658 82,803Software cost 73,893 82,423Deposit for future investment 41,192 41,192Security deposits (Note 36) 5,325 5,208Others 51,872 40,145

P=2,721,166 P=2,311,660

Deferred input VATThis pertains to the unamortized input VAT incurred from acquisition of capital assets mostlycoming from the recently completed coal-fired power plant of SLPGC.

Claims for refunds and tax credits - netThis amount pertain to claims for refund and issuance of tax credit certificates from BIR onerroneously withheld Value-added taxes (VAT) on VAT exempt coal sales which were ruled bythe Supreme Court in favor of SMPC. The balance as of December 31, 2016 and 2015 ispresented net of allowance for impairment losses amounting to P=15.29 million

Movements in allowance for impairment losses of the 5% input VAT withheld follows:

2016 2015At January 1 P=15,292 P=25,976Reversal (Note 28) − 10,684At December 31 P=15,292 P=15,292

Capitalized development costs for clay businessThe Group has capitalized development expenditures amounting to P=156.07 million andP=128.17 million as of December 31, 2016 and 2015, respectively. Development costs for goods,commodities, wares and merchandise including potter earthenware, stoneware, bricks, tiles, roofsand other merchandise produce from clay are recognized as an intangible asset.

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*SGVFS022831*

Deposits and fund for future investmentOn October 18, 2012, the Group entered into an Omnibus Agreement (OA) with a third partywherein the Group will purchase 33% each of the three holding companies (HoldCos). Theintention in the OA is for the Group to eventually own HoldCos at 73% valued atUS$13.20 million. Full value is at US$18.00 million. The Group opened a bank account asrequired by the OA and made available US$2.80 million cash (bank account) from whichpayments of the shares will be drawn. On the same date, the Group entered into a Deed ofAssignment of Shares with the third party wherein 33% share in the HoldCos were assigned toGroup. The Group paid an initial US$0.25 million for the assignment of shares which was drawnfrom the bank account. The assigned shares are subject to a condition that all pending cases facedby the third party, the three holding companies (HoldCos) and three development companies(DevCos) with which the HoldCos have investments, are resolved in their favor.

On March 21, 2014, a Memorandum of Agreement (MOA) was entered into by the Group and athird party setting out the intention of final ownership of the HoldCos and DevCos, where theGroup will eventually own 73% of the HoldCos and 84% of the DevCos. The full value of theDevCos is at US$12.00 million. On the same date, the Group entered into a Deed of Assignmentof Shares wherein 40.00% of DevCos are assigned to the Group. The Group paid an initialamount of US$0.75 million for the assignment of shares and was drawn from the bank account.

As of December 31, 2016 and 2015, the Group has not yet complied with all the conditions setforth under the agreement.

Refundable depositsRefundable deposits pertain to utilities which are measured at cost and will be recouped againstfuture billings. This also includes rental deposits which are noninterest-bearing and are refundable60 days after the expiration of the lease period.

Prepaid rentThe Group entered into a Land Lease Agreement (LLA) with PSALM for the lease of land inwhich the plant is situated for a period of 25 years. The Group paid US$3.19 million or its pesoequivalent of P=150.57 million as payment for the 25 years of rental (see Note 37). Long termportion of the prepaid rent amounted to P=69.37 million and P=82.80 million as of December 31,2016 and 2015, respectively.

Software costMovements in software cost account follow:

2016 2015At CostAt January 1 P=278,529 P=234,287Additions 42,021 44,242At December 31 320,550 278,529Accumulated AmortizationAt January 1 196,106 153,445Amortization (Notes 24 and 25) 50,551 42,661At December 31 246,657 196,106Net Book Value P=73,893 P=82,423


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*SGVFS022831*

Security DepositsSecurity deposits represent payments to and held by the lessor as security for the faithful andtimely performance by the Group of all its obligations and compliance with all provisions of theequipment rental agreement (see Note 37). These deposits shall be returned by the lessor to theGroup after deducting any unpaid rental, and/or any other amounts due to the lessor for anydamage and expense incurred to put the vehicle in good working condition.

15. Short-term Debt

This account consists of the following:

2016 2015Acceptances and trust receipts payable P=45,234 P=78,777Bank loans 2,575,875 3,628,577

P=2,621,109 P=3,707,354

Acceptances and trust receipts payableAcceptances and trust receipts payable are used by the Group to facilitate payment forimportations of materials, fixed assets and other assets. These are noninterest-bearing and withmaturity of less than one (1) year.

Bank loansThe Group’s bank loans consist of unsecured peso-denominated short-term borrowings from localbanks which bear annual interest ranging from 2.40% to 2.55% and 1.20% to 5.00% in 2016 and2015, respectively, and are payable on monthly, quarterly and lump sum bases on various maturitydates within the next 12 months after the reporting date.

The Group’s agreements with local banks contain some or all of the following restrictions relatingto, among others: purchase of issued and outstanding capital stock; disposal of encumberedproperties; change in the ownership or management and nature of its business; dividenddeclaration and distribution; guarantees; incurrence of additional liabilities; and merger andconsolidation.

During 2016 and 2015, the Group obtained unsecured bridge loans from local banks with totalprincipal of P=743.00 million and P=540.00 million, respectively, subject to prevailing market rates.Loans obtained during 2016 were used primarily for the construction of 3x1.23MW Diesel-FiredPower Plant, 2x4.95MW Bunker-Fired Power Plant in Aborlan, Palawan and 1x23MW GasTurbine Plant in Calaca, Batangas. In 2016 and 2015, interest expense incurred from bank loansamounted to P=19.52 million and P=13.79 million, respectively. In 2016 and 2015, interestamounting to P=14.29 million and P=4.40 million, respectively, were capitalized as theaforementioned loans were used for the construction of the bunker-fired power plant in AborlanPalawan.

As of December 31, 2016 and 2015, the Group is in compliance with the loan covenants requiredby the creditors. Finance costs incurred on bank loans and short-term borrowings, net ofcapitalized borrowing cost, amounted to P=421.41 million, P=268.09 million and P=112.42 million in2016, 2015 and 2014, respectively (Note 27).

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16. Liabilities for Purchased Land

Liabilities for purchase of land represent the balance of the Group’s obligations to various realestate property sellers for the acquisition of certain parcels of land and residential condominiumunits. The terms of the deed of absolute sale covering the land acquisitions provided that suchobligations are payable only after the following conditions, among others, have been compliedwith: (a) presentation by the property sellers of the original transfer certificates of title coveringthe purchased parcels of land; (b) submission of certificates of non-delinquency on real estatetaxes; and (c) physical turnover of the acquired parcels of land to the Group.

The outstanding balance of liabilities for purchased land as of December 31, 2016 and 2015follow:

2016 2015Current P=906,622 P=2,201,291Noncurrent 623,151 816,135

P=1,529,773 P=3,017,426

Liabilities for purchased land were recorded at fair value at initial recognition. These liabilities forpurchased land are payable over a period of two (2) to four (4) years. The fair value is derivedusing discounted cash flow model using the discount rate ranging from 2.45% to 4.74% and2.37% to 3.93% in 2016 and 2015, respectively based on applicable rates for similar types ofliabilities.

Rollforward of unamortized discount are as follows:

2016 2015Balance at beginning of year P=6,880 P=10,383Accretion for the year (Note 27) (4,516) (3,503)Balance at end of year P=2,364 P=6,880

Accretion amounting to P=4.52 million, P=3.50 million and P=1.12 million are recorded as financecosts in 2016, 2015 and 2014, respectively (Note 27).


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17. Accounts and Other Payables

This account consists of the following:

2016 2015Trade and other payables

Suppliers and subcontractors (Note 20) P=7,415,169 P=9,813,359Others 1,784,514 870,797

Output VAT payable 1,952,112 1,498,373Payable to related parties (Note 21) 979,373 217,628Refundable deposits 216,994 231,575Accrued costs and expenses 6,850,212 4,822,707

19,198,374 17,454,439Less noncurrent portion of trade and other

payables (Note 20) 1,119,572 2,060,692P=18,078,802 P=15,393,747

SuppliersPayable to suppliers includes liabilities to various foreign and local suppliers for open accountpurchases of equipment and equipment parts and supplies. These are noninterest-bearing and arenormally settled on a 30 to 60 day credit terms.

SubcontractorsSubcontractors payable arise when the Group receives progress billing from its subcontractors forthe construction cost of a certain project and is recouped against monthly billings. Thesesubcontractors were selected by the contract owners to provide materials, labor and other servicesnecessary for the completion of a project. These are noninterest-bearing and are normally settledon 15 to 60 day credit terms.

Other payablesOther payables include payables to nickel mine rights owner and marketing agents and retentionpayable on contract payments. Payables to nickel mine rights owner and marketing agents arenoninterest-bearing and are normally settled within one (1) year. Retention on contract paymentsis being withheld from the contractors as guaranty for any claims against them. These are settledand paid once the warranty period has expired.

Output VAT payableOutput VAT pertains to the VAT due on the sale of goods or services, net of input VAT, by theGroup.

Refundable depositsRefundable deposits consist of deposits which are refundable due to cancellation of sales as wellas deposits made by unit owners upon turnover of the unit which will be remitted to its utilityprovider.

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Accrued costs and expensesAccrued costs and expenses consist of the following:

2016 2015Accrued construction cost P=3,734,028 P=2,281,765Payable to DOE and local government

Units (LGU) (Note 31) 1,647,719 1,121,510Withholding and others taxes 268,693 298,225Accruals:

Accrued salaries 224,293 156,774Accrued interest 158,232 162,753Accrued professional fees 31,491 9,810

Financial benefit payable 48,950 8,870Dividends 24,476 14,587Accrued royalties 21,633 31,328Accrued rental 11,084 210,851Shipping cost − 17,764Others 679,613 508,470

P=6,850,212 P=4,822,707

Accrued construction costAccrued construction costs pertain to direct materials, labor, overhead and subcontractor costs forwork accomplished by the suppliers and subcontractors but were not yet billed to DMCI.

Payable to DOE and LGULiability to DOE and LGU represents the share of DOE and LGU in the gross revenue fromSMPC’s coal production (including accrued interest on the outstanding balance) computed inaccordance with the coal operating contract between SMPC, DOE and the local government unitsdated July 11, 1977, as amended on January 16, 1981 (Note 31).

Financial benefits payableAs mandated by R.A. 9136 or the Electric Power Industry Reform Act (EPIRA) of 2001 and theEnergy Regulations No. 1-94, issued by DOE, the BOD authorized the Group on June 10, 2010 toenter and execute a Memorandum of Agreement with the DOE relative to or in connection withthe establishment of Trust Accounts for the financial benefits to the host communities equal toP=0.01 per kilowatt hour generated.

Accrued rentalAccrued rental pertains to the rental payable for building and office leases, equipment rentals andrental of various barges and tugboats for use in the delivery of nickel ore to various customers.

OthersOthers include accruals for contracted services, utilities, supplies, advertising, commission andother administrative expenses. This account also includes accrual for liability relating to claim onconstruction contracts which is still subject to a negotiation with a third party (Note 37).


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18. Customers’ Advances and Deposits


2016 2015Real estate customers P=8,254,848 P=5,677,970Coal and nickel ore supply contracts 25,284 14,301

P=8,280,132 P=5,692,271

Real estate customersCustomers’ advances and deposits from real estate customers represent reservation fees and initialcollections received from customers before the two (2) parties enter into a sale transaction. Thesewere payments from buyers which have not yet met the revenue recognition conditions whichincludes: (a) related project is fully completed and (b) buyers’ payment reaching the minimumrequired percentage of equity investment. When the conditions for revenue recognition are metfor the related customer account, sale is recognized and these deposits will be recognized asrevenue and will be applied against the receivable balance.

Coal and nickel ore supply contractsThese deposits represent advances from the customers of the Group. Coal deposits are appliedagainst future coal deliveries which occur within one year from the dates the deposits were madewhile nickel ore will be applied to related receivables upon consummation of the sale transaction.

19. Long-term Debt

Long-term debt pertains to the following obligations:

2016 2015Bank loans P=34,264,260 P=37,055,606Less current portion of bank loans 3,193,487 11,291,955Noncurrent portion P=31,070,773 P=25,763,651

- 75

-

*SGVFS022831*

Det

ails

of t

he b

ank

loan

s fo

llow

(am

ount

s in

mill

ions

):

Dat

e of

Out

stan

ding

Bal

ance

sL

oan

Typ

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2016

2015

Mat

urity

Inte

rest

Rat

ePa

ymen

t Ter

ms

Cov

enan

ts/C

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tera

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cal b

ank

loan

sSM

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120

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,100

.00

P=−20

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g ra

te to

be

repr

iced

eve

ry 3

mon

ths

base

d on

3-m

onth

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DST

-R2"

plu

s asp

read

of o

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nt(1

%)

Inte

rest

pay

able

eve

ry3

mon

ths,

prin

cipa

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be p

aid

on m

atur

ity d

ate

Curre

nt R

atio

not

less

than

1:1

and

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atio

not

to e

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d 2:

1

Dol

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oan

120

161,

345.

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2019

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ting

rate

to b

ere

pric

ed e

very

3 m

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sed

on 3

-mon

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LIB

OR

plus

a sp

read

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0.86

%

Inte

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able

eve

ry3

mon

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Curre

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220

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320

1685

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ry 3

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BO

R pl

us a

spre

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86%

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able

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than

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201

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ry 3

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base

d on

3-m

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eve

ry3

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Curre

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atio

not

less

than

1:1

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Deb

t-Equ

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atio

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1

(For

war

d)


- 76

-

*SGVFS022831*

Dat

e of

Out

stan

ding

Bal

ance

sL

oan

Typ

eA

vailm

ent

2016

2015

Mat

urity

Inte

rest

Rat

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ms

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Inte

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Uns

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urre

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SLPG

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paya

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Var

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dra

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201

2 to

201

59,

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rterly

mat

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. Fin

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. St

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+ 1

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in tw

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qual

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mor

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ectiv

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).

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ting

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qual

mon

thly

inst

allm

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ting

Apr

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spor

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and

P=3.5

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ectiv

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ral

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ans p

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s pay

able

2015

329.

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rest

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y 3

mon

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inan

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enan

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reed

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n B

NC

and

the

Lend

er.

(For

war

d)

- 77

-

*SGVFS022831*

Dat

e of

Out

stan

ding

Bal

ance

sL

oan

Typ

eA

vailm

ent

2016

2015

Mat

urity

Inte

rest

Rat

ePa

ymen

t Ter

ms

Cov

enan

ts/C

olla

tera

lsD

MCI

Long

- ter

m d

ebt

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P=499

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P=997

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ious

qua

rterly

mat

uriti

es st

artin

g 20

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til 2

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% s

tate

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ble

in e

ight

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al q

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mor

tizat

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men

cing

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n.

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ecur

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o co

vena

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d ra

te c

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rate

not

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ario

us

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che

from

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, PD

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the

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nce

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inan

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ebt-

Equi

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not

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note

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731.

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ario

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p.a

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P=31,

070.

77P=2

5,76

3.65


- 78 -

*SGVFS022831*

SMPCThe remaining borrowing facility that can be drawn as of December 31, 2016 and 2015 amounts toP=5,625.00 million and P=4,700.00 million, respectively.

Interest expenses on long-term debt recognized under ‘Finance cost’ amounted to P=128.85 millionand P=44.09 million in 2016 and 2015, respectively.

The maturities of long-term debt at nominal values as of December 31, 2016 and 2015 follow:

2016 2015Due in:

2016 P=− P=1,831,7552018 1,319,641 1,383,9792019 2,198,666 −2021 2,100,000 −

P=5,618,307 P=3,215,734

SLPGCOn February 4, 2012, SLPGC entered into an P=11.50 billion Omnibus Agreement with Banco deOro Unibank (BDO), Bank of the Philippine Island (BPI) and CBC as Lenders. As security forthe timely payment of the loan and prompt observance of all the provision of the OmnibusAgreement, the 67% of issued and outstanding shares of SLPGC owned by SMPC were pledgedon this loan. The proceeds of the loan were used for the engineering, procurement andconstruction of 2x150 MW coal-fired thermal power plant.

Breakdown of the original loan balance is as follows:

AmountBDO Unibank P=6,000,000BPI 3,000,000CBC 2,500,000

P=11,500,000

Details of the loan follow:

a. Interest: At applicable interest rate (PDST-F + Spread or BSP Overnight Rate, whichever ishigher). Such interest shall accrue from and including the first day of each interest period upto the last day of such interest period. The Facility Agent shall notify all the Lenders of anyadjustment in an interest payment date at least three banking days prior to the adjustedinterest payment date.

b. Repayment: The principal amount shall be paid in twenty-seven equal consecutive quarterlyinstallments commencing on the fourteenth quarter from the initial borrowing date. Finalrepayment date is ten (10) years after initial borrowing.

The loan had its first drawdown schedule on May 24, 2012 amounting to P=550.00 million.In 2013, second and third drawdowns were made which amounted to P=5.15 billion. In 2014,fourth to seventh drawdowns were made which amounted to P=4.79 billion. In 2015, the eighth andfinal drawdown was made amounting to P=1.01 billion, bringing the total to P=11.50 billion. As ofDecember 31, 2016 and 2015, outstanding loan payable is P=9.34 billion and P=11.04 billion,respectively.

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Rollforward of unamortized debt issuance cost follows:

2016 2015At January 1 P=36,959 P=42,558Additions − 5,057Amortization (Notes 13 and 27) (10,148) (10,656)At December 31 P=26,811 P=36,959

Amortization of financing cost during the commissioning of the plant on the first quarter of 2016amounting to P=2.67 million was charged to CIP. The remaining P=7.48 million was recognized aspart of finance costs as construction activities were completed in the first quarters of 2016 ceasingcapitalization of borrowing cost.

Mortgage payable by SLPGC provide certain restrictions and requirements with respect to, amongothers, maintain and preserve its corporate existence, comply with all of its material obligationsunder the project agreements, maintain at each testing date a Debt-to-Equity ratio not exceedingtwo times, grant loans or make advances and disposal of major property. These restrictions andrequirements were complied with by SLPGC as of December 31, 2016 and 2015.

Provision in the loan indicates that the borrower shall pay to the lenders, a commitment feeequivalent to one-half (1/2%) per annum of any portion of a scheduled drawdown amount thatremains undrawn after the lapse of the relevant scheduled drawdown month. As of December 31,2016, 2015 and 2014, SLPGC has paid commitment fee amounting to nil, P=1.31 million andP=4.85 million, respectively and these were recognized under the “Finance costs” account in theconsolidated statements of income (see Note 27).

SCPCOn May 20, 2010, the Company entered into a P=9,600.00 million Omnibus Loan SecurityAgreement (“the Omnibus Agreement”) with Banco de Oro Unibank, Inc. (BDO), Bank ofPhilippine Islands (BPI) and Philippine National Bank (PNB) as Lenders, SMPC as Pledgor,BDO Capital and Investment Corporation as Lead Arranger and Sole Bookrunner, BPI CapitalCorporation and PNB Capital and Investment Corp. as Co-Arrangers, and BDO Unibank, Inc.-Trust and Investments Group as Security Trustee, Facility Agent, Registrar and Paying Agent.The loan was drawn in full on the same date.

The loan was collateralized by all monies in the Collateral Accounts, supply receivables, proceedsof any asset and business continuity insurance obtained by the Company, project agreements, first-ranking mortgage on present and future real assets and first-ranking chattel mortgage on presentand future chattels with carrying value of P=14.93 billion and P=14.86 billion as of December 31,2016 and 2015, respectively (see Note 13). Further, 67% of issued and outstanding shares ofSCPC owned by the Parent Company were also pledged on this loan.

Breakdown of the original loan balances is as follows:

AmountBDO Unibank P=6,000,000BPI 2,000,000PNB 1,600,000

P=9,600,000


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The Omnibus Agreement was entered into to finance the remaining balance of the purchase priceof the Power Plant pursuant to the Asset Purchase Agreement (APA), ongoing plant rehabilitationand permanent working capi tal requirements of the Company. On August 24, 2016 andFebruary 24, 2017, Bank of Philippine Islands (BPI) and Banco de Oro Unibank, Inc. (BDO),respectively, approved the SCPC’s release of all security arrangements. However, PhilippineNational Bank (PNB) has not given its approval to SCPC.

Details of the loan follow:

a. Interest: At a floating rate per annum equivalent to the three (3) months Philippine DealingSystem Treasury-Fixing (PDST-F) benchmark yield for treasury securities as published on thePDEx page of Bloomberg (or such successor electronic service provider) at approximately11:30a.m. (Manila Time) on the banking day immediately preceding the date of initialborrowing or start of each interest period, as applicable, plus a spread of 175 basis points.Starting August 2015 amortization, interest is at floating rate per annum equivalent tothree (3) months Philippine Dealing System Treasury Reference Rate PM (PDST-R2), plus aspread of 195 basis points.

b. Repayment: The principal amount shall be payable in twenty-five (25) equal consecutivequarterly installments commencing on the twelfth month from the initial borrowing date.Final repayment date is seven (7) years after initial borrowing. The loan may be prepaidvoluntarily provided the conditions in the Omnibus Agreement are satisfied. On February 29,2016, the Company prepaid the long-term debt amounting to P=1.60 billion.

Rollforward of the deferred financing cost follows:

2016 2015At January 1 P=6,241 P=17,191Amortization (Note 27) (6,121) (10,951)At December 31 P=120 P=6,240

Amortization of deferred financing cost recognized under “Finance cost” account in theconsolidated statements of income amounted to P=6.12 million, P=10.95 million and P=16.36 millionfor the years 2016, 2015 and 2014, respectively (see Note 27).

Loans payableWire RopeLoans payable represents unsecured loans from local banks bearing annual interests of 8.97% to15.16% in 2016 and 2015. No additional availments of loans in 2016. Wire Rope made paymentsto the loans amounting to P=0.67 million and P=0.86 million in 2016 and 2015, respectively. WireRope has no debt covenants to be complied with.

Beta ElectricLong-term debt represents peso-denominated long-term borrowings from local banks which bearinterest ranging from 8.68% to 10.25% per annum in 2016 and 2015, and are payable in equalmonthly installments starting April 2010 up to September 2020. The loans are secured by achattel mortgage for the whole amount of Beta Electric’s transportation equipment purchasedusing the proceeds of these loans.

Interest expense on these long-term debt amounted to P=0.31 million in 2016 and 2015.

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As of December 31, 2016 and 2015, the outstanding balance from loans amounted toP=3.99 million and P=3.12 million, respectively.

BNCOn May 20, 2015, BNC obtained long-term loan from Banco de Oro Universal Bank, Inc.amounting to US$6.63 million bearing an annual interest rate of 5.04% and of which interestexpense are paid quarterly. The loan amounted to P=329.64 million and P=312.01 million as atDecember 31, 2016 and 2015, respectively, and will mature on May 21, 2018.

BNC shall maintain financial covenants customary for transactions of similar nature, including butnot limited to Debt Service Coverage Ratios (historical and prospective) and Debt-to-EquityRatios, to be determined and mutually agreed upon between BNC and the Lender in the course ofthe Lender’s due diligence.

DMCILoans payable consists of:

2016 2015Long-term debt P=500,000 P=1,000,000Less: Unamortized deferred financing cost 755 2,688

499,245 997,312Less: Current portion of long term debt 499,245 −Non-current portion of long-term debt P=− P=997,312

Rollforward of the deferred financing cost follows:

2016 2015At January 1 P=2,688 P=5,000Amortization (Note 27) (1,933) (2,312)At December 31 P=755 P=2,688

The maturities of loans payable at nominal values as of December 31 follow:

2016 2015Due in:

2016 P=− P=500,0002017 500,000 500,000

P=500,000 P=1,000,000

On December 29, 2014, DMCI entered into an unsecured P=1 billion Term Loan Agreement withBanco De Oro (BDO) as lender. The loan was fully drawn by DMCI on the same date. Theagreement was entered into to partially refinance the purchase of machineries and equipment andrefinance existing short-term loan.

The stated interest rate is 3.33% and the principal amount shall be paid in eight (8) equal quarterlyamortization commencing at the end of the 5th quarter from initial drawdown.


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PDIFixed rate corporate notesIn December 2015, PDI signed corporate notes facility agreement on the issuance peso-denominated notes in the aggregate amount of P=10,000.00 million with local banks. Proceeds ofthe notes facility will be used to fund its capitalization of real estate properties, fund its projectdevelopment costs, refinance its existing indebtedness and fund other general corporate purposes.

The notes will be issued in six (6) tranches and payments shall be made in each tranche as follows:

Series Quarterfrom Issue

Date

Payment for EachQuarter; Computed Basedon Aggregate % of IssueAmount of each Series

Total

Series F 4th to 19th Quarter 0.5% (8% + 92%)Final Maturity 92.0% 100%

Series H 4th to 19th Quarter 0.5% (8% + 92%)Final Maturity 92.0% 100%

Series J 4th to 19th Quarter 0.5% (8% + 92%)Final Maturity 92.0% 100%

Series G 4th to 27th Quarter 0.5% (12% + 88%)Final Maturity 88.0% 100%

Series I 4th to 27th Quarter 0.5% (12% + 88%)Final Maturity 88.0% 100%

Series K 4th to 27th Quarter 0.5% (12% + 88%)Final Maturity 88.0% 100%

Tranches 1 (Series F) and 2 (Series G) of the P=10,000.00 million were issued onDecember 18, 2015 in the aggregate principal amount of P=1,000.00 million each. Tranches 3(Series H) and 4 (Series I) were issued in January 2016 in the aggregate principal amount ofP=2,500.00 million each. Tranches 5 (Series J) and 6 (Series K) were issued on February 2017 inthe aggregate principal amount of P=1,500.00 million each.

The note is issued in registered form in the minimum denominations of P=75.00 million andmultiples of P=25.00 million each. Corporate notes shall bear interest from Tranche 1 and 2PDST-R2 Issue Date and ending 3 months after such Issue Date and every 3 months thereafter.The interest rate shall initially be the PDST-R2 rate for five-year (Tranche 1) and seven-year(Tranche 2) treasury securities on banking day immediately preceding an Issue Date plus theMargin (150 basis points) for each of the Tranche, gross any applicable withholding taxes.Interest is payable quarterly.

In October 2012, PDI signed corporate notes facility agreement on the issuance of 7-year pesodenominated notes in the aggregate amount of P=10,000.00 million with local banks. Proceeds ofthe notes facility were used to fund land acquisition, general operations and project developmentand construction.

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The notes were issued in three (3) tranches and payments were made in each tranche are asfollows:

Quarter from IssueDate

Based on aggregate % of issue amount of each Series (Equallydivided over the applicable quarters)

7th to 10th Quarter 2%11th to 14th Quarter 4%15th to 18th Quarter 5%19th to 27th Quarter 12%Final Maturity 77%Total 100%

Tranche 1 of the P=10,000.00 million Series C was issued on October 31, 2012 in the aggregateamount principal amount of P=1,000.00 million. Tranche 2 (Series D) and 3 (Series E) were issuedon April 10, 2013 and July 30, 2013 in the aggregate principal amount of P=4,000.00 million andP=5,000.00 million, respectively.

The note is issued in registered form in the minimum denominations of P=100.00 million andmultiples of P=10.00 million each. Corporate notes shall bear interest from PDST-F Issue Dateending 3 months after such Issue Date, and every 3 months thereafter. The interest rate shallinitially be the PDST-F rate for seven-year treasury securities on banking day immediatelypreceding an Issue Date plus the Margin (125 basis points) for each of the Tranche, gross anyapplicable withholding taxes. Interest is payable quarterly.

In January 2011, the PDI signed a corporate notes facility agreement with local banks relating onthe issuance of 5-year peso denominated notes in the aggregate amount of P=5,000.00 million.Proceeds of the said notes facility will be used to fund land acquisition, general operations andproject development and construction. The notes have been issued in two (2) tranches,redeemable in full at the end of third year following the issue date of the second tranche note.Payments shall be made in each tranche is equal to 1% every year from the issue date and thebalance payable at maturity.

Tranche 1 (Series A) of P=5,000.00 million corporate notes was issued on January 28, 2011, in theaggregate principal amount of P=2,000.00 million while Tranche 2 (Series B) was issued onMarch 17, 2011, in the aggregate principal amount of P=3,000.00 million. They were issued inregistered form in the minimum denominations of P=100.00 million and multiples ofP=10.00 million each.

Corporate notes shall bear interest from Tranche 1 and 2 PDST-F Issue Date and ending three (3)months after such issue date, and every three (3) months thereafter. The interest rate shall initiallybe the PDST-F benchmark yield for five-year treasury securities (Base Rate) on banking dayimmediately preceding an issue date plus the margin (125 basis points) for each of the Tranche,gross of any applicable withholding taxes. Interest is payable quarterly.

Unamortized debt issuance costs included in fixed rate corporate notes as of December 31,2016 and 2015 amounted to P=140.80 million and P=117.40 million, respectively.


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The rollforward analysis of unamortized debt issuance cost follows:

2016 2015Balance at beginning of year P=117,405 P=84,708Availments 49,500 58,999Amortization of debt issue cost (Note 27) (26,100) (26,303)Balance at end of year P=140,805 P=117,404

In 2016 and 2015, interest expense incurred and capitalized interest related to long-term debtamounted to P=630.83 million and P=323.02 million and P=1,006.22 million and P=856.62 million,respectively. The average capitalization rates used are 5.45% and 5.91% of the averageexpenditures in 2016 and 2015, respectively.

The P=10,000.00 million and P=5,000.00 million corporate notes facility agreement requires theGroup to ensure that debt-to-equity ratio will not exceed 3.2 times and 2.0 times, respectively, andcurrent ratio is at least 1.75 times. As of December 31, 2016 and 2015, the Group is fullycompliant with these requirements.

As of December 31, 2016 and 2015, corporate notes recognized are unsecured.

Agreement to purchase receivablesThe installment contracts receivable under these purchase agreements are used as collaterals in theloans payable obtained. These amounted to P=1,310.90 million and P=2,365.57 million as ofDecember 31, 2016 and 2015 (Note 7), respectively, represent net proceeds from sale of portion ofthe PDI installment contracts receivable to local banks pursuant to the receivable purchaseagreements entered into by PDI on various dates. The agreements also provide the submission ofcondominium certificates of title and their related postdated checks issued by the buyers. Theseloans bear interest at prevailing market rates and are payable in various maturity dates. Theaverage effective interest rate ranges from 5.09% to 8.17% and 5.00% to 5.25% in 2016 and 2015,respectively.

HomeSaver bondsOn November 16, 2015, PDI offered and issued to the public deferred coupon-paying HomeSaverBonds (the Bonds) in an aggregate principal amount of P=1,000.00 million with an initial offeringof P=500.00 million for working capital and other general corporate purposes, such as marketingand administrative expenses.

The Bonds were offered through three investment options, namely, Tranche A, Tranche B andTranche C.

Tranche A was issued in equal monthly installments with no maximum subscription, but prioritywill be given to aggregate subscriptions amounting to P=3.60 million and less over a period ofthirty-six (36) months, beginning November 16, 2015 (the Initial Issue Date) at a fixed interestrate of 4.5% per annum and shall mature three (3) years from the Initial Issue Date. As ofDecember 31, 2016 and 2015, total Tranche A bonds issued by PDI amounted to P=33.14 millionand P=3.32 million, respectively.

Tranche B was issued in equal monthly installments with no maximum subscription, but prioritywill be given to aggregate subscriptions amounting to P=6.00 million and less over a period ofsixty (60) months, beginning on the Initial Issue Date at a fixed interest rate of 5.00% per annumand shall mature five (5) years from the Initial Issue Date. As of December 31, 2016 and 2015,total Tranche B bonds issued by PDI amounted to P=7.29 million and P=0.78 million, respectively.

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Tranche C was issued one-time with no maximum subscription, but priority will be given toaggregate subscriptions amounting to P=7.00 million and less on the Initial Issue Date as a singleupfront investment and payable in lump sum on the Initial Issue Date at a fixed interest rate of4.50% per annum and shall mature three (3) years from the Initial Issue Date. As of December 31,2016 and 2015, total Tranche C bonds issued by PDI amounted to P=333.80 million.

On March 21, 2016, PDI offered and issued the second bonds of up to P=500.00 million to thepublic through four (4) investment options, namely, Tranche D, Tranche E, Tranche F, andTranche G.

Tranche D was issued in equal monthly installments with no maximum subscription, but prioritywill be given to aggregate subscriptions amounting to P=3.60 million and less over a period ofthirty six (36) months, beginning on the Initial Issue Date at a fixed interest rate of 4.75% perannum and shall mature three (3) years from the Initial Issue Date. As of December 31, 2016,total Tranche D bonds issued by the Group amounted to P=10.78 million.

Tranche E was issued in equal monthly installments with no maximum subscription, but prioritywill be given to aggregate subscriptions amounting to P=6.00 million and less over a period ofsixty (60) months, beginning on the Initial Issue Date at a fixed interest rate of 5.25% per annumand shall mature five (5) years from the Initial Issue Date. As of December 31, 2016, totalTranche E bonds issued by the Group amounted to P=5.39 million.

Tranche F was issued one-time with no maximum subscription, but priority is given to aggregatesubscriptions amounting P=7.00 million and less on the Initial Issue Date as a single upfrontinvestment and payable in lump sum on the Initial Issue Date at a fixed interest rate of 4.75% perannum and shall mature three (3) years from the Initial Issue Date. As of December 31, 2016,total Tranche F bonds issued by the Group amounted to P=159.33 million.

Tranche G was issued one-time with no maximum subscription, but priority is given to aggregatesubscriptions amounting P=7.00 million and less on the Initial Issue Date as a single upfrontinvestment and payable in lump sum on the Initial Issue Date at a fixed interest rate of 5.25% perannum and shall mature five (5) years from the Initial Issue Date. As of December 31, 2016, totalTranche G bonds issued by the Group amounted to P=173.91 million.

As of December 31, 2016 and 2015, the aggregate HomeSaver Bonds issued amounted toP=731.23 million and P=337.90 million, respectively. The remaining unissued bonds amounted toP=268.77 million.

Management assessed that the Group has complied with all covenants required by the creditors ofthe above long-term debts.

20. Other Noncurrent Liabilities

The details of this account consist of:

2016 2015Provision for decommissioning and site

rehabilitation (Note 13) P=1,632,162 P=539,703Noncurrent trade and other payables (Note 17) 1,119,572 2,060,692

P=2,751,734 P=2,600,395


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Trade and other payablesNoncurrent trade and other payables includes noninterest-bearing payable to suppliers andsubcontractors and accrued expenses which are expected to be settled within 2 to 3 years from thereporting date and retention contract payment that is being withheld from the contractors asguaranty for any claims which are expected to be settled a year after the turn-over of projects.

Provision for decommissioning and site rehabilitationThe Group makes full provision for the future cost of rehabilitating mine sites on a discountedbasis on the development of mines. There are currently three minesites identified with coaldeposits at various stages of operations namely Panian, Molave and Narra, all located in SemiraraIsland in Antique province. These provisions have been created based on the group’s internalestimates. Discount rates used by the Group to compute for the present value of liability fordecommissioning and site rehabilitation cost are from 3.86% to 8.77% in 2016 and 4.81% to5.24% in 2015. Assumptions based on the current economic environment have been made, whichmanagement believes are reasonable bases upon which to estimate the future liability. Theseestimates are reviewed regularly to take into account any material changes to the assumptions.However, actual rehabilitation costs will ultimately depend upon future market prices for thenecessary decommissioning works required which will reflect market conditions at the relevanttime. Furthermore, the timing of rehabilitation is likely to depend on when the mines cease toproduce at economically viable rates. This, in return, will depend upon future ore and coal prices,which are inherently uncertain.

Provision for decommissioning and site rehabilitation also includes cost of rehabilitation of theGroup’s power plant and nickel ore mine site.

The rollforward analysis of the provision for decommissioning and site rehabilitation accountfollows:

2016 2015At January 1 P=539,703 P=200,270Additions 1,089,423 285,013Effect of change in estimates (Note 13) (9,611) 56,993Actual usage (13,287) (10,996)Accretion of interest (Note 27) 25,934 8,423At December 31 P=1,632,162 P=539,703

The Group is expecting to rehabilitate 1,030 hectares, 836 hectares and 943 hectares of Panian,Narra and Molave mine sites, respectively. Panian has completed and closed its operations inSeptember 2016.

The addition of P=1,089.42 million in 2016 pertains to a significant change in rehabilitation plan ofPanian mine pit. The previous plan includes partial backfilling of open areas while portion will beconverted into a lake. In 2016, the rehabilitation plan of Panian minepit was changed, such thatthe entire open pit will be covered with overburden from Narra and Molave mine pits. Theadditional costs represent the incremental cost of moving the overburden from Narra and Molavepits which is included in the ‘Cost of coal sales’ in 2016 given that Panian has closed operations(see Note 24).

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21. Related Party Transactions

Related parties are considered to be related if one party has the ability, directly or indirectly, tocontrol the other party or exercise significant influence over the other party in making the financialand operating decisions. Parties are also considered to be related if they are subject to commoncontrol or common significant influence. Related parties may be individuals or corporate entities.

Transactions entered into by the Group with related parties are at arm’s length and have termssimilar to the transactions entered into with third parties. These are settled in cash, unlessotherwise specified. In the regular course of business, the Group’s significant transactions withrelated parties include the following:

2015

Reference Due from(Due to) Amount / VolumeAffiliates

Receivable from related parties (Note 7)Construction contracts (a) P=29,795 P=21,512Receivable from affiliates (b) 57,217 −Equipment rentals (c) 15,168 15,168Payroll processing (d) 15,243 2,274Transfer of materials and reimbursement of shared

and operating expenses (e) 26,219 27,172P=143,642

Payable to related parties (Note 17)Payable to affiliates (f) (P=32,742) P=31,039Mine exploration, coal handling and hauling

services (g) (98,331) 370,325Equipment rental expenses (h) (55,539) 55,539Other general and administrative expense (i) (6,891) 5,104Aviation services (j) (12,725) 247Office and parking rental (k) (9,926) 7,991Arrastre and Cargo Services (l) (774) 774Purchases of office supplies and refreshments (m) (700) 700

(P=217,628) Others

Construction contracts (a) (P=1,218) P=1,218Nickel Delivery (n) (3,140) 164Labor charges (o) (2,628) −

(P=6,986)

2016

Reference Due from (Due to) Amount / VolumeAffiliates

Receivable from related parties (Note 7)Construction contracts (a) P=40,867 P=11,072Receivable from affiliates (b) 53,898 −Equipment rentals (c) 17,374 17,374Payroll processing (d) 15,893 539Transfer of materials and reimbursement of shared

and operating expenses (e) 2,582 2,582P=130,614

Payable to related parties (Note 17)Payable to affiliates (f) (P=26,003) P=6,905Mine exploration, coal handling and hauling

services (g) (847,609) 2,034,138Labor charges (o) (42,331) −Equipment rental expenses (h) (32,479) 10,277Other general and administrative expense (i) (12,895) 6,005Aviation services (j) (12,725) −Office and parking rental (k) (2,477) 8,486Arrastre and Cargo Services (l) (1,666) 1,906Nickel Delivery (n) (844) 844Construction contracts (a) (342) 876Purchases of office supplies and refreshments (m) (2) −

(P=979,373)


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(a) The Group provides services to its other affiliates in relation to its construction projects.Outstanding receivables lodged in “Receivables from related parties” amounted toP=40.87 million and P=29.80 million as of December 31, 2016 and 2015, respectively.

In addition, receivables of the Group from its affiliate amounting to P=0.34 million andP=1.22 million is lodged in “Costs and estimated earnings in excess of estimates and billings onuncompleted contracts” in 2016 and 2015, respectively.

(b) The Group has outstanding receivable from its affiliates amounting to P=53.90 million andP=57.22 million as of December 31, 2016 and 2015, respectively. This mainly pertains to thesale of a previous investment in 2014.

(c) The Group rents out its equipment to its affiliates for their construction projects. Outstandingreceivables from equipment rentals amounted to P=17.37 million and P=15.17 million as ofDecember 31, 2016 and 2015, respectively.

(d) The Group processes the payroll of its affiliates and charges Electronic Data Processing (EDP)expenses. Total outstanding EDP charges to the related parties under common controlamounted to P=15.89 million and P=15.24 million as of December 31, 2016 and 2015,respectively.

(e) The Group paid for the contracted services, material issuances, rental expenses and othersupplies of its affiliates. The outstanding balance from its affiliates included under “Receivablefrom related parties” amounted to P=2.58 million and P=26.22 million as of December 31, 2016and 2015, respectively.

(f) The Group has outstanding payable to affiliates amounting to P=26.00 million andP=32.74 million as at December 31, 2016 and 2015, respectively. This mainly pertains toreceivables collected by the Group in behalf of the affiliate.

(g) An affiliate had transactions with the Group for services rendered relating to the Group’s coaloperations. These include services for the confirmatory drilling for coal reserve and evaluationof identified potential areas, exploratory drilling of other minerals within the Island, dewateringwell drilling along cut-off wall of Panian mine and fresh water well drilling for industrial anddomestic supply under an agreement.

The affiliate also provides to the Group marine vessels for use in the delivery of coal to itsvarious customers. The coal freight billing is on a per metric ton basis plus demurrage chargeswhen delay will be incurred in the loading and unloading of coal cargoes. The outstandingpayable of the Group amounted to P=847.61 million and P=98.33 million as of December 31,2016 and 2015, respectively.

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(h) The Group rents from its affiliate construction equipment for use in the Group’s constructionprojects. The outstanding payable lodged under “Payable to related parties” amounted toP=32.48 million and P=55.54 million as of December 31, 2016 and 2015, respectively.

(i) A shareholder of the Group, provided maintenance of the Group’s accounting system,Navision, which is used by some of the Group’s subsidiaries to which related expenses areincluded under “Others” of “Operating expenses”. Outstanding payable of the Group recordedunder “Payable to related parties” amounted to P=12.90 million and P=6.89 million as ofDecember 31, 2016 and 2015, respectively.

(j) An affiliate of the Group transports visitors and employees from point to point in relation to theGroup's ordinary course of business and vice versa and bills the related party for the utilizationcosts of the aircrafts. The related expenses are included in “Cost of sales and services”. Theoutstanding balance to the affiliate amounted to P=12.73 million as of December 31 2016 and2015.

(k) An affiliate had transactions with the Group for rental of parking space to which relatedexpenses are included in operating expenses under “Operating expenses” in the consolidatedstatements of income (see Notes 25 and 37). Outstanding payable amounted toP=2.48 million and P=9.93 million as at December 31, 2016 and 2015, respectively.

(l) In 2016 and 2015, an affiliate had transactions with the Group for shipsiding services. Theoutstanding balance to the affiliate amounting to P=1.67 million and P=0.77 million is lodgedunder “Payable to related parties” in the consolidated statements of financial position as ofDecember 31, 2016 and 2015, respectively.

(m) In 2016 and 2015, the Group engaged its affiliates to supply various raw materials, officesupplies and refreshments. The outstanding balance to its affiliates amounting to nil andP=0.70 million for aforementioned transactions is lodged in the "Payable to related parties" as ofDecember 31, 2016 and 2015, respectively.

(n) An affiliate provides the Group various barges and tugboats for use in the delivery of nickel oreto its various customers. The Group has outstanding payable to the affiliate amounting toP=0.84 million and P=3.14 million as of December 2016 and 2015, respectively.

(o) Payable to affiliate pertains to labor charges incurred by the Group, which are initially paid bythe affiliate in behalf of the Group. The outstanding payable to the affiliate is recorded in“Other accounts payable” amounted to P=42.33 million and P=2.63 million as of December 2016and 2015, respectively.

Terms and conditions of transactions with related partiesOutstanding balances as of December 31, 2016 and 2015, are unsecured and interest free, are alldue within one year, normally within 30-60 day credit term. As of December 31, 2016 and 2015,the Group has not made any provision for impairment loss relating to amounts owed by relatedparties. This assessment is undertaken each financial year through examining the financialposition of the related party and the market in which the related party operates.


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Compensation of Key Management PersonnelKey management personnel of the Group include all directors and senior management. Theaggregate compensation and benefits of key management personnel of the Group follows:

2016 2015 2014Short-term employee benefits P=249,795 P=233,687 P=211,530Post-employment benefits (Note 23) 27,302 23,401 16,685

P=277,097 P=257,088 P=228,215

There are no agreements between the Group and any of its directors and key officers providing forbenefits upon termination of employment, except for such benefits to which they may be entitledunder the Group’s pension plan.

22. Equity

Capital StockAs of December 31, 2016 and 2015, the Parent Company’s capital stock consists of:

2016Shares Amount

Preferred stock - P=1 par valueAuthorized: 100,000 P=100,000Issued and outstanding:

Balance at beginning and end of year 4 P=4Common stock - P=1 par value

Authorized: 19,900,000 P=19,900,000Issued and outstanding:

Balance at beginning and end of year 13,277,470 P=13,277,470

2015Shares Amount

Preferred stock - P=1 par valueAuthorized: 100,000 P=100,000Issued and outstanding:

Balance at beginning and end of year 4 P=4Common stock - P=1 par value

Authorized: 19,900,000 P=19,900,000Issued and outstanding:

Balance at beginning and end of year 13,277,470 P=13,277,470

The preferred stock is redeemable, convertible, non-voting, non-participating and cumulative withpar value of P=1.00 per share. The preferred shareholders’ right of converting the preferred sharesto common shares expired in March 2002.

On December 18, 1995, the Parent Company launched its Initial Public Offering where a total of1.13 billion common shares were offered at an offering price of P=9.12 per share.

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Below is the summary of the Parent Company’s track record of registration of securities with theSEC as of December 31, 2016:

Year

Number of SharesRegistered

(in billions)Number of holders of

securities as of year endDecember 31, 2014 13.28 688Add/(Deduct) Movement − 14December 31, 2015 13.28 702Add/(Deduct) Movement − (4)December 31, 2016 13.28 698

Increase in Authorized Capital StockOn August 5, 2014, the SEC approved the increase in authorized capital stock of the ParentCompany from P=6,000.00 million divided into P=5,900.00 million common shares andP=100.00 million preferred shares both with par value of P=1.00 per share, to P=20,000.00 milliondivided into P=19,900.00 million common shares and P=100.00 million preferred shares both with apar value of P=1.00 per share.

Retained EarningsIn accordance with SEC Memorandum Circular No. 11 issued in December 2008, the ParentCompany’s retained earnings available for dividend declaration as of December 31, 2016 and2015 amounted to P=4,836.59 million and P=7,438.63 million, respectively.

Under the tax code, publicly held corporations are allowed to accumulate retained earnings inexcess of capital stock and are exempt from improperly accumulated earnings tax.

Dividend declarationThe Parent Company’s BOD approved the declaration of cash dividends in favor of all itsstockholders as follows:

2016 2015 2014May 11, 2016, P=0.24 per share cash

dividend to stockholders on recordas of May 27, 2016, payable on orbefore June 10, 2016. P=3,186,593 P=− P=−

May 11, 2016, P=0.24 per share cashdividend to stockholders on recordas of May 27, 2016, payable on orbefore June 10, 2016. 3,186,593 − −

May 15, 2015, P=0.24 per share cashdividend to stockholders on record asof May 29, 2015, payable on orbefore June 10, 2015. − 3,186,593 −

May 15, 2015, P=0.24 per share cashdividend to stockholders on record asof May 29, 2015, payable on orbefore June 10, 2015. − 3,186,593 −

(Forward)


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2016 2015 2014May 15, 2014, P=1.20 per share cash

dividend to stockholders on record asof May 30, 2014, payable on orbefore June 13, 2014. P=− P=− P=3,186,593

May 15, 2014, P=1.20 per share specialcash dividend to stockholders onrecord as of May 30, 2014, payableon or before June 13, 2014. − − 3,186,593

P=6,373,186 P=6,373,186 P=6,373,186

On August 5, 2014, the stockholders of the Parent Company approved the 400% stock dividendsamounting to P=10,621.98 million, divided into 10,621.98 million shares at the par value ofP=1.00 per share, or four (4) common shares for every one common share held, from theunrestricted retained earnings of the Parent Company as of December 31, 2013, and to be issuedfrom the increase in the authorized capital stock of the Parent Company. On September 18, 2014,Securities and Exchange Commission approved and fixed the record date on October 17, 2014.The stock transaction cost paid in 2014 amounted to P=92.92 million which is netted against the‘Additional Paid-in Capital’ in the consolidated statements of changes in equity.

On various dates in 2016, 2015 and 2014, partially owned subsidiaries of the Group declareddividends amounting to P=4,281.44 million and P=5,615.00 million and P=4,284.95 million,respectively, of which dividends to non-controlling interest amounted to P=1,841.12 million,P=2,213.94 million, P=1,871.13 million, respectively.

Appropriation of of retained earningsOn December 19, 2014, the Parent Company’s BOD approved the reversal of appropriatedretained earnings amounting to P=2,100.00 million.

The unappropriated retained earnings include accumulated equity in undistributed net earnings ofconsolidated subsidiaries, associates and jointly controlled entities accounted for under equitymethod of P=25,966.31 million and P=20,425.67 million as of December 31, 2016 and 2015,respectively. These are not available for dividend declaration until declared by the subsidiaries,associates and the jointly controlled entities.

Capital ManagementThe primary objective of the Group’s capital management strategy is to ensure that it maintains astrong credit rating and healthy capital ratios in order to support its business and maximizeshareholder 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. There were no changes made in theGroup’s capital management objectives, policies or processes. The Group considers totalstockholders’ equity as capital. Equity, which the Group considers as capital, pertains to theequity attributable to equity holders of the Parent Company less unrealized gain or loss on AFSfinancial assets.

The Group is not subject to any externally imposed capital requirements.

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23. Employee Benefits

Retirement PlansThe Group has a funded, noncontributory, defined benefit pension plan covering substantially allof its regular employees. Provisions for pension obligations are established for benefits payable inthe form of retirement pensions. Benefits are dependent on years of service and the respectiveemployee’s final compensation. The Group updates the actuarial valuation every year by hiringthe services of a third party professionally qualified actuary. The latest actuarial valuation reportof the retirement plans was made as of December 31, 2016.

The Group has a Multiemployer Retirement Plan (the Plan) which is administered separately by anindividual trustee, a Group executive and BDO Unibank, Inc. Trust Investment Division under thesupervision of the Board of Trustees (BOT) of the Plan. The responsibilities of the BOT, amongothers, include the following:· To hold, invest and reinvest the fund for the exclusive benefits of the members and

beneficiaries of the retirement plan and for this purpose the BOT is further authorized todesignate and appoint a qualified Investment Manager with such powers as may be required torealize and obtain maximum yield on investment of the fund;

· To make payments and distributions in cash, securities and other assets to the members andbeneficiaries of the Plan.

Under the existing regulatory framework, Republic Act 7641 requires a provision for retirementpay to qualified private sector employees in the absence of any retirement plan in the entity,provided however that the employee’s retirement benefits under any collective bargaining andother agreements shall not be less than those provided under the law. The law does not requireminimum funding of the plan.

The following table summarizes the components of net pension expense (included in “Salaries,wages and employee benefits” account) and pension income (included in “Other income - net”account) in the consolidated statements of income (see Notes 25 and 28):

Pension Expense2016 2015 2014

Current service cost P=126,975 P=84,082 P=88,520Effect of the asset limit 1,393 509 –Settlement loss 4,423 91 −Net interest expense (income) on benefit

obligation and plan assets 8,017 (2,083) 3,137Past service cost - curtailment (22,412) (9,844) (11,442)Total pension expense P=118,396 P=72,755 P=80,215

Pension Income2016 2015 2014

Current service cost P=35,336 P=33,721 P=41,092Effect of the asset limit 36,947 37,913 28,526Net interest income on benefit obligation

and plan assets (83,040) (86,729) (71,585)Total pension income (P=10,757) (P=15,095) (P=1,967)


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Movements in the fair value of plan assets of the Group follow:

2016 2015Balance at beginning of year P=2,750,392 P=2,904,705Interest income 140,661 136,894Remeasurement losses (100,315) (283,125)Benefits paid from plan assets (51,742) (8,082)Contributions 27,768 –Balance at end of year P=2,766,764 P=2,750,392

Changes in the present value of the defined benefit obligation follow:

2016 2015Balances at beginning of year P=1,209,637 P=1,006,684Current service cost 162,311 117,803Interest expense 65,638 48,082Settlement loss 4,423 91Past service cost - curtailment (22,412) (9,844)Benefits paid - from plan assets (51,742) (8,082)Benefits paid - direct payments (24,759) (5,780)Remeasurement losses (gains) arising from:

Financial assumptions (24,499) 8,023Demographic assumptions 12,535 (7,803)Experience adjustments (53,508) 60,463

Balances at end of year P=1,277,624 P=1,209,637

Below is the net pension asset for those entities within the Group with net pension asset position:

2016 2015Present value of funded defined benefit obligations (P=637,428) (P=981,313)Fair value of plan assets 2,344,038 2,664,268

1,706,610 1,682,955Effect on asset ceiling (812,846) (723,976)Net pension asset P=893,764 P=958,979

Movements in the net pension asset follow:

2016 2015Net pension asset at beginning of year P=958,979 P=1,178,058Remeasurements loss recognized in other

comprehensive income (77,243) (184,802)Net pension income (expense) 6,736 (25,377)Contributions 5,292 –Reclassifications - net − (8,900)Net pension asset at end of year P=893,764 P=958,979

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Below is the net pension liability for those entities within the Group with net pension liabilityposition:

2016 2015Present value of funded defined benefit obligations (P=640,196) (P=228,324)Fair value of plan assets 422,726 86,124Net pension liability (P=217,470) (P=142,200)

Movements in the net pension liability follow:

2016 2015Net pension liability at beginning of year (P=142,200) (P=97,364)Net pension expense (114,375) (32,283)Remeasurement loss recognized in other

comprehensive income (8,130) (27,233)Reclassifications - net − 8,900Benefits paid - direct payment 24,759 5,780Contributions 22,476 −Net pension liability at end of year (P=217,470) (P=142,200)

The Group does not expect to contribute to the pension funds for the year 2017.

The major categories and corresponding fair values of plan assets by class of the Group’s Plan asat the end of each reporting period are as follow:

2016 2015Cash and cash equivalents

Cash in banks P=55,380 P=100,708Time deposits 125,045 2,237

180,425 102,945Investments in stocks

Common shares 1,783,015 1,853,244Preference shares 23,674 29,122

1,806,689 1,882,366Investment in government securities

Fixed rate treasury notes (FXTNs) 500,805 528,318Retail treasury bonds (RTBs) 42,112 19,969

542,917 548,287Investment in other securities and

debt instrumentsAAA rated debt securities 214,266 193,451Not rated debt securities 12,119 11,984

226,385 205,435Other receivables 10,793 11,769Accrued trust fees and other payables (445) (410)Fair value of plan assets P=2,766,764 P=2,750,392


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The investment in stocks is further categorized as follows:

2016 2015Common shares

QuotedHoldings P=1,738,784 P=1,809,594Mining and oil 23,400 24,570

1,762,184 1,834,164Unquoted

Service 8,192 19,0808,192 19,080

Preference sharesQuoted

Holdings 15,204 P=15,372Industrial 21,109 13,750

36,313 29,122P=1,806,689 P=1,882,366

Trust fees paid in 2016, 2015 and 2014 amounted to P=1.78 million, P=0.44 million andP=1.38 million, respectively.

The composition of the fair value of the Fund includes:

· Cash and cash equivalents - include savings and time deposit with various banks and specialdeposit account with Bangko Sentral ng Pilipinas (BSP SDA).

· Investment in stocks - includes investment in common and preferred shares both traded andnot traded in the PSE. The fund holds investments in shares of stock of the Parent Companywith fair market value of P=1,738.78 million and P=1,809.59 million as of December 31, 2016and 2015, respectively.

· Investment in government securities - include investment in Philippine RTBs and FXTNs.

· Investments in other securities and debt instruments - include investment in long-term debtnotes and retail bonds.

· Other receivables - includes interest and dividends receivable generated from investmentsincluded in the plan.

· Accrued trust fees and other payables - pertain mainly to charges of trust or in themanagement of the plan.

The overall administration and management of the plan rest upon the Plan’s BOT. The votingrights on the above securities rest to the BOT for funds directly held through the Group’s officersand indirectly for those entered into through other trust agreements with the trustee bankauthorized to administer the investment and reinvestments of the funds.

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The cost of defined benefit pension plans and the present value of the pension obligation aredetermined using actuarial valuations. The actuarial valuation involves making variousassumptions. The principal assumptions used in determining pension and post-employmentmedical benefit obligations for the defined benefit plans are shown below:

2016 2015 2014Discount rate 5.00% to 5.87% 5.00% to 6.36% 4.07% to 5.57%Salary increase rate 3.00% to 10.00% 3.00% to 10.00% 3.00% to 10.00%

There are no unusual or significant risks to which the Plan exposes the Group. However, in theevent a benefit claim arises under the Retirement Plan and the Retirement Fund is not sufficient topay the benefit, the unfunded portion of the claim shall immediately be due and payable from theGroup to the Retirement Fund.

There was no plan amendment, curtailment, or settlement recognized in the years endedDecember 31, 2016 and 2015.

Sensitivity analysis on the actuarial assumptionsEach sensitivity analysis on the significant actuarial assumptions was prepared by remeasuring theDefined Benefit Obligation (DBO) at the reporting date after first adjusting one of the currentassumptions according to the applicable sensitivity increment or decrement (based on changes inthe relevant assumption that were reasonably possible at the valuation date) while all otherassumptions remained unchanged. The sensitivities were expressed as the corresponding changein the DBO.

It should be noted that the changes assumed to be reasonably possible at the valuation date areopen to subjectivity, and do not consider more complex scenarios in which changes other thanthose assumed may be deemed to be more reasonable.

Increase(decrease) 2016 2015

Discount rates +100 basis points (P=130,639) (P=37,583)-100 basis points 134,300 43,222

Salary increases +1.00% 135,347 36,855-1.00% (114,551) (42,832)

Asset-liability matching strategiesEach year, an Asset-Liability Matching Strategy (ALM) is performed with the result beinganalyzed in terms of risk-and-return profiles. It is the policy of the Trustee that immediate andnear-term retirement liabilities of the Group’s Retirement Fund are adequately covered by itsassets. As such, due considerations are given that portfolio maturities are matched in accordancewith due benefit payments. The retirement fund’s expected benefit payments are determinedthrough the latest actuarial reports.

Funding arrangementsThe Group is not required to pre-fund the future defined benefits payable under the RetirementPlan before they become due. For this reason, the amount and timing of contributions to theRetirement Fund are at the Group’s discretion. However, in the event a benefit claim arises andthe Retirement Fund is insufficient to pay the claim, the shortfall will then be due and payablefrom the Group to the Retirement Fund.


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Shown below is the maturity analysis of the undiscounted benefit payments:

2016 2015Less than 1 year P=394,512 P=370,803More than 1 year to 5 years 248,898 127,055More than 5 years to 10 years 525,071 343,631

P=1,168,481 P=841,489

24. Costs of Sales and Services

Details of costs of sales and services follow:

2016 2015 2014Cost of SalesCost of real estate inventory

(Note 9) P=5,313,539 P=6,673,502 P=6,412,311Materials and supplies 4,508,399 3,091,755 4,107,099Outside services 1,742,566 898,327 1,184,384Fuel and lubricants 1,493,340 1,165,441 2,797,911Depreciation and amortization

(Notes 12, 13 and 14) 1,261,886 745,144 1,039,826Provision for decommissioning

and site rehabilitation(Note 20) 1,089,423 − −

Direct labor 805,636 617,852 609,459Hauling, shiploading and

handling costs (Note 21) 425,909 128,503 179,088Production overhead 369,227 487,624 440,746Others 81,219 85,261 143,469

17,091,144 13,893,409 16,914,293Cost of ServicesMaterials and supplies 6,944,590 7,360,305 7,722,466Depreciation and amortization

(Notes 12, 13 and 14) 3,216,474 2,090,768 2,003,746Direct labor 2,965,631 2,127,668 1,845,916Spot purchases of electricity 2,495,357 107,406 4,118,591Outside services 2,225,965 2,918,717 2,434,698Fuel and lubricants 1,618,843 1,577,839 1,669,150Production overhead 1,494,561 1,554,895 1,130,221Hauling, shiploading and

handling costs (Note 21) 127,518 110,270 68,582Others 190,985 62,489 90,304

21,279,924 17,910,357 21,083,674P=38,371,068 P=31,803,766 P=37,997,967

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Depreciation, depletion and amortization included in the consolidated statements of incomefollow:

2016 2015 2014Included in:

Cost of energy sales P=2,439,553 P=1,298,297 P=1,189,196Cost of coal mining 1,183,837 552,096 892,296Cost of construction contracts

and others 776,316 791,720 813,560Cost of nickel mining 78,049 193,048 147,530Cost of real estate development 605 751 990Operating expenses (Note 25) 914,462 798,682 793,505

P=5,392,822 P=3,634,594 P=3,837,077Depreciation, depletion and amortization of:

Property, plant and equipment (Note 13) P=5,963,672 P=4,093,953 P=3,975,963

Other noncurrent assets (Note 14) 50,551 42,661 35,476

Investment properties (Note 12) 22,045 8,970 8,846

P=6,036,268 P=4,145,584 P=4,020,285

Depreciation, depletion and amortization capitalized in ending inventories and mine propertiesincluded in ‘Property, Plant and Equipment’ amounted to P=643.45 million, P=510.99 million andP=183.21 million in 2016, 2015 and 2014, respectively.

Salaries, wages and employee benefits included in the consolidated statements of income follow:

2016 2015 2014Presented under:

Costs of constructioncontracts P=2,984,612 P=2,152,364 P=1,856,256

Operating expenses (Note 25) 1,527,526 1,276,762 1,261,471Costs of mining 786,655 593,156 599,119

P=5,298,793 P=4,022,282 P=3,716,846


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25. Operating Expenses


2016 2015 2014Government share (Note 31) P=2,649,979 P=1,796,047 P=1,858,190Salaries, wages and employee

benefits (Notes 23 and 24) 1,527,526 1,276,762 1,261,471Depreciation and amortization

(Notes 3, 12, 13, 14 and 24) 914,462 798,682 793,505Taxes and licenses 869,076 762,003 583,316Commission 624,283 599,319 616,675Repairs and maintenance 562,020 348,412 297,301Advertising and marketing 505,228 549,629 397,549Outside services 493,887 466,538 615,821Provisions for doubtful accounts,

probable losses and loss onsale of assets(Notes 7, 10, and 14) 217,632 960,954 514,248

Rent (Note 37) 216,635 82,382 127,680Communication, light and water 148,154 156,624 159,154Insurance 129,704 105,185 80,720Entertainment, amusement and

recreation 93,214 112,199 102,660Transportation and travel 91,549 105,961 104,779Supplies 75,694 59,063 69,640Association dues 44,462 72,696 116,161Loss on write-down of property,

plant and equipment(Notes 3 and 13) 14,316 16,088 111

Miscellaneous 439,041 278,324 391,242P=9,616,862 P=8,546,868 P=8,090,223

26. Finance Income

Finance income is derived from the following sources:

2016 2015 2014Interest on:

Real estate installmentreceivables (Note 7) P=205,923 P=288,260 P=216,089

Short-term placements (Note 4) 107,414 117,246 149,674Bank savings account

(Note 4) 121,629 53,007 65,694Investment from sinking fund (Note 10) 11,359 8,993 6,691

P=446,325 P=467,506 P=438,148

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27. Finance Costs

The finance costs are incurred from the following:

2016 2015 2014Long-term debt (Note 19) P=463,422 P=226,138 P=304,260Short-term debt (Note 15) 421,413 268,086 112,417Amortization of debt issuance

cost (Note 19) 30,450 39,566 16,361Accretion on unamortized

discount on liabilities forpurchased land and provisionfor decommissioning and siterehabilitation(Notes 16 and 20) 39,697 11,926 34,050

P=954,982 P=545,716 P=467,088

28. Other Income - net


2016 2015 2014Income from commissioning P=595,343 P=58,327 P=−Forfeitures and cancellation of real estate

contracts 490,940 319,776 496,641Recoveries from insurance claims 218,089 157,651 82,552Sales of fly ash 129,153 133,119 122,600Rental income (Note 12) 87,794 114,224 237,802Gain on sale of undeveloped land

(Note 9) 73,182 − 284,287Write-off of accrued expenses 40,925 − −Income from default payments 15,588 31,128 45,045Pension income (Note 23) 10,757 15,095 1,967Dividend income (Notes 5 and 6) 4,282 4,288 7,000Management fee (Note 21) 1,362 5,112 3,785Gain on sale of property, plant and

equipment and investment properties- net (Notes 12 and 13) 390 90,922 127,201

Reversal of allowance for doubtfulaccounts (Notes 6, 7, and 14) − 10,684 2,573

Others 83,734 61,707 106,002P=1,751,539 P=1,002,033 P=1,517,455

Income from commissioningCommissioning income pertains to net revenue earned by the Group from the testing phase of the2X150 MW CFB coal-fired thermal power plant during the first quarter of 2016 and for the wholeyear 2015.

Recoveries from insurance claimsRecoveries from insurance claims pertain to the amount reimbursed by the insurer on insuredequipment which were damaged.


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OthersOthers include penalty charges, holding fees, fees for change in ownership, transfer fees,restructuring fees, lease facilitation fees and others.

29. Income Tax

The provision for (benefit from) income tax shown in the consolidated statements of incomeconsists of:

2016 2015 2014Current P=1,495,548 P=2,723,212 P=1,291,178Deferred 738,306 819,336 (244,451)Final 43,668 62,282 41,549

P=2,277,522 P=3,604,830 P=1,088,276

The components of net deferred tax assets as of December 31, 2016 and 2015 follow:

2016 2015Deferred tax assets on:

Allowance for:Doubtful accounts P=473,303 P=428,442

Pension liabilities - net 33,467 30,710Inventory obsolescence 20,218 19,846Impairment 11,705 13,526

Accruals of expenses 5,880 15,843Provision for decommissioning and site

Rehabilitation 3,113 2,675NOLCO 545 490Construction contracts price adjustments 165 69,213MCIT − 2,062Others 1,454 129

549,850 582,936Deferred tax liabilities on:

Unrealized foreign exchange loss (14,216) (9,600)Unrealized gross profit on construction contracts (119,617) (29,477)

(133,833) (39,077)P=416,017 P=543,859

The components of net deferred tax liabilities as of December 31, 2016 and 2015 follow:

2016 2015Deferred tax assets on:

Allowance for:Doubtful accounts P=21,421 P=21,427Probable losses 7,648 7,648

Unamortized discount on payable to landowners 5,451 4,096Impairment losses − 669

Provision for decommissioning and site rehabilitation − 913

NOLCO − 261Others 254 8,466

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2016 201534,774 43,480

Deferred tax liabilities on:Excess of book over tax income pertaining to

real estate sales (2,365,667) (1,774,916)Effect of business combination (1,370,931) (1,393,424)Capitalized interest on real estate for sale and

development deducted in advance (307,126) (238,169)Unrealized foreign exchange gain - net (107,875) (133,921)Unrealized gross profit on construction contracts (119,981) (82,276)Unamortized transaction cost on loans payable (27,313) (35,142)Pension assets − (7,227)Mine rehabilitation (5,809) (6,089)Others (1,639) (1,392)

(4,306,341) (3,672,556)(P=4,271,567) (P=3,629,076)

The Group has the following deferred taxes on deductible temporary differences, NOLCO andMCIT that are available for offset against future taxable income or tax payable for which have notbeen recognized:

2016 2015NOLCO P=3,086,391 P=3,562,698Allowance for impairment losses 37,403 37,556Allowance for probable losses 15,887 16,922Allowance for doubtful accounts 9,164 12,979Provision for retirement 9,059 8,160Mine rehabilitation 6,864 6,888Pension liabilities 5,097 7,747MCIT 2,814 3,375Accruals − 1,142Unrealized forex losses − 47,891

Deferred tax assets are recognized only to the extent that taxable income will be available againstwhich the deferred tax assets can be used.

The reconciliation of the statutory income tax rate to the effective income tax rate follows:

2016 2015 2014Statutory income tax rate 30.00% 30.00% 30.00%Adjustments for:

Tax-exempt income (18.66) (11.79) (24.02)Changes in unrecognized

deferred tax assets 2.98 2.96 8.54Nontaxable equity in net

earnings of associates andjointly controlled entities (2.92) (3.47) (0.01)

Foreign exchange losses(gains) - net (0.62) (0.20) 0.03

Excess costs of constructioncontracts 0.43 0.35 1.11

(Forward)


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2016 2015 2014Nondeductible expenses 0.23 0.13 1.06Gain on sale of investment

subjected to final tax at alower rate - net (0.17) (0.79) −

Interest income subjected tofinal tax at a lower rate - net (0.14) (0.10) (0.15)

Depletion of mining rights 0.09 0.17 1.06Dividend income (0.01) (0.01) (10.49)Stock transaction costs − − (0.19)MCIT − − (0.05)NOLCO − 0.10 0.15Others 0.29 0.21 0.27

Effective income tax rate 11.50% 17.56% 7.31%

Board of Investments (BOI) IncentivesPDI - New Developer of Mass Housing ProjectOn various dates in 2015, several projects of PDI were registered on a non-pioneer status with theBOI as these projects fall under the infrastructure (Mass Housing Projects) listing of theInvestment Priorities Plan.

Under the terms of its registrations with BOI, PDI is entitled, among others, to the followingincentives:a. Income Tax Holiday (ITH) for a period of three (3) to four (4) years;b. Employment of foreign officials may be allowed in supervisory, technical or advisory

positions for five (5) years from date of registration; andc. Importation of consigned equipment for a period of ten (10) years from date of registration,

subject to the posting of re-export bond.

SMPC - Expanding Producer of CoalPanian MinesiteOn September 26, 2008, BOI issued in favor of SMPC a Certificate of Registration (COR) as anExpanding Producer of Coal in accordance with the provisions of the Omnibus Investments Codeof 1987. As a registered entity, SMPC is entitled to certain fiscal and non-fiscal incentives whichinclude among others an ITH for a period of six (6) years from September 2008 or actual start ofoperations whichever is earlier, but in no case earlier than the date of registration.

On May 1, 2014, the BOI approved SMPC’s additional year of ITH entitlement from September2014 to September 2015. On August 12, 2014, the BOI approved SMPC’s additional year of ITHentitlement from September 2015 to September 2016.

SMPC’s Certificate of Registration for Panian Minesite has expired on September 26, 2016simultaneous to the full depletion of the mineable coal reserve.

Narra and Molave MinesiteOn August 31, 2012 and February 24, 2016, BOI has granted SMPC COR as New Producer ofCoal in accordance with the provisions of the Omnibus Investments Code of 1987 in relation tothe operation in Narra Minesite (formerly Bobog) (COR No. 2012-183) and Molave Minesite(COR No. 2016-042).

As a registered entity, SMPC is entitled to ITH incentive for four (4) years from January 2015 andJanuary 2017 for Narra Minesite and Molave Minesite or actual start of commercial operations,whichever is earlier, but in no case earlier than the date of registration. Income qualified for ITH

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availment shall not exceed by more than 10% the projected income represented by SMPC in itsapplication provided the project’s actual investments and employment match SMPC’srepresentation in the application.

SMPC availed of tax incentive in the form of ITH on its income under registered activitiesamounting to P=2,747.09 million, P=2,339.37 million and P=2,686.91 million in 2016, 2015 and 2014,respectively.

SCPC - New Operator of the 600-MW Calaca Coal-Fired Power PlantOn April 19, 2010, SCPC was registered with the BOI as New Operator of the 600-MW CalacaCoal-Fired Power Plant on a Non-Pioneer Status in accordance with the provisions of theOmnibus Investments Code of 1987. In accordance with its registration, SCPC shall be entitledto, among others, an ITH for four (4) years from April 2011 or actual start of commercialoperations, whichever is earlier, but in no case earlier than the date of registration. The ITHincentives shall be limited to the revenue generated from the sales of electricity of the 600 MWBatangas Coal-Fired Thermal Power Plant.

On January 7, 2011, BOI approved SCPC’s request for an earlier application of the ITH to beeffective January 1, 2010.

On December 17, 2013, BOI approved SCPC’s request for the extension for one (1) year of theITH for the period January 1 to December 31, 2014. Starting January 1, 2015, SCPC is in taxposition applying regular corporate income tax.

SLPGC - New Operator of 300-MW Batangas Coal Fired Power PlantOn June 21, 2012, the application for registration of SLPGC as new operator of 300 MW(Phase 1) Batangas Coal Fired Power Plant on a Non-Pioneer Status under the OmnibusInvestments Code of 1987 (Executive Order No. 226) was approved. As a registered entity,SLPGC is entitled to certain fiscal and non-fiscal incentives which include among others an ITHfor a period of four (4) years from January 2015 or actual start of commercial operations,whichever is earlier but in no case earlier than the date of registration;

SLPGC requested for the deferment of the start of commercial operation and on June 29, 2016, theBOI granted the request for the movement of the reckoning period for the ITH incentive fromJanuary 1, 2015 to January 1, 2016 due to the delay arising from interconnection issue which isconsidered as an operational force majeure. During 2016, SLPGC availed of tax incentive in theform of ITH on its income under registered activities amounting to P=842.59 million.

DMCI Masbate - New Operator of a 24.4 MW Diesel Power Plant in Mobo, MasbateOn September 23, 2010, the BOI approved the registration of DMCI Masbate as New Operator ofa 24.4 MW Diesel Power Plant in Mobo, Masbate on a Pioneer status under the OmnibusInvestment Code of 1987. As a registered entity, DMCI Masbate is entitled to certain fiscal andnon-fiscal incentives which include, among others, an ITH on the registered operations of theentity. Other incentives with no specific number of years of entitlement may be enjoyed for amaximum of ten (10) years from the start of commercial operation/date of registration.DMCI Masbate availed of tax incentive in the form of ITH on its income under registeredactivities amounting to P=53.45 million and P=72.02 million in 2016 and 2015, respectively.


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DPC - BOINew Operator of 14MW Diesel-Fired Power PlantOn April 28, 2015, the BOI issued the Certificate of Registration (COR) to DPC as ExpandingOperator of a 14MW Diesel-Fired Power Plant on a Non-Pioneer Status in accordance withOmnibus Investments Code of 1987 (Executive Order No. 226). This effectively transfersincentives previously granted to DMCI-Palawan to DPC.

As a registered entity, DPC is entitled to certain fiscal and non-fiscal incentives which includeamong others an ITH for a period of three (3) years starting October 3, 2014 but subject to ataxable income from sales volume of 20.5 gigawatt-hours per year of the registered activity. Thisvolume base is to be prorated over 365 days to compute the taxable income portion of theregistered activity for every quarter and/or annual taxable periods. In accordance with RevenueMemorandum Circular 14-2012, the BOI also issued a Certificate of ITH Entitlement (COE) onMay 4, 2015 as a requirement by the BIR to avail of the income tax incentive.

New Operator of 3x1.23MW Diesel-Fired Power Plant in Sultan KudaratOn January 15, 2016, the BOI issued the COR to DPC as New Operator of 3x1.23MW Diesel-Fired Power Plant on a Non-Pioneer Status under the Omnibus Investments Code of 1987(Executive Order No. 226).

As a registered entity, DPC is entitled to certain fiscal and non-fiscal incentives which include,among others, an ITH for a period of ten (10) years from January 15, 2016 or actual start ofcommercial operations, whichever is earlier but in no case earlier than the date of registration.

New Operator of 2x4.95MW Bunker-Fired Power Plant in Iraan, Aborlan, PalawanOn November 23, 2016, the BOI issued the COR to DPC as New Operator of 2x4.95MW Bunker-Fired Power Plant on a Pioneer Status under the Omnibus Investments Code of 1987 (ExecutiveOrder No. 226).

As a registered entity, DPC is entitled to certain fiscal and non-fiscal incentives which include,among others, an ITH for a period of six (6) years from December 1, 2016 or actual start ofcommercial operations, whichever is earlier but in no case earlier than the date of registration.

DPC availed of tax incentive in the form of ITH on its income under registered activitiesamounting to P=53.42 million and P=46.17 million in 2016 and 2015, respectively.

30. Earnings Per Share

The following table presents information necessary to calculate basic earnings per share on netincome attributable to equity holders of the Parent Company (in thousands except basic/dilutedearnings per share):

2016 2015 2014Net income attributable to equity holders

of Parent Company P=12,184,942 P=12,834,666 P=10,775,334Divided by weighted average number

of common shares 13,277,470 13,277,470 13,277,470Basic/diluted earnings per share P=0.92 P=0.97 P=0.81

There were no dilutive potential ordinary shares. Accordingly, no diluted earnings per share ispresented in 2016, 2015 and 2014.

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31. Coal Operating Contract with DOE

On July 11, 1977, the Government, through its former Energy Development Board, awarded a35-year COC to a consortium led by Vulcan Industrial & Mineral Exploration Corporation andSulu Sea Oil Development Corporation that subsequently assigned said COC to SMPC on April 7,1980. On July 27, 1977, Presidential Decree (PD) 972 was amended by PD 1174: (a) increasingcoal operators’ maximum cost recovery from an amount not exceeding 70% to 90% of the grossproceeds from production, and (b) increasing the amount of a special allowance for Philippinecorporations from an amount not exceeding 20% to 30% of the balance of the gross income, afterdeducting all operating expenses. As a result, SMPC's COC was subsequently amended onJanuary 16, 1981 reflecting said changes.

On June 8, 1983, the Ministry of Energy (now DOE), issued a new COC to SMPC, incorporatingthe foregoing assignment and amendments. The COC gives SMPC the exclusive right to conductexploration, development and coal mining operations on Semirara Island until July 13, 2012. OnMay 13, 2008, the DOE granted SMPC’s request for an extension of its COC for another 15-yearor until July 14, 2027.

On November 12, 2009, the COC was amended further, expanding its contract area to includeportions of Caluya and Sibay islands, Antique, covering an additional area of 5,500 hectares and300 hectares, respectively.

On April 29, 2013, the DOE issued a new COC to SMPC, which grants it the exclusive right toconduct exploration, development and coal mining operations in the municipality of Bulalacao,province of Oriental Mindoro, up to a maximum of 36 years from its effective date. The COCcovers two coal-bearing parcels of land covering areas of 2,000 and 5,000 hectares, respectively.

On June 7, 2013, the DOE issued a new COC to SMPC, which grants it the exclusive right toconduct exploration, development and coal mining operations in the municipalities of Maitum andKiamba, province of Sarangani, up to a maximum of 36 years from its effective date.The COC covers a coal-bearing parcel of land covering area of 5,000 hectares.

In return for the mining rights granted to SMPC, the Government is entitled to receive annualroyalty payments consisting of the balance of the gross income after deducting operating expenses,operator’s fee and special allowance. SMPC’s provision for DOE’s share under this contract andto the different LGU in the province of Antique, under the provisions of the Local GovernmentCode of 1991, amounted to P=2.65 billion, P=1.80 billion and P=1.86 billion in 2016, 2015 and 2014,respectively, included under “Operating expenses” in the consolidated statements of income(see Note 25). Payable to DOE and LGU, amounting to P=1.65 billion and P=1.12 billion as ofDecember 31, 2016 and 2015 are included under the “Accounts and other payables” account in theconsolidated statements of financial position (see Note 17).

The DOE, through the Energy Resources Development Bureau, approved the exclusion of coalproduced and used solely by SMPC to feed its power plant in determining the amount due toDOE.


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32. Material Partly-Owned Subsidiary

The financial information of the Group’s subsidiaries with material non-controlling interest (NCI)are provided below. These information are based on amounts before intercompany eliminations.

Semirara Mining and Power Corporation (SMPC) and Subsidiaries

2016 2015Consolidated statements of financial positionCurrent assets P=21,154,330 P=15,092,708Noncurrent assets 44,606,147 42,064,329Total assets 65,760,477 57,157,037Current liabilities 15,652,537 15,555,722Noncurrent liabilities 15,821,628 14,700,233Total liabilities 31,474,165 30,255,955Equity P=34,286,312 P=26,901,082

Consolidated statements of comprehensive incomeRevenue P=36,584,375 P=24,680,171Cost of sales 18,701,021 10,542,092Gross profit 17,883,354 14,138,079Operating expenses (4,998,866) (4,389,084)Other income (expenses) 19,262 (80,002)Income before income tax 12,903,750 9,668,993Provision for income tax 863,080 1,182,084Net income 12,040,670 8,486,909Other comprehensive income (loss) 7,106 (17,038)Total comprehensive income P=12,047,776 P=8,469,871

Cash flows informationOperating P=16,420,477 P=10,683,869Investing (6,689,483) (5,115,628)Financing (7,316,858) (4,467,783)Effect of exchange rate changes on cash and cash

equivalents (166,705) (37,975)Net increase in cash and cash equivalents P=2,247,431 P=1,062,483

The accumulated balances of material noncontrolling interest as at December 31, 2016 and 2015amounted to P=15,522.25 million and P=12,099.31 million, respectively. Dividends paid tononcontrolling interests amounted to P=1,867.23 million and P=2,203.38 million in 2016 and 2015,respectively.

33. Business Combination

Acquisition of TMM, URHI, UNC, NRHI and BNCIn June 2014, organizational meetings were held for the above entities, wherein the voting rightsheld by Atlas were assigned to the representative of the Group. In that same meeting,management team from the Group were assigned as key officers of the above entities. Further, onJuly 11, 2014, a Memorandum of Agreement (MOA) was entered between TMC and Atlas, whichset out the material terms under which the parties have agreed to hold their respective investmentsin respect of the exploration, development and utilization of Berong Mineral Properties defined inthe joint venture agreement dated January 9, 2005. The said MOA sets out the rights of each of

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Atlas and TMC including the assignment of board seats, majority of which were assigned to TMCand delegation to TMC of the day-to-day operations and critical decision making in running themining operations.On June 19, 2014, the Group assessed that its investment in these entities be accounted for asinvestment in subsidiaries, instead of associates, in accordance with the guidance set out byPFRS 10. The assets, liabilities and equity of these entities have been consolidated in the financialstatements of the Group on June 19, 2014, the date when control is obtained.

The following table summarizes the amounts of the assets acquired and liabilities assumedrecognized at the acquisition date:

Fair valuerecognized on

acquisition dateAssets

Cash and cash equivalents P=410,978Trade and other receivables 131,047Inventory 185,562Other current assets 129,296Property and equipment 560,247Mining properties 1,588,726Deferred tax assets 964Other noncurrent assets 165,230

3,172,050Liabilities

Trade and other payables 983,052Provision for mine rehabilitation and decommissioning 2,364Pension liabilities 11,332Deferred tax liabilities 386,405

1,383,153Fair value of net assets acquired P=1,788,897

The Group assessed that the carrying values of the assets acquired and liabilities assumedapproximates fair values except for the mining properties which were valued using the incomeapproach, discounted cash flow (DCF) method.

Total gain from remeasurement of previously held interests in TMM, URHI, UNC, NRHI andBNC amounted to P=54.36 million in 2014, shown as part of ‘Gain from remeasurement ofpreviously held interest’ in the consolidated statements of income.

Excess of fair values of net identifiable assets over the consideration paid on the businesscombination of TMM, URHI, UNC, NRHI and BNC follows:

Fair value of net assets acquired P=1,788,897Less:

Fair value of previously held interest 1,198,157Fair value of noncontrolling interest 333,243

Excess of fair value of identifiable net assets over consideration (P=257,497)

Excess of fair value of net identifiable assets over the consideration paid is shown as a ‘Gain onbargain purchase’ in the consolidated statements of income.


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From the date of acquisition, TMM, URHI, UNC, NRHI and BNC has contributedP=1,040.80 million of revenue and other income from nickel mining and P=201.75 million to netincome of the Group in 2014. If the combination had taken place at the beginning of the year in2014, contributions to revenue and other income from nickel mining operations would have beenP=2,166.55 million, while contributions to net income would have been P=423.60 million in 2014.

Acquisition of ENKIn 2013, the Parent Company’s investment in ENK was previously treated as a joint ventureinvestment with D&A as the strategic and financial operating decisions relating to the economicactivities of ENK require the unanimous consent of both parties.

On March 25, 2014, the Parent Company purchased from D&A Income Ltd. the remaining 40%interest in ENK and its subsidiaries for approximately P=3.13 billion, making ENK and itswholly owned foreign and local subsidiaries, wholly owned subsidiaries of the Parent Company.The business combination was completed on April 3, 2014 when the directors representing D&Aresigned and the positions were occupied by the representatives of the Parent Company.

The Group assessed that its investment in ENK be accounted for as investment in subsidiary, inaccordance with the guidance set out by PFRS 10. The assets, liabilities and equity of ENK havebeen consolidated in the financial statements of the Group on April 3, 2014, the date when controlis obtained.

The following table summarizes the amounts of the assets acquired and liabilities assumedrecognized at the acquisition date:

Fair valuerecognized on

acquisition dateAssets

Cash and cash equivalents P=692,244Trade and other receivables 22,577Property and equipment 59,725Mining properties and other noncurrent assets 4,120,031

4,894,577Liabilities

Trade and other payables 75,879Provision for mine rehabilitation and decommissioning 21,381Deferred tax liabilities 1,064,384

1,161,644Fair value of net assets acquired P=3,732,933

The Group assessed that the carrying values of the assets acquired and liabilities assumedapproximates fair values except for the mining properties which were valued using the incomeapproach, discounted cash flow (DCF) method.

Total gain from remeasurement of previously held interests in ENK amounted to P=206.73 millionin 2014, shown as part of ‘Gain from remeasurement of previously held interest’ in theconsolidated statements of income.

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Goodwill recognized on the business combination of ENK follows:

Fair value of net assets acquired P=3,732,933Less:

Fair value of previously held interest 2,239,760Consideration paid 3,130,603

Goodwill (P=1,637,430)

The goodwill recognized amounting to P=1,637.43 million comprises the expected cash flowsgenerated from the mining rights and properties of ENK, particularly attributable to CGUs ofZDMC and ZCMC. The acquisition of ENK will enable the Group to strengthen its strategicobjective in the nickel mining segment. With a more diversified portfolio, the Group expects togenerate revenue from its nickel mining segment. These recurring revenues can, in turn, be usedto provide internally generated funding for other projects.

From the date of acquisition, ENK has contributed P=448.88 million of revenue and other incomefrom nickel mining and P=131.29 million to net income of the Group in 2014. If the combinationhad taken place at the beginning of the year in 2014, contributions to net income would have beenP=124.14 million in 2014.

34. Cumulative Translation Adjustment

Cumulative translation adjustment represents exchange differences arising from the translation offinancial statements of the foreign subsidiaries, TMC, whose functional currency is the BritishPounds and ENK (including EN Iberia, EN Spain, Rusina, EN Holland and EN Philland) withfunctional currency of US Dollar.

In 2014 and 2016, the cumulative translation adjustment pertaining to TMC and ENK,respectively, were closed to profit or loss upon loss of control in TMC and disposal of ENK(see Note 33).

35. Operating Segments

Business Segment InformationFor management purposes, the Group is organized into seven (7) major business units that arelargely organized and managed separately according to industry.

Construction - engaged in various construction component businesses such as production andtrading of concrete products, handling steel fabrication and electrical and foundation works.

Coal mining - engaged in the exploration, mining and development of coal resources on SemiraraIsland in Caluya, Antique.

Nickel mining - engaged primarily in mining and selling nickel ore from existing stockpile inAcoje mines in Zambales and Berong mines in Palawan.

Real estate - focused in mid-income residential development carried under the brand nameDMCI Homes.


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On-grid Power - engaged in power generation through coal-fired power plants providingelectricity to distribution utilities and indirect members of WESM.

Off-grid Power - engaged in power generation through satellite power plants providing electricityto areas that are not connected to the main transmission grid.

Water - includes share in net earnings from associates, MWHCI and Subic Water, which areengaged in water services for the west portion of Metro Manila and Olongapo City and Subic BayFreeport, respectively.

No operating segments have been aggregated to form the above reportable operating segments.Management monitors the operating results of its business units separately for the purpose ofmaking decisions about resource allocation and performance assessment. Segment performance isevaluated based on revenue, earnings before interest, income taxes and depreciation andamortization (EBITDA) and operating profit or loss, and is measured consistently in theconsolidated financial statements.

The Group’s management reporting and controlling systems use accounting policies that are thesame as those described in Note 2 in the summary of significant accounting policies under PFRS.

EBITDA is the measure of segment profit (loss) used in segment reporting and comprises grossprofit, selling and general administrative expenses, research and non-capitalized developmentcosts, other operating income (expense) - net, as well as other financial income (expense) - net.

Segment assets principally comprise all assets. The industrial business segments' assets excludeincome tax assets, assets from defined benefit plans and certain financial assets.

Segment liabilities principally comprise all liabilities. The industrial business segments' liabilitiesexclude income tax liabilities, liabilities from defined benefit plans and certain financial liabilities.

The Group has no significant customer which contributes 10.00% or more to the revenues of theGroup.

Group financing (including finance costs and finance income) and income taxes are also managedper operating segments. Transfer prices between operating segments are on an arm’s length basisin a manner similar to transactions with third parties.

Business SegmentsThe following tables present revenue, net income (loss) and depreciation and amortizationinformation regarding business segments for the years ended December 31, 2016, 2015 and 2014and property, plant and equipment additions, total assets and total liabilities for the businesssegments as of December 31, 2016, 2015 and 2014:

- 113

-

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Yea

r en

ded

Dec

embe

r 31

, 201

6C

onst

ruct

ion

and

Oth

ers*

Coa

l Min

ing

Nic

kel M

inin

gR

eal E

stat

eD

evel

opm

ent

Pow

erO

n G

rid

Pow

erO

ff G

rid

Wat

erPa

rent

Com

pany

Tot

alR

even

ueP=1

4,06

8,93

9P=2

0,07

9,46

2P=1

,573

,086

P=10,

369,

924

P=16,

504,

913

P=2,3

02,4

52P=−

P=−P=6

4,89

8,77

6E

quity

in n

et e

arni

ngs o

f ass

ocia

tes

−−

−−

−−

1,92

6,33

7−

1,92

6,33

7O

ther

inco

me

(exp

ense

) - n

et39

,281

(180

,270

)43

,229

717,

150

679,

858

44,5

07−

1,27

31,

345,

028

14,1

08,2

2019

,899

,192

1,61

6,31

511

,087

,074

17,1

84,7

712,

346,

959

1,92

6,33

71,

273

68,1

70,1

41C

ost o

f sal

es a

nd se

rvic

es (b

efor

e de

prec

iatio

n an

dam

ortiz

atio

n11

,502

,888

9,82

9,66

244

1,59

95,

475,

131

5,60

0,30

01,

043,

128

−−

33,8

92,7

08G

ener

al a

nd a

dmin

istr

ativ

e ex

pens

e (b

efor

ede

prec

iatio

n an

d am

ortiz

atio

n)41

6,79

23,

188,

888

730,

525

2,41

8,78

91,

213,

733

670,

978

−62

,695

8,70

2,40

011

,919

,680

13,0

18,5

501,

172,

124

7,89

3,92

06,

814,

033

1,71

4,10

6–

62,6

9542

,595

,108

EB

ITD

A2,

188,

540

6,88

0,64

244

4,19

13,

193,

154

10,3

70,7

3863

2,85

31,

926,

337

(61,

422)

25,5

75,0

33O

ther

inco

me

(exp

ense

s)Fi

nanc

e in

com

e (c

ost)

(Not

es 2

6 an

d 27

)(2

8,33

9)(1

87,4

63)

(9,0

81)

(46,

566)

(328

,294

)(4

,958

)−

96,0

44(5

08,6

57)

Gai

n on

sale

of i

nves

tmen

ts (N

otes

11

and

28)

−−

−13

1,49

8−

−−

−13

1,49

8D

epre

ciat

ion

and

amor

tizat

ion

(Not

es 2

4 an

d 25

)(8

25,5

23)

(1,2

03,5

05)

(307

,425

)(3

42,2

15)

(2,5

35,8

64)

(172

,981

)−

(5,3

09)

(5,3

92,8

22)

Pret

ax in

com

e1,

334,

678

5,48

9,67

412

7,68

52,

935,

871

7,50

6,58

045

4,91

41,

926,

337

29,3

1319

,805

,052

Prov

isio

n fo

r in

com

e ta

x(N

ote

29)

358,

957

12,0

1913

1,37

590

1,31

982

6,14

731

,014

−16

,691

2,27

7,52

2N

et in

com

eP=9

75,7

21P=5

,477

,655

(P=3,

690)

P=2,0

34,5

52P=6

,680

,433

P=423

,900

P=1,9

26,3

37P=1

2,62

2P=1

7,52

7,53

0N

et in

com

e at

trib

utab

le to

non

-con

trol

ling

inte

rest

P=29,

627

P=2,3

62,3

63P=6

0,89

4P=−

P=2,8

89,7

04P=−

P=−P=−

P=5,3

42,5

88N

et in

com

e at

trib

utab

le to

equ

ity h

olde

rs o

f the

Pare

nt C

ompa

nyP=9

46,0

94P=3

,115

,292

(P=64

,584

)P=2

,034

,552

P=3,7

90,7

29P=4

23,9

00P=1

,926

,337

P=12,

622

P=12,

184,

942

Segm

ent A

sset

sC

ash

P=1,3

15,2

24P=4

,298

,080

P=1,3

00,5

26P=3

,861

,944

P=2,6

94,9

24P=2

13,6

62P=−

P=5,0

53,7

46P=1

8,73

8,10

6R

ecei

vabl

es4,

281,

336

2,32

9,04

010

0,91

97,

082,

177

3,23

5,48

267

3,46

0−

10,1

6617

,712

,580

Inve

ntor

ies

1,10

3,22

22,

960,

195

267,

845

31,2

68,4

362,

426,

266

209,

040

−−

38,2

35,0

04In

vestm

ent i

n as

soci

ates

and

join

t ven

ture

73,6

1352

,385

−26

8,26

8−

−−

12,3

66,7

7812

,761

,044

Prop

erty

, pla

nt a

nd e

quip

men

t2,

143,

003

10,2

12,6

655,

411,

375

1,06

4,84

134

,328

,632

2,57

6,63

6−

14,5

5055

,751

,702

Oth

ers

4,12

7,65

697

8,20

72,

415,

505

3,75

1,50

63,

020,

508

449,

521

−92

,752

14,8

35,6

55P=1

3,04

4,05

4P=2

0,83

0,57

2P=9

,496

,170

P=47,

297,

172

P=45,

705,

812

P=4,1

22,3

19P=–

P=17,

537,

992

P=158

,034

,091

Segm

ent L

iabi

litie

sC

usto

mer

s' ad

vanc

es a

nd d

epos

itsP=−

P=25,

281

P=3P=8

,254

,848

P=−P=−

P=−P=−

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6,15

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- 114

-

*SGVFS022831*

Yea

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Dec

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5C

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13,2

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Cos

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11,4

14,8

325,

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723,

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6,80

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293,

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62,

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- 115

-

*SGVFS022831*

Yea

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, 201

4C

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d O

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RCP


- 116 -

*SGVFS022831*

Geographic InformationAnalysis of sales and revenue by geographical locationThe financial information about the operations of the coal mining as of December 31, 2016, 2015and 2014 reviewed by the management follows:

Customer Location 2016 2015 2014Revenue

Local P=5,742,358 P=5,861,577 P=4,925,269Export 14,337,104 5,920,248 11,351,661

P=20,079,462 P=11,781,825 P=16,276,930

Substantially all revenue from external customers are from open cut mining and sales of thermalcoal. Local and export classification above is based on the geographic location of the customer.Customers on the export sales are significantly from China.

36. Financial Risk Management Objectives and Policies

The Group’s principal financial instruments comprise interest-bearing loans and borrowings. Themain purpose of these financial instruments is to raise financing for its operations and capitalexpenditures. The Group has various other financial assets and liabilities, such as receivables andpayables which arise directly from its operations.

The main risks arising from the use of financial instruments are liquidity risk, market risk andcredit risk. The Group’s BOD reviews and approves policies for managing each of these risks andthey are summarized below.

a. Liquidity RiskLiquidity risk is the risk that an entity will encounter difficulty in meeting obligationsassociated with financial liabilities. The Group seeks to manage its liquidity profile to be ableto service its maturing debts and to finance capital requirements. The Group maintains a levelof cash and cash equivalents deemed sufficient to finance operations.

A significant part of the Group’s financial assets that are held to meet the cash outflowsinclude cash equivalents and accounts receivables. Although accounts receivables arecontractually collectible on a short-term basis, the Group expects continuous cash inflows. Inaddition, although the Group’s short-term deposits are collectible at a short notice, the depositbase is stable over the long term as deposit rollovers and new deposits can offset cashoutflows.

Moreover, the Group considers the following as mitigating factors for liquidity risk:· It has available lines of credit that it can access to answer anticipated shortfall in sales and

collection of receivables resulting from timing differences in programmed inflows andoutflows.

· It has very diverse funding sources.· It has internal control processes and contingency plans for managing liquidity risk. Cash

flow reports and forecasts are reviewed on a weekly basis in order to quickly addressliquidity concerns. Outstanding trade receivables are closely monitored to avoid past duecollectibles.

- 117 -

*SGVFS022831*

· The Group regularly evaluates its projected and actual cash flows. It also continuouslyassesses conditions in the financial markets for opportunities to pursue fund-raisingactivities. Fund-raising activities may include bank loans and capital market issues bothon-shore and off-shore which is included in the Group’s corporate planning for liquiditymanagement.

The following table summarizes the maturity profile of the Group’s financial assets andliabilities as of December 31, 2016 and 2015, based on contractual undiscounted cash flows.The table also analyses the maturity profile of the Group’s financial assets in order to providea complete view of the Group’s contractual commitments.

2016

On DemandWithin1 year

Beyond 1year to 2

years

Beyond 2years to 3

yearsBeyond 3

years TotalLoans and ReceivableCash and cash equivalents P=18,738,106 P=− P=− P=− P=− P=18,738,106Receivables Trade: Real estate 57,772 4,124,225 955,106 308,864 919,454 6,365,421 General construction 1,749,433 2,372,124 − − − 4,121,557 Electricity sales 3,152,315 461,259 − − − 3,613,574 Coal mining 2,315,442 − − − − 2,315,442 Nickel mining 35,238 − − − − 35,238 Merchandising and others 58,582 − − − − 58,582 Receivables from related parties 130,614 − − − − 130,614 Other receivables 1,072,152 − − − − 1,072,152Security deposits − − − 5,325 − 5,325Refundable deposits − 259,756 88,518 − − 348,274

27,309,654 7,217,364 1,043,624 314,189 919,454 36,804,285AFS financial assetsQuoted securities 80,139 − − − − 80,139Unquoted securities 5,116 − − − − 5,116

85,255 − − − − 85,255Total undiscounted financial assets 27,394,909 7,217,364 1,043,624 314,189 919,454 36,889,540

Other Financial LiabilitiesShort-term debt − 2,621,109 − − 2,621,109Accounts and other payables* − 12,964,961 1,119,572 − − 14,084,533Payable to related parties 979,373 − − − − 979,373Liabilities for purchased land − 906,622 434,629 53,091 135,431 1,529,773Long-term debt − 3,193,487 4,227,136 5,649,315 21,194,322 34,264,260Total undiscounted financial

liabilities 979,373 19,686,179 5,781,337 5,702,406 21,329,753 53,479,048Liquidity gap P=26,415,536 (P=12,468,815) (P=4,737,713) (P=5,388,217) (P=20,410,299) (P=16,589,508)*Excludes non-financial liabilities


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2015

On DemandWithin1 year

Beyond 1year to 2

years

Beyond 2years to 3

yearsBeyond 3

years TotalLoans and ReceivableCash and cash equivalents P=19,150,603 P=− P=− P=− P=− P=19,150,603Receivables Trade: Real estate 59,165 3,680,145 1,232,283 402,220 1,528,198 6,902,011 General construction 1,529,582 3,312,354 − − − 4,841,936 Electricity sales 1,414,881 356,494 − − − 1,771,375 Coal mining 1,252,818 − − − − 1,252,818 Nickel mining 31,568 − − − − 31,568 Merchandising and others 63,460 − − − − 63,460 Receivables from related

parties 143,642 − − − − 143,642 Other receivables 992,847 − − − − 992,847Security deposits − − − 5,208 − 5,208Refundable deposits − 291,902 90,963 − − 382,865

24,638,566 7,640,895 1,323,246 407,428 1,528,198 35,538,333AFS financial assetsQuoted securities − 74,409 − − − 74,409Unquoted securities − 2,491 − − − 2,491

− 76,900 − − − 76,900Total undiscounted financial assets 24,638,566 7,717,795 1,323,246 407,428 1,528,198 35,615,233

Other Financial LiabilitiesShort-term debt − 3,707,354 − − − 3,707,354Accounts and other payables* − 12,017,566 2,060,692 − − 14,078,258Payable to related parties 217,628 − − − − 217,628Liabilities for purchased land − 2,201,291 541,381 76,768 197,986 3,017,426Long-term debt − 11,291,955 5,393,462 2,890,261 17,479,928 37,055,606Total undiscounted financial

liabilities 217,628 29,218,166 7,995,535 2,967,029 17,677,914 58,076,272Liquidity gap P=24,420,938 (P=21,500,371) (P=6,672,289) (P=2,559,601) (P=16,149,716) (P=22,461,039)*Excludes non-financial liabilities

b. Market RiskMarket risk is the risk of loss to future earnings, to fair values or to future cash flows that mayresult from changes in the price of a financial instrument. The value of a financial instrumentmay change as a result of changes in equity prices, market prices, interest rates and foreigncurrency exchange rates.

The sensitivity analyses have been prepared on the following bases:· Equity price risk - movements in equity indices· Market price risk - movements in one-year historical coal and nickel prices· Interest rate risk - market interest rate on unsecured bank loans· Foreign currency risk - yearly movement in the foreign exchange rates

The assumption used in calculating the sensitivity analyses of the relevant income statementitem is the effect of the assumed changes in respective market risks. This is based on thefinancial assets and financial liabilities held at December 31, 2016 and 2015.

Equity Price RiskThe Group’s equity price risk exposure at year-end relates to financial assets whose valueswill fluctuate as a result of changes in market prices, principally, equity securities classified asAFS financial assets.

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Quoted securities are subject to price risk due to changes in market values of instrumentsarising either from factors specific to individual instruments or their issuers or factorsaffecting all instruments traded in the market. The Group’s market risk policy requires it tomanage such risks by setting and monitoring objectives and constraints on investments;diversification plan; and limits on investment in each industry or sector.

The analyses below are performed for reasonably possible movements in the Philippine StockExchange (PSE) index for quoted shares and other sources for golf and club shares with allother variables held constant, showing the impact on equity:

Change in variableEffect on equity

(Other comprehensive income)2016 2015 2016 2015

PSE +0.11% +4.46% P=197 P=1,079-0.11% -4.46% (197) (1,079)

Others +13.24% +10.21% 9,229 6,103-13.24% -10.21% (9,229) (6,103)

The sensitivity analyses shown above are based on the assumption that the movement in PSEcomposite index and other quoted equity securities will be most likely be limited to an upwardor downward fluctuation of 0.11% and 13.24% in 2016 and 4.46% and 10.21% in 2015.

The Group, used as basis of these assumptions, the annual percentage change in PSEcomposite index and annual percentage change of quoted prices as obtained from publishedquotes of golf and club shares.

The impact of sensitivity of equity prices on the Group’s equity already excludes the impacton transactions affecting the consolidated statements of income.

Commodity Price RiskPrice risk is the risk that the fair value or future cash flows of a financial instrument willfluctuate because of changes in market prices (other than those arising from interest rate riskor currency risk), whether those changes are caused by factors specific to the individualfinancial instrument or its issuer, or factors affecting all similar financial instruments traded inthe market.

CoalThe price that the Group can charge for its coal is directly and indirectly related to the price ofcoal in the world coal market. In addition, as the Group is not subject to domestic competitionin the Philippines, the pricing of all of its coal sales is linked to the price of imported coal.World thermal coal prices are affected by numerous factors outside the Group’s control,including the demand from customers which is influenced by their overall performance anddemand for electricity. Prices are also affected by changes in the world supply of coal andmay be affected by the price of alternative fuel supplies, availability of shipping vessels aswell as shipping costs.

As the coal price is reset on a periodic basis under coal supply agreements, this may increaseits exposure to short-term coal price volatility.

There can be no assurance that world coal prices will be sustained or that domestic andinternational competitors will not seek to replace the Group in its relationship with its key


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customers by offering higher quality, better prices or larger guaranteed supply volumes, any ofwhich would have a materially adverse effect on the Group’s profits.To mitigate this risk, the Group continues to improve the quality of its coal and diversify itsmarket from power industry, cement industry, other local industries and export market. Thiswill allow flexibility in the distribution of coal to its target customers in such manner thatminimum target average price of its coal sales across all its customers will still be achieved.Also, in order to mitigate any negative impact resulting from price changes, it is the Group’spolicy to set minimum contracted volume for customers with long term supply contracts foreach given period (within the duration of the contract) and pricing is negotiated on a monthlybasis to even out the impact of any fluctuation in coal prices, thus, protecting its target margin.The excess volumes are allocated to spot sales which may command different price than thosecontracted already since the latter shall follow pricing formula per contract.

Nevertheless, on certain cases temporary adjustments on coal prices with reference tocustomers following a certain pricing formula are requested in order to recover at least the costof coal if the resulting price is abnormally low vis-à-vis cost of production (i.e., abnormal risein cost of fuel, foreign exchange).

Below are the details of the Group’s coal sales to the domestic market and to the exportmarket (as a percentage of total coal sales volume):

2016 2015Domestic market 41.08% 45.82%Export market 58.92% 54.18%

The following table shows the effect on income before income tax should the change in theprices of coal occur based on the inventory of the Group as of December 31, 2016 and 2015with all other variables held constant. The change in coal prices used in the simulationassumes fluctuation from the lowest and highest price based on 1-year historical pricemovements in 2016 and 2015.

Effect on income before income taxChange in coal price 2016 2015Based on ending coal inventoryIncrease by 35% in 2016 and 15% in 2015 P=555,061 P=416,498Decrease by 35% in 2016 and 15% in 2015 (555,061) (416,498)

Based on coal sales volumeIncrease by 35% in 2016 and 15% in 2015 4,416,544 2,452,398Decrease by 35% in 2016 and 15% in 2015 (4,416,544) (2,452,398)

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Interest Rate RiskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument willfluctuate because of changes in market interest rates. The Group’s exposure to market risk forchanges in interest rates relates primarily to the Group’s long-term debt obligations. The Group’spolicy is to manage its interest cost using a mix of fixed and variable rate debt.

The following table demonstrates the sensitivity of the Group’s profit before tax and equity to areasonably possible change in interest rates, with all variables held constant, through the impact onfloating rate borrowings:

2016

Change inbasis points

Effect on incomebefore

income tax Effect on equityDollar floating rate borrowings +100 bps P=1,749,303 P=1,224,512

-100 bps (1,749,303) (1,224,512)

Peso floating rate borrowings +100 bps 307,666 215,366-100 bps (307,666) (215,366)

2015

Change inbasis points

Effect on incomebefore

income tax Effect on equityDollar floating rate borrowings +100 bps P=1,513,325 P=1,059,327

-100 bps (1,513,325) (1,059,327)

Peso floating rate borrowings +100 bps 18,420 12,894-100 bps (18,420) (12,894)

The sensitivity analyses shown above are based on the assumption that the interest movementswill be more likely be limited to hundred basis points upward or downward fluctuation in both2016 and 2015. The forecasted movements in percentages of interest rates used were derivedbased on the Group’s historical changes in the market interest rates on unsecured bank loans.

Foreign Currency RiskForeign currency risk is the risk that the future cash flows of a financial instrument willfluctuate because of changes in foreign exchange rates. The Group’s currency risks arisemainly from cash and cash equivalents, receivables, accounts and other payable, short-termloans and long-term loans of the Group which are denominated in a currency other than theGroup’s functional currency. The effect on the Group’s consolidated statements of income iscomputed based on the carrying value of the floating rate receivables as at December 31, 2016and 2015.

The Group does not have any foreign currency hedging arrangements.


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The following tables demonstrates the sensitivity to a reasonably possible change in foreignexchange rates, with all variables held constant, of the Group’s profit before tax (due tochanges in the fair value of monetary assets and liabilities):

Increase (decrease) inforeign currency rate

Effect on incomebefore income tax (in PHP)

2016 2015 2016 2015

US Dollar1 +1.39% +1.47% P=6,634 P=34,912-1.39% -1.47% (6,634) (34,912)

Japanese Yen2 +0.62% +5.46% 20 59-0.62% -5.46% (20) (59)

UK Pounds3 +21.80% +2.80% 1,556 231-21.80% -2.80% (1556) (231)

E.M.U. Euro4 +8.18% +1.22% 47 147-8.18% -1.22% (47) (147)

AUD8 − +2.51% − 37,604− -2.51% − (37,604)

SG Dollar6 +0.52% − 4 −-0.52% − (4) −

CHF7 +5.40% − 45 −-5.40% − (45) −

CNY5 +1.47% − 768 −-1.47% − (768) −

1.The exchange rates used were P=49.72 to $1 and P=47.06 to $1 for the year ended December 31, 2016 and 2015, respectively.2 The exchange rates used were P=0.43 to ¥1 and P=0.39 to ¥1 for the year ended December 31, 2016 and 2015, respectively.3 The exchange rates used were P=60.87 to £1 and P=70.18 to £1 for the year ended December 31, 2016 and 2015, respectively.4 The exchange rates used were P=51.84 to €1 and P=51.74 to €1 for the year ended December 31, 2016 and 2015, respectively.5 The exchange rates used were P=7.16 to CNY1 for the year ended December 31, 2016.6 The exchange rates used were P=34.35 to SGD1 for the year ended December 31, 2016.7 The exchange rates used were P=48.44 to CHF1 for the year ended December 31, 2016.8 The exchange rates used were P=34.27 to AUD1 for the year ended December 31, 2015.

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Information on the Group’s foreign currency-denominated monetary assets and liabilities andtheir Philippine peso equivalents as of December 31, 2016 and 2015 follows:

2016U.S.

DollarJapanese

Yen UK Pounds E.M.U Euro SG Dollar CHF AUD CNYEquivalent

in PHPFinancial assetsCash and cash

equivalents $66,811 ¥2,741 £118 €17 $– CHF17 $– ¥– P=3,331,118Receivables 18,622 – – – – – – – 925,903Advances 300 – – – – – – – 14,916

$85,733 ¥2,741 £118 €17 $– CHF17 $– ¥– P=4,271,937Financial liabilitiesAccounts payable and

accrued expenses ($24,587) (¥10,251) £− (€6) ($22) CHF− $− (¥7,298) (P=1,280,153)Payable to related

parties − − − − − − − – –Short-term loans − − − − − − − – –Long-term loans (70,762) − − − − − − – (3,518,308)

(95,349) (10,251) − (6) (22) − − (7,298) (4,798,461)($9,616) (¥7,510) £118 €11 ($22) CHF17 ($43,726) (¥7,298) (P=526,524)

2015U.S.

DollarJapanese

Yen UK Pounds E.M.U Euro SG Dollar CHF AUD CNYEquivalent

in PHPFinancial assetsCash and cash

equivalents $46,847 ¥2,740 £118 €251 $– CHF– $3 ¥– P=2,227,055Receivables 11,355 – – – – – – – 534,383Advances 300 – – – – – – – 14,118

$58,502 ¥2,740 £118 €251 $– CHF– $3 ¥– P=2,775,556Financial liabilitiesAccounts payable and

accrued expenses ($21,128) ¥− £− (€18) $− CHF− $− ¥– (P=995,240)Payable to related

parties (820) − − − − − (43,729) – (1,536,979)Short-term loans (18,817) − − − − − − – (885,535)Long-term loans (68,333) − − − − − − – (3,215,734)

(109,098) − − (18) − − (43,729) – (6,633,488)($50,596) ¥2,740 £118 €233 $− CHF− ($43,726) ¥– (P=3,857,932)

The effect on the Group’s income before tax is computed on the carrying value of the Group’sforeign currency denominated financial assets and liabilities as at December 31, 2016 and2015.

c. Credit RiskCredit risk is the risk that one party to a financial instrument will cause a financial loss for theother party by failing to discharge an obligation. The Group’s maximum exposure to creditrisk for the components of the statement of financial position at December 31, 2016 and 2015is the carrying amounts except for real estate receivables. The Group’s exposure to credit riskarises from default of the counterparties which include certain financial institutions, real estatebuyers, subcontractors, suppliers and various electric companies. Credit risk managementinvolves dealing only with recognized, creditworthy third parties. It is the Group’s policy thatall counterparties who wish to trade on credit terms are subject to credit verificationprocedures. The Treasury Department’s policy sets a credit limit for each counterparty. Inaddition, receivable balances are monitored on an ongoing basis. The Group’s financial assetsare not subject to collateral and other credit enhancement except for real estate receivables.As of December 31, 2016 and 2015, the Group’s exposure to bad debts is not significant.

Real estate contractsCredit risk is managed primarily through credit reviews and an analysis of receivables on acontinuous basis. The Group also undertakes supplemental credit review procedures forcertain installment payment structures. The Group’s stringent customer requirements andpolicies in place contributes to lower customer default. Customer payments are facilitatedthrough various collection modes including the use of postdated checks. The credit risk forreal estate receivable is also mitigated as the Group has the right to cancel the sales contractand takes possession of the subject house without need for any court action in case of default


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in payments by the buyer. This risk is further mitigated because the corresponding title to thesubdivision units sold under this arrangement is transferred to the buyers only upon fullpayment of the contract price. The fair value of collateral for installment contracts receivablesamounted to P=12,164.10 million and P=8,616.70 million in 2016 and 2015, respectively. Thisresulted to a net exposure of P=112.74 million and P=59.05 million in 2016 and 2015,respectively.

Electricity salesThe Group earns substantially all of its revenue from bilateral contracts and WESM and fromvarious electric companies. WESM and the various electric companies are committed to payfor the energy generated by the power plant facilities.

Under the current regulatory regime, the generation rate charged by the Group to WESM isnot regulated but is determined in accordance with the WESM Price DeterminationMethodology (PDM) approved by the Energy Regulatory Commission (ERC) and arecomplete pass-through charges to WESM. PDM is intended to provide the specificcomputational formula that will enable the market participants to verify the correctness of thecharges being imposed. Likewise, the generation rate charged by the Group to various electriccompanies is not subject to regulations and are complete pass-through charges to variouselectric companies.

MiningThe Group evaluates the financial condition of the local customers before deliveries are madeto them. On the other hand, export sales are covered by sight letters of credit issued byforeign banks subject to the Group’s approval, hence, mitigating the risk on collection.

The Group generally offers 80% of coal delivered payable within thirty (30) days upon receiptof billing and the remaining 20% payable within 15 days after receipt of final billing based onfinal analysis of coal delivered.

Construction contractsThe credit risk for construction receivables is mitigated by the fact that the Group can resort tocarry out its contractor’s lien over the project with varying degrees of effectiveness dependingon the jurisprudence applicable on location of the project. A contractor’s lien is the legal rightof the Group to takeover the projects-in-progress and have priority in the settlement ofcontractor’s receivables and claims on the projects-in-progress and have priority in thesettlement of contractor’s receivables and claims on the projects in progress is usually higherthan receivables from and future commitments with the project owners. Trade and retentionreceivables from project owners are normally high standard because of the creditworthiness ofproject owners and collection remedy of contractor’s lien accorded contractor in certain cases.

With respect to the credit risk arising from the other financial assets of the Group, whichcomprise cash and cash equivalents, the Group’s exposure to credit risk arises from default ofthe counterparty, with a maximum exposure equal to the carrying amount of these instruments.The Group transacts only with institutions or banks that have proven track record in financialsoundness.

Given the Group’s diverse base of counterparties, it is not exposed to large concentrations ofcredit risk.

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As of December 31, 2016 and 2015, the credit quality per class of financial assets is as follows:

2016

Neither past due nor impairedPast due or

IndividuallyGrade A Grade B Grade C Impaired Total

Cash in bank and cash equivalents P=18,694,254 P=− P=− P=− P=18,694,254AFS financial assets Quoted − 80,139 − − 80,139 Unquoted − 5,116 − 109,086 114,202Receivables Trade Real estate 5,132,129 815,757 138,322 279,750 6,365,958 Electricity sales 2,918,910 260,138 − 1,946,885 5,125,933 General construction 2,353,516 − − 1,850,683 4,204,199 Coal mining 1,215,821 − − 1,141,396 2,357,217 Nickel mining 6,503 − − 93,652 100,155 Merchandising 58,582 − − − 58,582 Receivable from related parties 130,577 37 − − 130,614 Other receivables 1,072,152 − − − 1,072,152Security deposits 5,325 − − − 5,325Refundable deposits 258,950 806 − 88,518 348,274Total 31,846,719 1,161,993 138,322 5,509,970 38,657,004Allowance for: Real estate − − − 537 537 General construction − − − 82,642 82,642 Electricity sales − − − 1,512,359 1,512,359 Coal mining − − − 41,775 41,775 Nickel mining − − − 64,917 64,917Total allowance − − − 1,702,230 1,702,230Net amount P=31,846,719 P=1,161,993 P=138,322 P=3,807,740 P=36,954,774

2015


IndividuallyGrade A Grade B Grade C Impaired Total

Cash in bank and cash equivalents P=19,124,137 P=− P=− P=− P=19,124,137AFS financial assets Quoted − 74,409 − − 74,409 Unquoted − 2,491 − 108,211 110,702Receivables Trade Real estate 3,515,162 2,191,455 289,927 906,004 6,902,548 General construction 2,530,113 − − 2,342,678 4,872,791 Electricity sales 1,218,284 200,126 − 1,724,907 3,143,317 Coal mining 666,817 − − 651,563 1,318,380 Nickel mining 3,525 − − 98,976 102,501 Merchandising 63,460 − − − 63,460 Receivable from related parties 73,730 37 − 69,875 143,642 Other receivables 992,847 − − − 992,847Security deposits 5,208 − − − 5,208Refundable deposits 290,667 1,235 − 90,963 382,865Total 28,483,950 2,469,753 289,927 5,993,177 37,236,807

(Forward)


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2015


Individually TotalGrade A Grade B Grade C Impaired

Allowance for: Real estate P=− P=− P=− P=537 P=537 General construction − − − 30,855 30,855 Electricity sales − − − 1,371,942 1,371,942 Coal mining − − − 65,562 65,562 Nickel mining − − − 70,933 70,933Total allowance − − − 1,539,829 1,539,829Net amount P=28,483,950 P=2,469,753 P=289,927 P=4,453,348 P=35,696,978

Cash and Cash EquivalentsCash and cash equivalents are short-term placements and working cash fund placed, investedor deposited in foreign and local banks belonging to top ten (10) banks in the Philippines interms of resources and profitability. These financial assets are classified as Grade A due to thecounterparties’ low probability of insolvency.

AFS Financial AssetsThe Group’s AFS financial assets are classified as Grade B because these assets aresusceptible to untoward consequences due to the current financial positions of counterparties.

ReceivablesIncluded under Grade A are accounts considered to be of high value and are covered with coalsupply, power supply, and construction contracts. The counterparties have a very remotelikelihood of default and have consistently exhibited good paying habits. Grade B accountsare active accounts with minimal to regular instances of payment default, due to collectionissues. These accounts are typically not impaired as the counterparties generally respond tocredit actions and update their payments accordingly. The Group determines financial assetsas impaired when probability of recoverability is remote and in consideration of lapse inperiod which the asset is expected to be recovered.

For real estate receivables, advances to officers and employees and other receivables, Grade Aare classified as financial assets with high credit worthiness and probability of default isminimal. While receivables under Grade B and C have favorable and acceptable riskattributes, respectively, with average credit worthiness.

Receivable from related parties are considered Grade A due to the Group’s positive collectionexperience.

Receivables are aged and analyzed on a continuous basis to minimize credit risk associatedwith these receivables. Receivable balances are monitored on an ongoing basis to ensuretimely execution of necessary intervention efforts, such as raising the case to the Group’s legaldepartment. Regular monitoring of receivables resulted to manageable exposure to bad debts.

Security and Refundable DepositsSecurity and refundable deposits are classified as Grade A since these are to be refunded bythe lessor and utility companies at the end of lease term and holding period, respectively, asstipulated in the agreements.

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As of December 31, 2016 and 2015, the aging analysis of the Group’s past due financial assetspresented per class follows:

2016Past due but not impaired Past due and

<30 days 30-60 days 61-90 days 91-120 days >120 days impaired TotalReceivables Trade Real estate 37,698 10,017 13,789 217,709 P=− P=537 P=279,750 General

construction 1,768,041 − − − − 82,642 1,850,683Electricity sales − − 434,526 − − 1,512,359 1,946,885

Coal mining − 563,758 535,863 − − 41,775 1,141,396 Nickel mining − 2,140 2,962 23,633 − 64,917 93,652

P=1,805,739 P=575,915 P=987,140 P=241,342 P=− P=1,702,230 P=5,312,366

2015Past due but not impaired Past due and

<30 days 30-60 days 61-90 days 91-120 days >120 days impaired TotalReceivables Trade Real estate P=205,544 P=15,059 P=38,002 P=646,862 P=− P=537 P=906,004 General

construction 2,272,598 17,433 4,401 17,391 − 30,855 2,342,678Electricity sales − − 352,965 − − 1,371,942 1,724,907

Coal mining − 484,665 101,336 − − 65,562 651,563 Nickel mining − 2,776 3,843 21,424 − 70,933 98,976

P=2,478,142 P=519,933 P=500,547 P=685,677 P=− P=1,539,829 P=5,724,128

The repossessed lots and residential houses are transferred back to inventory under the accountReal estate for sale and held for development and are held for sale in the ordinary course ofbusiness. The total of these inventories is P=550.40 million and P=519.50 million as ofDecember 31, 2016 and 2015, respectively. The Group performs certain repair activities onthe said repossessed assets in order to put their condition at a marketable state. Costs incurredin bringing the repossessed assets to its marketable state are included in their carryingamounts.

The Group did not accrue any interest income on impaired financial assets.

Fair Value of Financial InstrumentsThe table below presents a comparison by category of carrying amounts and estimated fair valuesof all the Group’s financial instruments as of December 31, 2016 and 2015:

2016 2015Carrying Value Fair Value Carrying Value Fair Value

Loans and ReceivablesCash and cash equivalents Cash in banks P=7,003,096 P=7,003,096 P=9,265,808 P=9,265,808 Cash equivalents 11,691,158 11,691,158 9,858,329 9,858,329Receivables - net Trade Real estate 6,365,421 8,342,528 6,902,011 9,248,150 General construction 4,121,557 4,121,557 4,841,936 4,841,936 Electricity sales 3,613,574 3,613,574 1,771,375 1,771,375 Coal mining 2,315,442 2,315,442 1,252,818 1,252,818 Nickel mining 35,238 35,238 31,568 31,568 Merchandising and others 58,582 58,582 63,460 63,460

(Forward)


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2016 2015Carrying Value Fair Value Carrying Value Fair Value

Receivable from related parties P=130,614 P=130,614 P=143,642 P=143,642 Other receivables 1,072,152 1,072,152 992,847 992,847Security deposits 5,325 5,325 5,208 5,208Refundable deposits 348,274 348,274 382,865 382,865

36,760,433 38,737,540 35,511,867 37,858,006AFS financial assetsQuoted securities 80,139 80,139 74,409 74,409Unquoted securities 5,116 5,116 2,491 2,491

85,255 85,255 76,900 76,900P=36,845,688 P=38,822,795 P=35,588,767 P=37,934,906

Other Financial LiabilitiesAccounts and other payables P=12,964,960 P=12,964,960 P=12,017,567 P=12,017,567Liabilities for purchased land 1,529,773 1,424,421 3,017,426 2,884,304Payable to related parties 979,373 979,373 217,628 217,628Short-term and long-term debt 36,885,369 48,268,346 40,762,960 42,759,970

P=52,359,475 P=63,637,100 P=56,015,581 P=57,879,469

Financial assetsThe fair values of cash and cash equivalents and receivables (except installment contractreceivables) approximate their carrying amounts as of reporting dates due to the short-term natureof the transactions.

The fair values of installment contracts receivables are based on the discounted value of futurecash flows using the applicable rates for similar types of loans and receivables. The discount ratesused for installment contracts receivable range from 15.94% to 19.00% in 2016 and 15.40% to19.00% in 2015.

Refundable deposits are carried at cost since these are mostly deposits to a utility company as aconsequence of its subscription to the electricity services of the said utility company needed forthe Group’s residential units.

In the absence of a reliable basis of determining fair values due to the unpredictable nature offuture cash flows and the lack of suitable methods in arriving at a reliable fair value, securitydeposits other than those pertaining to operating leases and unquoted AFS financial assets arecarried at cost less impairment allowance, if any.

Financial liabilitiesThe fair values of accounts and other payables and accrued expenses and payables to relatedparties approximate their carrying amounts as of reporting dates due to the short-term nature of thetransactions.

Estimated fair value of long-term fixed rate loans and liabilities for purchased land are based onthe discounted value of future cash flows using the applicable rates for similar types of loans withmaturities consistent with those remaining for the liability being valued. For floating rate loans,the carrying value approximates the fair value because of recent and regular repricing (quarterly)based on market conditions.

The discount rates used for long term debt range from 5.00% to 5.25% in 2016 and 2015. Thediscount rates used for liabilities to purchase land range from 2.67% to 4.10% in 2016 and 2.02%to 2.03% in 2015.

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Fair values of receivables, long-term debt, liabilities for purchased land and investment propertiesare based on level 3 inputs while that of quoted AFS financial assets and financial assets at FVPLare from level 1 inputs.

37. Contingencies and Commitments

SCPC - Provision for Billing DisputesOn October 20, 2010, SCPC filed a Petition for dispute resolution (“Petition”) before the ERCagainst NPC and PSALM involving over-nominations made by NPC during the billing periodsJanuary to June 2010 beyond the 169,000 kW Manila Electric Company (MERALCO) allocationof SCPC, as provided under the Schedule W of the Asset Purchase Agreement (APA).

In its Petition, SCPC sought to recover the cost of energy (a) sourced by SCPC from WESM inorder to meet NPC’s nominations beyond the 169,000 kW MERALCO contracted demand, or(b) procured by NPC from the WESM representing energy nominated by NPC in excess of the169,000 kW limit set in Schedule W, cost of which was charged by PSALM against SCPC.In relation to this, NPC withheld the payments of MERALCO and remitted to SCPC thecollections, net of the cost of the outsourced energy.

SCPC has likewise sought to recover interest on the withheld MERALCO payments collected byPSALM that is unpaid to SCPC as of due date, to be charged at the rate of 6% computed from thedate of SCPC’s extrajudicial demand until full payment by PSALM.

In 2010, SCPC made a provision for the total amount withheld by NPC, which amounted toP=383.29 million. Though a provision has already been made, SCPC has not waived its right tocollect the said amount in case the outcome of the dispute resolution would be a favorablesettlement for SCPC. The provision will be reversed and an income would be recognized in the"Other income" account upon collection of the said receivable.

On February 23, 2011 hearings resumed with the conduct of preliminary conference without theparties entering into an amicable settlement. The case continued with the presentation ofwitnesses on March 22 and 23, 2011.

On July 6, 2011, the ERC rendered its Decision in favor of SCPC and directed the parties, amongothers to submit the reconciled computation of the over-nominations and other MERALCOpayments withheld by PSALM during the periods January 2010 to June 2010, and for PSALM toreturn to SCPC the reconciled amount plus 6% per annum as interests. PSALM’s Motion forReconsideration on the Decision was denied by ERC on February 13, 2012 for lack of merit.

On April 24, 2012, SCPC and PSALM each filed their Compliance submitting the reconciledcomputations of the over-nominations and other MERALCO payments withheld by PSALM, asagreed upon by the parties, in the principal amount of P=476.00 million.

On December 4, 2013, SCPC filed a Motion for Issuance of Writ of Execution praying to directPSALM to remit the Principal Amount, including interest of 6% per annum computed fromAugust 4, 2010 until the date of actual payment, as well as the value added tax collected byPSALM from MERALCO, pursuant to the ERC’s Decision dated July 6, 2011 and Order datedFebruary 13, 2012.


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On June 23, 2014, the ERC issued an Order granting the Writ of Execution in favor of SCPC andcalled a clarificatory conference on September 3, 2014 for the parties to discuss the details of theexecution. PSALM filed a Motion for Reconsideration of the ERC’s Order dated June 23, 2014.

On September 3, 2014 clarificatory conference, the ERC directed the parties to discuss how theycould mutually carry out the execution granted by the ERC in favor of SCPC and likewise(1) granted SCPC ten days to file its Comment/Opposition to PSALM’s motion forreconsideration; and (2) ordered PSALM to file its Compliance and submit a copy of the 3rdIndorsement dated May 29, 2014 issued by the General Counsel of the Commission on Audit toPSALM.

On September 11, 2014, PSALM filed its Compliance and duly submitted the 3rd Indorsement.On September 15, 2014, SCPC filed its Opposition to PSALM’s Motion for Reconsideration.

As of December 31, 2016, the ERC has not resolved PSALM’s Motion for Reconsideration.

PSALM’s Petition for Review before the Court of Appeals and Supreme Court of the PhilippinesMeanwhile, PSALM filed a Petition for Review with Prayer for Temporary Restraining Orderand/or Preliminary Injunction with the Court of Appeals on March 30, 2012, questioning theERC’s decision dated July 6, 2011 and Order dated February 13, 2012.

On September 4, 2012, the Court of Appeals rendered a Decision, denying PSALM’s petition andaffirming the related Decision and Order previously issued. PSALM subsequently filed a Motionfor Reconsideration dated September 26, 2012 and seeking the reconsideration of the Decisiondated September 4, 2012. SCPC filed its Opposition to PSALM’s Motion for Reconsideration onNovember 5, 2012. Subsequently, the Court of Appeals issued a Resolution denying the Motionfor Reconsideration filed by PSALM on November 27, 2012.

On December 27, 2012, PSALM filed a Petition for Review on Certiorari with Prayer for Issuanceof Temporary Restraining Order and/or Preliminary Injunction with the Supreme Court.

Subsequently the Supreme Court issued a Resolution dated January 21, 2013 requiring SCPC tofile a Comment to PSALM’s Petition. Thus, on March 25, 2013, SCPC filed its Comment.

PSALM filed a Motion for Extension to file reply on July 25, 2013, requesting for an additionalperiod of ten (10) days from July 25, 2013, or until August 4, 2013, within which to file its Reply.PSALM subsequently filed its Reply on August 2, 2013.

In a Resolution dated September 30, 2013, the Supreme Court granted PSALM’s Motion forExtension to File Reply and noted the filing of PSALM’s Reply.

PSALM’s Petition has not yet been resolved by the Supreme Court as of December 31, 2015.

On December 16, 2016, the Supreme Court issued a Notice of Decision and Decision datedDecember 5, 2016. In said Decision, the Supreme Court denied PSALM’s Petition for Review onCertiorari with Prayer for issuance of Temporary Restraining Order and/or Preliminary injunctionand affirmed the ruling of the Court of Appeals.

PSALM filed its Motion for Reconsideration dated January 19, 2017. On February 13, 2017, theSupreme Court rendered Decision denying with finality PSALM’s Motion for Reconsideration.

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On February 22, 2017, due to the denial with finality of PSALM’s Motion for Reconsideration bythe Supreme Court, the Company filed with the ERC an Urgent Motion for Resolution ofPSALM’s Motion for Reconsideration pending with the ERC. SCPC prayed that the MR bedenied and a writ of execution be issued in favor of SCPC.

PDI - Legal ClaimsOn June 16, 2015, the Supreme Court (SC) issued a temporary restraining order (TRO) thatprovisionally suspends the construction of the Torre de Manila, effective until further orders fromthe SC. Subsequently, on June 18, 2015, the Housing and Land Use Regulatory Board(“HLURB”) issued an order temporarily suspending the License to Sell of the Parent Company inrespect of Torre de Manila. The order covers the temporary suspension and discontinuation ofselling and advertising of units in Torre de Manila and the collection of amortization paymentsfrom unit buyers, until further orders from the HLURB. The SC ordered oral arguments for thiscase that commenced on July 21, 2015 and thereafter. As of audit report date, the oral argumentshave concluded. The Company is waiting for the SC decision.

Lease CommitmentsOperating Lease - As LessorThe Group entered into lease agreements with third parties covering its investment propertyportfolio (Note 12). The lease agreements provide for a fixed monthly rental with an escalation of3.00% to 10.00% annually and is renewable under the terms and condition agreed with the lessees.

As of December 31, 2016 and 2015, future minimum lease receivables under the aforementionedoperating lease are as follows:

2016 2015Within one year P=99,189 P=109,896After one year but not more than five years 96,885 142,421More than five years − 85,360

P=196,074 P=337,677

Operating Lease - As LesseeThe Group has a noncancellable lease agreement with a various lessors covering office premises,for seven (7) years with escalation rate ranging from 5.00% to 10.00%. The leases are renewableunder such terms and conditions that are agreed upon by the contracting parties.

As of December 31, 2016 and 2015, future minimum lease payments under the above mentionedoperating lease are as follows:

2016 2015Within one year P=12,150 P=15,936After one year but not more than five years − 12,150

P=12,150 P=28,086

LLA with PSALMAs discussed in Note 14, SCPC entered into a LLA with PSALM for the lease of land in which theplant is situated, for a period of 25 years, renewable for another 25 years with the mutualagreement of both parties. In 2009, SCPC paid US$3.19 million or its peso equivalentP=150.57 million as payment for the 25 years of rental.


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Provisions of the LLA include that SCPC has the option to buy the Option Assets upon issuance ofan Option Existence Notice (OEN) by the lessor. Optioned assets are parcels of land that formpart of the leased premises which the lessor offers for the sale to the lease.

SCPC was also required to deliver and submit to the lessor a performance security amounting toP=34.83 million in the form of Stand-by Letter of Credits. The Performance Security shall bemaintained by SCPC in full force and effect continuously without any interruption until thePerformance Security expiration date. The Performance Security initially must be effective for theperiod of one year from the date of issue, to be replaced prior to expiration every year thereafterand shall at all times remain valid.

In the event that the lessor issues an OEN and SCPC buys the option assets in consideration forthe grant of the option, the land purchase price should be equivalent to the highest of the followingand / or amounts: (i) assessment of the Provincial Assessors of Batangas Province; (ii) theassessment of the Municipal or City Assessor having jurisdiction over the particular portion of theleased premises; (iii) the zonal valuation of Bureau of Internal Revenue or, (iv) $21.00 per squaremeter. Valuation basis for (i) to (iii) shall be based on the receipt of PSALM of the option toexercise notice. The exchange rate to be used should be the Philippine Dealing Exchange rate atthe date of receipt of PSALM of the OEN.

The exchange rate to be used should be the Philippine Dealing Exchange rate at the date of receiptof PSALM of the option to exercise notice.

On July 12, 2010, PSALM issued an OEN and granted SCPC the “Option” to purchase theOptioned Assets that form part of the leased premises. SCPC availed of the “Option” and paid theOption Price amounting to US$0.32 million or a peso equivalent of P=14.72 million exercisablewithin one year from the issuance of the OEN.

On April 28, 2011, SCPC sent a letter to PSALM requesting for the assignment of the option topurchase a lot with an area of 82,740 sqm in favor of SMPC. On May 5, 2011, PSALM approvedthe assignment. On June 1, 2011, SCPC exercised the land lease option at a purchase price ofP=292.62 million.On June 1, 2011, SMPC and SCPC exercised its option to purchase the Option Asset andsubsequently entered into a Deed of Absolute Sale with PSALM for the total consideration ofP=376.61 million.

On October 12, 2011, SCPC reiterated its proposal to purchase the remainder of the LeasedPremises not identified as Optioned Assets. One of the salient features of the proposal includedthe execution of Contract to Sell (CTS) between SCPC and PSALM. This included the proposal ofSCPC to assign its option to purchase and sublease in favor of SLPGC.

On February 13, 2012, PSALM held off the approval of the proposal to purchase the portion ofCalaca Leased Premises not identified as Optioned Assets, subject to further studies. On the samedate, PSALM’s Board approved SCPC’s request to sub-lease a portion of the Calaca LeasedPremises to SLPGC for the purpose of constructing and operating a power plant.

As of the December 31, 2016, PSALM has yet to make any response in connection therewith.

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Surety Arrangement and GuaranteesThe Group is contingently liable for contractor’s guarantees arising in the ordinary course ofbusiness, including letters of guarantee for performance, surety, warranty bonds and outstandingirrevocable standby letters of credit related to its construction projects amounting to P=11.02 billionand P=11.37 billion as at December 31, 2016 and 2015, respectively.

Standby Letters of CreditThe Group has outstanding irrevocable standby letters of credit amounting to P=5.12 billion andP=7.17 billion, respectively in 2016 and 2015, from local banks which are used as bid security,performance securities and downpayments received from ongoing construction projects.

Contingent Assets and LiabilitiesThe Group is currently negotiating certain claims filed by third parties for construction relatedactivities. It is also currently negotiating claims from third parties arising from sub-contractingactivities or claims from insurance companies. The information usually required by PAS 37 is notdisclosed on the grounds that it can be expected to prejudice the outcome of these lawsuits, claimsor assessments.

In 2016 and 2015, the Group has recognized potential liability on construction contracts which arestill under negotiation with a third party (Note 17). The amount of liability is included in Accountspayable and accrued expenses in the statement of financial position. The Group did not recognizeany asset claims arising from claims for collection which are still under negotiation.

The Group is also currently involved in lawsuits or claims filed by third parties which issubstantially labor related, civil cases and cases related to granting of permit to construct a projectin a specific location related to its real estate operations which are pending decision by the courtsor are under negotiation, the outcome of which are not presently determinable. In the opinion ofthe management and its legal counsel, the eventual liability under these lawsuits or claims, if any,will not have a material effect on the consolidated financial statements. The information usuallyrequired by PAS 37 is not disclosed on the grounds that it can be expected to prejudice theoutcome of these lawsuits, claims and assessments. No provisions were made in 2016, 2015 and2014 for these lawsuits and claims.

38. Other Matters

a. Electric Power Industry Reform Act (EPIRA)In June 2001, the Congress of the Philippines approved and passed into law R.A. No. 9136,otherwise known as the EPIRA, providing the mandate and the framework to introducecompetition in the electricity market. EPIRA also provides for the privatization of the assetsof NPC, including its generation and transmission assets, as well as its contract withIndependent Power Producers (IPPs). EPIRA provides that competition in the retail supply ofelectricity and open access to the transmission and distribution systems would occur withinthree years from EPIRA’s effective date. Prior to June 2002, concerned government agencieswere to establish WESM, ensure the unbundling of transmission and distribution wheelingrates and remove existing cross subsidies provided by industrial and commercial users toresidential customers. The WESM was officially launched on June 23, 2006 and begancommercial operations for Luzon. The ERC has already implemented a cross subsidy removalscheme. The inter-regional grid cross subsidy was fully phased-out in June 2002. ERC hasalready approved unbundled rates for Transmission Company (TRANSCO) and majority ofthe distribution utilities.


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Under EPIRA, NPC’s generation assets are to be sold through transparent, competitive publicbidding, while all transmission assets are to be transferred to TRANSCO, initially agovernment-owned entity that was eventually being privatized. The privatization of theseNPC assets has been delayed and is considerably behind the schedule set by the DOE. EPIRAalso created PSALM, which is to accept transfers of all assets and assume all outstandingobligations of NPC, including its obligations to IPPs. One of PSALM’s responsibilities is tomanage these contracts with IPPs after NPC’s privatization. PSALM is also responsible forprivatizing at least 70% of the transferred generating assets and IPP contracts within threeyears from the effective date of EPIRA.

In August 2005, the ERC issued a resolution reiterating the statutory mandate under theEPIRA law for the generation and distribution companies, which are not publicly listed, tomake an initial public offering (IPO) of at least 15% of their common shares. Provided,however, that generation companies, distribution utilities or their respective holdingcompanies that are already listed in the Philippine Stock Exchange (PSE) are deemed incompliance. SCPC was already compliant with this requirement given that SMPC, its parentcompany, is a publicly listed company.

WESMWith the objective of providing competitive price of electricity, the EPIRA authorized DOE toconstitute an independent entity to be represented equitably by electric power industryparticipants and to administer and operate WESM. WESM will provide a mechanism foridentifying and setting the price of actual variations from the quantities transacted undercontracts between sellers and purchasers of electricity.

In addition, the DOE was tasked to formulate the detailed rules for WESM which include thedetermination of electricity price in the market. The price determination methodology willconsider accepted economic principles and should provide a level playing field to all electricpower industry participants. The price determination methodology was subject to the approvalof the ERC.

In this regard, the DOE created PEMC to act as the market operator governing the operation ofWESM. On June 26, 2006, WESM became operational in the Luzon grid and adopts themodel of a “gross pool, net settlement” electricity market.

b. Clean Air ActOn November 25, 2000, the Implementing Rules and Regulations (IRR) of the PhilippineClean Air Act (PCAA) took effect. The IRR contains provisions that have an impact on theindustry as a whole that need to be complied within 44 months from the effectivity date,subject to the approval by DENR. The Group’s power plant uses thermal coal and uses afacility to test and monitor gas emissions to conform with Ambient and Source EmissionsStandards and other provisions of the Clean Air Act and its IRR. Based on the Group’s initialassessment of its existing power plant facilities, the Group believes that it is in full compliancewith the applicable provisions of the IRR of the PCAA.

c. Power Supply Agreement with MERALCOOn December 20, 2011, SCPC entered into a new power supply agreement with MERALCO,a distributor of electric power, which took effect on December 26, 2011 and shall have a termof seven (7) years extendable upon mutual agreement by the parties for another three (3) years.

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SCPC will be providing MERALCO with an initial contracted capacity of 210 MW and willbe increased to 420 MW upon the commercial operation of the plant’s Unit 1.

On March 12, 2012, MERALCO filed an application for the Approval of the Power SupplyAgreement (PSA) between MERALCO and SCPC, with a Prayer for Provisional Authority,docketed as ERC Case No. 2011-037 RC.

In the said application, MERALCO alleged and presented on the following: a.) the salientprovisions of the PSA; b.) payment structure under the PSA; c.) the impact of the approval ofthe proposed generation rates on MERALCO’s customers; and d.) the relevance and urgentneed for the implementation of the PSA.

On December 17, 2012, the Commission (ERC) issued a Decision approving the applicationwith modification. On January 7, 2013, applicant MERALCO filed a Motion for PartialReconsideration of the ERC Decision dated December 17, 2012 to introduce additionalmaterial evidence not available at the time of the filing of the application, in support of thereconsideration of the approved Fixed O&M Fee of P4,785.12/Kw/year.

d. Contract for the Fly Ash of the Power PlantOn April 30, 2012, SCPC and Pozzolanic Australia Pty, Ltd. (“Pozzolanic”) executed theContract for the Purchase of Fly Ash of the Power Plant (the “Pozzolanic Contract”). ThePozzolanic contract is valid and effective for a period of fifteen (15) years beginningFebruary 1, 2012. Pozzolanic, as agreed, shall purchase 100 % percent of fly ashes producedor generated by the Power Plant of SCPC.

e. Dispute Resolution Proceedings with MERALCO (Line Loss Rental)On August 29, 2013, MERALCO filed a Petition for Dispute Resolution before the EnergyRegulatory Commission against SCPC and other generating companies praying for refund ofthe amount of line loss allegedly collected by the said generating companies corresponding to2.98% of the NPC-Time of Use (TOU) amounts paid to the generating companies as assigneesof the portions of the contracted energy volume under the NPC-MERALCO Transition SupplyContract pursuant to the Orders dated March 4, 2013 and July 1, 2013 issued by the ERC inERC Case No. 2008-083MC. The total amount claim by MERALCO against SCPCP=265.54 million representing line loss amounts allegedly received by SCPC beginning 2009.

The ERC issued an Order dated September 10, 2013 for the generating companies to filecomments on MERALCO’s Petition and set the hearing on October 17, 2013.

On September 20, 2013, the generating companies filed a Joint Motion to Dismiss arguing thatMERALCO’s Petition failed to state a cause of action and the ERC has no jurisdiction overthe subject matter of the case.

On September 25, 2013, the ERC directed MERALCO to file its comments on the JointMotion to Dismiss. The ERC likewise set the hearing on the Joint Motion to Dismiss onOctober 14, 2013.

On October 14, 2013 during the hearing on the Joint Motion to Dismiss, ERC directedMERALCO to furnish the generating companies of its Comment and Pre-Trial Brief; grantedMERALCO a period of three (3) days from receipt of the generating companies Reply withinwhich to file a Rejoinder; granted the generating companies a period of five (5) days fromreceipt of MERALCO’s Rejoinder to file a Sur-Rejoinder. The ERC denied the generatingcompanies prayer to hold in abeyance the conduct of the initial heating on October 17, 2013


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and shall proceed on said date only insofar as the jurisdictional hearing is concerned withoutprejudice to the ERC’s resolution of the Joint Motion to Dismiss.

The generating companies’ Joint Motion to Dismiss has been submitted for resolution. As ofDecember 31, 2016 the Joint Motion to Dismiss has yet to be resolved.

f. Temporary Restraining Order on MERALCOOn December 23, 2013, the Supreme Court (SC) issued a temporary restraining order (TRO)to MERALCO enjoining it from increasing the generation rates it charges to its consumersarising from the increased generation costs from its suppliers for the supply month ofNovember 2013. The said TRO also enjoined the ERC from implementing its December 9,2013 Order authorizing MERALCO to stagger the collection of its increased generation costsfor the supply month of November 2013. The TRO was for a period of 60 days fromDecember 23, 2013 to February 21, 2014.

On January 10, 2014, the SC impleaded MERALCO’s suppliers of generation costs, includingPEMC, the operator of the wholesale electricity supply market (WESM), as parties-respondents in the cases.

On February 18, 2014, the SC extended the TRO for another 60 days up to April 22, 2014.

On April 24, 2014, the SC issued a resolution and corresponding TRO, extending indefinitelythe TRO issued on December 23, 2013 and February 18, 2014.

As a result of the TRO, MERALCO has not been able to fully bill its consumers for thegeneration costs for the supply month of November 2013; and in turn, it has not been able tofully pay its suppliers of generation costs, including PEMC.

On March 11, 2014, the ERC released its ERC Order (Case No 2014-021MC, datedMarch 3, 2014) voiding the Luzon WESM prices during the November and December 2013supply months and declaring the imposition of regulated prices in lieu thereof.

PEMC was hereby directed within 7 days from receipt of the Order to calculate theseregulated prices and implement the same in the revised WESM bills of the concerneddistribution utilities in Luzon for the November and December 2013 supply months for theirimmediate settlement, except for MERALCO whose November 2013 WESM bill shall bemaintained in compliance with the TRO issued by the SC.

Several generation companies and distribution companies filed their respective Motions forReconsideration of the March 3, 2014 ERC Order. SCPC filed its Motion for Reconsiderationwith Motion for Deferment of implementation of the Order dated March 3, 2014 on March 31,2014. The said Motions were set for hearing on April 28, 2014.

In the meantime, PEMC issued the adjusted WESM bills to the market participants, includingSCPC. In an Order dated March 27, 2014, the ERC directed PEMC to provide the marketparticipants an additional period of 45 days from receipt of the Order within which to complywith the settlement of the adjusted WESM bills in view of the pendency of the varioussubmissions before the ERC.

During the hearing held on April 28, 2014, the ERC directed the parties to submit theirrespective memoranda by May 2, 2014. In compliance with the directive, SCPC filed aManifestation on May 2, 2014 that it is adopting its Motion for Reconsideration in lieu of

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filing a Memorandum. In an Order dated October 15, 2014, the ERC denied SCPC’s Motionfor Reconsideration.

On December 11, 2014, SCPC filed a Petition for Review with Prayer for Issuance ofTemporary Restraining Order and/or Writ of Injunction with the Court of Appeals seekingreversal of the ERC Orders dated March 3, 2014 and October 15, 2014. In a resolution datedApril 30, 2015, the SCPC’s Petition was consolidated with other related cases filed by othergeneration companies before the Court of Appeals. PEMC and ERC filed their respectiveConsolidated Comments on the consolidated Petitions to which the SCPC filed its Reply.

MERALCO filed its Consolidated Motion for Leave to Intervene with Opposition to Prayersfor issuance of Temporary Restraining Order and/or Writ of Injunction. SCPC filed itsComment to MERALCO’s Consolidated Motion on November 2, 2015.

The Court of Appeals is yet to resolve MERALCO’s Consolidated Motion and theconsolidated Petitions.

Pending the finality of the ERC Order dated March 3, 2014 on recalculation of the WESMprices for the November and December 2013 supply months and its effect on each generationcompany that trade in the WESM, the SCPC estimated its exposure to the said ERC order. Inrelation to the ERC Order, SCPC entered into a special payment arrangement with PEMC forthe payment of the customer’s reimbursement, through PEMC, in excess of the regulated pricefor the purchases through spot market in November and December 2013. The payments areover 24 month from June 2014 to May 2016. Total payments amounted to P=674.00 million.Please see judgments and estimates in Note 3 and the related disclosures on allowance fordoubtful accounts in Note 7.

g. Supplemental Agreement with PALECOOn January 11, 2016, DPC and PALECO signed and executed the “Supplemental Agreementto the July 25, 2012 Power Supply Agreement” for the construction and operation of the2x4.95MW bunker-fired power plant to augment capacity of DPC’s power plants in theprovince of Palawan. The Supplemental Agreement shall be valid and effective until suchtime that DPC’s coal-fired power plant becomes operational. The provisions of the PSA, in sofar as they are not inconsistent with the provisions of the Supplemental Agreement, shallremain valid and binding between PALECO and DPC.

The DOE, through a letter dated June 24, 2016 to the BOI has endorsed and acknowledged the2x4.95MW bunker-fired power plant as part of DPC’s augmentation plan to deliver itscommitted GDC under the PSA.

On November 23, 2016, the BOI issued the Certificate of Registration (COR) for theCompany as New Operator of 15MW Bunker-Fired Power Plant on a Pioneer Status under theOmnibus Investments Code of 1987 (Executive Order No.226).

In the latter part of December 2016, the 2x4.95MW bunker-fired power plant started itscommercial operation.

On January 5, 2017, the Energy Regulatory Commission (ERC) granted a ProvisionalAuthority to Operate (PAO) relative to DPC’s application for the issuance of Certificate ofCompliance (COC) for its 2x4.95MW Bunker-Fired Power Plant (BFPP)


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h. ESA with Sultan Kudarat Electric Cooperative, Inc. (SUKELCO)On June 23, 2015, SUKELCO and DPC entered into an ESA wherein DPC shall construct,install, operate and maintain a 3MW Modular Diesel Power Plant in Brgy. Dukay, Esperanza,Sultan Kudarat.

The ESA has a period of three years commencing on the Commercial Operation Date (COD)and ending on the 3rd year, which may be extended for another one year pursuant to theprovisions of the ESA subject to mutual consent of the parties. The COD shall be the dayupon which ORMECO and DPC jointly certified that the project is capable of operating inaccordance with the operating parameters, and has successfully completed all its tests inaccordance with the schedules of the ESA.

i. Sales AgreementBNC entered into various sales agreements with different customers to sell and deliver nickellaterite ores. The selling price of the nickel laterite ores depends on its ore grading.High grade (1.9% to 2.09%) and low grade (1.1% to 1.11%) are priced at US$56 to US$72.5and US$15.5 to US$15, respectively. The sales agreements are subject to price adjustmentsdepending on the final nickel and moisture content agreed by both parties. BNC exported atotal of 1.03 million WMT and 1.60 million WMT of nickel laterite ores in 2016 and 2015,respectively.

ZDMC had one sale contract during 2016, which had specific ore grade of 1.43% at 55,000WMT and sold for $14 per ton. The contract term for ZDMC’s sale of nickel ore allow for aprice adjustment based on nickel grade and moisture content of the delivered ore as indicatedin the final assay report made by an independent party.

Provisional payment covering 90% of the total amount as reflected in provisional invoice andfinal settlement can be made upon receipt of final invoice.

j. SMPC - Special Order (SO) No. 2017-042, Series of 2017, Creation of DENR Regional Teamto Conduct Investigation on the Semirara Mining and Power Corporation

On February 9, 2017, the SMPC received a Special Order (SO) No. 2017-042, Series of 2017from Department of Environment and Natural Resources - Environment Management Bureau(DENR - EMB) Region VI. The DENR Team that was created through the SO conductedmonitoring, inspection and investigation of the following in relation to the Parent Company’sactivities in Semirara Island:

• Compliance to their ECC;• Ambient Air and Water Monitoring of Semirara Island;• Investigation of alleged reclamation of the Parent Company; and• Livelihood and Community Status in Semirara Island.

In accordance with the SO, the DENR Team proceeded with the investigation, monitoring andinspection on February 9 and 10, 2017. As of audit report date, SMPC has not yet receivedthe results of the investigation, monitoring and inspection from the DENR Region VI.

k. ZDMC - Cancellation of Mineral Production Sharing Agreements (MPSA)On February 8, 2017, the secretary of the DENR issued an order cancelling ZDMC’s MPSA,based among others, on the suspension imposed on ZDMC on July 7, 2016. It was alsogrounded on findings noted from the mine audit conducted by the DENR and other violationsof certain provisions of laws, rules and regulations which are allegedly committed by ZDMC.

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On March 2, 2017, ZDMC filed a for motion for reconsideration (MR) seeking the lifting ofits suspension and the setting aside of the order canceling ZDMC's MPSA. As at March 16,2017, the DENR is still in the process of evaluation of ZDMC’s MR.

l. BNC - Suspension of nickel mining operationsOn June 28, 2016, BNC, with mines located in Berong, Palawan received an indefiniteRegional Suspension Order from Regional Office No. IV-B of MGB in connection with thediscoloration of the Llabongan River which extended towards the surrounding area of thecauseway within the Berong Bay.

On October 28, 2016, BNC received the results of the DENR Audit dated October 21, 2016summarizing the findings and recommendation for BNC’s actions where BNC is given seven(7) days from the receipt of letter to provide explanations and comments on the results of theaudit. BNC submitted their response on November 5, 2016.

On February 8, 2017, the DENR issued an order to BNC maintainin the suspension of itsmining operations under the MPSA on the grounds of violation of certain provisions of thePhilippine Mining Act of 1995. On February 28, 2017, BNC filed a motion before the Officeof DENR Secretary seeking reconsideration for the said Suspension Order. As at March 16,2017, the DENR is still in the process of evaluation of the BNC’s MR.


Additional Information

Additional Inform

ation

Board AppointmentDate of appointment as Chairman:

November 2014Date of first appointment as a director:

March 1995Date of last re-election as a director: July

2016Length of service as a director: 21 years

Present Directorships in Listed CompaniesSemirara Mining and Power Corporation

(within Company Group)Atlas Consolidated Mining and

Development Corp.

Other Directorships within Company GroupD.M. Consunji, Inc.DMCI Project Developers, Inc.DMCI Mining CorporationDMCI Power CorporationDMCI Masbate CorporationDMCI-MPIC Water Company Inc.Maynilad Water Services, Inc.Sem-Calaca Power CorporationSouthwest Luzon Power Generation

CorporationSem Calaca Res Corporation (formerly

DMCI Calaca Corporation)

Further Information onBoard of Directors

Semirara Claystone, Inc. Dacon CorporationDFC Holdings, Inc.Wire Rope Corporation of the Philippines

EducationBS Civil Engineering University of the Philippines Diliman

Master of Business EconomicsCenter for Research and Communication

(now University of Asia and the Pacific)

Master of Business ManagementAsian Institute of Management

Advanced ManagementIESE School, Barcelona, Spain

Civic AffiliationsPhilippine Overseas Construction Board,

ChairmanConstruction Industry Authority of the

Philippines, Board MemberPhilippine Constructors Association, Past

PresidentPhilippine Chamber of Coal Mines, Past

PresidentAsian Institute of Management Alumni

Association, MemberUP Alumni Engineers, MemberUP Aces Alumni Association, Member

MS Civil Engineering, Major in Structures (Fulbright Scholar)

Lehigh University, Bethlehem, Pennsylvania, USA

Civic AffiliationsMemberMakati Business Club, Former TrusteeUniversity of the Philippines, Former

RegentAsian Institute of Management, Former

TrusteeBenigno Aquino Foundation, Past

President

Special RecognitionHonorary Officer, Order of the British

Empire (OBE) by Her Majesty Queen Elizabeth II

Prior Government PositionMember, Monetary BoardCentral Bank of the Philippines

Board AppointmentDate of first appointment as a director:




(within Company Group)

Other Directorships within Company GroupD.M. Consunji, Inc.DMCI Mining Corporation

DMCI Power CorporationDMCI-MPIC Water Company Inc.Sem-Calaca Power CorporationSouthwest Luzon Power Generation


DMCI Calaca Corporation.)Subic Water & Sewerage Co. Inc.

EducationB.S. Commerce Major in AccountingDe La Salle University, Manila

Civic AffiliationsPhilippine Institute of Certified Public

Accountants, Member

Isidro A. Consunji, 67 Filipino, Chairman and President





(within Company Group)iPeople, Inc. Petroenergy Resources CorporationPilipinas Shell Petroleum CorporationConcepcion Industrial Corporation

Other Directorships within Company GroupD.M. Consunji, Inc.

EducationBS Civil EngineeringUniversity of the Philippines Diliman

Cesar A. Buenaventura, 87 Filipino, Non-executive Director

Herbert M. Consunji, 64 Filipino, Executive Director


Additional Inform

ation




(did not serve from August 2006 to June 2008)



Other Directorships within Company GroupDMCI Project Developers, Inc.D.M. Consunji, Inc.Sem-Calaca Power CorporationDacon CorporationDFC Holdings, Inc.






Other Directorships within Company GroupD.M. Consunji, Inc.DMCI Project Developers, Inc.DMCI Mining Corporation DMCI Power CorporationDMCI Masbate CorporationSem-Calaca Power CorporationSouthwest Luzon Power Generation

CorporationDMCI-MPIC Water Company Inc.Maynilad Water Services, Inc.

EducationB.S. ArchitectureUniversity of the Philippines Diliman

Master in Business AdministrationUniversity of the Philippines Diliman

Civic AffiliationsInstitute of Corporate Directors Inc.,

FellowUP College of Architecture Alumni

Foundation Inc., MemberUnited Architects of the Philippines,

MemberGuild of Real Estate Entrepreneurs And

Professionals (GREENPRO) formerly Society of Industrial-

Residential-Commercial Realty Organizations, Member






Other Directorships within Company GroupD.M. Consunji, Inc.DMCI Mining Corporation

DMCI Power CorporationDMCI Masbate Corporation Sem-Calaca Power CorporationSouthwest Luzon Power Generation


DMCI Calaca CorporationDacon CorporationDFC Holdings, Inc.Wire Rope Corporation of the Philippines

EducationA.B. Political ScienceAteneo de Davao University

Dacon CorporationDFC Holdings, Inc.Wire Rope Corporation of the Philippines

EducationB.S. Industrial Management Engineering De La Salle University, Manila

Advanced Management Program SeminarUniversity of Asia and the Pacific

Top Management ProgramAsian Institute of Management

Civic AffiliationsConstruction Industry Authority of the

Philippines, Board MemberAsean Constructors Federation, Former

ChairmanPhilippine Constructors Association, Past

President/ChairmanPhilippine Contractors Accreditation

Board, Former ChairmanAssociation of Carriers & Equipment


July 2015Date of last re-election as a director: July

2016Length of service as a director: 1 year

Present Directorships in Listed CompaniesNil

Other Directorships within Company GroupNil

EducationBachelor’s Degree in Commerce, Major in

ManagementAssumption College

Master in Business EconomicsUniversity of Asia and the Pacific

Civic AffiliationsMissionaries of Mary Mother of the Poor,

Treasurer

Ma. Edwina C. Laperal, 55 Filipino, Executive Director

Victor A. Consunji, 66 Filipino, Non-executive Director

Jorge A. Consunji, 65 Filipino, Non-executive Director

Luz Consuelo A. Consunji, 63 Filipino, Non-executive Director


Additional Inform

ation



2016Length of service as a director: 4 years*

Present Directorships in Listed CompaniesPhilippine Business Bank

Other Directorships within Company Group Nil

EducationBA Major in EconomicsDe La Salle University

BS Commerce, Major in AccountingDe La Salle University

Master in Business ManagementAsian Institute of Management

Civic AffiliationsInstitute of Corporate Directors, FellowRotary Club of Makati West, Member/

TreasurerMakati Chamber of Commerce and

Industries, Past President



2016Length of service as a director: 4 years*

Present Directorships in Listed CompaniesABS-CBN Holdings Corporation ABS-CBN CorporationAyala CorporationBank of the Philippine IslandsMax’s Group, Inc.Philippine Seven Corporation

Other Directorships within Company Group Nil

EducationAB EconomicsAteneo de Manila University

Master of Science (Economics)Oxford University, United Kingdom

Master in Business AdministrationDarden Graduate School of Business

AdministrationUniversity of Virginia, USA

Civic AffiliationsGlobal Advisory Council Darden

Graduate School of Business Administration

University of Virginia, MemberFinance and Budget Committee of the

Board, Ateneo de Manila University,MemberFinance Committee, Philippine Jesuit

Provincial, Member

* based on SEC Circular No. 9-2011 which took effect on 2 January 2012

Further Information on Key Officers

Isidro A. ConsunjiChairman and President

Appointed President of the Company in March 1995. He concurrently holds top management positions in various DMCI Holdings subsidiary companies.

A civil engineering graduate from the University of the Philippines in Diliman, he pursued further studies at the Center for Research and Communication (Master of Business Economics), Asian Institute of Management (Master of Business Management) and IESE Business School in Barcelona, Spain (Advanced ManagementProgram).

Ma. Cristina C. GotianunAssistant Treasurer

Also holds executive positions in various DMCI Holdings subsidiary companies. A Business Economics graduate from the University of the Philippines in Diliman, she also completed further studies in Spanish from Instituto de Cultura Hispanica in Madrid, Spain and Strategic Business Economics from the University of Asia & the Pacific.

Cherubim O. MojicaVice President and Corporate Communications Officer

Promoted to Vice President for Corporate Communications in November 2016. A Communication Research (cum laude) and Industrial Relations graduate from the University of the Philippines-Diliman, she served as Corporate Communications Head of Maynilad Water Services, Inc. from October 2008 to September 2014.

Herbert M. ConsunjiExecutive Vice President and Chief Finance Officer

Also serves as Chief Compliance Officer of the Company. He concurrently occupies senior management positions in various DMCI subsidiary and affiliate companies. A Certified Public Account, he graduated from De La Salle University in Manila with a degree in Commerce Major in Accounting.

Ma. Edwina C. LaperalTreasurer

Concurrently holds Treasury positions in a number of DMCI Holdings subsidiary companies. After completing a BS Architecture degree from the University of the Philippines in Diliman, she obtained a Master in Business Administration degree from the same university and an Executive Certificate for Strategic Business Economics from the University of Asia & the Pacific.

Dr. Victor S. LimlinganManaging Director

Appointed as Managing Director in February 2009, Dr. Limlingan is a published author and recognized professor at the Asian Institute of Management (AIM). A Bachelor of Arts (major in engineering) graduate of the Ateneo de Manila University, he earned his Master in Business Management from the same university and received his Doctor of Business Administration from Harvard Business School.

Brian T. LimVice President and Senior Finance Officer OfficerPromoted to Vice President and Senior Finance Officer in November 2016. A former Auditor at Sycip Gorres and Velayo, he graduated with a BS Accountancy degree from University of St. La Salle and topped the Certified Public Accountant Board Exam in May 2007.

Ma. Luisa C. AustriaAdministration and Accounting Officer

Appointed as Administration and Accounting Officer in March 1996, she has been with the DMCI group since July 1989. She is a certified public accountant.

Tara Ann C. ReyesInvestor Relations Officer

Joined the Company in January 2013 as Investor Relations Officer. She trained under the Financial Planning and Forecasting department at Metro Pacific Investment Corporation for eight (8) months.

Honorio O. Reyes-Lao, 72 Filipino, Independent Director

Antonio Jose U. Periquet, 55 Filipino, Independent Director


Additional Inform

ation

Business Structure

Raco Haven Automation Phil. (50.14%)

Oriken Dynamix Company, Inc. (89%)

Beta Electric Corporation (53.95%)

DMCI Technical Training Center, Inc. (100%)

DM Consunji, Inc.-First Balfour Joint Venture (51%)

Bachy Solentache Philippines Corporation (49%)

Obayashi Philippines Corporation (39.55%)

D.M. Consunji, Inc. (100%)

DMCI Holdings, Inc.

Joint Venture

Associates

DMCI Project Developers, Inc. (100%)

DMCI Homes, Inc. (100%)

Hampstead Gardens Corporation (100%)

DMCI PDI Hotels, Inc. (100%)

DMCI Homes Property Management Corporation (100%)

Riviera Land Corporation (100%)

Subic Water and Sewerage Company (30%)

Zenith Mobility Solutions Services, Inc. (51%)

Associate Southeast Luzon Power Generation Corporation (100%)

Semirara Energy Utilities, Inc. (100%)

St. Raphael Power Generation Corporation (50%)

Sem Calaca Power Corporation (100%)

Semirara Claystone, Inc. (100%)

Southwest Luzon Power Generation Corporation (100%)

Sem-Cal Industrial Park Developers, Inc. (100%)

Sem-Calaca RES Corporation (100%)

Semirara Mining and Power Corporation (56.51%)

Joint Venture

Maynilad Water Holdings Company, Inc. (27.19%)

Associate

Heraan Holdings, Inc.

Zambales Chromite Mining Company Inc. (100%)

Zambales Diversified Metals Corp. (100%)

Montague Resources, Phil. Corporation (100%)

Fil-Asian Strategic Resources & Properties (100%) Mt. Lanat

Metals Corporation

DMCI Mining Corporation (100%)

Ulugan Resources Holdings, Inc. (30%)

Nickeline Resources Holdings, Inc. (40%)

Ulugan Nickel Corporation (40%)

60%

Berong Nickel Corporation (40%)

60%

60%

Fil-Euro Asia Nickel Corporation (100%)

Montemina Resources Corporation (99%)

TMM Management, Inc. (40%)

1%

Zambales Nickel Processing Corporation

Zamnorth Holdings Corporation

ZDMC Holdings Corporation

60% 40%

60% 40%

20% 80%

40%

60%

100%

Semirara Cement Corporation (100%)

* Includes 16.02% investment of DMCI to Wire Rope.

Wire Rope Corporation of the Philippines* (61.70%)DMCI Masbate

Power Corporation (100%)

DMCI Palawan Power Corporation (100%)

DMCI Power Corporation (100%)

Shareholding Statistics

DMCI Holdings has 13,277,470,000 outstanding shares as of 31 December 2016, with the top 20 shareholders as follows:

Rank Stockholder Name No. of Shares Percentage

1 DACON CORPORATION 6,838,807,440 51.51%

2 DFC HOLDINGS, INC. 2,379,799,910 17.92%

3 PCD NOMINEE CORPORATION (FOREIGN) 1,943,743,533 14.64%

4 PCD NOMINEE CORPORATION (FILIPINO) 1,665,571,202 12.54%

5 DMCI RETIREMENT PLAN 99,900,000 0.75%

6 BERIT HOLDINGS CORPORATION 99,791,687 0.75%

7 FERNWOOD INVESTMENT, INC. 75,856,020 0.57%

8 GUADALUPE HOLDINGS, CORP. 54,588,045 0.41%

9 DOUBLE SPRING INVESTMENTS CORPORATION 20,331,005 0.15%

10 AUGUSTA HOLDINGS, INC. 19,039,670 0.14%

11 DMCI RETIREMENT FUND 13,000,000 0.10%

12 JOSEFA CONSUNJI REYES 5,753,000 0.04%

13 MA. EDWINA/ MIGUEL DAVID C. LAPERAL 2,750,000 0.02%

14 YNTALCO REALTY DEVT. CORPORATION 2,500,000 0.02%

15 BENIGNO DELA VEGA 2,050,000 0.02%

16 WINDERMERE HOLDINGS, INC. 1,905,715 0.01%

17 AO ZHENG 1,840,000 0.01%

18 XIUFEN LI 1,830,000 0.01%

19 MAKATI SUPERMARKET CORP. 1,727,500 0.01%

20 ENRIQUE G. FILAMOR 1,570,000 0.01%


Additional Inform

ation

2016 2015

Direct Indirect Effective Interest Direct Indirect

Effective Interest

(In percentage) ENK Plc. (ENK)**** − – − 100.00 – 100.00

European Nickel Iberia SL (EN Iberia) 6 – – – – 100.00 100.00 European Nickel Spain SL (EN Spain) 6 – – – – 100.00 100.00 Rusina Mining Ltd. (Rusina) 6 – – – – 100.00 100.00 European Nickel Holland BV (EN Holland) 6 – – – – 100.00 100.00 European Nickel Philland BV (EN Philland) 6 – – – – 100.00 100.00 European Nickel PLC - Regional Operating

Headquarters (EN ROHQ) 6 – – –

– 100.00 100.00 Enickel Holdings, Inc. (EHI) 6* – – – – 100.00 100.00

Enickel Berhold, Inc. (EBI) 6 – – – – 100.00 100.00 Manufacturing: Semirara Cement Corporation (SemCem) * 100.00 – 100.00 100.00 – 100.00 Wire Rope Corporation of the Philippines

(Wire Rope) 45.68 16.02 61.70 45.68 16.02 61.70 * Have not yet started commercial operations as of December 31, 2016 and 2015 ** Has not yet started commercial operations and treated as joint-venture starting May 23, 2016. *** Previously named SEM-Balayan Power Generation Corporation (SBPGC), was changed to

Southeast Luzon Power Generation Corporation (SeLPGC) effective July 12, 2016. **** ENK and its subsidiaries were liquidated in 2016. 1 DMCI’s subsidiaries 2 PDI’s subsidiaries 3 SMPC’s subsidiaries 4 DPC’s subsidiaries 5 DMC’s subsidiaries 6 ENK’s subsidiaries

Effective Percentages of Ownership 2016 2015

Direct Indirect Effective Interest Direct Indirect

Effective Interest

(In percentage) General Construction: D.M. Consunji, Inc. (DMCI) 100.00 – 100.00 100.00 – 100.00 Beta Electric Corporation (Beta Electric) 1 – 53.95 53.95 – 53.95 53.95 Raco Haven Automation Philippines, Inc. (Raco) 1 – 50.14 50.14 – 50.14 50.14 Manufacturing and others: Oriken Dynamix Company, Inc. (Oriken) 1* – 89.00 89.00 – 89.00 89.00 DMCI Technical Training Center (DMCI Training) 1 – 100.00 100.00 – 100.00 100.00 Real Estate Development: DMCI Project Developers, Inc. (PDI) 100.00 – 100.00 100.00 – 100.00 Hampstead Gardens Corporation (Hampstead) 2 – 100.00 100.00 – 100.00 100.00 Riviera Land Corporation (Riviera) 2 – 100.00 100.00 – 100.00 100.00 DMCI-PDI Hotels, Inc. (PDI Hotels) 2 – 100.00 100.00 – 100.00 100.00 DMCI Homes Property Management Corporation (DPMC) 2 – 100.00 100.00 – 100.00 100.00 Zenith Mobility Solutions Services, Inc.2 – 51.00 51.00 – 51.00 51.00 Marketing Arm: DMCI Homes, Inc. (DMCI Homes) 2 – 100.00 100.00 – 100.00 100.00 Coal Mining Semirara Mining and Power Corporation (SMPC) 56.51 – 56.51 56.32 – 56.32 On-Grid Power Sem-Calaca Power Corporation (SCPC) 3 – 56.51 56.51 – 56.32 56.32 Southwest Luzon Power Generation Corporation (SLPGC) 3 – 56.51 56.51 – 56.32 56.32 Sem-Calaca RES Corporation (SCRC) 3* – 56.51 56.51 – 56.32 56.32 SEM-Cal Industrial Park Developers, Inc. (SIPDI) 3* – 56.51 56.51 – 56.32 56.32 Semirara Energy Utilities, Inc. (SEUI) 3* – 56.51 56.51 – 56.32 56.32 Southeast Luzon Power Generation Corporation

(SeLPGC) 3*** – 56.51 56.51

– 56.32 56.32 St. Raphael Power Generation Corporation (SRPGC)** – − − – 56.32 56.32 Manufacturing Semirara Claystone, Inc. (SCI) 3* – 56.51 56.51 – 56.32 56.32 Off-Grid Power DMCI Power Corporation (DPC) 100.00 – 100.00 100.00 – 100.00 DMCI Masbate Power Corporation (DMCI Masbate) 4 – 100.00 100.00 – 100.00 100.00 DMCI Palawan Power Corporation (DMCI Palawan) 4 – 100.00 100.00 – 100.00 100.00

Nickel Mining: DMCI Mining Corporation (DMC) 100.00 – 100.00 100.00 – 100.00 Berong Nickel Corporation (BNC) 5 – 74.80 74.80 – 74.80 74.80 Ulugan Resouces Holdings, Inc. (URHI) 5 – 30.00 30.00 – 30.00 30.00 Ulugan Nickel Corporation (UNC) 5 – 58.00 58.00 – 58.00 58.00 Nickeline Resources Holdings, Inc. (NRHI) 5 – 58.00 58.00 – 58.00 58.00 TMM Management, Inc. (TMM) 5 – 40.00 40.00 – 40.00 40.00 Zambales Diversified Metals Corporation (ZDMC) 5 – 100.00 100.00 – 100.00 100.00 Zambales Chromite Mining Company Inc. (ZCMC) 5 – 100.00 100.00 – 100.00 100.00

Fil-Asian Strategic Resources & Properties Corporation (FASRPC) 5 – 100.00 100.00 – 100.00 100.00

Montague Resources Philippines Corporation (MRPC) 5 – 100.00 100.00 – 100.00 100.00 Montemina Resources Corporation (MRC) 5 – 100.00 100.00 – 100.00 100.00 Mt. Lanat Metals Corporation (MLMC) 5 – 100.00 100.00 – 100.00 100.00 Fil-Euro Asia Nickel Corporation (FEANC) 5 – 100.00 100.00 – 100.00 100.00

Heraan Holdings, Inc. (HHI) 5 – 100.00 100.00 – 100.00 100.00 Zambales Nickel Processing Corporation (ZNPC) 5 – 100.00 100.00 – 100.00 100.00 Zamnorth Holdings Corporation (ZHC) 5 – 100.00 100.00 – 100.00 100.00 ZDMC Holdings Corporation (ZDMCHC) 5 – 100.00 100.00 – 100.00 100.00


Additional Inform

ation

D.M. Consunji, Inc. Isidro A. Consunji Chairman Jorge A. Consunji President and Chief Executive Officer Ma. Cristina C. Gotianun Vice President and Chief Finance Officer Ma. Edwina C. LaperalTreasurer David R. Villaviray Senior Vice President, Utilities & Plants SBU Head Christopher R. RodriguezSenior Vice President, Energy SBU Head Jesus V. Prindiana First Vice President, Infrastructure SBU Deputy Head Ronaldo R. Elepaño, Jr.First Vice President, International Business Development Geronimo L. Punzal First Vice President, Buildings SBU Head Rebecca E. Civil First Vice President, Contracts/Commercial Teddy A. Irenea First Vice President, Special Projects SBU Head

Subsidiaries and Affiliate Key Officers

Gerardo S. Ancheta, Jr.Vice President, Design & Engineering Frances Grace B. Mercado Vice President, Finance Leonila C. Alabastro Assistant Vice President, Treasury Mila D. Perez Assistant Vice President, Internal Audit and ISO Management Representative Francisco M. Zalameda, Jr.Assistant Vice President and General Manager, Ready Mixed Concrete & Wall Works Division Rustom R. FrondozaAssistant Vice President and General Manager, Equipment Management & Form Works Division Dwight David A. Ta-ala Assistant Vice President, Infrastructure SBU Head Jesus T. Cammayo, Jr.Assistant Vice President, Building SBU Deputy Head Joffrey B. Gacula Assistant Vice President, Energy SBU Deputy Head Alfredo Juan J. De VillaAssistant Vice President and General Manager, Steel Fabrication Vincent Ramon A. Almacen Assistant Vice President, Infrastructure SBU Operations

DMCI Homes (DMCI Project Developers, Inc.) Isidro A. ConsunjiChairman Alfredo R. Austria President Elmer G. Civil Senior Vice President, Construction & Post Construction Ma. Edwina C. Laperal Senior Vice President, Treasurer Florante C. Ofrecio Senior Vice President, Sales Enrico C. WongSenior Vice President, DPMC, AVB, GSD & Leasing Evangeline H. Atchioco Vice President, Finance

Adrian Crisanto M. Vice President, Design & Engineering & Asset Disposal

Atty. Roel A. Pacio Vice President, Legal & Permits

Ma. Severina M. Soriano Vice President, Architectural Design & Interior Design

Jonathan David C. Bote Assistant Vice President, Sales

Jesus Ma. A. Ferrer Assistant Vice President, IT and Asset Management

Josephine C. Isidro Assistant Vice President, Quality Management Systems & Business Process

Florence L. Loreto Assistant Vice President, Business Development

Teresa P. Tiongson Assistant Vice President, Human Resource

Januel Mikel O. Venturanza Assistant Vice President, Marketing, Customer Care & Corporate Planning

Dennis O. Yap Assistant Vice President, Project Development

Semirara Mining and Power Corporation Isidro A. ConsunjiChairman and Chief Executive Officer

Victor A. ConsunjiPresident and Chief Operating Officer

Cristina C. GotianunExecutive Vice President

Antonio R. Delos SantosVice President, Treasury

Jaime B. GarciaVice President, Procurement and Logistics

Jose Anthony T. VillanuevaVice President, Marketing

Atty. John R. SadulloVice President, Legal and Corporate Secretary

Junalina S. TaborVice President, Chief Finance Officer

Nena D. ArenasVice President, Chief Governance and Compliance Officer

Sharade E. PadillaAssistant Vice President, Investor and Banking Relations

DMCI Power CorporationIsidro A. Consunji Chairman

Victor A. ConsunjiVice Chairman

Cristina C. GotianunTreasurer

Nestor D. DadivasPresident

Henry V. AlcaldeVice President, Operations & Maintenance

Antonino E. Gatdula, Jr.Vice President, Accounting and Finance

Marichu O. DeeAssistant Vice President, Treasury and Risk Management

Denel C. MateoAssistant Vice President, Plant Manager

Loides C. CastroAssistant Vice President, Project Development

Jojo L. TandocAssistant Vice President, Human Resources and Administration

Atty. Francis Allan A. RubioAssistant Vice President, Legal


Maynilad Water Services, Inc. Manuel V. PangilinanChairman

Isidro A. Consunji Vice Chairman

Ramoncito S. FernandezPresident and CEO

Randolph T. EstrelladoChief Operating Officer and concurrently Chief Finance Officer

Christopher J. LichaucoHead, Business Area Operations

Francisco C. CastilloHead, Information Technology Services

John Patrick C. GregorioHead, Commercial & Marketing

Atty. Lourdes Marivic P. EspirituHead, Legal and Regulatory Affairs

DMCI Mining Corporation Isidro A. ConsunjiChairman

Cesar F. SimbulanPresident

Aldric G. BorlazaVice President, Human Resources, Administration & Finance

Tulsi Das C. ReyesVice President, Marketing

Herbert M. ConsunjiTreasurer

DMCI Holdings, Inc.3rd Floor, Dacon Building2281 Don Chino Roces Avenue ExtensionMakati City, Metro Manila1231 PhilippinesTel (632) 888 3000Fax (632) 816 7362Website: http://www.dmciholdings.com

Legal CounselCastillo Laman Tan Pantaleon &San Jose Law Offices4th Floor The Valero Tower122 Valero Street, Salcedo VillageMakati City, Metro Manila, PhilippinesTel (632) 810 4371 & 817 2724Fax (632) 819 2724/25 & 817 5938

Shareholder and Investor InquiriesInvestor Relations3rd Floor, Dacon Building2281 Don Chino Roces AvenueMakati City, Metro Manila1231 PhilippinesTel (632) 888 3000 local 1023Fax (632) 816 7362Email: [email protected]

Stock Transfer AgentSecurities Transfer Services, Inc.Ground Floor Benpres BuildingMeralco Avenue corner Exchange RoadOrtigas Center, Pasig CityMetro Manila, PhilippinesTel (632) 490 0060Fax (632) 631 7148

Corporate Information

Subsidiary and Affiliate Directory

D.M. Consunji, Inc.DMCI Plaza Bldg.2281 Don Chino Roces Avenue Extension,Makati City, Metro Manila1231 Philippines

DMCI HomesDMCI Homes Corporate Center1321 Capt. Apolinario St., Brgy. Bangkal,Makati City 1233 Philippines

Semirara Mining and Power Corporation2nd Floor DMCI Plaza2281 Chino Roces Avenue Extension,Makati City, Metro Manila1231 Philippines

DMCI Mining Corporation3rd Floor DMCI Homes Corporate Center1321 Capt. Apolinario St., Brgy. Bangkal,Makati City 1233 Philippines

DMCI Power Corporation3rd Floor DMCI Plaza2281 Chino Roces Avenue Extension,Makati City, Metro Manila1231 Philippines

Maynilad Water Services Inc.Maynilad BuildingMWSS Compound, Katipunan Avenue,Balara, Quezon City, Philippines

Yolanda C. LucasHead, Program Management Division

Irineo L. DimaanoHead, Central Non-Revenue Water

Francisco A. ArellanoHead, Corporate Quality, Environment, Safety & Health

Ronaldo C. PaduaHead, Water Supply Operations

Eric J. MontesHead, Integrated Asset Management

Arturo Celso D. BarandaHead, Corporate Logistics

Marcos D. De JesusHead, Technical Services Division

Mitchie M. ArcainaOfficer-in-Charge, Human Resources Division

The DMCI Holdings, Inc. Integrated Annual Report 2016 cover is printed on Mohawk Options with Inxwell. It is made with 100% post-consumer waste, and 100% of the electricity used to manufacture the paper is offset with Renewable Energy Certificates (RECs) from nonpolluting wind power projects. Mohawk Options is acid-free.

The DMCI Holdings, Inc. Integrated Annual Report 2016 inside pages are printed on Olin Smooth Absolute White, which is produced by an environment-friendly manufacturing process that uses pulp from well-managed forests certified in accordance with the rules of the FSC and is made from 100% ECF woodpulps.

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