Management Report - Queiroz Galvão · Maurício José de Queiroz Galvão President ... • Flávio Roberto Dornelas Câmara Pimentel ... • Paulo Cesar Medeiros Brechbuhler

Queiroz Galvão Financial Statements 2015 1

To the Stockholders,

In accordance with the by-laws, we are submitting for your consideration the annual report of the management, and the related financial statements for the year ended December 31, 2015, of Construtora Queiroz Galvão S/A.

The Management is grateful to all those who contributed toward the results achieved, especially our team of collaborators for their hard work and dedication, to suppliers and service providers for their good quality and punctuality and to clients for their faith in our work.

Rio de Janeiro, March, 22th, 2016.

ADMINISTRATIVE COUNCIL

Maurício José de Queiroz GalvãoPresident

Ricardo de Queiroz GalvãoFernando de Queiroz Galvão Counselors

EXECUTIVE BOARD

• PetrônioBrazJunior• CarlosAlbertoMendesdosSantos• RuiVazdaCostaFilho• MariaTerezaFernandesRodriguezdeCampos• RosaCecíliaAraújoFigueiroa• RosaliaMariaTerezaSergiAgatiCamello• AnaCristinaFreiredosSantos• GustavoSouza• JoséMarlonSouzaSerafim• LuizRonaldoCherulli• MárioBianchiniJunior• RuiNovaisDias• FlávioRobertoDornelasCâmaraPimentel• JoséHenriquedeÁvila• RicardoAulicinoAcar• UrbanoRamosdeAndradeLima• SávioRolembergAlbuquerquedeAguiar• AugustoNogueiradaSilva• PauloCesarMedeirosBrechbuhler• MárcioLuizJordãoCarneirodaCunha

ACCOUNTANT

RubensRufinodeOliveira-CRC-PE010.349/O-1T-RJ

Management ReportConstrutora Queiroz Galvão S.A.


Independent

auditors’report

ToDirectors and ShareholdersConstrutora Queiroz Galvão S/ARio de Janeiro - RJ

We have audited the individual and consolidated financial statements of Construtora Queiroz Galvão S/A, identified asHoldingCompanyandConsolidated,respectively,whichcomprisethebalancesheetat31December2015andthe related statements of income, comprehensive income, changes in equity and cash flows for the year ended on that date, as well as the summary of significant accounting policies and other explanatory notes.

Management’s Responsibility on Financial Statements

The Company’s management is responsible for the preparation and fair presentation of the individual and consolidatedfinancialstatementsaccordingtoaccountingpracticesadoptedinBrazil,andinaccordancewithinternationalfinancialreportingstandards(IFRS)issuedbytheInternationalAccountingStandardsBoard-IASBas well as in accordance with the internal controls established by it as necessary to permit preparation of these financial statements free of material misstatement, regardless if it was caused by fraud or error.

Independent Auditor’s Responsibilities

Our responsibility is to express an opinion on these financial statements based on our audit conducted in accordancewiththeBrazilianandinternationalauditingstandards.Thosestandardsdemandscomplianceof ethical requirements by the auditors and that the audit is planned and implemented in order to obtain reasonable assurance that the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. Theproceduresselecteddependontheauditor’sjudgment,includingassessmentoftherisksofmaterialmisstatement of the financial statements, regardless if it was caused by fraud or error.

In this risk assessment, the auditor considers internal control relevant to the preparation and fair presentation of financial statements of the Company to plan audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of those internal controls of the Company.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the presentation of the financial statements taken as a whole.

We believe that the audit evidence obtained is sufficient and appropriate to base our opinion.


Opinion

In our opinion, the individual and consolidated financial statements referred to above present fairly, in all material respects, the individual and consolidated equity and financial positions of Construtora Queiroz Galvão S/A on December 31, 2015, the individual and consolidated performance of its operations and its cash flows for the year ended on that date in accordance with international financial reporting standards (IFRS) issued by the International AccountingStandardsBoard-IASBandtheaccountingpracticesadoptedinBrazil.

Emphasis

AsmentionedinNote1tothefinancialstatements,areongoinginvestigationsrelatedtotheoperationcalled“LavaJato”.Inthiscontext,todate,theCompanyisnotawareofthefilingofanylegalproceedingsthatinvolveits subsidiaries or any of their representatives. The Company’s financial statements do not include any effects that eventually in the future may result from those investigations and our opinion is not modified in relation to this issue.

March 22th, 2016.

MárioVieiraLopes JoséCarlosdeAlmeidaMartinsContador-CRC-RJ 60.611/O Contador - CRC-RJ-036.737-0

(AtranslationoftheoriginalreportinPortuguesecontaining financial statements prepared in accordance with accounting practices generally acceptedinBrazil)


Financial StatementsCONSTRUTORAQUEIROZGALVÃOS.A.

See notes to financial statements.

ASSETS

Current assets:

Cash(Note3a,b)

Tradeaccountsreceivable(Note5)

Inventories

Taxes recoverable

Prepaidexpenses

Other receivables

Noncurrentassets:

Long-termassets:

Marketable securities

Relatedparties(Note8)

Deposits for fiscal investiments

Other accounts receivable

Investmentsinsubsidiariesandaffiliates(Note6)

Agio

Other investments

Fixedassets(Note7)

Intangibleassets(Note7)

Deferred assets

2015

516,466

595,063

39,235

103,498

7,232

17,576

1,279,070

102,730

63,796

319

459

53,385

1,703

2,260

195,815

9,164

2,304

431,935

1,711,005

2014

568,801

625,616

68,232

70,539

12,215

15,320

1,360,721

31,443

11,754

1,298

7,112

130,046

5,100

2,684

225,444

12,762

1,929

429,574

1,790,295

CONSOLIDATED

2015

126,847

279,413

11,959

31,546

5,261

4,206

459,232

7,360

75,397

-

79

322,623

-

1,376

78,900

8,508

-

494,243

953,475

2014

179,559

390,189

37,455

29,416

10,522

5,637

652,778

10,820

24,375

-

3,478

308,221

-

1,549

160,913

12,238

-

521,595

1,174,373

HOLDING COMPANY

CONSOLIDATED BALANCE SHEETSAtDecember31,2015and2014(InthousandsofUSdollars)




LIABILITIES

Current liabilities:

Trade accounts payable

Loans(Note10)

Payrollandsocialsecuritiesandtax

and social contribution payable

Other accounts payable

Noncurrentliabilities:

Loans(Note10)

Relatedparties(Note8)

Tax and social contribution payable

Deferred income tax and social contribution

Contingencies(Note9)

Other accounts payable

Deferred income

Shareholders’ equity:

Capitalstock(Note12)

Capital reserve

Revaluation reserve

Earningreserve

EquityValuationAdjustment

Participationofcontrollingshareholders

Participationofnoncontrollingshareholders

2015

117,524

271,144

107,883

22,335

518,886

203,463

-

1,813

25,907

2,768

310

406,802

641,063

322,146

192

7,905

102,797

89,568

522,608

28,448

551,056

1,711,005

2014

146,166

294,642

127,551

42,287

610,646

286,607

-

12,082

5,552

3,925

88

234,745

542,999

381,132

283

11,908

131,145

93,222

617,690

18,961

636,651

1,790,295

CONSOLIDATED

2015

29,026

146,013

30,720

11,522

217,281

82,606

-

1,811

11,177

2,768

-

115,224

213,586

322,146

192

7,905

102,797

89,568

522,608

-

522,608

953,475

2014

62,268

31,916

81,122

20,996

196,301

265,803

-

8,153

4,881

3,925

-

77,620

360,383

381,132

283

11,908

131,145

93,222

617,690

-

617,690

1,174,373

HOLDING COMPANY

CONSOLIDATED BALANCE SHEETSAtDecember31,2015and2014(InthousandsofUSdollars)



Financial Statements

2011

CONSTRUTORAQUEIROZGALVÃOS.A.

ConsolIdated and HoldIng CoMpany stateMents oF InCoMeYearsEndedDecember31,2015and2014(InthousandsofUSdollars,exceptsharedata)

Service income

Equityinearningsofsubsidiariesandaffiliates

Cost of services

Gross profit

Operating income (expenses):

Administrative

Depreciation

Tax expenses

Other revenues (expenses)

Financial income

Financial expenses

Profitbeforesocialcontributionandincometax

Social contribution

Income tax

Reversal of deferred income tax and social contribution

Netincome(loss)fortheyear

Participationofnoncontrollingshareholders

Netincomeofcontrollingshareholders

Earning(loss)pershare

Numberofsharesofthecapitalstock

2015

1,512,099

4,694

(1,312,578)

204,215

(109,852)

(16,304)

(1,350)

6,873

(120,633)

220,031

(268,472)

(48,441)

35,141

(3,053)

(8,159)

(6,828)

17,101

1,552

18,653

2014

2,288,707

33,029

(2,111,012)

210,723

(174,557)

(8,463)

(4,377)

2,449

(184,949)

160,904

(176,702)

(15,798)

9,976

(581)

(15,711)

(16,140)

(22,456)

(4,400)

(26,856)

CONSOLIDATED

2015

1,209,648

17,307

(1,048,717)

178,238

(63,438)

(229)

(693)

448

(63,912)

56,330

(135,957)

(79,627)

34,699

(2,377)

(6,393)

(7,276)

18,653

-

18,653

0.02

865,618,938

2014

1,754,187

(7,583)

(1,638,772)

107,832

(140,462)

(1,585)

(1,038)

1,315

(141,769)

106,023

(83,365)

22,658

(11,279)

211

352

(16,140)

(26,856)

-

(26,856)

(0.03)

865,618,938

HOLDING COMPANY



stateMents oF CoMpReHensIve InCoMeYearsEndedDecember31,2015and2014(InthousandsofUSdollars)

2015 2014

Netincome(loss)fortheyear 18,653 (26,856)

Other Comprehensive Income:

Items to be subsequently reclassified to profit

Translationadjustmentsoninvestmentsabroad 31,774 3,787

Total comprehensive income (loss) 50,427 (23,069)


8 Queiroz Galvão Financial Statements 2015



stateMents oF CHanges In sHaReHoldeRs` equItyYearsEndedDecember31,2015and2014(InthousandofUSdollars)

Balances at january 1, 2014

Gain (loss) on translation AdjustmentforhamonizationwiththenewaccountingstandardsIncreaseincapital-01/01/2014EquityValuationAdjustment-reflexTranslationadjustmentofforeigninvestments Dividends paid EquityValuationAdjustmentLossfortheyear Appropriation of earnings: Reversal of unrealized profits

Balances at December 31, 2014

Gain (loss) on translation AdjustmentforhamonizationwiththenewaccountingstandardsIncreaseincapital-28/12/2015EquityValuationAdjustment-reflexTranslationadjustmentofforeigninvestments Dividends paid Debentures Amortization Realization of Revaluation Reserve EquityValuationAdjustmentLossfortheyear Appropriation of earnings: Constitution of legal reserve Reversal of unrealized profits

Balances at December 31, 2015

CapitalStock

409,397

(51,021) -

22,756 - - - - -

-

381,132

(121,871) -

62,885 - - - - - - -

- -

322,146

CapitalReserve

320

(37) - - - - - - -

-

283

(91) - - - - - - - - -

- -

192

Earning Reserve

LegalReserve

8,513

(1,005) - - - - - - -

-

7,508

(2,400) - - - - - - - - -

933 -

6,041

RealizableProfits

199,411

(23,543) - - - -

(35,427) - -

(16,804)

123,637

(39,534) - - - -

(9,841) (3,765)

195 - -

- 26,064

96,756

RetainedEarnings

-

1 - - - - -

10,051 (26,856)

16,804

-

2 - - - - - - -

8,34218,653

(933)(26,064)

-

ComprehensiveIncome

7,768

(917) - - -

3,787 - - -

-

10,638

(3,402) - - -

31,774 - - - - -

- -

39,010

EquityValuation

Adjustment

102,960

(12,156) - -

(581) - -

(7,639) -

-

82,584

(26,408) - -

4,729 - - - -

(10,347) -

- -

50,558

Total

741,872

(90,273) -

22,756 (581)3,787

(35,427)2,412

(26,856)

-

617,690

(197,512) -

62,8854,729

31,774(9,841) (3,765)

- (2,005)18,653

- -

522,608

Total-

759,265

(92,326) 3,621

22,756 (581)3,787

(35,427)2,412

(26,856)

-

636,651

(203,575) 15,550 62,885

4,72931,774(9,841) (3,765)

- (2,005)18,653

- -

551,056

RevaluationReserve

13,503

(1,595) - - - - - - -

-

11,908

(3,808) - - - - - -

(195) - -

- -

7,905

Participationof non controlling

Shareholders

17,393

(2,053) 3,621

- - - - - -

-

18,961

(6,063) 15,550

- - - - - - - -

- -

28,448




stateMent oF CasH FlowYearsEndedDecember31,2015and2014(InthousandsofUSdollars)

2011

Cash flows from operating activities:

Income (loss) of the year

Adjustmentsfor:

Depreciation

Equityinearningsofsubsidiariesandaffiliates

Minority interest

Netvalueoffixedassetswrittenoff

Interest expenses

Decrease (increase) in accounts receivable

Decrease (increase) in inventories

Decrease (increase) in recoverable taxes

Decrease (increase) in other accounts receivable

Increase (decrease) in related parties

Increase (decrease) in suppliers

Increase (decrease) in salaries, charges and tax obligations to pay

Increase (decrease) in other trade accounts payable

Cash flows from operating activities

( - ) interests paid

Net cash provided by (used in) operating activities

2015

18,653

71,329

(4,694)

1,552

8,529

48,441

143,810

30,553

28,997

(32,959)

(60,928)

(52,042)

(28,642)

(19,668)

161,255

170,376

(268,472)

(98,096)

2014

(26,856)

73,722

(33,029)

(4,400)

4,954

15,798

30,189

(5,352)

2,882

(19,624)

88,222

(11,754)

(89,835)

13,000

(16,873)

(9,144)

(176,702)

(185,846)

CONSOLIDATED

2015

18,653

38,362

(17,307)

-

8,210

79,627

127,545

110,776

25,496

(2,130)

13,551

(51,022)

(33,242)

(50,401)

26,927

167,500

(135,957)

31,543

2014

(26,856)

58,278

7,583

-

3,514

(22,658)

19,861

47,616

10,475

(15,970)

(492)

(24,375)

(24,414)

(16,197)

(83,996)

(87,494)

(83,365)

(170,859)

HOLDING COMPANY


Financial Statements



stateMent oF CasH FlowYearsEndedDecember31,2015and2014(InthousandsofUSdollars)

2011

Cash flows used in investing activities

( - ) Additions in Fixed assets

( - ) Additions in Invest.in affiliates and subsidiaries

EquityValuationAdjustment

Interests received

Net cash used in investing activities

Cash flows from financing activities

Financing

EquityValuationAdjustment-reflex

Increase in capital

Adjustmentforhamonizationwiththenewaccountingstandards

Debentures Amortization

Translationadjustmentofforeigninvestments

Financial expenses- interest on shareholders’ equity and

dividends

Net cash provided by (used in) financing activities

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of the year

Cash and cash equivalents, end of the year

Gain on translation

Increase (decrease) in cash and cash equivalents

2015

(47,005)

83,624

(2,005)

220,031

254,646

(106,642)

4,729

62,885

15,550

(3,765)

31,774

(9,841)

(5,310)

151,240

568,801

516,466

203,575

151,240

2014

(4,876)

21,076

2,412

160,904

179,515

98,330

(581)

22,756

3,621

-

3,787

(35,427)

92,486

86,155

574,972

568,801

92,326

86,155

CONSOLIDATED

2015

39,172

3,078

(2,005)

56,330

96,575

(69,100)

4,729

62,885

-

(3,765)

31,774

(9,841)

16,682

144,800

179,559

126,847

197,512

144,800

2014

(3,234)

(22,904)

2,412

106,023

82,297

59,204

(581)

22,756

-

-

3,787

(35,427)

49,739

(38,823)

308,655

179,559

90,273

(38,823)

HOLDING COMPANY


1 - Operations

The company is primarily engaged in the engineering and construction business, including construction of bridges, tunnels, dams, roads, buildings, airports, hydroelectric power, industrial construction and other related works.

Withregardtoreportsinvariousmedia,aboutongoinginvestigationsconcerningtheoperationcalled“LavaJato”,relatingtocontractsexecutedwithPetrobras,theManagementofConstrutoraQueirozGalvaoS.A.clarifiesthat,according to the internal investigation carried out so far, have not been identified any evidence of non-compliance withlegalregulations,especiallyinrelationtotheapplicablelegislationstopublictenders(seenote14).

2 - Presentation of Financial Statements

The financial statements have been prepared and are presented in accordance with accounting practices adopted inBrazil,whichincludetheprovisionsoftheCorporationsLaw,andtheaccountingstandardsandproceduresissuedbytheSecuritiesandExchangeCommission-CVMandAccountingPronouncementsCommittee-CPC,resolutions approved by the Federal Accounting Council - CFC.

ThepreparationoffinancialstatementsaccordingtoIFRSstandardsandtheCPCrequiremanagementtomakejudgments,estimatesandassumptionsthataffecttheapplicationofaccountingpoliciesandthereportedamountsof assets, liabilities, revenues and expenses. Actual results could differ from those estimates.

Estimatesandassumptionsarereviewedonacontinuousbasis.Reviewwithrespecttoaccountingestimatesarerecognized in the fiscal year in which the estimates are revised and in any future periods affected.

ThefinancialstatementswereauthorizedforissuebytheBoardofDirectorsonMarch22,2016.

3 - Summary of Significant Accounting Policies

a. Cash and cash equivalent

Represent the company’s resources without restrictions for immediate use, in moving the company’s operations, they include cash balances, bank deposits and investments of immediate liquidity. They are classified as financial assets at fair value through income available for trading and are recorded at the original value plus accrued interest until the closing dates of the statements made by the pro-rata criterion which is equivalent to their market values.

b. Marketable securities

The company’s financial assets are classified as financial assets at fair value through income and are presented in the balance sheet at fair value with corresponding gains or losses recognized in the income statement.

notes to Individual and Consolidated Financial StatementsYearsEndedDecember31,2015and2014(InthousandofUSdollars)


The company’s financial assets include cash and cash equivalents, accounts receivable and marketable securities.

c. Financial assets (including receivables)

A financial asset is not measured at fair value through profit or loss is assessed to each filing date to determine whetherthereisobjectiveevidencethattherehasbeenlossofitsrecoverableamount.Anassetislostinitsrecoverableamountifobjectiveevidenceindicatesthatalosseventoccurredaftertheinitialrecognitionofassets,andthatlosseventhadanegativeeffectonprojectedfuturecashflowsthatcanbeestimatedinareliablemanner.

d. Inventories

Inventories are valued at the lower value between the cost and net realizable value. The cost of inventories is based on the principle of the Average Cost of Acquisition and includes expenditure incurred for the purchase of inventory, production and processing costs and other costs incurred in bringing them to their locations and conditions.

e. Fixed Assets

The items of equipment are measured at historical cost of acquisition or construction, including revaluations in prior yearsandtheassetvaluationadjustmentsattributabletothecost,lessaccumulateddepreciationandlossesonimpairment (impairment) accumulated. Cost includes expenditures that are directly attributable to the acquisition of an asset.

Wherepartsofanitemoffixedassetshavedifferentusefullives,theyarerecordedasseparateitems(majorcomponents) of property. Gains and losses on disposal of an item of fixed assets (calculated as the difference between the proceeds of the sale and the book value of fixed assets) are recognized in other income / expenses in the result.

The items of equipment are depreciated on the straight-line method in the income statement based on the useful lives of each component. Items of fixed assets are depreciated from the date they are installed and available for use, or in case of internally constructed assets, from the day on which construction is completed and the asset is available for use.

Depreciationmethods,usefullivesandresidualvaluesarereviewedeveryyearandanyclosingadjustmentsarerecognized as a change in accounting estimates.

f. Intangible Assets

It is represented by spending on software acquisition and registration of trademark, registered earlier in the group fixed assets.



g. Investments

Investments in subsidiaries and affiliates, evaluated by the equity method, based on consolidated financial statements of the investee companies. The results obtained are shown as operating result in account equity income.

Investments in controlled entities and associates

Controlled entities are those that directly or indirectly, the controller has the power to regulate financial and operating policies, to obtain benefits from its activities usually accompanied by a participation of more than half of the voting rights (voting capital).

Associates are investments where the company has the power to exercise significant influence, but that does not havecontrolorjointcontrolthroughparticipationinthefinancialandoperationaldecisionsoftheCompany.

The use of the equity method is suspended from the date on which the Company fails to have significant influence over the associate.

h. Income tax and social contribution

The company adopts the taxable income as tax regime for calculation of income tax and social contribution.

Income tax and social contribution Current and deferred, are calculated based on the rates of 15%, plus a surcharge of 10% on taxable income exceeding two hundred and forty thousand dollars for annual income tax and 9%ontaxableincomeforsocialcontributiononnetincome.

i. Deferred revenues

IncompliancewithLaw11.638/07,theresultoftheworksofshort-term(previouslyclassifiedasDeferredIncome) is recorded in Deferred Revenue. The recognition in the income statement is made at the close of the work.

j. Provisions

A provision is recognized on the basis of a past event, the Company has a legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.Provisionsareclearedthrutheexpecteddiscountinginthefuturecashflowsatapre-taxratethatreflects current market assessments of the value of money over time and risks specific to the liability. The financial costs incurred are recorded in the result.



k. Construction contracts

Contract revenue comprises the initial value agreed in the contract plus variations due to additional requests, claims and incentive payment contract, provided that it is probable that they result in revenue and can be measured reliably. As soon as the result of a construction contract can be estimated reliably, contract revenue is recognized in the result as far as the stage of completion of the contract. Contract expenses are recognized when incurred, unless they create an asset related to the activity of the futures contract.

The stage of completion is assessed by reference to the measurement of the work performed.

When the result of a construction contract can not be measured reliably, contract revenue is recognized to the extentofthecostsrecognizedonconditionthatthecostsincurredcanberecovered.Lossesoncontractsarerecognized immediately in the result.

l. Translation into United States dollars

TheUnitedStatesdollaramountsresultfromtranslationofthefinancialstatementsattheyear-endrateofexchange as follows:2015 R$3,9048toUS$1,002014 R$2,6562toUS$1,00

The translation should not be construed as representation that the real (R$) amounts actually represent or have been,orcouldbeconvertedintoUnitedStatesdollars.

4 - Summary of the Main Procedures used in the Consolidated of the Financial Statements

TheconsolidatedfinancialstatementsatDecember31,2015and2014covertheparentConstrutoraQueirozGalvão S.A. and subsidiaries in which it holds the participation as detailed in note 6;

The financial statements were prepared and are presented in accordance with accounting practices adopted in Brazil,whichincludetheprovisionsoftheLawofCorporations,andtheaccountingstandardsandproceduresissuedbytheBrazilianSecuritiesCommission-CVMandtheAccountingPronouncementsCommittee-CPC,approved by resolutions of the Federal Accounting Council - CFC.

From2014,theaccountingpracticesadoptedinBrazilapplicabletotheindividualfinancialstatementsdonotdifferfromIFRSapplicabletoseparatefinancialstatements,sincetheAccountingPronouncementsCommittee(“CPC”)nowallowtheapplicationoftheequitymethodinsubsidiariesinseparatefinancialstatements(pursuanttoCVMResolutionNo.733/14).Thus,theyarealsoinaccordancewithinternationalfinancialreportingstandards




(InternationalFinancialReportingStandards-IFRS)issuedbytheInternationalAccountingStandardsBoard(IASB).These individual statements are disclosed together with the consolidated financial statements.

The process of consolidating the balance sheet and income is the sum of balances of assets, liabilities, revenues and expenses according to their nature, supplemented with the following eliminations:

Of profit sharing, reserves and accumulated results held between them;

The balance of current accounts and other asset and / or liability held between the companies whose balance sheets were consolidated;

Effectsarisingfromtransactionsbetweenthesecompanies;

NegativegoodwillandgoodwilloninvestmentswerebasedontheexpectationoffutureresultsandinlinewiththereferredCVMandCPCinstruction,andwereclassifiedasdeferredincome;and

The rights of non-controlling are shown in liabilities and results of Investments in non Controllers.

5 - Customers

The accounting records of the accounts receivable of the company are carried out in accordance with the accrual basis, including measurements from unbilled services, whose corresponding costs have ocurred at the balance sheet date.

6 - Investments in Subsidiaries and Affiliates

During2015,theCompanyrecordedU$D30,029equity.

Thetablebelowshowsthecompositionofthebalanceofinvestmentinsubsidiaries,associatesandjointlycontrolled entities.


a) TheinvestmentsincludeanagiooveramountofR$5.542equivalentofUSD1,445in2015.

b) ThebalanceofU$D53,385inDec/15andU$D130,046inDec/2014,theinvestmentaccountoftheConsolidatedFinancialStatementsasperCPC19iscomposedofthefollowinginvestmentsincompanieswheremanagement is shared:

2015 % 2014 %

AgropecuáriaRioArataúS.A. 793 35,72 659,13 35,72

CHC–CentralesHidroeletricasdeCentroamericaS.A. 25.229 50,00 29,771 50,00

Cia.SiderúrgicaValedoPindaré - 10,37 2,437 10,37

ConcessionáriaRioTeresópolisS.A. 5.390 9,48 7,704 9,48

ConstructoraRecifeS.A.C. 12.488 100,00 8,714 100,00

ConstructoraSURS.A. 153 33,33 164 33,33

EnobConcessõesS.A. - 63,25 4,432 63,25

GuaranySiderurgiaeMineraçãoS.A. 31.724 44,94 51,175 44,94

IntersurConcesionesS.A. 3.986 33,33 3,976 33,33

LOCAVLocadoraLtda. 4.009 50,00 6,594 50,00

OperadoraSURPERUS/A 964 33,33 1,528 33,33

Q.GalvãoImportaçãoeExportaçãoLtda. 33 100,00 70 100,00

Quebec–Constr.,MontagemeTransp.deEstruturasLtda. 162 65,00 292 65,00

Queiroz Galvão Alimentos S.A. 755 7,71 2,550 7,71

QueirozGalvãoInternationalLtd. - 100,00 273 100,00

QueirozGalvãoServiçosEspeciaisdeEngenhariaLtda. - 99,99 2,521 99,99

QueirozPetroS.A. 47 40,59 69 40,59

QueirozGalvãoTecnologiaemDefesaeSegurançaS/A 9.255 100,00 13,141 100,00

QUIPS/A 5.290 29,75 6,907 29,75

JointVentures - 65,00 6,024 65,00

ConstrutoraQueirozGalvãoS.A.–Branchesabroad 166.362 100,00 92,832 100,00

TransportadoraGuaranyLtda. 2.009 100,00 2,979 100,00

RIGOIL&GasContractors 2.232 25,48 2,790 25,48

ConcessionáriaMoveSãoPaulo 3.183 19,61 3,767 19,61

QueirozGalvãoZCSDesenvolvimentoImobiliárioS/A 4.181 26,00 4,694 26,00

ConcessionáriaRodoviadosTamoios 1.183 20,00 1,033 20,00

QGIBrasilS/A 25.900 78,12 37,377 78,12

QGIOIL&GasContractors 17.295 80,00 13749 80,00

322.623 308,221




2015 % 2014 %

AgropecuáriaRioArataúS.A. 793 35,72 658 35,72

Cia.SiderúrgicaValedoPindaré - 7,42 2,437 7,42

ConcessionáriaRioTeresópolisS.A. 5.390 9,48 7,704 9,48

ConstructoraSURS.A. 153 33,33 164 33,33

GuaranySiderurgiaeMineraçãoS.A. - 44,94 51,175 44,94

IntersurConcesionesS.A. 3.986 33,33 3,976 33,33

OperadoraSURPERUS/A 964 33,33 1,528 33,33

Queiroz Galvão Alimentos S.A. 755 7,71 2,550 7,71

QueirozPetroS.A. 47 40,59 69 40,59

QUIPS/A 5.290 29,75 6,907 29,75

RIGOil&GasContractors 2.232 25,48 2,790 25,48

CHC–CentralesHidroeletricasdeCentroamericaS.A. 25.229 50,00 29,771 50,00

SociedadeemContadeParticipação - 65,00 5,553 65,00

ConcessionáriaMoveSãoPauloS.A. 3.183 19,61 3,767 19,61

QueirozGalvãoZCSDesenvolvimentoImobiliárioS.A. 4.181 26,00 4,694 26,00

ConcessionáriaRodoviasTamoiosS.A. 1.183 20,00 1,033 20,00

EcourbisAmbientalS.A. - 12,14 5,270 12,14

53.385 130,046

7 - Fixed assets and Intangible

7.1 - Fixed assets

estimated Consolidated Holding Company useful lives (years) 2015 2014 2015 2014

Fieldequipment 5 240,107 350,201 166,455 275,441

Vehicles 5 163,002 232,292 68,046 116,088

Buildings 25 36,214 21,817 12,419 18,553

Maintenanceequipment 10 26,263 48,122 16,600 30,541

Lands - 51,293 10,939 7,441 10,939

Constructioninprogress - 114 1,048 - -

Furnitureandfixtures 10 20,406 5,341 4,657 9,492

Otherfixedassets Many 6,954 8,941 4,128 7,442

544,353 678,701 279,746 468,496

Less:

Accumulateddepreciation (348,538) (453,257) (200,846) (307,583)

195,815 225,444 78,900 160,913



7.2 - Intangible

Consolidated Holding Company 2015 2014 2015 2014

Software 621 735 327 211

Trademarksandtechnology 8,181 12,027 8,181 12,027

Research and Development 362 - - -

9,164 12,762 8,508 12,238

8 - Related Parties

The balances arising from loans and transactions with related companies are:

Consolidated Holding Company 2015 2014 2015 2014

QueirozGalvãoS.A. (2,048) 952 (2,048) 952

QueirozGalvãoTecnologiaemDefesaeSegurança - - 4,384 6,511

CQGOil&Gas (3,754) - - -

CQGOffshore (55,541) - - -

CQG Offshore - -

AgropecuáriaRioArataú - (1,014) - (1,014)

QUIPS.A. (11,667) (15,965) (11,273) (15,965)

Operationswithbranches - - (47,291) (18,668)

QueirozPetroS.A. 2,260 4,273 2,260 4,273

QueirozGalvãoNaval (15,003) - (15,003) -

QueirozGalvãoAlimentos (6,140) - (6,140) -

QueirozGalvãoMineração (3,890) - - -

TimbaubaInternationalLtd 32,135 - - -

Other (148) - (284) (463)

(63,796) (11,754) (75,397) (24,375)



9 - Contingencies

The estimated time frame for settlement of provisions was based on management’s best estimate at the balance sheet date. The company is engaged in labor lawsuits considered as probable losses involving former employees of the Company, or service providers. These processes mainly involve claims for overtime, intra-day interval and unsanitary conditions, as well as their consequences and related charges.

10 - Loans

Banks

BancoAlfaS/A

C.E.F.

Itaú-BBA

BancoBradesco

ABC-Brasil

BancoIndustrial

BancoItaú

BancoSafraS/A

BancoDaimlerChryslerS.A

BancoGuanabaraS/A

BancoPine

BancoVotorantim

Caterpillar Financial

C.N.H.Capital

BancoItaúChileS/A

BancoSantander

SaharaBank

UPS

LandesBankWutemberg

Debentures

Other

Total

Current

1,120

214

1,398

138,012

532

78

682

5

1,218

10

1

381

1,867

71

20,500

43,374

6,698

418

2,074

52,491

-

271,144

Non Current

1,681

1,065

4,226

124,032

1,714

352

436

-

95

-

243

1,355

4,466

46

-

-

-

694

2,085

60,973

-

203,463

CONSOLIDATED

Current

1,120

214

1,398

84,162

532

-

-

-

1,201

-

-

381

1,867

-

-

-

-

-

2,074

52,491

573

146,013

Non Current

1,681

1,065

4,226

4,353

1,714

-

-

-

48

-

-

1,355

4,466

-

-

-

-

-

2,085

60,973

640

82,606

HOLDING COMPANY



11 - Perpetual Debentures

OnMay25,2011,theCompanyissued250convertibledebentureswithBrazilXXIEquityInvestmentFund(PIFBRAZIL).TheDebenturesareinregisteredform,bookandwillbeconvertibleatanytimefromthedateofissuanceofpreferredshareswithoutvotingrights,issuedbytheIssuer(“PreferredShares”).TheDebenturesareunsecuredand have indeterminate maturity.

UnderthetermsofCPCs38,39and40convergedtoIAS39,IAS32andIFRS7,theManagementclassifiedthePerpetualHybridasanequityinstrument.

Management believes, based also on the position issued by the International Financial Reporting Interpretations Committee(IFRIC)andapprovedbytheInternationalFinancialReportingStandardsBoard(IASB),anincentiveor management’s intent to pay does not create a present obligation for the entity and for it cannot generate a financial instrument classified as financial liabilities. The Company’s management also noted the international practice in relation to the registration of perpetual instruments of similar nature, noting that several companies in severalcountriesthatadopttheinternationalaccountingstandardsIFRSasissuedbyIASB,havesuchinstrumentsasequity.Additionally,theAdministrationestimatedthattheCompany,pursuanttoLaw6.404/76includesitsshareholders as part of its corporate structure, retains the right to allocate the balance of revenue reserves that mayexceedthelimitslegal/statutoryforcapitalincrease,subjecttotheminimummandatorydividend.

12 - Capital

Thecapital,subscribedandfullypaid,comprises982.219.515ordinarynominativeshareswithnoparvalue.OnDecember31,2015theCompany’sbookvalueperthousandofshareswasR$2,44equivalenttoUS$0,62(R$1,84equivalenttoUS$0,69in2014).

The shareholders have the right to a minimum dividend of 3% of the net income for the year, according to the company’s by-law. The shareholders’ general meeting has the power to decide for lower distribution or retention of the whole net income. Also, 5% of the net income for the year is appropriated to legal reserve limited to 20% of the capital stock.

13 - Financial Instruments

ThefinancialinstrumentsarerecordedinbalancesheetsatDecember31,2015and2014withvaluescompatiblewith those practiced by the market on that date. The management of these instruments is done through operational strategies aimed at liquidity, profitability and security.

The control policy is to ensure continuous monitoring of contracted rates versus current market.



Society does not have the practice to operate with derivatives or other risky assets.

The company has exposure to the following risks arising from financial instruments: credit risk, liquidity risk and market risk.

The risk management policies of the Company has been established to identify and analyze risks, set risk limits and appropriate controls and to monitor risks and adherence to the established limits. Risk policies and systems are reviewed regularly to reflect changes in market conditions and activities of the group.

14 - News Published – “Lava Jato” Operation

AsmentionedinNote1,regardingthenewspublishedinthemedia,concerningtheongoinginvestigationsrelatedtotheoperationcalled“LavaJato”,regardingcontractsconcludedwithPetrobras,accordingtointernalinvestigations carried out until now, no evidence of non-compliance with legal regulations have been identified, especially with regards to provisions of the legislation applicable to public tenders.

As a result of such press reports, some administrative processes were initiated, in order to investigate any possible irregularities, however there are no current deadlines for such processes, nor any conclusive decisions.

Itisimportanttonotice,especially,thattheadministrativeproceedingsinitiatedbyPetrobras,whichledtosuspendpreventively more than twenty companies in its register, among them the Company, preventing them from participatinginnewcontractingprocesses,werefiledbytheComptrollerGeneraloftheUnion,havingnodecisionrelated to the Company.

As an exceptional measure, a relative to the writs of payment enforceable to the Government of the State of Alagoas owed by the Company, in the amount close to R$ 163 million, was provisionally suspended by the Federal Court, even before those values were made available to the company. Given the disagreement as to the regularity ofjudicialmeasuresapplied,alegalproceedingwasinitiatedthatstillremainspending.

Finally, it is worth mentioning that Construtora Queiroz Galvão SA has no knowledge of any criminal action that has been proposed against the Company or its legal representatives, due to the mentioned investigations.

15 - Integrity Program

TheCompany,duringtheyear2015,stronglyimproveditsIntegrityProgram,creatingaComplianceManagementdirectly linked to senior management, including responsibility to risk assessment and internal controls.

Severalrelevantpolicieswerepublished,whichcurrentlymakeuptheIntegrityProgram,havingbeendevelopedtargeted training for all levels of Company leadership.



TheEthicsCommittee,whichalsoreportstoseniormanagementhasbeenworkingdiligentlyinthisprocess,bothasregardstheimplementationofcontinuousimprovementoftheIntegrityProgram,andinsearchofitseffectiveness.

Documents

Management Report - Queiroz Galvão · Maurício José de Queiroz Galvão President ... • Flávio Roberto Dornelas Câmara Pimentel ... • Paulo Cesar Medeiros Brechbuhler