Tarjetas Cuyanas S.A.

Transcription

1 Condensed Interim Financial Statements For the six-month period beginning January 1, 2012 and ended June 30, 2012, presented on a comparative basis

2 Condensed Interim Financial Statements For the six-month period beginning January 1, 2012 and ended June 30, 2012, presented on a comparative basis Table of Contents Statement of Comprehensive Income Balance Sheet Statement of Changes in Shareholders Equity Statement of Cash Flows Notes to the Condensed Interim Financial Statements Summary of Events Limited Review Report Statutory Audit Committee s Report

3 Registered Office: Principal Line of Business: Belgrano City of Mendoza Credit Card Administrator Fiscal Year No. 18 Condensed Interim Financial Statements For the six-month period beginning January 1, 2012 and ended June 30, 2012, presented on a comparative basis Figures stated in thousands of Pesos Registration with the Office of Public Records (DRP): File No. 3250, page 1 Registration Date: Of Bylaws: Of Latest Amendment: November 30, 1995 August 15, 2008 Date of Expiration of Company s Bylaws: November 29, 2094 CAPITAL STRUCTURE(Note ) Shares Amount Type Voting Rights per Share 3,233,283 Book-entry, common shares entitling to one vote per share and for a face value of AR$ 10 each Subscribed Paid-in and Registered 1 32,332 32,332 3,233,283 32,332 32,332 Information on the Controlling Company: Company s Name: Tarjetas Regionales S.A. Registered Office: Buenos Aires 37 Córdoba Principal Line of Business: Income from Shares and Other Securities Equity Interest: 99% Percentage of Votes: 99%

4 2 Registration Number with the Public Registry of Commerce: File No Statement of Comprehensive Income For the three- and six-month periods ended June 30, 2012 and 2011 Figures stated in thousands of Pesos Six-month Period Ended Three-month Period Ended Note Revenues from Services 6 212, , ,036 73,932 Expenses from Services 7 (34,014) (24,545) (17,469) (13,600) Net Income from Services 178, ,607 91,567 60,332 Revenues from Financing 8 134,038 83,666 71,277 43,332 Expenses from Financing 9 (52,728) (28,086) (30,047) (14,583) Net Income from Financing 81,310 55,580 41,230 28,749 Net Income from Short-term Investments 10 6, , Total Net Operating Income 265, , ,191 89,873 Provision for Credit Losses, Net of Recoveries 11 (67,860) (11,288) (39,633) (5,163) Taxes and Rates 12 (25,940) (16,091) (13,294) (8,760) Personnel Expenses 13 (75,982) (50,554) (39,212) (27,335) Advertising Expenses 14 (7,418) (6,792) (4,165) (3,232) Depreciation of Property, Plant and Equipment, and Amortization of Intangible Assets 15 (6,424) (4,240) (3,390) (2,278) Other Net Operating Expenses 16 (17,329) (15,022) (8,964) (7,960) Total Operating Expenses (133,093) (92,699) (69,025) (49,565) Net Income before Investments in Other Companies 64,918 68,134 27,533 35,145 Income from Valuation of Investments in Other Companies 17 1, , Income before Income Tax 66,598 68,206 28,725 35,181 Income Tax 18 (22,779) (24,023) (9,683) (12,456) Comprehensive Income for the Period Attributable to the Company s Shareholders (1) 43,819 44,183 19,042 22,725 The notes on pages 36 through 41 are an integral part of these financial statements. (1) Earnings per basic and diluted shares are detailed in Note 35. Dr. Fernando Alberto Rodriguez Contador Público (UBA) Matrícula N C.P.C.E. Mendoza

5 3 Tarjetas Cuyanas S.A Registration Number with the Public Registry of Commerce: File No Balance Sheet As of June 30, 2012, and December 31, 2011 and 2010 Figures stated in thousands of Pesos Note In Thousands of AR$ Note ASSETS CURRENT ASSETS Cash and Cash Equivalents ,023 52,788 44,400 Receivables from Services Other Receivables ,210,712 1,065, ,813 8,718 11,261 5,827 Total Current Assets 1,354,453 1,130, ,040 NON-CURRENT ASSETS Receivables from Services 20 10,430 18,220 24,176 Other Receivables Deferred Income Tax Assets 18 32,813 18,906 23,093 Investments in Other Companies 22 13, LIABILITIES CURRENT LIABILITIES Accounts Payable Bank and Financial Payables Salaries and Payroll Taxes Taxes Payable Other Liabilities Provision for Income Tax (Net) Total Current Liabilities NON-CURRENT LIABILITIES Bank and Financial Payables Provisions , , , , , , ,749 14,444 7, ,353 16,191 11, ,980 4,242 2, ,679 24,696 19,191 1,066, , , , ,172 66, ,069 5,861 5,659 Dr. Fernando Alberto Rodriguez Contador Público (UBA) Matrícula N C.P.C.E. Mendoza

6 Property, Plant and Equipment 23 8,801 8,899 5,986 Intangible Assets 24 9,452 8,828 6,449 Total Non-current Assets 75,556 55,187 60,345 Total Assets 1,430,009 1,185, ,385 4 Total Non-current Liabilities Total Liabilities Shareholders' Equity Attributable to the Company s Shareholders Total Liabilities and Shareholders' Equity 112, ,033 71,877 1,178, , , , , ,563 1,430,009 1,185, ,385 The notes on pages 40 through 50 are an integral part of these financial statements. Dr. Fernando Alberto Rodriguez Contador Público (UBA) Matrícula N C.P.C.E. Mendoza

7 5 Registration Number with the Public Registry of Commerce: File No Statement of Changes in Shareholders Equity For the six-month periods ended June 30, 2012 and 2011 Figures stated in thousands of Pesos Attributable to the Company s Shareholders Capital Stock Legal Reserve Unappropriated Retained Earnings Total Shareholders Equity Balances as of ,333 6, , ,281 Net Income ,819 43,819 Distribution of Cash Dividends Decided Pursuant to Minutes of Shareholders Meeting Dated April 9, (19,462) (19,462) Balances as of ,333 6, , ,638 Balances as of ,333 4, , ,563 Net Income ,183 44,183 Distribution of Cash Dividends Decided Pursuant to Minutes of Shareholders Meeting Dated March 31, 2011 Creation of a Legal Reserve Decided Pursuant to Minutes of Shareholders Meeting Dated March 31, (11,958) (11,958) - 1,560 (1,560) - Balances as of ,333 6, , ,788 Dr. Fernando Alberto Rodriguez Contador Público (UBA) Matrícula N C.P.C.E. Mendoza

8 6 Registration Number with the Public Registry of Commerce: File No Statement of Cash Flows For the six-month periods ended June 30, 2012 and 2011 Figures stated in thousands of Pesos Note NET CASH FLOW FROM OPERATING ACTIVITIES Net Income for the Period 43,819 44,183 Income Tax Accrued During the Period 22,779 24,023 Interest, Adjustments and Other Financial Income (Expenses) Accrued During the Period, Net 20,146 3,312 Adjustments to Calculate Net Cash Flow from Operating Activities 30 90,539 32,060 Changes in Operating Assets 31 (205,283) (144,511) Changes in Operating Liabilities 32 (45,139) (32,532) NET CASH FLOW USED IN OPERATING ACTIVITIES (73,139) (73,465) NET CASH FLOW FROM INVESTING ACTIVITIES Decrease in Short-term Investments 1,040 (427) Collection of Dividends Payments for Purchases of Investments in Other Companies (13,006) - Payments for Property, Plant and Equipment Purchases (2,629) (1,947) Payments for License and Software Development Purchases (4,321) (3,494) NET CASH FLOW USED IN INVESTING ACTIVITIES (18,416) (5,868) NET CASH FLOW FROM FINANCING ACTIVITIES Increase in Accounts Payable 13,772 32,982 Payment of Dividends (10,099) (11,958) Issuance of Corporate Bonds 150,000 50,000 Loans Received 179,000 76,000 Payment of Principal and Interest on Corporate Bonds (63,251) (36,408) Payment of Principal and Interest on Bank and Financial Payables and Others (95,367) (51,622) Gain (Loss) on Futures Transactions Settled (203) (768) NET CASH FLOW PROVIDED BY FINANCING ACTIVITIES The notes on pages 47 through 48 are an integral part of these financial statements. 173,852 58,226 NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 82,297 (21,107) Cash / Cash Equivalents and Bank Overdrafts at the Beginning of the Period 44,749 31,637 Exchange Difference Gain/(Loss) 1,079 (370) Cash / Cash Equivalents and Bank Overdrafts at Period-end ,125 10,160 Bank Overdrafts 6,898 11,936 Cash and Cash Equivalents at Period-end 135,023 22,096 Dr. Fernando Alberto Rodriguez Contador Público (UBA) Matrícula N C.P.C.E. Mendoza

9 6 Notes to the Condensed Interim Financial Statements (In the notes, figures are stated in thousands of Pesos, except otherwise noted) Note 1 General Information Note 2 Basis for Preparation and Adoption of International Financial Reporting Standards (IFRS) Note 3 Financial Risk Management Note 4 Additional Information on the Financial Statements as of December 31, 2011 Note 5 Segment Reporting Note 6 Revenues from Services Note 7 Expenses from Services Note 8 Revenues from Financing Note 9 Expenses from Financing Note 10 Net Income from Short-term Investments Note 11 Provision for Credit Losses, Net of Recoveries Note 12 Taxes and Rates Note 13 Personnel Expenses Note 14 Advertising Expenses Note 15 Depreciation of Property, Plant and Equipment, and Amortization of Intangible Assets Note 16 Other Net Operating Expenses Note 17 Income from Valuation of Investments in Other Companies Note 18 Income Tax Note 19 Cash and Cash Equivalents Note 20 Receivables from Services Note 21 Other Receivables Note 22 Investments in Other Companies Note 23 Property, Plant and Equipment Note 24 Intangible Assets Note 25 Accounts Payable Note 26 Bank and Financial Payables Note 27 Salaries and Payroll Taxes Note 28 Taxes Payable Note 29 Other Liabilities Note 30 Adjustments to Calculate Net Cash Flow and Cash Equivalents from Operating Activities Note 31 Changes in Operating Assets Note 32 Changes in Operating Liabilities Note 33 Provisions Note 34 Corporate Bonds Note 35 Earnings per Share Note 36 Changes in the Group s Structure Note 37 Receivables from/payables to and Transactions with Companies under Section 33, Law No and Other Related Parties Note 38 Restricted Assets Note 39 Bank Loans Note 40 Breakdown by Term of Investments, Receivables and Payables Note 41 Information Required by Section 64, Subsection (b) of Law No Note 42 Subsequent Events

10 7 Notes to the Condensed Interim Financial Statements For the six-month period beginning January 1, 2012, and ended June 30, 2012, presented on a comparative basis NOTE 1 GENERAL INFORMATION (hereinafter, the Company ) was organized as a corporation in the Province of Mendoza on November 1, Its main business is to create, develop, direct, manage, market, exploit and operate credit and/or debit and/or purchase and/or similar card systems. The Company may hold an interest in the capital stock of other companies rendering supplementary services to the financial activity, which are allowed by the Argentine Central Bank (BCRA). In addition, it may collect federal, provincial and municipal taxes on behalf of the Government and other governmental agencies involved. It may also make collections itself or through third parties from private organizations. These condensed interim financial statements were approved for their issuance by the Company s Board of Directors on August 8, NOTE 2 BASIS FOR PREPARATION AND ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) 2.1 Requirements for Transition to IFRS The National Securities Commission (CNV) has established through its General Resolutions No. 562/09 and 576/10 the application of Technical Resolutions No. 26 and 29 issued by the Argentine Federation of Professional Councils in Economic Sciences (FACPCE), which adopt the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) for certain entities included in the public offering system prescribed in Law No , whether for their capital stock or corporate bonds or because these entities have requested an authorization to be included in this system. The application of such standards is mandatory for the Company as from the fiscal year beginning January 1, Therefore, the date of transition to IFRS for the Company, as established in IFRS 1 First-time Adoption of IFRS, is January 1, The Company s condensed interim financial statements for the three- and six-month periods ended June 30, 2012 and 2011 have been prepared in conformity with International Accounting Standard (IAS) 34 Interim Financial Reporting and IFRS 1 First-time Adoption of IFRS. The condensed interim financial statements have been prepared according to the accounting policies the Company expects to adopt in its annual financial statements as of December 31, The accounting policies are based on the IFRS issued by the IASB and IFRIC (International Financial Reporting Standards Committee) interpretations the Company expects to apply as of that date.

11 9 NOTE 2 BASIS FOR PREPARATION AND ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (Continued) 2.1 Requirements for Transition to IFRS (Continued) Note 2.4 discloses a reconciliation of balance sheet and statement of comprehensive income figures related to the financial statements issued in conformity with Argentine generally accepted accounting principles applicable to the Company (hereinafter, Argentine GAAP ) as of the transition date (December 31, 2010), as of the adoption date (December 31, 2011) and as of the closing date of the comparative interim period (June 30, 2011) to the figures presented under IFRS in these condensed interim financial statements, as well as the effects of cash flow adjustments. These interim financial statements should be read together with the Company s annual financial statements as of December 31, 2011, prepared under Argentine GAAP. Additionally, Note 4 included in these interim financial statements discloses information under IFRS as of December 31, 2011, which is necessary to understand these condensed interim financial statements. The preparation of these condensed interim financial statements, in conformity with IFRS, requires the Company s Management to make certain estimates and assumptions that may affect the book amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and the book amounts of income and expenses for the periods reported. Actual figures may differ from those estimates. In preparing these condensed interim financial statements, the significant judgment made by Management in applying the Company s accounting policies and the main estimate uncertainty sources were the same as those applied to the financial statements for the fiscal year ended December 31, Optional IFRS Exemptions The following are the applicable exemptions and exceptions considering IFRS 1 and that were used in converting Argentine GAAP to IFRS. IFRS 1 allows entities that adopt IFRS for the first time to consider certain one-off exemptions from the principle of retrospectively applying certain IFRS effective for the closing dates of the financial statements as of December 31, Such exemptions have been established by the IASB to streamline the first-time application of such standards. Below are the optional exemptions applicable to the Company under IFRS 1: Deemed Cost of Property, Plant & Equipment: The cost of Property, Plant and Equipment, restated according to Argentine GAAP, has been adopted as deemed cost as of the date of transition to IFRS because it is similar to the cost or depreciated cost under IFRS, which is adjusted to reflect the changes in a general or specific price index. The Company has not made use of other exemptions available in IFRS 1 as they are not applicable to its operations as of the transition date.

12 9 NOTE 2 BASIS FOR PREPARATION AND ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (Continued) 2.3 Mandatory IFRS Exemptions Below are the mandatory exemptions applicable to the Company under IFRS 1: 1. Estimates: The Company reviewed the significant estimates as of December 31, 2010 (date of transition to IFRS), which are consistent with the estimates made as of the same date under Argentine GAAP, except for the allowance for credit losses. Note 2.4 below discloses the effect of the difference in the calculation methods between Argentine GAAP and IFRS for this estimate. 2. Other mandatory exceptions established in IFRS 1, which have not been applied since they are not material to the Company, are as follows: Derecognition of financial assets and liabilities Hedge accounting Non-controlling interests Embedded derivatives 2.4 Reconciliations Required As required by the provisions of FACPCE Technical Resolutions Nos. 26 and 29 and IFRS 1, the reconciliations of the shareholders equity calculated according to Argentine GAAP and that calculated under IFRS as of December 31, 2011, June 30, 2011 and December 31, 2010 and the reconciliation of comprehensive income for the three- and six-month periods ended June 30, 2011 and the fiscal year ended December 31, 2011 are included below. In this regard, in preparing reconciliations, the Company has considered those IFRS it expects to be applicable to the preparation of its annual financial statements as of December 31, The items and figures included in this note are subject to changes and may only be considered to be definitive when annual financial statements are prepared for the fiscal year when IFRS are adopted for the first time. The items and figures included in the reconciliation could be changed insofar as the standards to be used when the financial statements as of December 31, 2012 are prepared are different.

13 11 NOTE 2 BASIS FOR PREPARATION AND ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (Continued) 2.4 Reconciliations Required (Continued) A. Balance Sheet Reconciliation As of December 31 and June 30, 2011, and December 31, 2010: Argentine GAAP Amounts Adjustments/ Reclassifications IFRS Amounts Argentine GAAP Amounts Adjustments/ Reclassifications IFRS Amounts Argentine GAAP Amounts Adjustments Reclassificatio December 31, 2010 June 30, 2011 December 31, ASSETS Cash and Cash Equivalents 44,400-44,400 23,286-23,286 52,788 Receivables from Services 782,236 (27,423) 754, ,828 (15,057) 877,771 1,065,956 Other Receivables 5,827-5,827 9,342-9,342 11,261 Total Current Assets 832,463 (27,423) 805, ,456 (15,057) 910,399 1,130,005 Receivables from Services 24,176-24,176 27,153-27,153 18,220 Other Receivables 13,890 (13,495) ,125 (18,772) ,240 (18,9 Deferred Income Tax Assets - 23,093 23,093-24,042 24,042-18,9 Investments in Other Companies Property, Plant and Equipment 5,986-5,986 6,039-6,039 8,899 Intangible Assets 6,449-6,449 7,596-7,596 8,828 Total Non-current Assets 50,747 9,598 60,345 60,231 5,270 65,501 55,187 Total Assets 883,210 (17,825) 865, ,687 (9,787) 975,900 1,185,192 LIABILITIES Accounts Payable 321, , , , ,594 Bank and Financial Payables 288, , , , ,711 Salaries and Payroll Taxes 7,639-7,639 8,425-8,425 14,444 Taxes Payable 30,557 (19,191) 11,366 29,920 (17,416) 12,504 40,887 (24,6 Other Liabilities 2,043-2,043 1,628-1,628 4,242 Provision for Income Tax - 19,191 19,191-17,416 17,416-24,6 Total Current Liabilities 649, , , , ,878 Bank and Financial Payables 66,218-66,218 43,723-43, ,172 Provisions 5,659-5,659 7,189-7,189 5,861 Total Non-current Liabilities 71,877-71,877 50,912-50, ,033 Total Liabilities 721, , , , ,911 Shareholders Equity 161,388 (17,825) 143, ,575 (9,787) 175, ,281

14 11 NOTE 2 BASIS FOR PREPARATION AND ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (Continued) 2.4 Reconciliations Required (Continued) B. Statement of Comprehensive Income Reconciliation As of December 31 and June 30, 2011: Argentine GAAP Amounts Adjustments/ Reclassifications IFRS Amounts Argentine GAAP Amounts Adjustments/ Reclassifications IFRS Amounts Argentine GAAP Amounts Adjustments/ Reclassifications June 30, 2011 for six months June 30, 2011 for three months December 31, 2011 Revenues from Services 140, ,152 73,932-73, ,918 - Expenses from Services (24,545) - (24,545) (13,600) - (13,600) (53,720) - Net Income from Services 115, ,607 60,332-60, ,198 - Revenues from Financing 83,666-83,666 43,332-43, ,467 - Expenses from Financing (28,086) - (28,086) (14,583) - (14,583) (72,833) - Net Income from Financing 55,580-55,580 28,749-28, ,634 - Net Income from Short-term Investments , Total Net Operating Income 172, ,121 89,873-89, ,490 - Provision for Credit Losses (23,654) 12,366 (11,288) (14,117) 8,954 (5,163) (44,271) 27,423 Taxes and Rates (16,091) - (16,091) (8,760) - (8,760) (35,963) - Personnel Expenses (50,554) - (50,554) (27,335) - (27,335) (120,973) - Advertising Expenses (6,792) - (6,792) (3,232) - (3,232) (14,149) - Depreciation of Property, Plant and (2,278) - (2,278) Equipment (4,240) - (4,240) (9,680) - Other Net Operating Expenses (15,022) - (15,022) (7,960) - (7,960) (31,436) - Total Operating Expenses (92,699) - (92,699) (49,565) (49,565) (212,201) - Net Income before Investments in Other Companies 55,768 12,366 68,134 26, , ,018 27,423 Income from Valuation of Investments in Other Companies Income before Income Tax 55,840 12,366 68,206 26, , ,135 27,423 Income Tax (19,695) (4,328) (24,023) (9,322) (3,134) (12,456) (42,284) (9,598) Comprehensive Income for the Period Attributable to the Company s Shareholders 36,145 8,038 44,183 16,905 5,820 22,725 77,851 17,825

15 13 NOTE 2 BASIS FOR PREPARATION AND ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (Continued) 2.4 Reconciliations Required (Continued) C. Significant Statement of Cash Flows Reclassifications Below are the significant reclassifications made in the Statement of Cash Flows: - Under Argentine GAAP, the variation in accounts payable was disclosed in changes in operating liabilities and under IFRS was disclosed as cash flow provided by financing activities. - Under Argentine GAAP, cash and cash equivalents were considered to be the amounts of cash on hand and in banks, and highly-liquid short-term investments with an original maturity of three months or less. Bank overdrafts were disclosed as cash flow provided by financing activities. Under IFRS the following were considered as cash and cash equivalents: cash on hand and in banks, highly-liquid short-term investments with an original maturity of three months or less and bank overdrafts. D. Explanation of Adjustments (a) Change in Estimating the Allowance for Credit Losses Under Argentine GAAP, the allowance for credit losses was recognized, through the date of transition to IFRS, based on the assessment of the customers repayment ability, the debtor's degree of compliance with contractual payments and the guarantees securing transactions, according to the best practices and the minimum allowance for credit losses required by the Argentine Central Bank from financial institutions in Argentina.

16 14 Under IFRS, for the calculation of the allowance for credit losses, the Company analyzes the historical losses of its portfolio in order to estimate the losses related to receivables from services accrued as of the date of the financial statements, but that have not been individually identified, according to the guidelines set out in IAS 39. In addition, the historical ratios are adjusted, if appropriate, to include recent information that reflects the economic conditions as of the closing date of the financial statements, trends of behavior in the industry, geographic or customer concentrations in each portfolio segment and any other information that could affect the estimation of the allowance for credit losses related to receivables from services. Several factors may affect Management s estimation of the allowance for credit losses, including the volatility of the likelihood of loss, migrations and estimates of the severity of losses. This model, called Markov Chain, is used by different European and US financial institutions to estimate the allowances for credit losses under IFRS. The adjustment for the change in estimating the allowance for credit losses as of the date of transition to IFRS represents a decrease in the shareholders equity as of that date amounting to in thousands AR$ 27,423. No differences resulted from the change in criterion as of December 31, (b) Tax Effect of IFRS Adjustments It represents the income tax effect of the abovementioned IFRS adjustment. The tax effect of the IFRS adjustment represents an increase in the shareholders equity as of the transition date of in thousands AR$ 9,598. No differences resulted from the change in criterion as of December 31, 2011.

17 15 NOTE 2 BASIS FOR PREPARATION AND ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (Continued) 2.5 Accounting Policies The accounting policies used in preparing these condensed interim financial statements are consistent with those used in the additional reporting under IFRS as of December 31, 2011, with the considerations included in Note 2.4, and are based on those IFRS expected to be effective as of December 31, The most significant accounting policies are as follows: Segment Reporting The entity has disclosed the segment reporting, as established by IFRS 8 Operating Segments. An operating segment is that component of the entity whose financial information is separately available and is regularly used by the Board of Directors in decision-making regarding how to allocate resources and assess the business performance. Reportable segments are one or more operating segments with similar characteristics, distribution systems and regulatory environments. Operating segments are presented consistently with the internal information furnished to the maximum authority in decision-making relating to the Company s operation. The maximum authority in decision-making related to the Company s operation to allocate resources and assess performance is Tarjeta Cuyanas S.A. s Board of Directors Functional and Presentation Currency The figures included in the Company s financial statements were measured using its functional currency, i.e., the currency of the primary economic environment where the Company operates. The condensed interim financial statements are presented in Argentine Pesos, which is the Company s functional and presentation currency Foreign Currency Assets and Liabilities Foreign currency assets and liabilities have been valued at the benchmark exchange rates published by the Argentine Central Bank effective as of period-end. Exchange differences were recognized in the line Expenses from Financing in the Statement of Comprehensive Income during the period when they arose.

18 16 NOTE 2 BASIS FOR PREPARATION AND ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (Continued) 2.5 Accounting Policies (Continued) Financial Instruments Financial instruments, other than derivatives, are defined as any contract that simultaneously gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. IFRS 9 Financial Instruments introduces new classification and measurement requirements for financial assets and liabilities and their derecognition. Such IFRS requires that all financial assets that are included in the scope of IAS 39 Financial Instruments Recognition and Measurement are measured at amortized cost or fair value. Specifically, investments in debt instruments that are held within a business model, whose objective is to collect contractual cash flows, and that solely consist in payments of principal or interest on the principal amount outstanding, are measured at amortized cost at later accounting period-ends. All the other investments in debt or equity instruments are measured at fair values at later accounting period-ends. Such IFRS shall be applied for the fiscal years beginning on or after January 1, Early application is permitted. The Company has opted for the early application as from the fiscal year beginning January 1, 2012, as well as in its interim periods and in the additional information as of December 31, As set out in IFRS 9, financial assets are classified into the following categories: (a) Financial Assets at Amortized Cost A financial asset is classified in this category if it meets the following conditions: The objective of the entity's business model is to hold the asset in order to collect contractual cash flows; and the contractual terms entitle collection of cash flows on specified dates that are solely principal and interest. In this category, the Company has classified the following financial assets: Receivables from Services, Time Deposits (included in the account Cash and Cash Equivalents) and Other Receivables. (b) Financial Assets at Fair Value If any of both conditions referred to in the preceding point is not met, the asset is classified in this category. In this category, the Company has classified the following financial assets: Cash on Hand, Cash in Banks and Mutual Funds (included in the account Cash and Cash Equivalents) and investments in companies on which no control, joint control or significant influence is exercised.

19 17 NOTE 2 BASIS FOR PREPARATION AND ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (Continued) 2.5 Accounting Policies (Continued) Cash and Cash Equivalents The following components are considered to be included in this account, in the Statement of Cash Flows, as long as there are no restrictions on the availability: - Cash, including deposits with financial institutions. - Cash equivalents, including those investments with an original maturity of three months or less from their placement, mutual funds and others, net of restricted assets and bank overdrafts. Bank overdrafts are classified as Bank and Financial Payables in Current Liabilities in the Balance Sheet. Cash considered in the Statement of Cash Flows is broken down as follows: Cash Cash on Hand and Cash in Banks (Note 19) 29,861 15,047 Short-term Investments (Note 19) 105,162 7,049 Overdrafts (Note 39) (6,898) (11,936) Total 128,125 10, Investments The placements of funds in time deposits were valued at their amortized cost. The investments in mutual funds and government securities, as well as the investments in companies on which no control, joint control or significant influence is exercised, were measured at their fair value. Changes in fair value were accounted for in the Statement of Comprehensive Income Receivables from Services and Other Receivables Receivables from services include the amounts payable by customers for credit-card consumption, loans granted and service fees and others. Receivables from Services and Other Receivables have been initially recognized at fair value and have been subsequently valued at amortized cost using the effective interest rate method. They are disclosed net of the allowance for credit losses, if applicable, calculated according to the guidelines set out in Note below.

20 18 NOTE 2 BASIS FOR PREPARATION AND ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (Continued) 2.5 Accounting Policies (Continued) Impairment of Financial Assets Allowance for Credit Losses Impairment of Financial Assets At each period-end, the Company analyzes whether there is objective evidence that a financial asset or group of financial assets is impaired. The loss on impairment of financial assets is recognized when there is objective evidence of impairment as a result of one or more events occurred after the initial recognition of the financial asset and such event has impact on estimated cash flows for such financial asset or group of financial assets. Allowance for Credit Losses The allowance for credit losses is recognized as further described in Note 2.4.D. The book value of the asset is reduced through the account Allowance for Credit Losses and the amount of loss or recovery, as the case may be, is recognized in the Statement of Comprehensive Income Derivatives Derivatives are initially recognized at fair value at the date of execution of the contract and are subsequently measured at fair value, charged to income, except a specific treatment under hedge accounting should be given. The method to recognize the gain or loss resulting from each valuation depends, therefore, on whether the derivative is designated as hedge instrument and, if applicable, on the nature of the risk inherent to the item hedged. As of June 30, 2012 and December 31, 2011, the derivatives recorded by the Company do not meet the requirements set out in the standard for them to qualify as effective hedging. Therefore, the Company has not applied hedge accounting. Derivatives are forward currency sale contracts to hedge cash flow risks arising from Class VI, Series I and II, Corporate Bonds. See also Note 4 Market Risk Exchange Rate-associated Risks.

21 19 NOTE 2 BASIS FOR PREPARATION AND ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (Continued) 2.5 Accounting Policies (Continued) Income Tax Income tax is recognized in these condensed interim financial statements according to the deferred tax method, thus recognizing the effect of the temporary differences between accounting and tax measurements of assets and liabilities. The main temporary differences stem from the allowance for credit losses, the provision for contingencies and, to a lesser extent, the differences with regard to the charge for depreciation of property, plant and equipment. For the purpose of determining the deferred assets and liabilities, the 35% tax rate that is expected to be in force at the moment of their reversal has been applied to the temporary differences identified, under the legal regulations enacted at the date of these financial statements. Deferred assets are recognized in the balance sheet as long as it is deemed likely that the Company will have enough future taxable income against which deferred income tax assets may be applied. The breakdown and changes of deferred income tax assets and liabilities are explained in detail in Note Property, Plant and Equipment Property, Plant and Equipment were valued at historical acquisition cost, net of depreciation and impairment losses, if applicable. The historical cost includes the expenses that are directly attributable to the acquisition of assets. The costs of adapting and improving stores are capitalized as Property, Plant and Equipment only when investments improve the conditions of the asset, irrespective of those originally established. The costs subsequently incurred are included in the values of the asset only provided that it is likely for the asset to generate future economic benefits and their cost is reliably measured. The other maintenance and repair costs are charged to income during the period when they are incurred. Depreciation charges have been calculated following the straight-line method based on the estimated useful life of the assets, applying annual rates enough so as to write off their values at the end of their estimated useful life, according to the following parameters. Group of Assets Cost of Adapting Stores Furniture and Office Supplies Hardware Fixtures and Improvements Years of Estimated Useful Life Term of Lease Agreement 5 years 2 years 5 years

22 20 NOTE 2 BASIS FOR PREPARATION AND ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (Continued) 2.5 Accounting Policies (Continued) Property, Plant and Equipment (Continued) The residual value of assets is reviewed and adjusted, if necessary, as of each fiscal year-end. Changes in the criteria originally established are recognized, as the case may be, as a change of estimate. The value of assets is impaired if the accounting residual value exceeds their estimated recoverable value. Property, Plant and Equipment are reviewed for impairment when events or circumstances that indicate that their book value may not be recovered have arisen Intangible Assets Intangible assets are those non-monetary assets, without physical substance, that are identifiable either because of being separable or because of deriving from legal or contractual rights. They are recorded when they may be reliably measured and it is likely for them to generate economic benefits for the Company. Patents and software are recognized at their historical cost as of the acquisition date, net of amortization and impairment loss, if applicable. Amortization is calculated by the straight-line method based on their estimated useful lives, which do not exceed five years. The value of assets is impaired if the accounting residual value exceeds their estimated recoverable value. Property, plant and equipment are reviewed for impairment when events or circumstances that indicate that their book value may not be recovered have arisen Accounts Payable Accounts payable represent the obligations to pay merchants (comercios amigos) and payables for goods and services acquired from suppliers in the normal course of business. They are disclosed in current liabilities if their payment falls due in a term shorter than or equal to one year. They are initially recognized at fair value and subsequently measured at amortized cost using the effective interest rate method Bank and Financial Payables and Other Liabilities Bank and financial payables, and corporate bonds are initially recognized at their fair value. They are subsequently valued at amortized cost using the effective interest rate method.

23 21 NOTE 2 BASIS FOR PREPARATION AND ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (Continued) 2.5 Accounting Policies (Continued) Provisions Provisions have been made as set out in IAS 37 to cover possible contingencies of a labor, commercial, civil or tax nature and for miscellaneous risks that could lead to obligations for the Company. When estimating their amounts and the possibility of occurrence, the opinion of the Company s legal advisors and the insurance policies purchased by the Company have been taken into consideration. At the date of these financial statements, the Company's Management believes there are no elements that make it possible to determine there may be contingencies, other than those recorded, that could occur and thus generate a negative impact on the Company s financial position. The breakdown and changes of provisions are disclosed in Note Capital Stock The capital stock is represented by non-endorsable registered common shares, with a face value of AR$ 10 per share. As of June 30, 2012, capital stock was as follows: Capital Stock AR$ Approved by Body Date Registration Date Subscribed, paid-in and registered 100,000 Bylaws Subscribed, paid-in and registered 1,900,000 Subscribed, paid-in and registered 30,332,830 32,332,830 Unanimous Special Shareholders Meeting Unanimous Special Shareholders Meeting Revenue Recognition (a) Revenues from Services Revenues from services are recognized in the period when the service is provided, once the revenue may be reliably measured and future economic benefits are likely to be generated for the Company..

24 22 NOTE 2 BASIS FOR PREPARATION AND ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (Continued) 2.5 Accounting Policies (Continued) Revenue Recognition (Continued) (b) Revenues from Financing Revenues from financing are accounted for when they are accrued, by applying the effective interest rate method. 2.6 Changes in Accounting Policies (a) New and Amended Standards Adopted by the Company. The Company early adopted IFRS 9, as described in Note As of the date of these condensed interim financial statements, there are no other IFRS or IFRIC interpretations that are effective for the first time for the fiscal year beginning on or after January 1, 2012 and that are expected to have a material effect on the Company. (b) New Standards, Amendments and Interpretations Published that Have Not Become Effective Yet for the Fiscal Years Beginning on or after January 1, 2012 and that Have Not Been Early Adopted. IFRS 13 Fair Value Measurement seeks to increase consistency and reduce complexity by providing an exact definition of fair value and a single source for fair value measurement, as well as disclosure requirements for its use in IFRS. The requirements, which are mostly aligned with US GAAP, do not extend the use of fair value accounting, but provide guidance on how it should be applied when its use is required or permitted by other IFRS or US GAAP. The Company still has to assess the full effect of IFRS 13 and intends to adopt IFRS 13 no later than the accounting period beginning on or after January 1, NOTE 3 FINANCIAL RISK MANAGEMENT The Company s activities expose it to several financial risks: market risk (including the exchange rate risk, the fair value interest rate risk and the price risk), credit risk and liquidity risk. There were no changes in the Company s risk department from the last closing or in risk management policies. Information relating to December 31, 2011 is disclosed in Note 4 below.

25 23 NOTE 4 ADDITIONAL INFORMATION ON THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2011 The following information prepared under IFRS, related to the fiscal year ended December 31, 2011, is necessary to understand these condensed interim financial statements. 1. Financial Risk Management 1.1 Financial Risk Factors The nature of the Company's operations and the characteristics of its customer portfolio expose it to several risks, primarily related to market risks (including the effects of changes in exchange rates and interest rates) and credit and liquidity risks. In order to manage the volatility related to these exposures, Management carries out an ongoing risk monitoring, measurement and identification process. (a) Credit Risk The credit risk refers to the risk that one of the parties breaches its contractual obligations, resulting in a financial loss for the Company. The credit risk arises from deposits with banks and financial institutions, as well as customer credit exposures, including other remaining loans and committed transactions. As regards the risk management related to deposits with banks and financial institutions, the Board of Directors approved the Company's credit assessment and investment policy to provide a framework for generating businesses aimed at achieving an appropriate relation between the risk taken and profitability. The guidelines of such policy are as follows: Placements shall be made with financial institutions or mutual funds that have a minimum short-term local currency rating of A1, according to the rating agency Fitch Ratings or its available equivalent according to other rating agencies. Investments made in financial institutions may not exceed individually 15% (fifteen per cent) of the Company s shareholders equity. The same shall be applicable to mutual funds. In addition, the investments made in financial institutions may not exceed 5% (five per cent) of their shareholders equity. The same shall be applicable to mutual funds as regards their equity. Up to 20% (twenty per cent) out of total investments in each financial institution or mutual fund may be invested. This amount rises to 35% (thirty-five per cent) if the target financial institution has an authorized credit line (borrowed or contingent) of at least in thousands AR$ 10,000. Investments placed in financial institutions rated A2" shall be exceptionally allowed, provided that the Company has a line borrowed from such institution. The placement, in addition to the other restrictions, may not exceed the amount of the line.

26 24 NOTE 4 ADDITIONAL INFORMATION ON THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2011 (Continued) 1. Financial Risk Management (Continued) 1.1 Financial Risk Factors (Continued) (a) Credit Risk (Continued) In addition, in connection with the risk associated with its customers' credit positions, the Company actively monitors the credit reliability of its customers in order to mitigate the credit risk. In order to manage and control the credit risk for the customer portfolio, the Company implemented a credit and credit assessment policy for each customer so as to provide the following guidelines in this regard, for the following purposes: Achieve a proper segmentation of the customer portfolio. Use tools to analyze and assess the risk that best suits the customer's profile. Establish guidelines to grant cards and loans based on the customer s solvency. Monitor customers degree of compliance on an ongoing basis. Grant credit limits to each customer based on the assessment of each customer s particular situation, generally without requiring guarantees and taking into account the customer's monthly income, the number of family members, among other aspects. In this respect, seven different credit limits have been set: (I) monthly balance limit, which is 50% of the income presented and will be the maximum amount in the aggregate of the installments that shall be paid monthly; (II) short-term installment plan limit, which is three times the monthly balance limit and is the maximum amount with which the customer may purchase in two to six installments; (III) the total debt limit and long-term installment plans, which is five times the monthly balance limit, which will be the maximum amount with which the customer may purchase in seven or more installments and will also be the maximum amount that the customer may owe to the card company on every account. This available balance also includes a product called Nevaplan (Neva), where the maximum amount that may be used will be three times the monthly balance limit and it may be paid in one, two or three installments not accruing interest or six, nine or twelve installments, accruing interest; (IV) ATM cash withdrawal limit or advance granted by tellers, which is a fixed amount of AR$ 700, that may be withdrawn in cash; if an ATM withdrawal is made, it may be paid in one to six installments; if cash is withdrawn at a branch's teller (advance), it is discounted in a single payment from the next-month account statement; (V) limit for loans, which is equal to the short-term installment plan limit and may be chosen up to twenty-four months; this amount is subject to the customer s credit check; (VI) limit on cell phone top-ups, which is a maximum amount of AR$ 350 for which customers may top up their cell phones credit and settle it in a single payment in next month account statement; (VII) balance limit with Tarjeta Nevada Visa, which uses and shares the same monthly balance limit and the short-term installment plan limit of its Tarjeta Nevada.

27 25 NOTE 4 ADDITIONAL INFORMATION ON THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2011 (Continued) 1. Financial Risk Management (Continued) 1.1 Financial Risk Factors (Continued) (a) Credit Risk (Continued) Furthermore, has a strong policy to address customers payment in arrears, as follows: If the account statement cannot be settled upon maturity, two options are offered: (1) If the outstanding amount cannot be settled upon maturity, the customer is offered an installment plan or express friend loan upon maturity, which allows financing the outstanding amount from two to six installments, which are added to the amount that falls due in 30 days. (2) The option of an installment plan or friend loan upon maturity, which consists in financing the total debt, including past due amounts and those to fall due from six to thirty-six installments. The first installment is paid at the moment or making a downpayment. This plan is enabled provided that there are limits to be able to do so. Limits increase as each installment is paid. Two options are offered in the "yellow" status (30 days in arrears): (1) An installment plan (installment paid at the moment) or express friend loan (downpayment), which allows financing the past due amount and that to fall due from two to twelve installments. (2) Make an installment plan (installment paid at the moment) or friend loan (downpayment) in a yellow status for the total debt, including past due amounts and those to fall due from six to thirty-six installments. For this plan, the account is disabled until paying 51% of the installment options made. In the principal status (60 days in arrears), the possibility offered is settlement with a principal installment plan, which may be also made by the collection agent at the respective address or friend loan of principal, which implies financing the total debt (past due amounts and those to fall due) from six to twelve installments, at any collection entity, or up to thirty-six installments at branches. The first installment payment or downpayment is made at the moment. For this plan, the account is disabled until paying 51% of the installment options made. If, after this stage, customers do not pay the plans previously chosen, they will be offered the possibility of financing the total debt, but this time the installment plan or friend loan chosen will be disabled until 71% of installment options made are settled.

28 26 NOTE 4 ADDITIONAL INFORMATION ON THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2011 (Continued) 1. Financial Risk Management (Continued) 1.1 Financial Risk Factors (Continued) (a) Credit Risk (Continued) The risk of default under a loan may vary in each customer s particular case, depending among other factors on each customer s own economic situation. assesses the uncollectibility risk and sets allowances, which are calculated based on the criterion described in Note to these financial statements, and such allowances are deemed adequate for the recognition of losses incurred for credit losses under IFRS. Due to the nature of this activity, there is no risk of credit risk concentration in this group of debtors, since credit cards are given to customers, being none of them significant, who carry out a very wide range of activities. In this sense and taking into account the foregoing, the Company has approved the following credit card limits for customers as of December 31, 2011: Maximum Exposure to Credit Risk: In Thousands of AR$ Monthly Purchase Limit 520,708 Short-term Limit 1,602,980 Total Indebtedness and Long-term Limit 2,456,795 The following table shows the maximum gross exposure to credit risk, disregarding guarantees or other credit improvements: In Thousands of AR$ Cash and Cash Equivalents 52,788 Receivables from Services (Net of Allowances) 1,084,176 Total 1,136,964 For the assets recorded in the condensed interim financial statements, the exposures established are based on the net book amounts of the respective allowances for credit losses, as disclosed in the balance sheet.