São Carlos Empreendimentos e Participações S.A.

Transcription

1 (Convenience Translation in English from the Original Previously Issued in Portuguese) São Carlos Empreendimens e Participações S.A. Interim Financial Information for the Quarter Ended June 30, 2017 and Report on Review of Interim Financial Information Deloitte Touche Tohmatsu Audires Independentes

2 Deloitte Touche Tohmatsu Dr. Chucri Zaidan Avenue, nº th 12 th floors - Golden Tower São Paulo - SP Brazil Tel: + 55 (11) Fax: + 55 (11) (Convenience Translation in English from the Original Previously Issued in Portuguese) REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION To the Shareholders, Direcrs and Management of São Carlos Empreendimens e Participações S.A. São Paulo - SP Introduction We have reviewed the accompanying individual and consolidated interim financial information of São Carlos Empreendimens e Participações S.A. (the Company ), included in the Interim Financial Information Form (ITR), for the quarter ended June 30, 2017, which comprises the balance sheet as at June 30, 2017 and the related statement of profit and loss, statement of comprehensive income, statement of changes in equity and statement of cash flows for the six-month period then ended, including the explanary notes. Management is responsible for the preparation of the individual and consolidated interim financial information in accordance with CPC 21(R1) and IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well as for the presentation of such information in accordance with the standards issued by the Brazilian Securities Commission (CVM), applicable the preparation of Interim Financial Information (ITR). Our responsibility is express a conclusion on this interim financial information based on our review. Scope of Review We conducted our review in accordance with Brazilian and international standards on review of interim financial information (NBC TR 2410 and ISRE Review of Interim Financial Information Performed by the Independent Audir of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the standards on auditing and consequently does not enable us obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion on the Interim Financial Information Based on our review, nothing has come our attention that causes us believe that the accompanying individual and consolidated interim financial information included in the ITR referred above is not prepared, in all material respects, in accordance with CPC 21 (R1) and IAS 34 applicable the preparation of Interim Financial Information (ITR) and presented in accordance with the standards issued by the Brazilian Securities Commission. Deloitte refers one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL"), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred as "Deloitte Global") does not provide services clients. Please see for a more detailed description of DTTL and its member firms. Deloitte provides audit, consulting, financial advisory, risk management, tax and relates services public and private clients spanning multiple industries. Deloitte serves four out of five Fortune Global 500 companies through a globally connected network of member firms in more than 150 countries bringing world-class capabilities, insights, and high-quality service address clients most complex business challenges. To learn more about how Deloitte s approximately 225,000 professionals make an impact that matters, please connect with us on Facebook, LinkedIn or Twitter Deloitte Touche Tohmatsu. All rights reserved.

3 Other Matters Statements of value added We have also reviewed the individual and consolidated statements of value added ( DVA ), for the six-month period ended June 30, 2017, prepared under the responsibility of the Company s management, the presentation of which is required by the standards issued by the Brazilian Securities Commission (CVM) applicable the preparation of Interim Financial Information (ITR), and is considered as supplemental information for IFRS that does not require the presentation of a DVA. These statements were subject the same review procedures described above and, based on our review, nothing has come our attention that causes us believe that they are not prepared, in all material respects, in relation the interim financial information taken as a whole. The accompanying individual and consolidated interim financial information has been translated in English for the convenience of readers outside Brazil. São Paulo, August 10, 2017 DELOITTE TOUCHE TOHMATSU Audires Independentes Ribas Gomes Simões Engagement Partner 2017 Deloitte Touche Tohmatsu. All rights reserved. 2

4 (Convenience Translation in English from the Original Previously Issued in Portuguese) SÃO CARLOS EMPREENDIMENTOS E PARTICIPAÇÕES S.A. AND SUBSIDIARIES BALANCE SHEET AS AT JUNE 30, 2017 (In thousands of Brazilian reais - R$) ASSETS Note LIABILITIES AND EQUITY Note CURRENT ASSETS CURRENT LIABILITIES Cash and cash equivalents 3 53,225 50,885 58,246 57,089 Borrowings and financing 10 65,131 62, , ,855 Short-term investments 4 119, , , ,105 Advances from cusmers - - 1,593 1,366 Trade receivables 5 4,321 3,306 25,647 10,563 Payroll and related taxes 5,220 9,710 6,242 10,639 Due from related parties Provision for income tax and social contribution - - 5,405 6,512 Recoverable taxes 6 22,969 23,125 27,021 27,844 Taxes, fees and contributions 767 1,027 2,384 3,100 Prepaid expenses and other receivables 3,830 4,004 16,559 15,433 Dividends and interest on capital - 18,104-18,104 Properties held for sale ,828 12,636 Payables for acquisition of properties - - 3,202 3,202 Total current assets 203, , , ,642 Other payables 2,020 5,433 8,961 5,565 Total current liabilities 73,138 96, , ,343 NONCURRENT ASSETS Trade receivables 5 36,022 29, , ,169 NONCURRENT LIABILITIES Related-party balances and transactions 8 72,542 95,782 16,254 14,455 Deferred taxes ,311 8,361 Escrow deposits Borrowings and financing , ,408 1,445,890 1,516,012 Prepaid expenses and other receivables 4,050 4,394 9,609 10,512 Provision for risks 12 14,332 14,085 14,332 14,085 Investments in subsidiaries and joint ventures 7 1,063,970 1,015,515 10,215 11,981 Total noncurrent liabilities 771, ,196 1,468,533 1,538,458 Investment property 9 806, ,957 2,554,198 2,570,645 Property, plant and equipment ,583 8,755 EQUITY Intangible assets ,889 3,941 Capital ,073, ,912 1,073, ,912 Total noncurrent assets 1,984,370 1,958,032 2,716,985 2,728,582 Sck option plan 30,731 27,251 30,731 27,251 Treasury shares (64,128) (63,822) (64,128) (63,822) Earnings reserves 303, , , ,919 Noncontrolling interests - - 3,213 3,163 Total equity 1,343,741 1,323,260 1,346,954 1,326,423 TOTAL ASSETS 2,188,026 2,220,859 2,992,833 3,056,224 TOTAL LIABILITIES AND EQUITY 2,188,026 2,220,859 2,992,833 3,056,224 The accompanying notes are an integral part of these financial statements. 3

5 (Convenience Translation in English from the Original Previously Issued in Portuguese) SÃO CARLOS EMPREENDIMENTOS E PARTICIPAÇÕES S.A. AND SUBSIDIARIES STATEMENT OF PROFIT AND LOSS FOR THE PERIOD ENDED JUNE 30, 2017 (In thousands of Brazilian reais - R$, except earnings per share) 04/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2016 Note NET REVENUE 16 14,992 29,703 11,335 22, , ,316 73, ,477 Cost of properties sold (15,581) (15,581) - (4,847) Rental cost 17 (3,503) (7,007) (3,457) (6,916) (10,580) (21,129) (11,081) (22,100) GROSS PROFIT 11,489 22,696 7,878 15,633 83, ,606 62, ,530 OPERATING INCOME (EXPENSES) General and administrative expenses 17 (7,893) (16,000) (7,217) (14,100) (9,832) (19,626) (8,958) (17,738) Selling expenses 17 (678) (1,352) (1,322) (2,548) (6,745) (13,921) (6,724) (13,383) Other operating income, net , ,207 Share of profit (loss) of subsidiaries 7 28,386 41,177 16,452 31,624 (862) (1,766) (1,011) (1,525) OPERATING INCOME BEFORE FINANCE INCOME (COSTS) 31,304 46,521 15,791 30,737 65, ,239 46,527 93,091 FINANCE INCOME (COSTS) Finance income 18 5,973 13,441 8,492 17,459 6,725 15,104 9,116 18,620 Finance costs 19 (20,181) (42,655) (25,077) (49,819) (41,455) (87,061) (50,861) (102,507) OPERATING INCOME (LOSS) BEFORE INCOME TAX AND SOCIAL CONTRIBUTION 17,096 17,307 (794) (1,623) 31,173 36,282 4,782 9,204 INCOME TAX AND SOCIAL CONTRIBUTION Current (11) 158 (13,789) (18,476) (5,384) (10,249) Deferred (63) (62) (59) (113) PROFIT (LOSS) FOR THE SIX-MONTH PERIOD 17,096 17,307 (805) (1,465) 17,321 17,744 (661) (1,158) ATTRIBUTABLE TO Owners of the Company 17,096 17,307 (805) (1,465) Noncontrolling interests EARNINGS (LOSS) PER SHARE Basic (cents per share - in R$) (0.0261) Diluted (cents per share - in R$) (0.0253) The accompanying notes are an integral part of these financial statements. 4

6 (Convenience Translation in English from the Original Previously Issued in Portuguese) SÃO CARLOS EMPREENDIMENTOS E PARTICIPAÇÕES S.A. AND SUBSIDIARIES STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED JUNE 30, 2017 (In thousands of Brazilian reais - R$) 04/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2016 PROFIT (LOSS) FOR THE YEAR 17,096 17,307 (805) (1,465) 17,321 17,744 (661) (1,158) Other comprehensive income TOTAL COMPREHENSIVE INCOME FOR THE YEAR 17,096 17,307 (805) (1,465) 17,321 17,744 (661) (1,158) ATTRIBUTABLE TO Owners of the Company 17,096 17,307 (805) (1,465) Noncontrolling interests The accompanying notes are an integral part of these financial statements. 5

7 (Convenience Translation in English from the Original Previously Issued in Portuguese) SÃO CARLOS EMPREENDIMENTOS E PARTICIPAÇÕES S.A. STATEMENTS OF CHANGES IN EQUITY FOR THE PERIOD ENDED JUNE 30, 2017 (In thousands of Brazilian reais - R$) Treasury shares Attributable owners of the Company Earnings reserves Gain (loss) on sale Treasury Sck Earnings Retained earnings Noncontrolling Total Capital of treasury shares shares option plan Legal retention (accumulated losses) Total interests equity BALANCES AS AT DECEMBER 31, ,912 (9,925) (55,013) 22,680 64, ,053-1,259,448 1,828 1,261,276 Recognition of sck option plan - 2, ,373-2,373 Sale of treasury shares , ,410-1,410 Acquisition of treasury shares - - (377) (377) - (377) Acquisition of noncontrolling interests Profit (loss) for the year (1,465) (1,465) 307 (1,158) BALANCES AS AT JUNE 30, ,912 (7,552) (55,390) 24,090 64, ,053 (1,465) 1,261,389 2,853 1,264,242 BALANCES AS AT DECEMBER 31, ,912 (9,925) (53,897) 27,251 68, ,367-1,323,260 3,163 1,326,423 Capital increase 400, (400,000) Recognition of sck option plan , ,480-3,480 Sale of treasury shares - (7,065) 11, ,955-3,955 Acquisition of treasury shares - - (4,261) (4,261) - (4,261) Acquisition of noncontrolling interests (387) (387) Profit for the period ,307 17, ,744 BALANCES AS AT JUNE 30, ,073,912 (16,990) (47,138) 30,731 68, ,367 17,307 1,343,741 3,213 1,346,954 The accompanying notes are an integral part of these financial statements. 6

8 (Convenience Translation in English from the Original Previously Issued in Portuguese) SÃO CARLOS EMPREENDIMENTOS E PARTICIPAÇÕES S.A. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE PERIOD ENDED JUNE 30, 2017 (In thousands of Brazilian reais - R$) CASH FLOW FROM OPERATING ACTIVITIES Profit for the year 17,307 (1,465) 17,744 (1,158) Adjustments reconcile profit for the quarter net cash provided by operating activities: Provision for doubtful debits Depreciation and amortization 7,007 6,916 21,129 22,100 Share of profit (loss) of subsidiaries (41,177) (31,624) 1,766 1,525 Recognition of sck option plan 3,480 2,373 3,480 2,373 Income from short-term investments (5,933) (3,357) (6,842) (3,898) Gain on the sale of investments - - (25,765) - Gain on sale of held-for-sale assets - - (857) Adjustments provision for tax risks Income tax and social contribution ,476 - Acquisition of noncontrolling interests ,025 Finance charges on borrowings and financing 40,479 48,294 84, ,546 Cash provided by operating activities 21,410 21, , ,954 Changes in operating assets: Trade receivables (7,900) (6,755) (18,031) (9,782) Due from related parties Escrow deposits - - (11) (2) Recoverable taxes 156 (1,756) 823 (1,104) Properties held for sale - - (1,192) 1,351 Prepaid expenses and other receivables (223) (599) Changes in operating liabilities: Payroll and related taxes (4,490) 305 (4,397) 780 Provision for income tax and social contribution ,447 Taxes, fees and contributions (260) 52 (716) (89) Other payables (3,414) (960) 2,819 (1,812) Deferred taxes (10) (18) (50) 172 Adjustments from costumers (1,460) Interest payment (32,284) (35,588) (64,991) (74,670) Income tax and social contribution paid - - (18,789) (4,389) Changes in assets and liabilities (47,684) (43,938) (103,607) (87,329) Net cash provided by (used in) operating activities (26,274) (22,506) 10,811 34,625 CASH FLOW FROM INVESTING ACTIVITIES Due from related parties 602 1,531 (1,799) (4,387) Subsidiaries' dividends and interest on capital received 47,259 43, Short-term investments 68,129 7,880 75,448 (107) Advance for future capital increase Proceeds from the sale of properties ,722 3,636 Capital reduction in subsidiaries received 3, Capital increase in subsidiaries (35,311) (42,964) - - Acquisitions of investment property, property, plant and equipment and intangible assets (1,588) (16,595) (25,068) (35,945) Net cash provided by (used in) investing activities 82,503 (6,282) 91,303 (36,803) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of principal - borrowings (35,479) (21,089) (82,546) (54,334) Borrowings ,861 Sale of own shares 3,955 1,410 3,955 1,410 Share buyback (4,261) (377) (4,261) (377) Dividends paid (18,104) (11,308) (18,104) (11,308) Net cash used in financing activities (53,889) (31,364) (100,956) (62,748) (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 2,340 (60,152) 1,157 (64,926) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 50, ,505 57, ,107 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 53,225 80,353 58,246 82,181 (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 2,340 (60,152) 1,157 (64,926) The accompanying notes are an integral part of these financial statements. 7

9 (Convenience Translation in English from the Original Previously Issued in Portuguese) SÃO CARLOS EMPREENDIMENTOS E PARTICIPAÇÕES S.A. AND SUBSIDIARIES STATEMENT OF VALUE ADDED FOR THE PERIOD ENDED JUNE 30, 2017 (In thousands of Brazilian reais - R$) Revenues Lease revenue 32,185 24, , ,186 Revenue from sale of properties ,347 5,730 32,185 24, , ,916 Inputs purchased from third parties Rental costs (7,007) (6,916) (21,129) (22,100) Cost of properties sold - - (15,581) (4,847) Supplies, power, outside services and other inputs (2,991) (4,087) (16,182) (15,432) (9,998) (11,003) (52,892) (42,379) Gross value added 22,187 13, , ,537 Wealth created 22,187 13, , ,537 Wealth received in transfer Share of profit (loss) of subsidiaries 41,177 31,624 (1,766) (1,525) Finance income 13,441 17,459 15,104 18,620 Other income ,946 1,207 54,618 49,211 15,284 18,302 Total wealth for distribution 76,805 62, , ,839 Wealth distributed Employees and payroll taxes 14,329 12,533 17,318 15,640 Taxes, fees, contributions 2,515 1,704 27,727 19,841 Interest and inflation adjustments 41,118 48,446 85,001 94,048 Noncontrolling interests Other 1,536 1,373 2,060 6,468 Interest and dividends ,000 Profit (loss) for the period 17,307 (1,465) 17,307 (1,465) Wealth distributed 76,805 62, , ,840 The accompanying notes are an integral part of these financial statements. 8

10 (Convenience Translation in English from the Original Previously Issued in Portuguese) SÃO CARLOS EMPREENDIMENTOS E PARTICIPAÇÕES S.A. NOTES TO THE INTERIM FINANCIAL INFORMATION FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2017 (Amounts in thousands of Brazilian reais - R$, unless otherwise stated) 1. GENERAL INFORMATION São Carlos Empreendimens e Participações S.A. ( Company ) is a publicly-held company established in Brazil, with registered office at Rua Dr. Eduardo de Souza Aranha, 153, 12o floor, Vila Nova Conceição - São Paulo, SP, Brazil. The Company currently has a portfolio that includes office buildings and convenience retail centers located mainly in the States of Saõ Paulo and Rio de Janeiro. The Company has been operating in this market since 1999 and in December 2006 it has joined the Novo Mercado corporate governance listing segment of the Sa o Paulo Commodities, Futures and Sck Exchange (BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros), where it is listed under the ticker symbol SCAR 3.The Company is engaged in the following operations: a) The management of own or third-party real estate projects, including shopping malls. b) The purchase and sale of completed or under construction residential and office properties, land or undivided interests in the properties. c) Property leasing. d) The operation of short-term parking lots. e) Performance of other similar activities or any business related its core business. f) Holding interests in other entities. The Company s subsidiaries are engaged in several core businesses, including investments in and management of single- or multi-tenant commercial real estate projects, mainly in the States of Saõ Paulo and Rio de Janeiro, real estate development projects, purchase and sale of properties, and real estate brokerage services. The Company s individual and consolidated interim financial information is presented in Brazilian reais (R$), which is the Company's functional and reporting currency in Brazil. The Company s individual and consolidated interim financial information was approved by the Company s Board of Direcrs and authorized for issue on August 10, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1. Statement of compliance The individual and consolidated interim financial information has been prepared in accordance with International Financial Reporting Standards ("IFRSs") issued by the International Accounting Standards Board ("IASB"), and accounting practices adopted in Brazil. The accounting practices adopted in Brazil comprise the policies set out in Brazilian Corporate Law and the technical pronouncements, guidelines, and interpretations issued by the Accounting Pronouncements Committee ( CPC ) and approved by the Federal Accounting Council ( CFC ) and the Brazilian Securities and Exchange Commission ( CVM ). 9

11 São Carlos Empreendimens e Participações S.A. Management asserts that all relevant information related the interim financial information is being disclosed and corresponds the information used by it in its management Summary of significant accounting policies The information related the basis for preparation and presentation of the interim financial information, the summary of the significant accounting policies and the use of estimates and judgment did not change as compared the information disclosed in the Notes the Annual Financial Statements for the year ended December 31, 2016 (hereinafter referred as Financial Statements for the year ended December 31, 2016 ), published on March 9, 2017 on the newspaper Valor Econômico and the Official Gazette, and made available on the following websites: and Accordingly, this interim financial information should be read in conjunction with these financial statements New and revised standards and interpretations applicable the interim financial information for the six-month period ended June 30, 2017 a) The following new and revised International Financial Reporting Standards (IFRSs), effective for annual periods beginning on or after January 1, 2017, have been adopted in the financial statements. The adoption of these new and revised IFRSs, applicable the Company, did not have any significant impact on the amounts reported and/or disclosed for the period. b) New and revised standards and interpretations not yet adopted Standard IFRS 9 IFRS 15 IFRS 16 IFRS 19 Amendments IFRS 2 Amendments IFRS 10 and IAS 28 Amendments IAS 7 IFRIC 22 Annual Improvements Amendments IAS 40 Description Financial Instruments (b) Revenue from Contracts with Cusmers (b) Leases (c) Provisions (b) Classification and Measurement of Share-based Payment Transactions Sale or Contribution of Assets Between Invesr and its Associate or Joint Venture Disclosure Initiative Foreign Currency Transactions and Advance Consideration (b) IFRSs Cycle (a) Transfer of Investment Property (b) (a) Effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. (b) Effective for annual periods beginning on or after January 1, 2019, with early adoption permitted. (c) Effective for annual periods beginning on or after a date be determined. The Company s management is currently assessing the potential impact of these standards on the financial statements Companies included in the consolidated interim financial information The consolidated interim financial information includes the balances and transactions of the Company and its subsidiaries, listed in Note 7. 10

12 São Carlos Empreendimens e Participações S.A. 3. CASH AND CASH EQUIVALENTS For the purposes of the statement of cash flows, line item Cash and cash equivalents includes cash, banks and short-term investments, as follows: Cash Banks ,347 Short-term investments (*): Repurchase agreements 53,206 50,609 57,069 52,118 Savings and other accounts ,225 50,885 58,246 57,089 (*) Short-term investments immediately convertible in cash and insignificant risk of change in value. All short-term investments have been structured have the features and return of fixed-income securities, yielding approximately 101% of the Interbank Certificate of Deposit rate (CDI). The repurchase agreements are mainly comprised of investments in Banco do Brasil and Itaú Unibanco S.A., backed by private securities and with repurchase commitment not subject significant changes in value. 4. SHORT-TERM INVESTMENTS Financial bills and fixed-income investment funds 119, , , ,105 Refer financial bills issued by prime banks, basically Itaú Unibanco S.A. and Banco Bradesco, that are not highly liquid and whose redemption before maturity date depends on the secondary market. Fixed-income investment funds are open-end funds managed by prime financial institutions. 5. TRADE RECEIVABLES Trade receivables 40,343 32, , ,700 Allowance for doubtful debts (922) (922) (1,115) (1,101) Receivables from the sale of properties ,430 Receivables from the sale of equity interests and disposal of real estate projects Common area maintenance and other fees - - 2,062 2,781 Total 40,343 32, , ,732 Current 4,321 3,306 25,647 10,563 Noncurrent (i) 36,022 29, , ,169 (i) Amounts arising from straight-lining that will be realized after 12 months. 11

13 São Carlos Empreendimens e Participações S.A. Trade receivables Outstanding balances of trade receivables are subject interest of 1% p.m. The Company's management records an allowance for doubtful debts for amounts past due for more than 180 days with no indication that they will be collected or renegotiated. The aging list of trade receivables is as follows: Past due: days days days days Over 180 days ,022 1, ,032 2,861 Current 4,321 3,306 25,541 8,803 Unbilled 36,022 29, , ,169 Total trade receivables 41,265 33, , ,833 Variations in allowance for doubtful debts Opening balance (922) (922) (1,101) (1,098) Recognition of allowance - - (14) (3) Closing balance (922) (922) (1,115) (1,101) 6. RECOVERABLE TAXES Recoverable income tax 14,793 9,563 17,891 12,471 Income tax on short-term investments 5,696 11,155 5,902 12,077 Recoverable social contribution (CSLL) Recoverable taxes on revenue (PIS and COFINS) 2,222 2,149 2,960 2,892 Other Total 22,969 23,125 27,021 27,844 12

14 São Carlos Empreendimens e Participações S.A. 7. INVESTMENTS IN SUBSIDIARIES AND JOINT VENTURES Ownership equity - Profit (loss) in the Balance as at Capital increase Share of profit (loss) of Dividends distributed Balance as at Subsidiaries Assets Liabilities Capital Equity % six-month period Other (decrease) subsidiaries interest on capital Changes 253 Participações Ltda. 96,598 5,762 32,000 90, ,413 83, ,413-90,836 SC Correra de Imóveis Ltda (4) (1) - 5 (4) - - Top Center Empreendimens e Participações Ltda. 467, ,343 97, , , , ,784 (19,500) 170,004 Globaltech Empreendimens e Participações Ltda. 23,440 15,385 7,663 8, ,092 4, (420) 4,834 H.T.Y.S.P.E. Empreendimens e Participações Ltda. 75,874 6,667 57,620 69, ,121 67, ,121 (5,000) 69,207 SC Rio Sul Empreendimens e Participações Ltda. 121,963 5, , , , , ,134 (10,003) 116,817 SC Rio CE Generali Empreendimens e Participações Ltda. 88,401 3,691 83,800 84, ,255 88,533 - (3,500) 1,255 (1,578) 84,710 SC Rio CE Candelária Empreendimens e Participações Ltda. 71,234 31,246 40,369 39, ,925-4, ,988 SC Rio Cidade Nova Empreendimens e Participações Ltda. 236, , , , ,781 - (5,000) ,409 SC Rio Pasteur Empreendimens e Participações Ltda. 52,930 37,597 14,004 15, (1,675) 14,607-2,400 (1,674) - 15,333 SC SP CE Aço Empreendimens e Participações Ltda. 193, ,660 64,539 70, ,691 68,261-3,300 1,691 (2,347) 70,905 Best Center Empreendimens e Participações S.A. 419, , , , (9,412) 210, ,000 (9,412) - 245,815 U.K.Q.S.P.E. Empreendimens e Participações Ltda (2) (2) (2) C.L.D.S.P.E. Empreendimens e Participações Ltda. 81,948 53,837 27,053 28, , (727) 28,111 D.J.L.S.P.E. Empreendimens e Participações Ltda Total 1,003, ,705 42,943 (39,575) 1,053,967 Joint ventures H.T.K.S.P.E. Empreendimens e Participações S.A. 36,057 37,751 8,833 (1,694) (1,694) 5, (847) - 4,571 Longford Paticipações e Empreendimens S.A. 48,880 50,719 22,972 (1,839) (1,839) 6, (919) - 5,432 11, (1,766) - 10,003 Total 1,015, ,705 41,177 (39,575) 1,063,970 13

15 São Carlos Empreendimens e Participações S.A. Ownership interest - Profit (loss) in the Balance as at Share of profit (loss) of Capital Dividends distributed Balance as at Subsidiaries Assets Liabilities Capital Equity % six-month period Other subsidiares increase interest on capital Changes 253 Participações Ltda. 91,606 6,886 32,000 84, ,339 74,380-10, ,719 SC Correra de Imóveis Ltda (2) Top Center Empreendimens e Participações Ltda. 504, , , , , ,123-1,018 25, ,141 Globaltech Empreendimens e Participações Ltda. 23,828 16,718 7,663 7, , ,075-4,267 H.T.Y.S.P.E. Empreendimens e Participações Ltda. 75,934 7,515 57,620 68, ,486 68,398-8,486 2,536 (11,000) 68,420 SC Rio Sul Empreendimens e Participações Ltda. 119,332 5, , , , ,684-17,239 - (14,000) 113,923 SC Rio CE Generali Empreendimens e Participações Ltda. 89,433 1,293 87,300 88, ,849 86,178-1,849 2,800 (2,688) 88,139 SC Rio CE Candelária Empreendimens e Participações Ltda. 72,202 37,404 35,869 34, , ,735-34,799 SC Rio Cidade Nova Empreendimens e Participações Ltda. 234, , , , (597) 114,112 - (597) 8, ,515 SC Rio Pasteur Empreendimens e Participações Ltda. 47,305 31,210 11,604 16, ,999 15,511-1, (1,800) 16,094 SC SP CE Aço Empreendimens e Participações Ltda. 192, ,502 61,239 66, ,248 67,053-2,248 - (2,400) 66,901 Best Center Empreendimens e Participações S.A. 401, , , , (12,484) 207, (12,484) ,681 U.K.Q.S.P.E. Empreendimens e Participações Ltda (1) (4) (1) C.L.D.S.P.E. Empreendimens e Participações Ltda. 80,834 53,132 27,053 27, , ,702 D.J.L.S.P.E. Empreendimens e Participações Ltda Total 949, ,149 42,335 (31,888) 991,300 Joint ventures H.T.K.S.P.E. Empreendimens e Participações S.A (1,304) 5,104 - (652) - (115) 4,337 Longford Participações e Emprendimens S.A (1,746) 8,682 - (873) - - 7,809 13,786 - (1,525) - (115) 12,146 Total 963, ,624 42,335 (32,003) 1,003,446 HTKSPE Empreendimens e Participações S.A. and Longford Participações e Empreendimens S.A. were not consolidated because the Company holds shared control over such investments and reported an investment balance of R$10,003 as at June 30, 2017 (R$11,769 as at December 31, 2016). 14

16 São Carlos Empreendimens e Participações S.A. 8. RELATED-PARTY BALANCES AND TRANSACTIONS Transactions are broken down as follows: Balances Noncurrent assets Subsidiary/associate Globaltech Empreendimens e Participações Ltda H.T.Y.S.P.E. Empreendimens e Participações Ltda. 4,165 6,274 SC Rio Cidade Nova Empreendimens e Participações Ltda. 14,115 8, Participações Ltda. 4,153 11,359 Longford Participações e Empreendimens S.A. (i) 12,335 12,067 SC Rio Pasteur Empreendimens e Participações Ltda. 3,074 2,461 Top Center Empreendimens e Participações Ltda. 5,416 3,370 SC Rio CE Generali Empreendimens e Participações Ltda. 3, SC Rio Sul Empreendimens e Participações Ltda. 3, H.T.K.S.P.E. Empreendimens e Participações S.A. (i) 3,908 2,488 SC SP CE Aço Empreendimens e Participações Ltda. 2,554 2,842 Best Center Empreendimens e Participações S.A. 15,219 40,851 U.K.Q.S.P.E. Empreendimens e Participações Ltda. 2 2 C.L.D.S.P.E. Empreendimens e Participações Ltda. 1, SC Rio CE Candelária Empreendimens e Participações Ltda. 7 4,509 Total 72,542 95,782 (i) In noncurrent assets, R$72,542 (R$95,782 as at December 31, 2016), in, and R$16,254 (R$14,555 as at December 31, 2016), in consolidated noncurrent, refer dividends, advance for future capital increase, and interest on capital receivable from subsidiaries and joint ventures. Transactions are not subject fines and interest. Management compensation On April 28, 2017, the Annual Shareholders Meeting approved the Company s overall management compensation for 2017 in the amount of up R$22,887, of which R$5,959 refers the fees payable the Board of Direcrs and R$16,928 the fees payable the executive committee, including benefits and charges, and the fair value of options granted for the year. In the years ended June 30, 2017 and December 31, 2016, the following amounts were paid and accrued: Fixed Variable Total Fixed Variable Total Board of Direcrs ,691 1,819 1,875 3,694 Officers 2,492 2,234 4,726 4,529 5,313 9,842 Total 3,432 2,985 6,417 6,348 7,188 13,536 Key management personnel compensation is set by the Company s Board of Direcrs, which considers the individual performance and the market trends. 15

17 São Carlos Empreendimens e Participações S.A. 9. INVESTMENT PROPERTIES Annual depreciation rate - % Cost Accumulated depreciation Net Net Land 158, , ,912 Buildings From ,086 (30,468) 473, ,542 Facilities 10,00 183,233 (9,560) 173, ,971 Advance for construction ,281 Construction in progress Total 846,481 (40,028) 806, ,957 Annual depreciation rate - % Cost Accumulated depreciation Net Net Land 773, , ,148 Buildings From ,407,551 (185,176) 1,222,375 1,235,882 Facilities 10,00 563,926 (42,030) 521, ,898 Advance for construction 12,204-12,204 10,256 Construction in progress 23,990-23,990 30,461 Total 2,781,404 (227,206) 2,554,198 2,570,645 Variations are as follows: Additions Transfers Land 158, ,912 Buildings 504, ,086 Facilities 174,682 1,269 7, ,233 Advance for construction 7,281 - (7,281) - Construction in progress (1) ,212 1, ,481 Depreciation (33,255) (6,773) - (40,028) Total 811,957 (5,504) - 806, Additions Land 158, ,912 Buildings 504, ,016 Facilities 156, ,679 Advance for construction - 15,600 15,600 Construction in progress ,029 16, ,422 Accumulated depreciation (19,808) (6,684) (26,492) Total 800,221 9, ,930 16

18 São Carlos Empreendimens e Participações S.A Additions (i) Write-offs (iii) Transfers (ii) Land 777,148 1,086 (6,212) 1, ,733 Buildings 1,410,970 2,582 (11,268) 5,267 1,407,551 Facilities 552, (1,476) 12, ,926 Advance for construction 10,256 12,182 - (10,234) 12,204 Construction in progress 30,461 7,015 - (13,486) 23,990 2,781,563 23,060 (18,956) (4,263) 2,781,404 Depreciation (210,918) (20,215) 3,927 - (227,206) Balance 2,570,645 2,845 (15,029) (4,263) 2,554,198 (ii) The main transfers refer reclassifications from construction in progress properties available for sale. (iii) On May 29, 2017, subsidiary Top Center sold its tal ownership interest (approximately 57%) in Edifício Mykonos, in the amount of R$41.3 million, in cash. The gain on such transaction amounted R$25, Additions (i) Write-offs (ii) Transfers (iii) Land 815,198 - (4,003) - 811,195 Buildings 1,411, ,191 1,416,237 Facilities 509,148 1,445-17, ,081 Advance for construction - 15, ,600 Construction in progress 58,029 18,775 - (22,338) 54,466 2,793,383 35,858 (4,003) 341 2,825,579 Accumulated depreciation (185,448) (21,263) - - (206,711) Balance 2,607,935 14,595 (4,003) 341 2,618,868 (i) (ii) Construction in progress in SPOP X, Morumbi Park (e.g. Sul América), Candelaria, and some commercial centers and advance for improvements in EZ Towers project. On March 31, 2016, through the private real estate purchase and sale agreement, the Company sold the land located at Avenida Washingn Luiz - SP, at the amount of R$5,700, which was received as follows: i) R$500 in cash; ii) 20 interest-free installments of R$110; and iii) installment of R$3,000 payable within 15 days from the delivery of the real estate documentation. The gain on such transaction amounted R$1,472. The Company decided maintain its investment properties recorded at cost less accumulated depreciation since it understands it is the best information for companies operating in the real estate investment market rely on for rental purposes. 17

19 São Carlos Empreendimens e Participações S.A. Pursuant CPC 28, independent consultant CB Richard Ellis estimated the fair value of the Company s properties at R$4,344,586 in September 2016, determined using the valuation approach set forth by NBR of the Brazilian Technical Standards Association (ABNT) and the technical standards of The Royal Institution of Chartered Surveyors (RICIS) of the United Kingdom and the Appraisal Institute of the United States, which are internationally used and acknowledged for real estate appraisal and other analyses. The lease revenues and selling value in the 10th year are then adjusted present value at discount rates that are adequate the market s risk perception; accordingly, the present value of the cash flows reflects the selling value available for acquisition of the property from the invesr s standpoint. 10. BORROWINGS AND FINANCING Description of the property (collateral) (a) Currency Annual charges - % Final maturity Acquisition - Centro Empresarial Botafogo R$ CDI ,029 27,695 Acquisition - Edifício SPOP II and X (*) R$ IGP-M ,946 24,310 Acquisition - Borges Lagoa (*) R$ TR ,276 12,112 Acquisition - Edifício BST R$ TR ,859 21,219 Acquisition - Edifício Pasteur 110 R$ TR ,477 17,580 Acquisition - Edifício Eldorado R$ TR ,247 21,529 Acquisition - Edifício Eldorado R$ TR ,869 59,421 Acquisition - Edifício Centro Empresarial Guaíba R$ TR ,720 25,096 Acquisition - Edifício Visconde de Ouro Pre R$ TR ,011 8,484 Acquisition - Edifício Arcos da Lapa R$ TR ,928 8,132 Acquisition - Edifício Cidade Nova R$ TR ,746 43,940 Construction - Edifício Torre A EZ Towers R$ TR ,810 50,336 Acquisition - Edifício Torre A EZ Towers R$ TR , ,683 Total 821, ,537 Current 65,131 62,129 Noncurrent 756, ,408 Description of the property (collateral) (a) Currency Annual charges - % Final maturity Acquisition - Centro Empresarial Botafogo R$ CDI ,029 27,695 Acquisition - Edifício SPOP II and X (*) R$ IGP-M ,946 24,310 Acquisition - Borges Lagoa (*) R$ TR ,276 12,112 Acquisition - Edifício BST R$ TR ,859 21,219 Acquisition - Edifício Pasteur 110 R$ TR ,477 17,580 Acquisition - Edifício Eldorado R$ TR ,247 21,529 Acquisition - Edifício Eldorado R$ TR ,869 59,421 Acquisition - Edifício Centro Empresarial Guaíba R$ TR ,720 25,096 Acquisition - Edifício Visconde de Ouro Pre R$ TR ,011 8,484 Acquisition - Edifício Arcos da Lapa R$ TR ,928 8,132 Acquisition - Edifício CA Cidade Nova R$ TR ,746 43,940 Construction - Edifício Torre A EZ Towers R$ TR ,810 50,336 Acquisition - Edifício Torre A EZ Towers R$ TR , ,681 Acquisition - Edifício C.A. Rio Negro R$ TR ,896 16,577 Acquisition - Edifício Itaim Center R$ TR ,704 6,163 Acquisition- Edifício Mykonos R$ TR ,299 Acquisition - Edifício Corporate Plaza R$ TR ,052 12,880 Acquisition - Edifício Annio Carlos R$ TR ,679 4,938 Acquisition - Edifício BFC R$ TR ,664 52,623 Acquisition - Edifício Centro Adm. San Amaro - CASA R$ TR ,947 91,219 Acquisition - Edifício Sul América R$ TR ,030 81,842 Retrofit - Jardim Europa R$ TR ,929 26,929 Series 286 Debentures R$ IPCA ,268 4,859 Series 287 Debentures R$ IPCA ,883 38,796 Series 288 Debentures R$ IPCA ,660 10,161 Convenience retail center development R$ TR ,666 34,036 Convenience retail center development R$ TR ,991 70,637 Acquisition - Edifício Ciatec II R$ TR ,845 15,611 18

20 São Carlos Empreendimens e Participações S.A. Description of the property (collateral) (a) Currency Annual charges - % Final maturity Acquisition - Edifício CEA R$ TR , ,916 Acquisition - Edifício CE Urca R$ TR ,234 29,276 Retrofit - Cidade Nova R$ TR , ,548 Retrofit - Candelaria 62 R$ TR ,706 32,788 Acquisition - Edifício Souza Cruz R$ TR ,460 52,234 Total 1,595,449 1,658,867 Current 149, ,855 Noncurrent 1,445,890 1,516,012 TR - Reference Rate IGP-M - General Market Price Index IPCA Broad Consumer Price Index (a) Each loan is collateralized by the financed property or any other property pledged as collateral or properties sharing the collateral with other loans, except for Centro Empresarial Botafogo, the collateral of which is its mortgage. As at June 30, 2017, the breakdown of the noncurrent portion per year is as follows: Maturity year Beginning July 1 st 34,699 67,651 80, , ,014 73, , , ,391 77, , , ,350 84, , , ,020 78, , , ,218 50, , , ,259 51, , , ,784 48,578 83,109 82, ,618 52,396 69,497 69, ,753 50,539 61,551 61, ,271 55,037 55,271 55, ,190 59,936 60,190 59, ,555 37,397 37,555 37,397 The variations in consolidated borrowings are as follows: 756, ,408 1,445,890 1,516,012 Description Balance as at Interest and inflation adjustment Repayment of principal Interest and inflation adjustment payment Balance as at Borrowings 874,204 48,294 (21,089) (35,588) 865,821 Description Balance as at Interest and inflation adjustment Repayment of principal Interest and inflation adjustment payment Balance as at Borrowings 848,537 40,479 (35,479) (32,284) 821,253 19

21 São Carlos Empreendimens e Participações S.A. Description Balance as at Fund raising Interest and inflation adjustment Repayment of principal Interest and inflation adjustment payment Balance as at Borrowings 1,725,587 1, ,547 (54,334) (74,670) 1,698,991 Description Balance as at Fund raising Interest and inflation adjustment Repayment of principal Interest and inflation adjustment payment Balance as at Borrowings 1,658,867-84,119 (82,546) (64,991) 1,595,449 (*) These borrowings are subject the compliance with certain financial ratios, required on an annual basis, every December, taking in consideration the subsidiaries consolidated and/or individual operations, as follows: Net debt below 30% or 40% of the portfolio market value (consolidated); EBITDA/bank liability amortization ratio plus net finance costs below 1.3 times. 11. DEFERRED TAXES AND CONTRIBUTIONS Deferred taxes and contributions arise from temporary differences mainly due temporarily nondeductible provisions and/or straight-line revenue recognized in profit or loss, and are recorded in noncurrent liabilities. Deferred taxes and contributions reflect the future tax effects attributable temporary differences between the tax base of assets and liabilities and the respective book value. Reported amounts are monthly reviewed. Deferred taxes and contributions are broken down as follows: Temporary differences: PIS and COFINS - straight-line revenue ,829 2,940 IRPJ and CSLL - straight-line revenue ,482 5,421 Total ,311 8, PROVISION FOR RISKS AND ESCROW DEPOSITS The Company and its subsidiaries are parties tax lawsuits arising from the normal course of their activities. The provisions were recognized taking in account the in-house and outside legal counsel s opinion, the nature of the lawsuits, the similarity with prior proceedings, the complexity of the claims and the position of courts, whenever the loss is assessed as probable and the amount can be measured reliably. The Company s and its subsidiaries management understands that the provision is sufficient cover losses arising from the related lawsuits. 20

22 São Carlos Empreendimens e Participações S.A Income tax and social contribution 5,075 5,075 PIS/COFINS (taxes on revenue) (*) 9,202 8,955 Other Total 14,332 14,085 Escrow deposits (40) (40) Total 14,292 14, Income tax and social contribution 5,075 5,075 PIS/COFINS (taxes on revenue) (*) 9,202 8,955 Other Total 14,332 14,085 Escrow deposits (135) (124) Total 14,197 13,961 (*) The Company maintains a provision related the increase in the PIS and COFINS tax rates, with the purpose of maintaining the payment of such taxes in accordance with Regulary Instruction 468/04, which establishes that contracts involving assets entered in through Ocber 31, 2003, for a period in excess of one year, are taxed at the rate prevailing before such increase. Variations are as follows: and Opening balance 14,085 13,655 Write-offs - (160) Inflation adjustment Closing balance 14,332 14,085 As at June 30, 2017, the Company and its subsidiaries are parties tax lawsuits, in the amount of R$28,006 (R$6,837 as at December 31, 2016), civil lawsuits in the amount of R$558 (R$1,688 as at December 31, 2016) and labor lawsuits in the amount of R$100 as at December 31, 2016, whose likelihood of loss is assessed as possible by their internal and external legal counsel and for which no provision was recorded. Liabilities relating legal obligations being discussed in court are recognized until a final and unappealable favorable decision is issued. 13. PROFIT SHARING The Company has an employees' profit sharing program. This program s main calculation measures are the goals set based on the employees function, area and title, as established by Management, which are recorded in line item General and administrative expenses. In the six-month period ended June 30, 2017, the amount of R$1,434 (R$2,124 as at December 31, 2016) was recorded in line item Payroll and related taxes. 21

23 São Carlos Empreendimens e Participações S.A. 14. EQUITY Fully paid common shares As at June 30, 2017, capital amounts R$1,073,912 (R$673,912 as at December 31, 2016), represented by 57,737,319 registered common shares without par value. The Extraordinary Shareholders Meeting held on April 28, 2017 authorized the Company s capital increase in the amount of R$400,000, from R$673,912 R$1,073,912, through the capitalization of earnings reserve Treasury shares The Company intends use the proceeds from the sale of treasury shares discharge obligations related the sck option plan. As at June 30, 2017, the Company held in treasury 1,338,217 registered common shares (1,520,586 common shares as at December 31, 2016), acquired at the average cost of R$33.49 per share (R$33.92 per share as at December 31, 2016) Earnings reserve - legal Recognized in an amount corresponding 5% of profit for the year, pursuant Article 193 of Law 6404/76, up the limit of 20% of capital. 15. LEASE REVENUE Operating leases relate the investment properties owned by the Company and its subsidiaries with lease terms of between two ten years, with an option extend for equal period. All operating lease agreements contain market review clauses in the event that the Company exercises its option renew. The lessee does not have the option purchase the leased property after the lease term. As at June 30, 2017, the Company and its subsidiaries do not have any non-cancelable operating lease agreements since the lease agreements are based on the Tenant Act and can be canceled by the lessee or the Company and its subsidiaries at any time, provided that the contractual obligations are met. 16. NET REVENUE 04/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2016 Lease revenue 16,247 32,185 12,226 24,383 72, ,111 78, ,186 Revenue from sale of properties ,347 41, ,730 Taxes (1,255) (2,482) (891) (1,834) (4,489) (9,142) (4,782) (9,439) 14,992 29,703 11,335 22, , ,316 73, ,477 22

24 São Carlos Empreendimens e Participações S.A. 17. COSTS AND EXPENSES BY NATURE 04/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2016 Personnel expenses (7,014) (14,329) (6,389) (12,533) (8,537) (17,318) (7,929) (15,648) Outside services (457) (710) (432) (676) (689) (1,045) (518) (936) Depreciation and amortization expenses (3,503) (7,007) (3,457) (6,916) (10,580) (21,129) (11,081) (22,100) Cost of properties sold (15,581) (15,581) - (4,847) Selling expenses - Municipal Real Estate Tax (IPTU), common area maintenance and other fees related vacant areas (678) (1,352) (1,322) (2,548) (6,745) (13,921) (6,724) (13,383) Occupancy expenses (262) (531) (238) (482) (285) (580) (249) (520) Tax expenses (17) (33) (13) (28) (28) (46) (21) (41) Other (143) (397) (145) (253) (181) 1, (12,074) (24,359) (11,996) (23,436) (42,626) (68,311) (25,804) (56,861) 04/01/ /01/ /01/2016 6/30/ /01/ /01/ /01/ /01/ /01/2016 Classified as: Rental cost (3,503) (7,007) (3,457) (6,916) (10,580) (21,129) (11,081) (22,100) Cost of properties sold (15,581) (15,581) 9 (4,847) General and administrative expenses (7,893) (16,000) (7,217) (14,100) (9,832) (19,626) (8,958) (17,738) Selling expenses (678) (1,352) (1,322) (2,548) (6,745) (13,921) (6,724) (13,383) Other operating income, (expenses), net , ,207 (12,074) (24,359) (11,996) (23,436) (42,626) (68,311) (25,804) (56,861) 18. FINANCE INCOME 04/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2016 Interest gains Short-term investments 5,611 12,615 8,122 16,692 6,164 13,873 8,632 17,557 Trade receivables Adjustment of recoverable taxes Other (3) 3 5 (1) (7) 5,973 13,441 8,492 17,459 6,725 15,104 9,116 18, FINANCE COSTS 04/01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/2016 Interest and inflation adjustments on borrowings and financing (19,564) (41,119) (24,293) (48,443) (40,003) (83,875) (49,367) (99,652) Adjustments provision for tax risks (112) (246) (148) (295) (112) (246) (148) (295) Other finance costs (505) (1,290) (636) (1,081) (1,340) (2,940) (1,346) (2,560) (20,181) (42,655) (25,077) (49,819) (41,455) (87,061) (50,861) (102,507) 23