São Carlos Empreendimentos e Participações S.A. and Subsidiaries

Transcription

1 (Convenience Translation in English from the Original Previously Issued in Portuguese) São Carlos Empreendimens e Participações S.A. and Subsidiaries Interim Financial Statements for the Three-month Period Ended March 31, 2016 and Report on Review of Interim Financial Information Deloitte Touche Tohmatsu Audires Independentes

2 (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. ( Company ), included in the Quarterly Financial Information Form (ITR) for the quarter ended March 31, 2016, which comprises the balance sheet as at March 31, 2016, and the related income statement and statement of comprehensive income for the three-month period then ended, and the statement of changes in equity and statement of cash flows for the three-month period then ended, including the explanary notes. Management is responsible for the preparation of this 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 and Exchange 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 and Exchange Commission.

3 Deloitte Touche Tohmatsu Other matters Statements of value added We have also audited the individual and consolidated statements of value added (DVA) for the threemonth period ended March 31, 2016, prepared under the responsibility of the Company s management, the presentation of which is required by the standards issued by the Brazilian Securities and Exchange Commission (CVM) applicable the preparation of Interim Financial Information (ITR), and considered supplemental information by IFRS, which 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 individual and consolidated interim financial information taken as a whole. Other matters The accompanying interim financial information has been translated in English for the convenience of readers outside Brazil. São Paulo, May 05, 2016 DELOITTE TOUCHE TOHMATSU Audires Independentes Alexandre Cassini Decourt Engagement Partner c docx 2016 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 MARCH 31, 2016 (In thousands of Brazilian reais - R$) ASSETS Note LIABILITIES AND EQUITY Note CURRENT ASSETS CURRENT LIABILITIES Cash and cash equivalents Borrowings and financing Short-term investments Advances from cusmers Trade receivables Payroll and related taxes Due from related parties Provision for income tax and social contribution Recoverable taxes Taxes, fees and contributions Other receivables Dividends and interest on capital Properties for sale Payables for acquisition of properties Total current assets Other payables Total current liabilities NONCURRENT ASSETS Trade receivables NONCURRENT LIABILITIES Due from related parties Deferred taxes Escrow deposits Borrowings and financing Other receivables Provision for risks Investments in subsidiaries and joint ventures Total noncurrent liabilities Investment property Property, plant and equipment EQUITY Intangible assets Issued capital Total noncurrent assets Capital reserve Treasury shares 14.2 (63.940) (64.938) (63.940) (64.938) Earnings reserves Equity attributable the Company's owners Noncontrolling interests Total equity TOTAL ASSETS TOTAL LIABILITIES AND EQUITY The accompanying notes are an integral part of the interim financial statements. 3

5 (Convenience Translation in English from the Original Previously Issued in Portuguese) SÃO CARLOS EMPREENDIMENTOS E PARTICIPAÇÕES S.A. AND SUBSIDIARIES INTERIM STATEMENT OF PROFIT AND LOSS FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2016 (In thousands of Brazilian reais - R$, except earnings per share) Note GROSS OPERATING REVENUE Lease and management revenue Revenue from sale of properties Total gross operating revenue Taxes (3.264) (2.225) (22.317) (17.811) Net revenue from goods and services Net revenue from sale of properties Net sales revenue Cost of properties sold (4.856) (26.853) Lease costs 17 (3.459) (507) (11.019) (7.378) GROSS PROFIT OPERATING INCOME (EXPENSES) General and administrative 17 (6.883) (7.651) (8.780) (8.827) Selling expenses 17 (1.226) (166) (6.659) (4.448) Other operating income, net Share of profit of subsidiaries (514) (155) OPERATING PROFIT BEFORE FINANCE?INCOME?(COSTS) FINANCE INCOME (COSTS) Finance income Finance costs 19 (24.742) (10.042) (51.646) (33.678) INCOME (LOSS) BEFORE INCOME TAX AND SOCIAL CONTRIBUTION (829) INCOME TAX AND SOCIAL CONTRIBUTION Current (4.865) (8.629) Deferred (54) 135 PROFIT (LOSS) (660) (497) ATTRIBUTED TO Company's owners (660) Noncontrolling interests 163 (22) EARNINGS (LOSS) PER SHARE Basic (cents per share) 21.1 (0,012) 1,114 Diluted (cents per share) 21.2 (0,011) 1,096 The accompanying notes are an integral part of the interim financial statements. 4

6 (Convenience Translation in English from the Original Previously Issued in Portuguese) SÃO CARLOS EMPREENDIMENTOS E PARTICIPAÇÕES S.A. AND SUBSIDIARIES INTERIM STATEMENT OF COMPREHENSIVE INCOME FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2016 (In thousands of Brazilian reais - R$) PROFIT (LOSS) FOR THE PERIOD (660) (497) Other comprehensive income TOTAL COMPREHENSIVE INCOME (LOSS) (660) (497) ATTRIBUTABLE TO Company's owners (660) Noncontrolling interests 163 (22) The accompanying notes are an integral part of the interim financial statements. 5

7 (Convenience Translation in English from the Original Previously Issued in Portuguese) SÃO CARLOS EMPREENDIMENTOS E PARTICIPAÇÕES S.A. AND SUBSIDIARIES STATEMENT OF CHANGES IN EQUITY FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2016 (In thousands of Brazilian reais - R$) Attributable the Company's owners Treasury shares Earnings reserves Share Loss on sale of Treasury Sck Earnings Retained Retained earnings Noncontrolling Total Note capital treasury shares shares option plan Legal retention earnings (accumulated losses) Total interests equity BALANCE AS AT DECEMBER 31, (9.134) (48.739) Recognition of sck option plan - (792) Income on the sale of shares Acquisition of treasury shares - - (6.453) (6.453) - (6.453) Subscription by noncontrolling interests (44) (44) Profit for the period (660) (22) BALANCE AS AT MARCH 31, (9.926) (51.078) (660) BALANCE AS AT DECEMBER 31, (9.925) (55.013) Recognition of sck option plan Sale of treasury shares Acquisition of treasury shares - - (158) (158) - (158) Acquisition of noncontrolling interests Loss for the period (660) (660) (660) 163 (497) BALANCE AS AT MARCH 31, (8.769) (55.171) (660) (660) The accompanying notes are an integral part of the interim financial statements. 6

8 (Convenience Translation in English from the Original Previously Issued in Portuguese) SÃO CARLOS EMPREENDIMENTOS E PARTICIPAÇÕES S.A. AND SUBSIDIARIES INTERIM STATEMENT OF CASH FLOWS FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2016 (In thousands of Brazilian reais - R$) CASH FLOW FROM OPERATING ACTIVITIES Profit (loss) for the period (660) (497) Adjustments reconcile net profit (loss) the net cash provided by (used in) operating activities: Allowance for doubtful debts Depreciation and amortization Share of profit (loss) of subsidiaries (15.172) (63.357) Recognition of sck option plan Gain on the sale of investments and assets held for sale - - (857) (41.788) Interest on securities (1.395) - (1.418) - Adjustment of provision for tax risks Income tax and social contribution Noncontrolling interests Finance charges of borrowings and financing Cash provided by operations Changes in operating assets: Trade receivables (3.650) (5.168) (8.179) (15.343) Related parties Escrow deposits Recoverable taxes (1.141) (874) (902) 879 Properties held for sale Other receivables (1.201) (639) (1.951) Changes in operating liabilities: Payroll and related taxes (1.792) (4.910) (1.844) (5.492) Taxes and contributions (133) 294 (504) 56 Payables due acquisition of properties Deferred taxes (9) Advances from cusmers - - (3.306) - Other payables Income tax and social contribution - - (4.366) (9.233) Interest and inflation adjustment (21.835) - (47.332) - Changes in assets and liabilities (25.597) (8.168) (62.768) (3.991) Cash provided by (used in) operating activities CASH FLOW FROM INVESTING ACTIVITIES Related parties (700) (670) Dividends received Short-term investments (1.123) (1.123) Advance for future capital increase (20.318) (4.151) - (4.151) Receivables due sale of properties Capital increase in subsidiaries (70) Capital reduction in subsidiaries Acquisition of investment properties, property, plant and equipment and intangible assets (16.392) (53.450) (23.824) (74.343) Net cash provided by (used in) investing activities (11.349) (42.065) CASH FLOW FROM FINANCING ACTIVITIES Receivables due sale of properties (33.960) Payment of principal - borrowings (6.426) (17.768) (16.904) (47.491) Borrowings Sale of shares Share buyback (158) (6.453) (158) (6.453) Net cash used in financing activities (5.174) (20.899) (13.791) (54.027) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (17.886) (21.962) (27.101) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD CASH AND CASH EQUIVALENTS AT END OF PERIOD INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (17.886) (21.962) (27.101) The accompanying notes are an integral part of the interim financial statements. 7

9 (Convenience Translation in English from the Original Previously Issued in Portuguese) SÃO CARLOS EMPREENDIMENTOS E PARTICIPAÇÕES S.A. AND SUBSIDIARIES INTERIM STATEMENT OF VALUE ADDED FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2016 (In thousands of Brazilian reais - R$) REVENUE Lease revenue Revenue from sale of properties INPUTS PURCHASED FROM THIRD PARTIES Cost of properties sold - - (4.856) (26.853) Supplies, power, outside services and other (1.950) (989) (7.702) (5.602) (1.950) (989) (12.558) (32.455) GROSS VALUE ADDED WITHHOLDINGS Depreciation and amortization (3.459) (507) (11.019) (7.378) WEALTH CREATED WEALTH RECEIVED IN TRANSFER Share of profit of investees (514) (155) Finance income (including exchange gains) Other income Noncontrolling interests - - (163) Total wealth for distribution WEALTH DISTRIBUTED Employees and payroll taxes Taxes, fees and contributions Interest and inflation adjustments Other Retained earnings (accumulated losses) (660) (660) WEALTH DISTRIBUTED The accompanying notes are an integral part of the interim financial statements. 8

10 (Convenience Translation in English from the Original Previously Issued in Portuguese) SÃO CARLOS EMPREENDIMENTOS E PARTICIPAÇÕES S.A. AND SUBSIDIARIES. NOTES TO THE INTERIM FINANCIAL INFORMATION FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2016 (Amounts in thousands of Brazilian reais - R$, unless otherwise stated) 1. GENERAL INFORMATION São Carlos Empreendimens e Participações S.A. ( Company ) is a publicly-held company, with registered office at Rua Dr. Eduardo de Souza Aranha, 153, 12º andar, Vila Nova Conceição - São Paulo, SP, Brazil. The Company currently has a portfolio that includes office buildings and retails projects located mainly in the States of Sa o Paulo and Rio de Janeiro. The Company has been operating in this market since 1999 and in December 2006 it joined the Novo Mercado corporate governance listing segment of the Sa o Paulo Commodities, Futures and Sck Exchange (BM&FBOVESPA), where it is listed under the ticker symbol SCAR 3. The Company is engaged in the following operations: a) The management of own or third-party real estate projects, including shopping malls. b) The purchase and sale of completed or under construction residential and office properties, land or undivided interests in the properties. c) Property leasing. d) The operation of short-term parking lots. e) Any business related its core business. f) Holding interests in other entities. The Company s subsidiaries are engaged in several core businesses, including investments in and management of single- or multi-tenant commercial real estate projects, mainly in the states of Sa o Paulo and Rio de Janeiro, real estate development projects, purchase and sale of properties, and real estate brokerage services. This individual and consolidated interim financial information is presented in Brazilian reais (R$), which is the Company's functional and presentation currency in Brazil. This individual and consolidated interim financial information was approved by the Company s Board of Direcrs and authorized for issue on May 4, 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 ( IFRS ) issued by the International Accounting Standards Board ( IASB ), and accounting practices adopted in Brazil, as set out in CPC 26 (R1) - Presentation of Financial Statements, identified as. 9

11 São Carlos Empreendimens e Participações S.A. The accounting practices adopted in Brazil comprise the policies set out in Brazilian Corporate Law and the pronouncements, guidelines, and interpretations issued by the Accounting Pronouncements Committee ( CPC ), approved by the Federal Accounting Council ( CFC ) and the Brazilian Securities and Exchange Commission ( CVM ). 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, 2015 (hereinafter referred as Financial Statements for the year ended December 31, 2015 ), published on March 10, 2016 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 a) The following new and revised International Financial Reporting Standards (IFRSs), effective for annual periods beginning on or after January 1, 2016, have been adopted in the interim financial information. The adoption of these new and revised IFRSs did not have any significant impacts on the amounts reported and/or disclosed for the current and prior years: Amendments IAS 1/CPC 26 (R1) - Presentation of Financial Statements. Amendments IFRS 11/CPC 19 (R2) - Joint Arrangements. Amendments IAS 16/CPC 27 and IAS 38/CPC 04 (R1) - Clarification of Acceptable Methods of Depreciation and Amortization. Amendments IAS 16/CPC 27 and IAS 41/CPC 29 - Agriculture: Bearer Plants. b) New standards and interpretations not yet adopted Amendments IFRSs Annual improvements IFRSs: Cycle (1) IFRS 15 Revenue from Contracts with Cusmers (2) IFRS 9 Financial Instruments (2) (1) Effective for annual periods beginning on or after July 1, (2) Effective for annual periods beginning on or after January 1, The standards and interpretations effective for annual periods beginning January 1, 2016 did not significantly impact the amounts reported in the current and prior three-month periods. 10

12 São Carlos Empreendimens e Participações S.A 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 CASH AND CASH EQUIVALENTS For the purposes of the statement of cash flows, line item Cash and cash equivalents includes cash, banks and money market investments, as follows: Cash Banks Short-term investments (*): Repurchase agreements 122, , , ,257 Savings account and other , , , ,107 (*) 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 100% of the Interbank Certificate of Deposit rate (CDI). The repurchase agreements are mainly comprised of investments in Banco do Brasil, 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 114, , , ,113 Refer financial bills issued by prime banks that are not highly liquid and whose redemption before maturity date depends on the secondary market. 11

13 São Carlos Empreendimens e Participações S.A. 5. TRADE AND OTHER RECEIVABLES Trade receivables 19,760 16,317 90,309 87,821 Allowance for doubtful debts (922) (922) (1,098) (1,098) Receivables from the sale of equity interests and disposal of real estate projects , Common area maintenance fees and other 1,775 1,568 8,687 8,196 Total 21,535 17, ,020 95,841 Current 4,881 4,450 36,717 26,921 Noncurrent (i) 16,654 13,435 67,303 68,920 (i) Straight-line revenue performed after 12 months. Trade receivables Outstanding balance of trade receivables are subject interest of 1%. 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. The aging list of trade receivables is as follows: Past-due: days days days days Over 180 days , ,040 2,286 Current 22,435 17, ,078 94,653 Total trade receivables 22,457 18, ,118 96,939 Changes in allowance for doubtful debts Opening balance (922) - (1,098) (120) Recognition of allowance - (922) - (978) Closing balance (922) (922) (1,098) (1,098) 12

14 São Carlos Empreendimens e Participações S.A. 6. RECOVERABLE TAXES Recoverable income tax 10,527 8,298 13,130 9,505 Income tax on short-term investments 7,778 8,202 7,976 9,916 Social contribution (CSLL) 1,637 2,190 1,837 2,407 Recoverable taxes on revenue (PIS and COFINS) 1,920 2,029 2,579 2,790 Other Total 21,958 20,817 25,639 24,737 13

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16 São Carlos Empreendimens e Participações S.A. 7. INVESTMENTS IN SUBSIDIARIES AND JOINT VENTURES Subsidiaries Assets Liabilities Capital Equity Interest % Profit (loss) for the year Balance as at Others Share of profit (loss) of subsidiaries Dividends - Interest on capital Balance as at Participações Ltda. 90,239 10,074 32,000 80, ,785 74,380-5,785-80,165 SC Correra de Imóveis Ltda (3) (2) (2) Top Center Empreendimens e Participações Ltda. 501, , , , (56) 144,123 - (56) - 144,067 Globaltech Empreendimens e Participações Ltda. 23,744 18,784 5,872 4, , ,976 H.T.Y.S.P.E. Empreendimens e Participações Ltda. 77,499 4,899 55,084 72, ,202 68,398-4,202-72,600 SC Rio Sul Empreendimens e Participações Ltda. 119,198 4, , , , ,684-8,470 (4,500) 114,654 SC Rio CE Generali Empreendimens e Participações Ltda. 90,089 3,992 84,500 86, , (1,000) 86,098 SC Rio CE Candelária Empreendimens e Participações Ltda. 70,716 37,690 34,134 33, , ,027 SC Rio Cidade Nova Empreendimens e Participações Ltda. 237, , , , (260) 114,112 - (260) - 113,852 SC Rio Pasteur Empreendimens e Participações Ltda. 47,480 31,801 11,220 15, , (800) 15,678 SC SP CE Aço Empreendimens e Participações Ltda. 192, ,965 61,239 65, , (2,400) 65,626 Best Center Empreendimens e Participações SA. 397, , , , (5,928) 207, (5,928) - 201,173 U.K.Q.S.P.E. Empreendimens e Participações Ltda (4) (4) (4) C.L.D.S.P.E. Empreendimens e Participações Ltda. 80,348 53,632 26,253 26, , ,716 D.J.L.S.P.E. Empreendimens e Participações Ltda Total 949, ,686 (8,700) 956,626 Joint ventures H.T.K.S.P.E. Empreendimens e Participações S.A. 50,123 40,230 8,315 9, (315) 5,104 - (157) - 4,947 Longford Participações e Empreendimens S.A. 58,877 42,224 22,972 16, (711) 8,682 - (357) - 8,325 Total 963, ,172 (8,700) 969,898 HTKSPE Empreendimens e Participações S.A. and Longford Participações e Empreendimens S.A. were not consolidated because the Company does not have control over such investments and reported an investment balance of R$ 13,272 as at March 31, 2016 (R$13,786 as at December 31, 2015). 15

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18 São Carlos Empreendimens e Participações S.A. 8. RELATED-PARTY BALANCES AND TRANSACTIONS Transactions are broken down as follows: Income from interest on capital Balances Noncurrent assets Subsidiary/associate Globaltech Empreendimens e Participações Ltda ,075 1,075 H.T.Y.S.P.E. Empreendimens e Participações Ltda ,574 9,168 SC Rio Cidade Nova Empreendimens e Participações Ltda ,881 7, Participações Ltda ,537 13,986 Longford Participações e Empreendimens S.A SC Rio Pasteur Empreendimens e Participações Ltda Top Center Empreendimens e Participações Ltda. - 8,050 36,702 30,673 SC Rio CE Generali Empreendimens e Participações Ltda ,479 3,215 SC Rio Sul Empreendimens e Participações Ltda ,097 7,818 H.T.K.S.P.E. Empreendimens e Participações S.A ,504 2,354 SC SP CE Aço Empreendimens e Participações Ltda , Best Center Empreendimens e Participações S.A ,076 12,847 SC Correra de Imóveis Ltda (1) U.K.Q.S.P.E. Empreendimens e Participações Ltda C.L.D.S.P.E. Empreendimens e Participações Ltda SC Rio CE Candelária Empreendimens e Participações Ltda ,740 1,737 Total - 8,050 99,441 92,799 In noncurrent assets, R$99,441,, and R$2,224, in, refers dividends, advance for future capital increase and interest on capital receivable from subsidiaries and joint ventures. Management compensation On April 29, 2016, the Annual Shareholders Meeting approved the Company s overall management compensation for 2016 in the amount of up R$19,303, of which R$4,909 refers the fees payable the Board of Direcrs and R$14,394 the fees payable the Executive Board, including benefits and charges, and the fair value of options granted for the year. In the three-month period ended March 31, 2016 and in the year ended December 31, 2015, the following amounts were paid and accrued: Fixed Variable Total Fixed Variable Total Board of Direcrs , ,141 Officers 1,061 1,117 2,178 4,536 1,985 6,521 Total 1,471 1,458 2,929 6,221 2,441 8,662 Management compensation is set by the Company s Board of Direcrs, which considers the individual performance and market trends. 17

19 São Carlos Empreendimens e Participações S.A. 9. INVESTMENT PROPERTIES Annual depreciation rate - % Cost Accumulated depreciation Net Net Land 158, , ,912 Buildings From ,016 (17,849) 486, ,718 Facilities ,246 (5,300) 151, ,399 Construction in progress Advance for construction , , Total 836,346 (23,149) 813, ,221 Annual depreciation rate - % Cost Accumulated depreciation Net Net Land 811, , ,198 Buildings From ,412,379 (167,469) 1,244,910 1,251,290 Facilities and improvements ,941 (28,579) 483, ,417 Advance for construction 16,157-16,157 - Construction in progress 65,456-65,456 58,030 2,817,128 (196,048) 2,621,080 2,607,935 Movements are as follows: Additions Land 158, ,912 Buildings 504, ,016 Facilities and improvements 156, ,246 Advance for construction - 15,957 15,957 Construction in progress ,029 16, ,346 Accumulated depreciation (19.808) (3.341) (23.149) Total ( ) Additions (i) Derecognition (ii) Transfers (iii) Land 815,198 - (4,003) - 811,195 Buildings 1,411, ,354 1,412,379 Facilities and improvements 509,148 1,751-1, ,941 Advance for construction - 16, ,157 Construction in progress 58,029 9,331 - (1,904) 65,456 2,793,383 27,256 (4,003) 492 2,817,128 Accumulated depreciation (185,448) (10,600) - - (196,048) Total 2,607,935 16,656 (4,003) 492 2,621,080 18

20 São Carlos Empreendimens e Participações S.A. (i) (ii) Construction in progress in SPOP X, Morumbi Park (ex Sul America) and Candelaria projects and some commercial centers, and advance for improvements in EZ Towers project. As at March 31, 2016, under the real estate purchase and sale agreement, the Company sold the land plot located at Avenida Washingn Luiz - SP, in the amount of R$5,700, as follows: (i) R$500 payable in cash; (ii) 20 interest-free installments of R$110, maturing beginning April 30, 2016; and (iii) installment of R$3,000 payable within 15 days from the delivery of the documents listed in clause III of the agreement. The gain on such transaction amounted R$1,472. (iii) Transfers of the investments in Candelária, Urca, Passeio and Centro Empresarial Botafogo projects. The Company decided maintain its investment properties recorded at cost value less accumulated depreciation since it understands it is the best information for companies operating in the real estate market rely on for rental purposes. Pursuant CPC 28, independent consultant CB Richard Ellis estimated the fair value of the Company s properties at R$ 4,277,090 in September 2015, 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 10 th 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 - % Balances Final maturity Acquisition - Centro Empresarial Botafogo R$ CDI ,877 27,888 Acquisition - Edifício SPOP II e X R$ IGP-M ,910 25,944 Acquisition - Borges Lagoa R$ TR ,160 13,487 Acquisition - Edifício BST R$ TR ,914 23,446 Acquisition - Edifício Pasteur 110 R$ TR ,946 19,377 Acquisition - Edifício Eldorado R$ TR ,118 23,615 Acquisition - Edifício Eldorado R$ TR ,825 65,253 Acquisition - Edifício Centro Empresarial Guaíba R$ TR ,803 27,341 Acquisition - Edifício Visconde de Ouro Pre R$ TR ,079 9,267 Acquisition - Edifício Arcos da Lapa R$ TR ,834 10,375 Acquisition - Edifício Cidade Nova R$ TR ,146 45,547 Construction - Edifício Torre A EZ Towers R$ TR ,805 56,123 Acquisition - Edifício Torre A EZ Towers R$ TR , ,541 Total 870, ,204 Current 47,221 42,696 Noncurrent 822, ,508 19

21 São Carlos Empreendimens e Participações S.A. Annual Final Carrying amount Market value Description of the property (collateral) (a) Currency charges - % maturity Acquisition - Centro Empresarial Botafogo R$ CDI ,877 27,888 28,281 27,513 Acquisition - Edifício SPOP II e X R$ IGP-M ,910 25,944 28,596 30,379 Acquisition - Borges Lagoa R$ TR ,160 13,487 10,066 10,203 Acquisition - Edifício BST R$ TR ,914 23,446 16,961 17,152 Acquisition - Edifício Pasteur 110 R$ TR ,946 19,377 13,988 14,139 Acquisition - Edifício Eldorado R$ TR ,118 23,615 17,119 17,291 Acquisition - Edifício Eldorado R$ TR ,825 65,253 47,353 47,875 Acquisition - Edifício Centro Empresarial Guaíba R$ TR ,803 27,341 19,715 19,889 Acquisition - Edifício Visconde de Ouro Pre R$ TR ,02,23 9,079 9,267 6,636 6,697 Acquisition - Edifício Arcos da Lapa R$ TR ,834 10,375 8,288 8,642 Acquisition - Edifício CA Cidade Nova R$ TR ,146 45,547 27,377 27,299 Construction - Edifício Torre A EZ Towers R$ TR ,805 56,123 37,091 37,558 Acquisition - Edifício Torre A EZ Towers R$ TR , , , ,419 Acquisition - Edifício C.A. Rio Negro R$ TR ,711 19,376 15,220 15,588 Acquisition - Edifício Itaim Center R$ TR ,746 6,927 5,466 5,553 Acquisition - Edifício Mykonos R$ TR ,800 6,960 5,043 5,100 Acquisition - Edifício Corporate Plaza R$ TR ,914 14,240 10,290 10,408 Acquisition - Edifício Annio Carlos R$ TR ,250 5,346 3,861 3,889 Acquisition - Edifício BFC R$ TR ,205 57,335 43,189 43,572 Acquisition - Edifício Centro Adm. San Amaro - CASA R$ TR ,543 94,371 70,957 70,838 Acquisition - Edifício Sul América R$ TR ,968 85,649 55,109 54,903 Retrofit - Edifício Jardim Europa R$ TR ,635 30,538 20,442 20,796 Debentures Série 286 R$ IPCA ,648 5,786 5,239 5,443 Debentures Série 287 R$ IPCA ,086 41,020 34,584 37,221 Debentures Série 288 R$ IPCA ,760 10,743 9,202 9,908 Commercial center development R$ TR ,041 37,940 25,074 25,390 Commercial center development R$ TR ,996 71,121 41,273 40,948 Acquisition - Edifício Ciatec II R$ TR ,513 16,806 12,012 12,095 Acquisition - Edifício CEA R$ TR , ,590 82,358 82,021 Acquisition - Edifício CE Urca R$ TR ,458 30,847 19,858 19,876 Retrofit - Edifício Cidade Nova R$ TR , ,032 73,196 73,089 Retrofit - Edifício Candelaria 62 R$ TR ,630 34,674 23,831 22,903 Acquisition - Edifício Souza Cruz R$ TR ,132 52,082 31,991 31,603 Total 1,714,066 1,725,587 1,092,373 1,094,200 Current 120, ,906 77,041 72,228 Noncurrent 1,593,179 1,611,681 1,015,332 1,021,972 TR - Reference Rate IGP-M - General Market Price Index IPCA: Extended 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. 20

22 São Carlos Empreendimens e Participações S.A. As at March 31, 2016, the breakdown of the noncurrent portion per year is as follows: Maturity year ,907 60, , , ,987 65, , , ,921 71, , , ,166 74, , , ,980 81, , , ,819 76, , , ,264 49, , , ,125 50, , , ,229 47,320 80,028 79, ,935 51,037 66,943 66, ,052 49,191 59,341 59, ,417 53,569 53,417 53, ,172 58,337 58,172 58, ,002 41,748 47,003 41, , ,508 1,593,179 1,611,681 Movements in consolidated loans are as follows: Description Balance as at Interest and inflation adjustment Repayment of principal Interest and inflation adjustment paid Balance as at Loans 874,204 24,254 (6,426) (21,835) 870,197 Description Balance as at Additions Interest and inflation adjustment Repayment of principal Interest and inflation adjustment paid Balance as at Loans 1,725,587 1,861 50,854 (16,904) (47,332) 1,714, DEFERRED TAXES AND CONTRIBUTIONS Deferred income tax and social contribution 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 income tax and social contribution 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. 21

23 São Carlos Empreendimens e Participações S.A. 22

24 São Carlos Empreendimens e Participações S.A. Deferred income tax and social contribution are as follows: Temporary differences: PIS and COFINS - straight-line revenue ,834 2,815 IRPJ and CSLL - straight-line revenue ,233 5,180 Total ,067 7, PROVISION FOR RISKS AND ESCROW DEPOSITS The Company and its subsidiaries are parties tax lawsuits arising from the normal course of business. The provisions were recognized taking in account the opinion of in-house and outside legal counsel, 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 Income tax and social contribution 5,180 5,075 PIS/COFINS (taxes on revenue) (*) 8,407 8,366 Other ,803 13,655 Total (24) (24) Escrow deposits 13,778 13, Income tax and social contribution 5,180 5,075 PIS/COFINS (taxes on revenue) (*) 8,407 8,366 Other ,803 13,655 Total (91) (90) Escrow deposits 13,711 13,565 23

25 São Carlos Empreendimens e Participações S.A. (*) 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. Movements were as follows: and Opening balance 13,655 13,271 Payments and reversals - - Inflation adjustment Recognitions - - Closing balance 13,803 13,396 As at March 31, 2016, the Company and its subsidiaries are parties tax lawsuits, in the amount of R$6,833 (R$10,560 as at December 31, 2015), civil lawsuits in the amount of R$397 and labor lawsuits in the amount of R$793, whose likelihood of loss is assessed as possible by its 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 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 three-month period ended March 31, 2016, the amount of R$740 was recorded in line item Payroll and related taxes. 14. EQUITY Fully paid ordinary shares As at March 31, 2016 and December 31, 2015, capital amounts R$673,912, represented by 57,737,319 registered common shares, without par value Treasury shares The Company intends use the proceeds from the sale of treasury shares discharge obligations related the sck option plan. As at March 31, 2016, the Company held in treasury 1,530,202 registered common shares (1,616,396 common shares as at December 31, 2015), acquired at the average cost of R$33.98 per share (R$34.03 per share as at December 31, 2015). 24

26 São Carlos Empreendimens e Participações S.A. 15. REVENUE FROM RENTAL 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 March 31, 2016, 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 01/01/ /31/ /01/ /31/ /01/ /31/ /01/ /31/2015 Lease and management revenue 12,157 10,564 77,079 77,886 Revenue from sale of properties - - 5,713 68,641 Taxes (943) (983) (4,657) (7,361) 11,214 9,581 78, , INCOME (EXPENSES) BY NATURE 01/01/ /31/ /01/ /31/ /01/ /31/ /01/ /31/2015 Personnel expenses (6,144) (6,812) (7,719) (7,647) Outside services (244) (331) (418) (565) Depreciation and amortization (3,459) (507) (11,019) (7,378) Cost of properties sold - - (4,856) (26,853) Selling expenses - Municipal Real Estate Tax (IPTU), common area maintenance fees, among others related vacant areas (1,226) (166) (6,659) (4,448) Occupancy expenses (244) (252) (271) (271) Taxes (15) (16) (20) (28) Other (108) (205) (87) 2,782 (11,440) (8,289) (31,049) (44,408) 25

27 São Carlos Empreendimens e Participações S.A. 01/01/ /31/ /01/ /31/ /01/ /31/ /01/ /31/2015 Classified as: Rental cost (3,459) (507) (11,019) (7,378) Cost of properties sold - - (4,856) (26,853) General and administrative expenses (6,883) (7,651) (8,780) (8,827) Selling expenses (1,226) (166) (6,659) (4,448) Other operating income, net ,098 (11,440) (8,289) (31,057) (44,408) 18. FINANCE INCOME 01/01/ /31/ /01/ /31/ /01/ /31/ /01/ /31/2015 Interest income: Short-term investments 8,570 7,843 8,925 9,848 Trade receivables Adjustment of recoverable taxes ,967 8,134 9,504 10, FINANCE COSTS 01/01/ /31/ /01/ /31/ /01/ /31/ /01/ /31/2015 Interest and inflation adjustments on borrowings and financing (24,254) (9,651) (50,854) (32,820) Adjustments provision for tax risks (147) (124) (147) (124) Other finance costs (341) (267) (645) (734) (24,742) (10,042) (51,646) (33,678) 26

28 São Carlos Empreendimens e Participações S.A. 20. INCOME TAX AND SOCIAL CONTRIBUTION Breakdown of IRPJ and CSLL expenses - current and deferred 01/01/ /31/ /01/ /31/ /01/ /31/ /01/ /31/2015 Current expenses: Social contribution 3 - (1,364) (2,484) Income tax (172) - (3,501) (6,145) (169) - (4,865) (8,629) Deferred expenses: Social contribution - - (19) 33 Income tax - - (35) (54) 135 (169) - (4,919) (8,494) Reconciliation of IRPJ and CSLL expenses - current and deferred IRPJ and CSLL expenses are reconciled at statury rates as follows: 01/01/ /31/ /01/ /31/ /01/ /31/ /01/ /31/2015 Income (loss) before income tax and social contribution (829) 62,741 4,422 71,233 Estimated IRPJ and CSLL expenses at statury rates - 34% 282 (21,332) (1,503) (24,219) Effect on other permanent additions and deductions, mainly share of profit (loss) of investees 5,016 21,541 (232) 643 Effect on interest on capital Effect of companies under the deemed income regime - - 4,546 16,622 Unused losses (5,097) (154) (7,708) (2,201) Other (32) (55) (22) (4,919) (8,494) Deferred tax credits - not recorded Deferred tax credits not recorded by the as at March 31, 2016 amount R$13,841 (R$10,402 as at March 31, 2015), comprised of R$10,177 (R$7,649 as at March 31, 2015) for IRPJ and R$3,664 (R$2,753 as at March 31, 2015) for CSLL, represented by tax losses and temporary differences. The amount is recorded upon compliance with all assumptions by the Company for recognition of such tax credits. 27

29 São Carlos Empreendimens e Participações S.A. 21. (LOSS) EARNINGS PER SHARE Basic (loss) earnings per share The earnings (loss) and weighted average number of common shares used in the calculation of basic earnings (loss) per share are as follows: Profit (loss) attributable the Company s owners (660) 62,741 Weighted average number of common shares used calculate basic earnings (loss) per share (all measurements) 56,150 56,318 Basic earnings (loss) per share (cents per share) (0.012) Diluted (loss) earnings per share The earnings (loss) used in the calculation of all diluted earnings (loss) per share measures are the same as those for the equivalent basic earnings (loss) per share measures, as outlined above. The weighted average number of common shares used calculate diluted earnings (loss) per share is reconciled with the weighted average number of common shares used calculate basic earnings (loss) per share, as follows: Profit (loss) attributable the Company s owners (660) 62,741 Weighted average number of common shares used calculate basic earnings (loss) per share 56,150 56,318 Effect of employees options 1, Weighted average number of common shares used calculate basic earnings (loss) per share (all measurements) 57,807 57,252 Diluted earnings (loss) per share (cents per share) (0.011) FINANCIAL INSTRUMENTS General considerations The Company and its subsidiaries enter in transactions involving financial instruments, all recorded in balance sheet accounts, which are intended meet their cash requirements and reduce exposure market and interest rate risks. Short-term investments are made based on agreed yield rates. Borrowings and financing are recorded based on the contractual interest of each transaction, as shown in Note

30 São Carlos Empreendimens e Participações S.A Capital risk management The Company manages its capital ensure that its subsidiaries can continue as going concerns, while it maximizes the return of all stakeholders by optimizing the balance of debt and equity. The Company s capital structure consists of borrowings and financing, including the borrowings reported in note 10, cash and cash equivalents, short-term investments and equity attributable owners, including issued capital and reserves Categories of financial instruments Loans and receivables Trade receivables 21,535 17,885 Cash and cash equivalents 122, ,505 Short-term investments 114, , , ,034 Financial liabilities measured at amortized cost Borrowings and financing 870, , , , Loans and receivables: Trade receivables 104,020 95,841 Cash and cash equivalents 125, ,107 Short-term investments 122, , , ,061 Financial liabilities measured at amortized cost: Borrowings and financing 1,714,066 1,725,587 Payables for acquisition of real estate 10,002 10,002 1,724,068 1,735, Financial risk management Management monirs and manages financial risks inherent in operations and coordinates the access local financial markets. These risks comprise market risk (changes in interest rates), credit risk and liquidity risk. The main purpose of the financial risk management strategy is maintain the Company s exposure these risks at minimum levels by using non-derivative financial instruments and assessing and controlling credit and liquidity risks. 29

31 São Carlos Empreendimens e Participações S.A Foreign currency risk management The Company and its subsidiaries are not exposed foreign currency risk. The financing strategy is based on domestic borrowings, denominated in Brazilian reais Exposure interest rate risks The Company is exposed floating interest rates, related primarily the fluctuations in TR, IGP-M, IPCA and CDI. As at March 31, 2016 and December 31, 2015, there are no contracts in effect related transactions with derivatives and hedge transactions in the Company. Interest rates on short-term investments are mostly related the variation of the CDI and SELIC rates, under conditions, rates and terms comparable similar transactions carried out in the market Market risk management The results of the operations depend on the Company s ability lease the spaces available in the real estate developments. Adverse conditions in the regions where the Company operates may reduce the lease levels, as well as restrict the possibility of increasing the rental price. The most important facrs that may adversely affect the operating performance of the Company s developments are: Periods of recession and an increase in vacancy levels of the developments or an increase in interest rates that may result in the reduction of the rental prices or an increase in tenants default rate. Tenants negative perception of the safety, convenience or attractiveness of the areas in which the developments are located. Inability attract and/or maintain premium tenants. Default and/or noncompliance with contractual obligations by tenants. Increases in the operating costs, including the need make additional capital contributions, among others. Increases in taxes related Company activities. Regulary changes in the real estate industry. The construction of new commercial real estate developments close the developments may hamper the Company s ability renew the rentals or rent them new tenants, which in turn could require nonbudgeted investments, impairing the Company s business. In order mitigate these risk facrs, the Company, with the assistance of outside consultants, continuously monirs the real estate market in the regions where the Company operated follow up the evolution of rental prices and vacancy rates. This way, the Company may anticipate possible market difficulties. 30