Financial Statements - Company and Consolidated BR Malls Participações S.A.

Transcription

1 Management Comments Despite the challenging macroeconomic scenario in 2014, we managed to end the year in line with our expectations. The World Cup event holidays on the second and third quarter, as well as the economic slowdown on the fourth quarter directly impacted our operational results. In spite of the negative factors, our tenants performed as expected achieving same store sales (SSS) of 6.5% on the fourth quarter and FY14. If we exclude the effects of the assets divested in 2014, our total sales reached a solid 8.8% growth on the quarter and 10.2% in We also maintained the efficiency of our assets reaching a NOI/m² of R$131.5, our highest level ever recorded. By maintaining focus in our tenants financial health as well as the efficiency of our common costs, we recorded an occupation cost of 9.7% in 4Q14, the lowest level in 2014 and in line with 4Q13. In 2014 we announced the inauguration of 3 expansions (Shopping Piracicaba, Shopping Recife e São Luís Shopping) and 1 greenfield (Shopping Vila Velha). With these inaugurations, we increased our total GLA by thousand m² and our owned GLA by 45.9 thousand m². We estimate that these projects will generate a stabilized NOI of R$38.3 million. In order to deliver more value to our shareholders and in line with our portfolio recycling strategy, we divested from 6 assets in 2014 for a total amount of R$389.2 million. We believe that 2015 will be even more challenging for the Brazilian economy. Meanwhile we will dedicate our best efforts to strengthen the company while increasingly looking to improve our operational efficiency while prioritizing the most profitable investments for our shareholders. In 2015 we expect the inauguration of 3 important expansion projects that will add 29.6 thousand m² of total GLA to our portfolio.

2 Financial Statements - Company and Consolidated BR Malls Participações S.A. with Independent Auditor s Report on Financial Statements

3 Financial Statements - Company and Consolidated Contents Independent auditor s report on financial statements... 1 Audited financial statements - Company and Consolidated Balance sheets... 4 Income statements... 6 Statements of comprehensive income... 7 Statements of changes in equity - Company... 8 Statements of changes in equity - Consolidated... 9 Cash flow statements Statements of value added Notes to financial statements... 12

4 A free translation from Portuguese into English of Independent Auditor s Report on financial statements Independent auditor s report on financial statements The Shareholders, Board of Directors and Officers BR Malls Participações S.A. Rio de Janeiro - RJ We have audited the accompanying individual and consolidated financial statements of BR Malls Participações S.A. ( Company ), identified as Company and Consolidated, respectively, which comprise the balance sheet as at December 31, 2014, and the related statements of income, comprehensive income, changes in equity and cash flow for the year then ended, and a summary of significant accounting practices and other explanatory Notes. Management s responsibility for the financial statements Management is responsible for the preparation and fair presentation of the individual financial statements in accordance with accounting practices adopted in Brazil, and the consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and in accordance with accounting practices adopted in Brazil, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Brazilian and international standards on auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the preparation and fair presentation of the Company s financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control. An audit also 1

5 Auditor s responsibility (Continued) includes evaluating the appropriateness of accounting practices used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion on the individual financial statements In our opinion, the individual financial statements referred to above present fairly, in all material respects, the financial position of BR Malls Participações S.A. as at December 31, 2014, the performance of its operations and cash flows for the year then ended in accordance with accounting practices adopted in Brazil. Opinion on the consolidated financial statements In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of BR Malls Participações S.A. as at December 31, 2014, its consolidated operating performance and its consolidated cash flows for the year then ended in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and accounting practices adopted in Brazil. Emphasis of a matter As described in Note 2.1, the individual financial statements were prepared in accordance with accounting practices adopted in Brazil. In the case of BR Malls Participações S.A., these practices differ from the IFRS - applicable to the separate financial statements - solely of maintaining the deferred charges balance existing at December 31, 2008, which has been amortized. Our opinion is not qualified in respect of these matters. 2

6 Statements of value added We have also audited the individual and consolidated statement of value added for the year ended December 31, 2014, prepared under the responsibility of the Company s management, whose presentation is required by the Brazilian Corporation Law for publicly-held companies and as additional information by the IFRS, which do not require presentation. These statements have been subject to the same auditing procedures previously described and, in our opinion, are presented fairly, in all material respects, in relation to the overall financial statements. Rio de Janeiro, March 11, ERNST & YOUNG Auditores Independentes S.S. CRC - 2SP /O-6 - F - RJ Roberto Martorelli Accountant CRC - 1RJ /O-0 3

7 A free translation from Portuguese into English of the Company s Financial Statements BR Malls Participações S.A. Balance sheets December 31, 2014 and 2013 Company Consolidated 12/31/ /31/ /31/ /31/2013 Current assets Cash and cash equivalents (Note 5) 1,501 1,604 76,648 70,509 Marketable securities (Note 5) 82,774 4, , ,696 Accounts receivable (Note 7.1) 48,305 35, , ,499 Derivative financial instruments (Note 4.1 (e)) 3,873 34,792 9,284 54,674 Taxes recoverable (Note 8) 41,596 45, , ,701 Advances 5,483 4,744 17,989 32,430 Other receivables (Note 7.2) 25,245 25,592 35,002 42,651 Prepaid expenses 1, ,669 2, , ,228 1,184, ,410 Noncurrent assets Accounts receivable (Note 7.1) 12,637 12, , ,501 Guarantees and deposits (Note 18) ,841 45,695 Deferred taxes (Note 9) - 2,028 53,432 82,117 Derivative financial instruments (Note 4.1 (e)) 35,146 30, , ,049 Future capital contributions (Note 10) 26,721 71,913 6,458 33,859 Receivables from subsidiaries and affiliates (Note 10) 33, ,136 20,928 5,210 Other receivables (Note 7.2) 12,071 14,253 20,365 26, , , , ,621 Investments (Note 11) 10,466,125 9,737, , ,266 Investment properties (Note 13) 1,522,496 1,609,635 17,301,914 16,651,002 Property and equipment 10,775 10,191 10,787 10,191 Intangible assets 33,655 14,317 35,330 16,360 Deferred charges 1,715 2, ,034,766 11,374,000 18,002,090 17,261,819 12,154,837 11,611,294 18,676,613 17,877,440 Total assets 12,365,340 11,763,522 19,860,626 18,820,850 4

8 Company Consolidated 12/31/ /31/ /31/ /31/2013 Current liabilities Accounts payable (Note 14) 9,501 4,443 48,219 84,892 Loans and financings (Note 15) 175, , , ,580 Income and social contribution taxes (Note 8) 757 4,966 54,427 64,071 Payroll and social charges 27,086 25,343 57,823 69,169 Dividends payable (Note 20(g)) 211, , , ,535 Taxes payable in installments (Note 16) ,732 19,871 Advances from customers 2,974 4,224 12,870 6,028 Accounts payable for acquisition of shopping malls (Note 17) 47,951 48,007 47, ,982 Deferred revenue (Note 19) 3,084 2,737 49,615 55,529 Derivative financial instruments (Note 4.1 (e)) 9,076 6,716 12,339 9,168 Other payables 342 8,423 6,099 9, , , ,014 1,397,128 Noncurrent liabilities Accounts payable (Note 14) 2,461 3,413 2,461 3,413 Loans and financing (Note 15) 1,674,476 1,372,906 4,796,976 3,956,500 Provision for contingencies (Note 18) 4,643 2,384 64,920 64,536 Taxes payable in installments (Note 16) ,197 80,016 Deferred taxes (Note 9) 93, ,006 3,650,869 3,280,145 Accounts payable for acquisition of shopping malls (Note 17) 5,072 48, , ,903 Derivative financial instruments (Note 4.1 (e)) 310, , , ,616 Deferred revenue (Note 19) 6,453 7,486 71,915 90,927 Intercompany loans (Note 10) 710, ,034 7, Other payables ,806,922 2,262,189 9,210,689 7,956,466 Equity (Note 20) Capital 4,331,619 4,293,342 4,331,619 4,293,342 Share issue costs (50,727) (50,727) (50,727) (50,727) Treasury shares (20,573) (20,573) (20,585) (20,585) Capital reserves 131,205 91, , ,315 Income reserves 4,678,735 4,473,153 4,672,356 4,466,774 9,070,259 8,786,212 9,074,166 8,790,119 Noncontrolling interests , ,137 9,070,259 8,786,212 9,812,923 9,467,256 Total liabilities and equity 12,365,340 11,763,522 19,860,626 18,820,850 See accompanying notes. 5

9 Income statements Years ended December 31, 2014 and 2013 Company Consolidated Net revenue from leases and services (Note 22) 113, ,008 1,324,707 1,247,432 Cost of leases and services (Note 23) (2,606) (3,029) (102,361) (99,949) Gross profit from leases and services 110, ,979 1,222,346 1,147,483 Operating income/(expenses) Selling expenses (23,800) (25,126) (37,323) (36,101) Administrative expenses (Note 24) (51,477) (47,554) (151,855) (146,192) Changes in fair value of investment properties (Note 13) (88,507) 6, , ,748 Other operating income 2, ,778 24,091 Income before equity pickup, financial income and taxes (50,841) 36,938 1,677,878 1,688,029 Equity pickup (Note 11) 873,740 1,019,111 28, ,697 Financial income (Note 25) Financial incomes 282, , , ,375 Financial expenses (625,854) (825,390) (1,381,420) (1,519,642) (343,267) (380,995) (577,260) (577,267) Income before income taxes 479, ,054 1,129,307 1,234,459 Income and social contribution taxes (Note 8) Current - - (139,938) (98,721) Deferred 8,745 4,896 (391,038) (380,115) 8,745 4,896 (530,976) (478,836) Net income for the year 488, , , ,623 Attributable to: Controlling interests 488, , , ,950 Noncontrolling interests ,954 75,673 Net income for the year 488, , , ,623 Earnings per share attributable to controlling interests (in R$ per share) Basic earnings per share (Note 21 (a)) Diluted earnings per share (Note 21 (b)) See accompanying notes. 6

10 Statements of comprehensive income Years ended December 31, 2014 and 2013 Company Consolidated Net income for the year 488, , , ,623 Other comprehensive income Total comprehensive income for the year 488, , , ,623 Attributable to: Controlling interests 488, , , ,950 Noncontrolling interests ,954 75, , , , ,623 See accompanying notes. 7

11 Statements of changes in equity - Company Years ended December 31, 2014 and 2013 Company Share Income reserves issue Treasury Capital Legal Retained Unrealizable Retained Capital costs shares reserve reserve profits profits earnings Total Balances at December 31, ,459,212 (50,727) - 49, ,995 4,063, ,525-8,184,899 Capital increase and payment 834, (789,407) ,723 Recognized options granted , ,748 Treasury shares - - (20,573) (20,573) Net income for the year , ,950 Set up of reserves , , ,487 (679,950) - Mandatory minimum dividends (144,535) - (144,535) Balances at December 31, ,293,342 (50,727) (20,573) 91, ,994 3,758, ,477-8,786,212 Capital increase and payment (Note 20a) 38, ,277 Recognized options granted (Note 28) , ,188 Net income for the year , ,377 Set up of reserves , , ,990 (488,377) - Mandatory minimum dividends (Note 20h) (282,795) - (282,795) Balances at December 31, ,331,619 (50,727) (20,573) 131, ,413 4,106, ,672-9,070,259 See accompanying notes. 8

12 Statements of changes in equity - Consolidated Years ended December 31, 2014 and 2013 Consolidated Share Income reserves issue Treasury Capital Legal Retained Unrealizable Retained Noncontrolling Total Capital costs shares reserve reserve profits profits earnings Total interests equity Balances at December 31, ,459,212 (50,727) (12) 59, ,995 4,057, ,525-8,188, ,151 8,814,957 Capital increase and payment 834, (789,407) ,723-44,723 Recognized options granted , ,748-41,748 Treasury shares - - (20,573) (20,573) - (20,573) Net income for the year , ,950 75, ,623 Set up of reserves , , ,487 (679,950) Mandatory minimum dividends (144,535) - (144,535) - (144,535) Mandatory minimum dividends (noncontrolling interests) (24,687) (24,687) Balances at December 31, ,293,342 (50,727) (20,585) 101, ,994 3,752, ,477-8,790, ,137 9,467,256 Capital increase and payment (Note 20a) 38, ,277-38,277 Recognized options granted (Note 28) , ,188-40,188 Net income for the year , , , ,331 Set up of reserves , , ,990 (488,377) Mandatory minimum dividends (Note 20h) (282,795) - (282,795) - (282,795) Mandatory minimum dividends (noncontrolling interests) (48,334) (48,334) Balances at December 31, ,331,619 (50,727) (20,585) 141, ,413 4,100, ,672-9,074, ,757 9,812,923 See accompanying notes. 9

13 Cash flow statements Years ended December 31, 2014 and 2013 Company Consolidated Cash flow from operating activities Net income for the year 488, , , ,950 Adjustments Depreciation and amortization 1,319 1,022 10,212 10,067 Restatement of loans and financing 232, , , ,780 Gain (loss) on marketable securities (3,718) (5,607) (65,152) (41,660) Revenue linearization adjustment and present value adjustment (1,975) 3,991 (4,735) (1,089) Share-based compensation 40,188 41,748 40,188 41,748 Fair value adjustment and gain (loss) on derivatives (24,923) 58,030 (29,916) 51,451 Deferred income and social contribution taxes (8,745) (4,896) 391, ,115 Changes in fair value of investment properties 88,507 (6,013) (633,932) (698,748) Gain on sale of investment property (2,123) - (29,710) - Equity pickup (873,740) (1,019,111) (28,689) (123,697) Noncontrolling interests ,954 75,673 Other 4,628 3,160 32,332 8,341 Adjusted net income (59,965) (32,881) 965, ,931 Changes in working capital Changes in operating assets and liabilities Accounts receivable (15,580) 1,110 (36,053) (45,801) Taxes recoverable 3,460 (15,097) (6,899) (29,618) Advances (739) 1,584 14,441 (3,173) Prepaid expenses (1,270) (14) (1,419) (99) Guarantees and deposits (93) (112) (2,146) (5,592) Financial instruments 159, ,746 33,955 (48,543) Trade accounts payable 4,106 (1,429) (37,625) 17,505 Taxes payable (4,209) 3,782 98,777 71,487 Payroll and social charges 1,743 2,401 (11,346) (7,335) Advances from customers (1,250) (165) 6,842 (19,807) Deferred revenue - (674) (1,960) 3,188 Provision for contingencies 2, (40,389) Income and social contribution taxes paid - - (114,007) (43,725) Other (5,018) (17,838) 10,246 (10,778) Cash flow provided by (used in) operating activities 82,910 65, , ,251 Cash flow from investing activities (Purchase) sale of marketable securities (74,825) 61,218 (203,883) 157,312 Increase (decrease) in property and equipment and intangible assets (21,242) (7,384) (29,779) (7,504) Acquisition and construction of investment properties (60,174) (82,598) (574,061) (684,526) Sale of investment property 12, ,678 - Future capital contribution (92,378) (217,391) (6,558) (9,900) Capital increase in subsidiaries - (112) (53,740) (17,397) Interest on Equity (IOE) received 58,000 55, Transactions with related parties 263,199 45,996 (8,101) 203 Dividends received 224,795 89,534 46,595 38,301 Cash flow used in investing activities 309,470 (55,737) (418,849) (523,511) Cash flow from financing activities Loans taken out 380, , ,610 1,875,066 Repayment of loans (595,704) (780,570) (1,043,204) (2,229,403) Purchase of treasury shares (20,573) Capital increase 38,277 44,723 38,277 44,723 Dividends paid (215,602) (215,501) (215,602) (215,501) Noncontrolling interests - - (48,334) (24,687) Cash flow used in financing activities (392,483) (10,619) (493,253) (570,375) Cash flow (103) (1,265) 6,139 (278,635) Cash and cash equivalents at beginning of year 1,604 2,869 70, ,144 Cash and cash equivalents at end of year 1,501 1,604 76,648 70,509 Changes in cash (103) (1,265) 6,139 (278,635) See accompanying notes. 10

14 Statements of value added Years ended December 31, 2014 and 2013 Company Consolidated A Revenues 145, ,391 1,715,634 1,525,990 Service revenue 124, ,272 1,434,117 1,352,222 Allowance for doubtful accounts - reversal (set up) 2,787 3,160 10,069 8,341 Other operating income (expenses) 2, ,778 24,091 Revenue from construction of own assets 15,415 34, , ,336 Inputs acquired from third parties (30,256) (54,392) (377,396) (254,624) Inputs and third-party services for construction of own assets (3,625) (31,670) (235,905) (128,268) Cost of services (2,606) (3,029) (73,667) (71,555) Materials, energy, third-party services and other expenses (24,025) (19,693) (67,824) (54,801) Gross value added 114, ,999 1,338,238 1,271,366 Retentions (1,319) (1,022) (10,212) (10,067) Depreciation and amortization (1,319) (1,022) (10,212) (10,067) Net value added produced by the Company 113,566 99,977 1,328,026 1,261,299 Value added received in transfer 1,067,820 1,469,519 1,466,781 1,764,820 Equity pickup 873,740 1,019,111 28, ,697 Financial incomes 282, , , ,375 Fair value adjustment of investment property (88,507) 6, , ,748 Total value added to be distributed 1,181,386 1,569,496 2,794,807 3,026,119 Distribution of value added 1,181,386 1,569,496 2,794,807 3,026,119 Personnel and related charges 60,870 57, , ,770 Payroll and related charges 12,805 3,624 70,680 69,068 Management fees ,388 3,177 Direct compensation ,178 20,093 Benefits ,102 3,565 Social security contributions ,826 6,126 Unemployment Compensation Fund (FGTS) ,434 1,880 Termination Personnel - shopping malls 11,786 2,660 41,588 34,011 Commissions on sales 5,940 10,431 6,344 2,527 Profit sharing 1,937 1,329 45,589 46,427 Stock options granted 40,188 41,748 40,188 41,748 Taxes, charges and contributions 6,284 7, , ,084 Financial expenses 625, ,390 1,381,420 1,519,642 Noncontrolling interests ,954 75,673 Retained profits for the period 488, , , ,950 See accompanying notes. 11

15 Notes to financial statements 1. Group s operations BR Malls Participações S.A., its subsidiary and jointly-controlled subsidiaries (collectively referred to as "Company" or BR Malls ), which are integral components of these financial statements, are primarily engaged in: (i) holding interest in and management of shopping malls, (ii) holding interest in other companies of the real estate sector as a shareholder or member, (iii) promotion and management of their own real estate enterprises of any kind, or for third parties, and (iv) holding interest in and management of car parking operations. The Company s operating results are subject to seasonal trends affecting the shopping mall industry. Shopping mall sales generally increase in certain seasons of the year such as in the weeks before Mother s Day (May), Valentine s Day (which in Brazil occurs in June), Father s Day (which in Brazil occurs in August), Children s Day (which in Brazil occurs in October) and Christmas (December). In addition, the large majority of the lessees in the Company s shopping malls pay double rent in December under their respective lease agreements. The Company is a corporation with headquarters in the city and State of Rio de Janeiro, Brazil, and has its stock traded on the BM&FBovespa Stock Exchange (BRML3). In addition, the Company has adhered to the level of corporate governance of BM&FBovespa s New Market ("Novo Mercado"). BR Malls is included in the BM&FBovespa Index (IBOVESPA) portfolio and in the Brazil Index 50 (IBRX 50). The issue of these individual and consolidated financial statements was authorized by the Company s Board of Directors on March 11, The Company presents excess of current liabilities over current assets in the balance sheet of the Company in the amount of R$277,656 at December 31, 2014 (R$562,893 at December 31, 2013). In connection with the preparation of these financial statements, management has made analyses and concluded that there is no evidence of uncertainties about obtaining these resources to re-establish the financial balance of excess current liabilities, as the Company s capital management is made in a consolidated manner. Accordingly, these financial statements were prepared in accordance with accounting practices applicable to going concerns. 12

16 1. Group s operations (Continued) a) Corporate restructuring In 2014, the Company began a corporate restructuring process with a view to streamlining its organizational structure and reducing administrative and operating costs. As part of this process, the following mergers of companies under common control took place: On May 1, Piracicaba Malls Participações Ltda. was merged by its direct controlling entity Empresa Patrimonial Industrial IV Ltda. The interest held by Piracicaba Mall Participações Ltda. in Shopping Piracicaba of 15.35% was transferred to Empresa Patrimonial Industrial IV Ltda. On May 1, Mídia Central Ltda. was merged by its direct controlling entity Center Shopping S.A. On the merger date, Mídia Central Ltda. held no direct interests in shopping malls. On May 1, BR Malls Desenvolvimento e Participações Ltda. was merged by BR Malls Serviços Compartilhados Ltda. On the merger date, BR Malls Desenvolvimento e Participações Ltda. held no direct interests in shopping malls. On May 1, SPE Vila Velha Empreendimentos Imobiliários e Participações Ltda. was merged by its direct controlling entity EDRJ113 Participações Ltda. On the merger date, SPE Vila Velha Empreendimentos Imobiliários e Participações Ltda. held no direct interests in shopping malls. On July 1, SPE Monza Participações S.A. was merged by its investee Shopping Center Mooca Empreendimento Imobiliário S.A. On the date of the reverse merger, SPE Monza Participações S.A. held no direct interests in shopping malls. On August 1, Ecisa Participações Ltda. was merged by Ecisa Engenharia Comércio e Indústria Ltda., both of which are wholly-owned subsidiaries of BR Malls Participações S.A. All interests held by Ecisa Participações Ltda. were transferred to Ecisa Engenharia Comércio e Industria Ltda. with no changes in the interest percentage. 13

17 1. Group s operations (Continued) a) Corporate restructuring (Continued) On November 1, SPE Indianápolis Participações Ltda. was merged by its direct controlling entity Ecisa Engenharia Comércio e Industria Ltda. All interests held by SPE Indianápolis Participações Ltda. were transferred to Ecisa Engenharia Comércio e Industria Ltda. with no changes in the interest percentage. On December 1, the Company and its investees Ecisa Engenharia Comércio e Industria Ltda. and L5 Corporate LLC entered into an agreement for exchange of shares of B. Sete Participações S.A. and VL 100 Empreendimentos e Participações S.A., both of which belong to the BR Malls group. Such exchange had no impact on the Company s consolidated financial statements. At December 31, KGM37 Empreendimentos Ltda. was merged by Ecisa Engenharia Comércio e Industria Ltda. On the merger date, KGM37 Empreendimentos Ltda. held no direct interests in shopping malls. The corporate restructuring operations were conducted at the related book values. b) Transactions of acquisition/disposal of interests/assets On January 10, the Company sold 100% of the green land next to Jardim Sul shopping mall for R$20,159. Of this amount, 60% is attributable to BR Malls and 40% to FII RUBI (adm. BTG). On February 26, Fashion Mall S.A. sold 49% of the real estate interest of 100% held in Ilha Plaza shopping mall for R$120,800. On February 26, SPE Classic Participações Ltda. and Empresa Patrimonial IV Ltda. sold 100% of the real estate interest held in Iguatemi Belém shopping mall (13.30%) for R$45,700. On March 20, SPE Classic Participações Ltda. sold 100% of the real estate interest held in Metrô Tatuapé shopping mall (3.15%) for R$20,

18 1. Group s operations (Continued) b) Transactions of acquisition/disposal of interests/assets (Continued) On April 8, the Company sold its full interest held in Big Shopping (13%) for R$11,400. On November 10, the Companhia sold its full interest held in Shopping Mueller (10.41%) for R$15,599. On November 27, the Company sold 100% of the real estate interest held in Shopping Fashion Mall for R$175,000. On October 21, Alvear Participações S.A., indirect subsidiary of BR Malls, sold 100% of the land next to Londrina Norte Shopping for R$1,319. c) Inaugurations On April 29, the Company inaugurated the expansion of Shopping Piracicaba, São Paulo state. d) Interest held in companies Interest - % 12/31/ /31/2013 Direct subsidiaries Ecisa Engenharia, Comércio e Indústria Ltda. ("Ecisa Engenharia") Ecisa Participações Ltda. ("Ecisa Participações") BR Malls International Finance Ltd. ("BR Malls Finance") BR Malls Desenvolvimento e Participações Ltda. ("BR Malls Desenvolvimento") BR Malls Serviços Compartilhados Ltda. ("BR Malls CSC") SPE Fortuna Gestão e Participações Ltda. ("BR Malls Fortuna") SPE Sfida Gestão e Participação Ltda. ("SPE Sfida") Crystal Administradora de Shopping Centers Ltda. ("Crystal") Silent partnership Crystal Parking ("Crystal Parking")

19 1. Group s operations (Continued) d) Interest held in companies (Continued) Interest - % 12/31/ /31/2013 Indirect subsidiaries (through Ecisa Engenharia Ltda. and BR Malls International Finance Ltd.) L5 Corporate LLC BR Malls Administração e Comercialização Ltda. ("BR Malls Administração") Proffito Holding Participações S.A. ("Proffito") Nattca 2006 Participações S.A. ("Nattca") SPE Indianápolis Participações Ltda. ("SPE Indianápolis") Empresa Patrimonial Industrial IV Ltda. ("EPI") SDR Empreendimentos Imobiliários Ltda. ("SDR") Empresa Cogeradora de Energia Ltda. ("Emce") Campo Grande Parking Ltda. ("Campo Grande Parking") SPE Xangai Participações S.A. ("SPE Xangai") VL 100 Empreendimentos e Participações S.A SPE Monza Participações Ltda. ("SPE Monza") SPE Classic Participações Ltda. ("SPE Classic") Fashion Mall S.A. ("Fashion Mall") Rai Rhodes Administração de Imóveis Ltda. ("Rai Rhodes") COFAC - Companhia Fluminense de Administração e Comércio ("COFAC") KGM37 Empreendimentos Ltda. ("KGM37") Shopping Center Mooca Empreendimento Imobiliários S.A. ("Shopping Center Mooca") Exímia Comercial e Empreendimentos Ltda. ("Exímia") LGR Macaé Empreendimentos Ltda

20 1. Group s operations (Continued) d) Interest held in companies (Continued) Interest - % 12/31/ /31/2013 Indirect subsidiaries (through Ecisa Engenharia Ltda. and BR Malls International Finance Ltd.) SPE Vila Velha Empreendimentos Imobiliários e Participações Ltda Silent Partnership Estação BH Parking Silent Partnership JLN-2 (Niterói Plaza) Silent Partnership JLN-2 (Rio Plaza) Silent Partnership Campinas Parking Silent Partnership Estação Parking Silent Partnership Fashion Parking Silent Partnership Independência Parking Silent Partnership Mooca Silent Partnership Shopping Granja Vianna Companhia Santa Cruz SAS Sociedade Administradora de Centros Comerciais Ltda. ("SAS Administradora") Sociedade Independência Imóveis ("SISA") Mídia Central Ltda. ("Mídia Central") Center Shopping S.A. ("Center Shopping") CIMA Empreendimentos do Brasil S.A. ("CIMA") Piracicaba Malls Participações Ltda Silent Partnership Tijuca Parking Silent Partnership Park Center CG Participações Ltda EDRJ113 Participações Ltda. ("EDRJ113") Estação BH Empreendimentos Imobiliários e Participações Ltda BR Malls Administração e Comercialização Rio/Minas Ltda Alvear Participações S.A. ("Alvear") Proeste S.A. ("Proeste") Silent partnership Uberlândia Parking BR Malls Administração e Comercialização Sul/SP Ltda Catuaí Maringá Parking Catuaí Londrina Parking BR Malls Premium Outlet Empreendimentos Imobiliários e Participações Ltda Dokka RJ Participações S.A Contagem Empreendimentos e Participações Ltda Villa Lobos Parking Ltda. ("Villa Lobos Parking") Incorporadora de Shopping Center Capim Dourado Ltda Sete Lagoas Parking Londrina Norte Parking São Bernardo Parking Capim Dourado Parking Contagem Parking

21 1. Group s operations (Continued) d) Interest held in companies (Continued) Interest - % 12/31/ /31/2013 Joint ventures (equity pickup) SPE Mônaco Participações S.A. ("SPE Mônaco") B. Sete Participações S.A GS Shopping Center S.A. ("GS Shopping") Macaé Participações SPE S.A Plaza Macaé S.A Macaé Participações imobiliárias Ltda Administradora Shopping Center Recife Ltda. ("ASCR") (*) Recife Parking Ltda. ("Recife Parking") (*) Recife Locadora de Equipamentos para Autogeração Ltda. ("Recife Locadora") (*) Christaltur Empreendimentos e Participações S.A. (*) Silent partnership Centro Oeste Parking Silent partnership Macaé Parking Silent partnership Natal Parking Espírito Santo Malls S.A Joint operations (proportional consolidation) Silent partnership Center Parking Silent partnership West Parking ("West Parking") Silent partnership Rio Anil Parking Silent partnership Itaú Power Parking Silent partnership Shopping Via Brasil Silent partnership Shopping llha Parking Contagem Parking Affiliates EDRJ100 Participações Ltda Pró-Parking Participações Ltda

22 1. Group s operations (Continued) e) Interest held in shopping malls (recorded as investment properties) Interest - % 12/31/ /31/2013 Amazonas Shopping Center Araguaia Shopping Big Shopping Campinas Shopping Catuaí Shopping Londrina Catuaí Shopping Maringá Center Shopping Rio Center Shopping Uberlândia Crystal Plaza Estação BH Fashion Mall Goiânia Shopping Ilha Plaza Londrina Norte Minas Shopping Mooca Plaza Shopping Natal Shopping NorteShopping Osasco Plaza Plaza Niterói Casa & Gourmet Shopping ABC Shopping Campo Grande Shopping Capim Dourado Shopping Center Iguatemi Belém Shopping Center Iguatemi Maceió Shopping Center Piracicaba Shopping Center Tamboré Shopping Contagem Shopping Curitiba Shopping Del Rey Shopping Estação Shopping Granja Vianna Shopping Iguatemi Caxias Shopping Independência Shopping Itaú Power

23 1. Group s operations (Continued) e) Interest held in shopping malls (recorded as investment properties (Continued) Interest - % 12/31/ /31/2013 Shopping Jardim Sul Shopping Metrô Santa Cruz Shopping Metrô Tatuapé Shopping Mueller Shopping Paralela Shopping Plaza Macaé Shopping Recife Shopping Rio Anil Shopping São Bernardo Shopping São Luis Shopping Sete Lagoas Shopping Tijuca Shopping Via Brasil Shopping Villa Lobos Top Shopping West Shopping f) Summary of activities of the major investees Subsidiaries/affiliates Major activities Shopping Malls Ecisa Engenharia Com. e Indústria Ltda. BR Malls International Finance Ltda. Economic planning, operation, development, trade, management and establishment of Shopping Malls; operation of parking lots; provision of technical assistance for business establishment, organization and startup - both trading or service companies. Entity established for the specific purpose of issuing perpetual bonds. Shopping Villa Lobos Shopping Curitiba Shopping Iguatemi Caxias Shopping Del Rey Shopping Recife Plaza Niterói Norte Shopping CPI I Norte Shopping CPI 2 Norte Shopping CPI 3 Norte Shopping CPI 4 Campinas Shopping Shopping Campo Grande - 20

24 1. Group s operations (Continued) f) Summary of activities of the major investees (Continued) Subsidiaries/affiliates Major activities Shopping Malls Empresa Cogeradora de Energia Ltda. Cogeneration of electric energy. - Empresa Patrimonial Industrial IV S.A. SPE Xangai Participações Ltda. SDR Empreendimentos Imobiliários S.A. Cima Empreendimentos do Brasil S.A. EDRJ113 Participações Ltda. BR Malls Administração e Comercialização Ltda. Interests in real estate ventures. Operation, economic planning, development, trade, administration, management, establishment of Shopping Malls as well as operation of parking lots. Operation, economic planning, development, trade, administration, management, establishment of Shopping Malls as well as operation of parking lots. Operation, economic planning, development, trade, administration, management, establishment of Shopping Malls as well as operation of parking lots. Operation, economic planning, development, trade, administration, management, establishment of Shopping Malls as well as operation of parking lots. Operation, economic planning, development, trade, administration, management and establishment of Shopping Malls. Amazonas Shopping Shopping Iguatemi Maceió Shopping Piracicaba Shopping Granja Vianna Shopping Del Rey Shopping Tijuca Shopping Via Brasil - Fashion Mall S.A. Operation, economic planning, development, trade, administration, management, establishment of Shopping Malls as well as operation of parking lots. Plaza Niterói Casa & Gourmet Shopping Ilha Plaza 21

25 2. Summary of significant accounting practices Significant accounting practices adopted in the preparation of these financial statements are described below. These practices have been consistently adopted in all years presented, unless otherwise stated Basis of preparation The financial statements were prepared under various measurement bases used in accounting estimates. The accounting estimates involved in the preparation of these financial statements were based on objective and subjective factors, considering management s judgment for determining the adequate amounts to be recorded in the financial statements. Significant items subject to these estimates and assumptions include selection of useful lives and recoverability of property, plant and equipment, measurement of financial assets at fair value and under present value method, estimated fair value of investment properties, estimated value in use of land and buildings, credit risk analysis in determining the allowance for doubtful accounts, as well as the analysis of other risk in determining other provisions, including provision for contingencies. The book values of assets and liabilities recognized, which represent hedged items at fair value, which, alternatively, would have been recorded at amortized cost, are adjusted to state the variations in fair values attributable to the hedged risks. As a result of the settlement of transactions comprising these estimates, values may be materially different from those recorded in the financial statements due to the probabilistic treatment inherent to the estimate process. The Company reviews its estimates and assumptions at least once a year. The consolidated financial statements were prepared based on the international accounting standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC"), implemented in Brazil by the Brazilian FASB ("CPC"), and its accounting interpretations ("ICPC") and guidance ("OCPC"), approved by the Brazilian Securities and Exchange Commission ("CVM"). 22

26 2. Summary of significant accounting practices (Continued) 2.1. Basis of preparation (Continued) The individual financial statements were prepared in accordance with accounting practices adopted in Brazil, which comprise the provisions of the Corporation Law, under Law No. 6404/76, as amended by Laws No /07 and No 11941/09, and accounting pronouncements, interpretations and guidance issued by the Brazilian FASB ("CPC"), approved by the Brazilian Securities and Exchange Commission ("CVM"). Until December 31, 2013, such practices differed from the IFRS applicable to the separate financial statements solely with respect to the measurement of investments in subsidiaries, affiliates and jointly-controlled subsidiaries, under the equity method, while such investments would be measured at cost or fair value for IFRS purposes, as well as to the decision of maintaining the deferred charges balance existing at December 31, 2008, which is being amortized. With issue of IAS 27 (Separate Financial Statements) amended by the IASB in 2014, the separate financial statements under IFRS now allow the use of the equity method for measurement of investments in subsidiaries, affiliates and jointly controlled entities. In December 2014, the CVM issued Resolution No. 733/2014, which approved the Standards Review Technical Document No. 07 regarding the CPC Pronouncements 18, CPC 35 and CPC 37 issued by the Accounting Pronouncements Committee, receiving the said revision of IAS 27, and allowing its adoption from the years ended December 31, Accordingly, the accounting practices adopted in preparing the financial statements of the parent company on December 31, 2014, differ from IFRS applicable to separate financial statements only for the maintenance of deferred charges balance at December 31, 2008, which is being amortized Basis of consolidation The consolidated financial statements comprise the financial statements of BR Malls Participações S.A. and its subsidiaries at December 31, 2014 and The major subsidiaries of the Group are presented in Note 1. 23

27 2. Summary of significant accounting practices (Continued) 2.2. Basis of consolidation (Continued) The subsidiaries are fully consolidated as from their acquisition date, which is the date on which the Company obtains their control, and continue being consolidated through the date on which such control ceases to exist. The subsidiary s financial statements are prepared for the same reporting period used by the Company, under consistent accounting practices. All intercompany balances, revenues and expenses and unrealized gains and losses arising from intercompany transactions are entirely eliminated. Changes in ownership interest in a subsidiary that do not result in a loss of control are accounted for as transactions between shareholders, in equity. Income for the year and each component of other comprehensive income (recognized directly in equity) are allocated to Company owners and to noncontrolling interests. Losses are allocated to noncontrolling interests, even if this results in a negative balance Investment in subsidiaries and joint ventures All investments in the individual financial statements and investments in affiliates and joint ventures in the consolidated financial statements are stated under the equity method. An affiliate is an entity on which the Company exercises significant influence. Significant influence is the power of participating in the decisions on the investees operating policies; however it does not mean to control or have common control on these policies. Joint venture is a joint business on which the parties that hold common control on the business have rights on the business net assets. Common control is the sharing, contractually agreed, of the business control that exists only when decisions on the significant activities require the unanimous consent from the parties that share the control. 24

28 2. Summary of significant accounting practices (Continued) 2.3. Investment in subsidiaries and joint ventures (Continued) Based on the equity method, the investment in affiliate or joint venture is recorded in the balance sheet at cost, plus changes after acquisition of ownership interest in the referred to affiliate or joint venture. Goodwill is included in the investment s book value, and is not amortized. Since goodwill based on future profitability is part of the book value of the investment in the investee or joint venture (not recognized separately), it is not tested separately for impairment. The income statement reflects the portion of income from the subsidiary or joint venture operations. When a change is recognized directly in the affiliates or joint venture s equity, the Company recognizes its share in the variations occurred and discloses such event, where applicable, in the statement of changes in equity. Unrealized gains and losses arising from transactions between the Company and its affiliate or joint venture are eliminated according to the ownership interest held in the affiliate or joint venture. The interest held in the affiliate or joint venture will be stated in the income statement as equity pickup, representing net income attributable to the affiliate s or joint venture s shareholders. The financial statements of the affiliate and joint venture are prepared for the same reporting period as that of the Company. Whenever necessary, adjustments are made for the accounting practices to be in line with those adopted by the Company. After the equity method is applied, the Company determines whether there is need to recognize additional impairment of its investment in is affiliate or joint venture. At each closing date, the Company determines whether there is objective evidence of impairment of investment in the affiliate or joint venture. If yes, the Company calculates the impairment loss as the difference between the recoverable amount of the affiliate or joint venture and its book value, and recognizes such amount in the income statement. 25

29 2. Summary of significant accounting practices (Continued) 2.3. Investment in subsidiaries and joint ventures (Continued) When there is loss of significant influence over the affiliate or loss of common control over the joint venture, the Company evaluates and recognizes the investment, at this moment, at fair value. Any difference between the book value of the affiliate or joint venture, upon loss of significant influence or common control, and the fair value of the investment held and results from divestiture will be recognized in income Foreign currency translation The consolidated financial statements are presented in Brazilian reais (R$), which is the Company s functional currency. Each Company s subsidiary determines its own functional currency, and for those entities whose functional currency differs from the real, the financial statements are translated into reais at the closing date Transactions and balances Transactions in foreign currency are initially recorded at the functional currency rate prevailing at the transaction date. Monetary assets and liabilities denominated in foreign currency are translated into reais at the functional currency rate prevailing at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the initial transaction date. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates as at the date when the fair value was determined Revenue recognition Revenue is recognized to the extent economic benefits are likely to flow to the Company and when it can be reliably measured. Revenue is measured at fair value of the consideration received, net of sales discounts, rebates, and related taxes or charges. The Company measures revenue transactions in accordance with specific criteria to determine whether it is operating as an agent or a principal and eventually concluded that it has been operating as a principal in all its revenue agreements. The following specific criteria must also be met before revenue recognition. 26

30 2. Summary of significant accounting practices (Continued) 2.5. Revenue recognition (Continued) Revenue from leases Tenants of commercial units usually pay rent that corresponds to the higher of a monthly minimum amount adjusted yearly, most of them by reference to the General Price Index - Internal Availability (IGP-DI), and an amount obtained by applying a percentage over gross sales revenue of each tenant. The Company records its store lease operations as operating leases. The set amount of minimum rent, including periodic fixed increases set forth in agreements and excluding inflation adjustments, is recognized at the proportion of the Company s interest held in each venture, on a straight-line basis over the effective term of the respective agreements, regardless of the receipt term. The difference between the minimum rent and a percentage of the tenant s gross sales revenue is considered to be contingent payment and is recognized when incurred Key money Key money contract, when signed, is classified as deferred revenue in liabilities and is allocated to the income statement on a straight-line basis, based on the term of the lease agreement of the respective stores, at lease inception Revenue from parking lots Refers to revenue arising from the operation of parking lots in the shopping malls. These revenues are recognized on an accrual basis and stated net of amounts passed on to the shopping malls. 27

31 2. Summary of significant accounting practices (Continued) 2.5. Revenue recognition (Continued) Service revenue Refers to (i) rendering of management and advisory services for shopping malls through subsidiaries BR Malls Administração, BR Malls Administração e Comercialização Rio/Minas Ltda. and BR Malls Administração e Comercialização Sul/SP; (ii) rendering of services for the trade of stores and Mall and Merchandising spaces through subsidiaries BR Malls Administração, BR Malls Administração e Comercialização Rio/Minas Ltda. and BR Malls Administração e Comercialização Sul/SP. Service revenues are recognized on an accrual basis. With respect to items (i) and (ii) above, BR Malls Administração, BR Malls Administração e Comercialização Rio/Minas Ltda. and BR Malls Administração e Comercialização Sul/SP render management and trading services to shopping malls owned by the Company and by third parties, earning monthly the following revenues: (a) fee paid by the entrepreneurs, which is calculated by applying a percentage over the shopping mall s net revenue, deducting shopping mall s operating expenses (excluding administration fee) from gross operating revenue; (b) fees paid by the storekeepers, which are determined based on a monthly fixed amount or on a percentage on the total condominium expenses and on the promotion fund; and (c) trade revenue, which in general corresponds to a percentage of the rental agreements of stores, kiosks and spaces for merchandising, as well as key money, transfer fees of traded real estate Revenue from transfer fees and others This revenue is recognized on an accrual basis. 28