Alicorp S.A.A. and Subsidiaries

Transcription

1 Alicorp S.A.A. and Subsidiaries Independent Auditors Report Consolidated Financial Statements For the Years Ended December 31, 2013 and 2012 (Free translation from a report originally issued in Spanish)

2 ALICORP S.A.A. AND SUBSIDIARIES TABLE OF CONTENT Pages INDEPENDENT AUDITORS REPORT 1-2 CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012: Consolidated Statements of Financial Position 3 Consolidated Statements of Income 4 Consolidated Statements of Comprehensive Income 5 Consolidated Statements of Changes in Equity 6 Consolidated Statements of Cash Flows 7 Notes to the Consolidated Financial Statements 8-91

3 Beltrán, Gris y Asociados S. Civil de R.L. Las Begonias 441, Piso 6 San Isidro, Lima 27 Perú INDEPENDENT AUDITORS REPORT Tel: +51 (1) Fax: +51 (1) To the Shareholders and Directors of Alicorp S.A.A. and Subsidiaries 1. We have audited the accompanying consolidated financial statements of Alicorp S.A.A. and Subsidiaries, which comprise the consolidated statements of financial position as of December 31, 2013 and 2012, and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility with respect to the consolidated financial statements 2. Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as Management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility 3. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with International Standards on Auditing approved by the Consejo Directivo de la Junta de Decanos de Colegios de Contadores Públicos del Perú (Board of Directors of the Council of Deans of Public Accountants Association of Peru ) for their application in Peru. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. 4. 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 consolidated 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 consolidated financial statements of the Company and its Subsidiaries 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 internal control of the Company and its Subsidiaries. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Deloitte se refiere a una o más de las firmas miembros de Deloitte Touche Tohmatsu Limited, una compañía privada del Reino Unido limitada por garantía, y su red de firmas miembros, cada una como una entidad única e independiente y legalmente separada. Una descripción detallada de la estructura legal de Deloitte Touche Tohmatsu Limited y sus firmas miembros puede verse en el sitio web Deloitte Touche Tohmatsu Limited es una compañía privada limitada por garantía constituida en Inglaterra & Gales bajo el número , y su domicilio registrado: Hill House, 1 Little New Street, London, EC4A 3TR, Reino Unido

4 5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion 6. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Alicorp S.A.A. and Subsidiaries as of December 31, 2013 and 2012, and of their consolidated financial performance and consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards. Other matter 7. The translation of this report has been made solely for the convenience of the English-speaking readers, and has been derived from the financial statements originally issued in Spanish. Countersigned by: (Partner) Patricia Mazuelos Coello CPC Registration No February 21,

5 ALICORP S.A.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2013 AND 2012 (In thousands of S/.) Notes Notes S/.000 S/.000 S/.000 S/.000 ASSETS LIABILITIES AND EQUITY CURRENT ASSETS: CURRENT LIABILITIES: Cash and cash equivalents 5 92, ,070 Financial obligations , ,769 Other financial assets 6 4, Other financial liabilities 17 11,422 42,317 Trade receivable (net) 7 959, ,555 Trade payable , ,729 Other receivable 8 164, ,348 Other payable ,871 40,261 Accounts receivable from related entities Accounts payable to related entities 31 5, Advances to suppliers 35,531 38,414 Employee benefits 20 95,326 94,653 Inventories (net) 9 790, ,328 Provisions 21 12,358 8,869 Income tax 30 (c) 61,967 27,103 Income tax 30 (c) 2,593 8,726 Other non-financial assets 10 12,104 35,871 Total current liabilities 1,191,448 1,266,316 2,122,161 2,219,764 NON-CURRENT LIABILITIES: Assets classified as held for sale (net) 11 9,559 9,473 Financial obligations 16 1,704, ,667 Other financial liabilities 17 57,351 - Total current assets 2,131,720 2,229,237 Other payable ,597 - Employee benefits 20 7,403 5,679 Provisions 21 8,265 - NON-CURRENT ASSETS: Deferred income tax liability 30 (d) 432, ,119 Other financial assets 6 271, ,865 Investments in associates 12 29,205 35,471 Total non-current liabilities 2,336, ,465 Other receivable 8 21, Property, plant and equipment (net) 13 1,876,942 1,326,827 Total liabilities 3,528,254 2,169,781 Other intangible assets (net) , ,435 Deferred income tax asset 30 (d) 89,067 34,224 EQUITY: 22 Goodwill (net) , ,968 Issued capital 847, ,192 Investment shares 7,388 7,388 Total non-current assets 3,762,577 2,049,427 Legal reserve 160, ,342 Retained earnings 1,263,996 1,029,995 Other equity reserves 77,734 88,206 Equity attributable to owners of the Parent 2,357,213 2,102,123 Non-controlling interests 8,830 6,760 Total equity 2,366,043 2,108,883 TOTAL 5,894,297 4,278,664 TOTAL 5,894,297 4,278,664 The accompanying notes are an integral part of these consolidated financial statements

6 ALICORP S.A.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (In thousands of S/.) NOTES S/.000 S/.000 Net operating revenues To third parties 5,777,982 4,461,863 To related entities 31 44,022 11,854 Total operating revenues 5,822,004 4,473,717 Cost of sales 24 (4,224,270) (3,254,369) Gross profit 1,597,734 1,219,348 Selling and distribution expenses 25 (718,477) (495,350) General and administrative expenses 26 (289,521) (242,706) Other income (net) 27 69,898 7,366 Operating income 659, ,658 Financial income 28 58,558 12,003 Financial expenses 29 (142,426) (45,235) Exchange differences, net 4 (b) (i) (121,497) 26,329 Net loss on derivative financial instruments 23 (24,135) (21,128) Share in net income of associates 12 (1,496) (636) Income before income tax 428, ,991 Income tax expense 30 (b) (123,239) (149,771) Net income for continuing operations 305, ,220 Income from discontinued operations, net of income tax 32 63,489 41,170 Net income for the year 368, ,390 Net income attributable to: Owners of the Parent 368, ,222 Non-controlling interests 777 (832) Net income for the year 368, ,390 Net earnings per share 33 Basic and diluted earning per common and investment share (S/.) Basic and diluted earning per common and investment share from continuing operations (S/.) Basic and diluted earnings per common and investment share from discontinued operations (S/.) The accompanying notes are an integral part of these consolidated financial statements

7 ALICORP S.A.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (In thousands of S/.) NOTES S/.000 S/.000 Net income for the year 368, ,390 Components of other comprehensive income that may be subsequently reclassified to the statement of income: Net changes for cash flow hedges 6,104 (33,061) Net (loss) gain on available-for-sale financial assets 22(c) (23,964) 46,649 Foreign currency translation 22(e) 8,596 (38,865) Other comprehensive income - (344) Other comprehensive income before income tax (9,264) (25,621) Income tax relating to components of other comprehensive income: Net changes for cash flow hedges 30(d) (1,208) 9,915 Income tax relating to components of other comprehensive income (1,208) 9,915 Other comprehensive income after income tax (10,472) (15,706) Total comprehensive income for the year 358, ,684 Comprehensive income attributable to: Owners of the Parent 357, ,516 Non-controlling interests 777 (832) Total comprehensive income for the year 358, ,684 The accompanying notes are an integral part of these consolidated financial statements

8 ALICORP S.A.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (In thousands of S/.) Other equity reserves Net Net changes Equity gain on from Foreign attributable to Issued Investment Legal Retained available-for-sale cash flow currency owners of the Non-controlling Total capital shares reserve earnings investments hedges translation Sub-total parent Interests Equity S/.000 S/.000 S/.000 S/.000 S/.000 S/.000 S/.000 S/.000 S/.000 S/.000 S/.000 (Note 22 (a)) (Note 22 (b)) (Note 22 (c)) (Note 22 (g)) (Note 22 (d)) (Note 22 (e)) (Note 22 (f)) BALANCES AS OF JANUARY 1, ,192 7,388 97, , ,303 (943) (9,792) 103,568 1,927,977 1,355 1,929,332 Net income for the year , ,222 (832) 351,390 Other comprehensive income after income tax (344) 46,649 (23,146) (38,865) (15,362) (15,706) - (15,706) Total comprehensive income for the year ,878 46,649 (23,146) (38,865) (15,362) 336,516 (832) 335,684 Cash dividends declared (162,370) (162,370) - (162,370) Transfer to legal reserve ,251 (32,251) Other changes ,237 6,237 BALANCES AS OF DECEMBER 31, ,192 7, ,342 1,029, ,952 (24,089) (48,657) 88,206 2,102,123 6,760 2,108,883 Net income for the year , , ,888 Other comprehensive income after income tax (23,964) 4,896 8,596 (10,472) (10,472) - (10,472) Total comprehensive income for the year ,111 (23,964) 4,896 8,596 (10,472) 357, ,416 Cash dividends declared (102,549) (102,549) - (102,549) Transfer to legal reserve ,561 (31,561) Other changes ,293 1,293 BALANCES AS OF DECEMBER 31, ,192 7, ,903 1,263, ,988 (19,193) (40,061) 77,734 2,357,213 8,830 2,366,043 The accompanying notes are an integral part of these consolidated financial statements

9 ALICORP S.A.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (In thousands of S/.) S/.000 S/.000 OPERATING ACTIVITIES: Collection from: Sales 5,617,244 5,120,799 Other cash inflows from operating activities 218,098 5,601 Payments for: Suppliers of goods and services (4,641,590) (4,054,957) Employees (551,074) (437,319) Income tax (170,555) (181,241) Taxes (24,552) (167,208) Other cash outflows for operating activities (161,746) (82,337) Cash and cash equivalents flows provided by operating activities 285, ,338 INVESTING ACTIVITIES: Collection from: Sale of property, plant and equipment 47, ,663 Sale of intangible asset 83,878 - Dividends received 3,558 3,393 Interests 12,057 8,610 Other cash inflows from investing activities 10,302 9,905 Payments for: Purchase of subsidiaries net of cash received (589,053) (207,356) Purchase of property, plant and equipment (368,691) (243,791) Purchase of intangible assets (4,794) (685) Loans received (granted) to related entities 224 (403) Cash and cash equivalents flows used in investing activities (805,343) (300,664) FINANCING ACTIVITIES Collection from: Short-term loans received from third parties 1,151, ,051 Long-term loans received from third parties 1,628, ,982 Payments for: Short-term loans from related entities 4,159 (1,455) Short-term loans from third entities (1,342,573) (69,530) Long-term loans from third parties (1,093,628) (55,927) Dividends (102,550) (162,370) Interests (121,326) (53,641) Other cash outflows for financing activities (7,899) - Cash and cash equivalents flows provided by financing activities 116, ,110 Net (decrease) increase in cash and cash equivalents (403,254) 395,784 Cash and cash equivalents at the beginning of the year 496, ,818 Effect of exchange difference on cash balances and cash equivalents held in foreign currencies 74 (1,532) Cash and cash equivalents at the end of the year 92, ,070 The accompanying notes are an integral part of these consolidated financial statements

10 ALICORP S.A.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 Expressed in thousands of nuevos soles (unless otherwise expressed) 1. INCORPORATION, ECONOMIC ACTIVITY, APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS, MAIN TRANSACTIONS AND SUBSIDIARIES (a) Incorporation and economic activity Alicorp S.A.A. (hereinafter the Company ) was incorporated in Peru on July 16, 1956 and started operations in August of that year. The legal address of the Company is Av. Argentina No Carmen de la Legua Reynoso - Callao, Peru. Its economic activity comprises the manufacture and distribution of edible oil and fats, pasta, flour, biscuits, soap, detergents, sauces, instant beverages, food for animal consumption and personal care products; as well as the distribution of products manufactured by third parties. The Company and its subsidiaries primarily conducts its business in their corresponding local markets, and also exports its products to Argentina, Brazil, Ecuador, Chile, Panama, Honduras, Bolivia, Haiti, Papua Nueva Guinea, Nicaragua, Guatemala, USA, Colombia, Costa Rica, Venezuela, Belize, Canada, Japan, Dominican Republic, Netherlands, Germany, Philippines, Puerto Rico, China, Cuba, Curaçao, Paraguay, among others. For years 2013 and 2012, they represent 35.9% and 25.7% of total consolidated sales, respectively. (b) Approval of the consolidated financial statements The accompanying consolidated financial statements for the year ended on December 31, 2013 have been authorized for issuance by the Company s Management on February 17, These financial statements will be submitted for their approval to the Board and General Shareholders Meeting within terms established by the Law. According to Management, the accompanying consolidated financial statements will be approved at the General Shareholders Meeting as without changes. The consolidated financial statements for the year ended December 31, 2012, were approved by the General Shareholders Meeting on March 25, (c) Explanation added for translation into the English language of the original consolidated financial statements issued in Spanish The accompanying translated consolidated financial statements originally issued in Spanish are in accordance with International Financial Reporting Standards (IFRS). Certain accounting practices applied by the Company and its Subsidiaries that conform to IFRS may not conform to accounting principles generally accepted in other countries. In the event of a discrepancy, the Spanish language version prevails

11 (d) Main transactions (d.1) Acquisitions and new investments (i) On February 6, 2013, the Company acquired, through its subsidiary Alicorp Do Brasil Participaçoes S.A., indirect subsidiary of Alicorp Inversiones S.A., 100% of Brazilian company Pastificio Santa Amália S.A., for R$195,000 (approximately S/.252,885), engaged in preparing and commercializing mass consumption products such as pastas, jelly, chocolate and instant beverages, labeled Santa Amália. (ii) On January 4, 2013, the Company acquired 99.10% common shares and 93.68% investment shares; and subsequently, on June 11, 2013, it acquired 4.11% investment shares of Industrias Teal S.A., engaged in manufacturing, commercializing and distributing flours, pastas, biscuits, panettone, chocolates and candies. Total amount paid for this transaction was S/.424,475 (Note 15). (iii) On December 20, 2012, the Company, along with its subsidiary Alicorp Inversiones S.A., acquired 100% shares in Industria Nacional de Conservas Alimenticias S.A., Alimentos Peruanos S.A., Garuza Transporte S.A. and S.G.A. & CO S.A. (Incalsa Group), companies engaged in manufacturing, commercializing and distributing sauces, for an amount of US$23,590 (equivalent to S/.60,486) (Note 15). (iv) On October 31, 2012, the Company, through an a sale and purchase agreement signed with Ucisa S.A., agreed to the acquisition of certain assets in relation to production activities, branding, inventory of finished goods and supplies related with edible oil and fat. Additionally, said contract included the non-competition commitment assumed by the selling part (Note 14(b)). Inventories purchase was made on October 31, 2012, for S/.17,877, and on January 15, 2013, fixed assets were acquired for S/.6,914, and intangibles for S/.9,798. (v) On September 5 and November 6, 2012, Alicorp Holdco España S.L. (subsidiary of Alicorp Inversiones S.A.), acquired 100% shares in Salmofood Group (Salmofood S.A. and its subsidiary Cetecsal S.A.) for US$64,549 (equivalent to S/.161,721), who is mainly engaged in producing food for fish farming, breeding and fattening up (Note 15). (d.2) Sale of assets and disposition of discontinued operations (i) (ii) On December 3, 2013, the Company transferred to Empresas Carozzi S.A. (Chile) and to its subsidiary Molitalia S.A. (Peru), assets related to the business of balanced food for pets. Sale value amounted to US$35,841 (equivalent to S/.100,612). This operation included the sale of Mimaskot and Nutrican brands, as well as productive assets. On the same date, production contract was signed with Molitalia S.A. (Note 32). On January 31, 2012, by means of purchase and sale agreement, the Company and its subsidiary Molinera Inca S.A. transferred to ONC (Peru) S.A.C. assets of its property, in relation to the production of fish oil with Omega 3, whose plant is located in Piura. Amount for this transfer was of US$52,679 (Note 32)

12 (e) Subsidiaries Subsidiaries are all entities in which the Group has the power to govern financial and operating policies. This situation is usually evidenced by a controlling shareholding of more than half of the shares entitled to vote. Subsidiaries are fully consolidated from the date on which effective control is transferred to the Group and until such control ceases. As of December 31, 2013 and 2012, the share percentage of the Company in the consolidated subsidiaries is as follows: Direct and indirect share ownership Agassycorp S.A. 100% 100% Alicorp Argentina S.C.A. 100% 100% Alicorp Colombia S.A % 99.98% Alicorp Do Brasil Participaçoes S.A. 100% - Alicorp Ecuador S.A. 100% 100% Alicorp Guatemala S.A. 100% 100% Alicorp Holdco España S.L. 100% 100% Alicorp Honduras S.A. 100% 100% Alicorp Inversiones S.A. 100% 100% Alicorp San Juan S.A. 100% 100% Alicorp Trading (Shenzhen) Ltd. Co % Alicorp Uruguay S.R.L. 100% 100% Alimentos Peruanos S.A. 100% 100% Cernical Group S.A. 100% 100% Cetecsal S.A. 100% 100% Consorcio Distribuidor Iquitos S.A % 99.84% Downford Corporation 100% 100% Farmington Enterprises Inc. 100% 100% Garuza Transportes S.A. 100% 100% Inbalnor S.A. 75% 75% Industria Nacional de Conservas Alimenticias S.A. 100% 100% Industrias Teal S.A % - Italo Manera S.A. 100% 100% Molinera Inca S.A. 100% 100% Pastas Especiales S.A. 100% 100% Pastificio Santa Amália S.A. 100% - Prooriente S.A. 100% 100% S.G.A. & CO. S.A. 100% 100% Salmofood S.A. 100% 100% Sanford S.A.C.I.F.I. y A. 100% 100% Sulfargen S.A. 100% 100% TVBC S.C.A. 100% 100%

13 Presented below, details of economic activity of consolidated subsidiaries and their operations: Agassycorp S.A. It was incorporated on February 25, 2005 in Guayaquil, Guayas Province, Ecuador, the legal address is Urb. Santa Leonor Solar 4 Mz. 10. The Company began operations on August 1, As of December 31, 2013, the subsidiary does not perform commercial operations. Alicorp Argentina S.C.A. The legal address is Ingeniero Butty 275, 11 th floor Buenos Aires, Capital Federal, Argentina. Its main activity is the manufacture and commercialization of personal care and household cleaning products. It is a subsidiary of Alicorp S.A.A. as from May 30, Alicorp Colombia S.A. It was incorporated on August 15, 2006, in the city of Bogota, Colombia. Its legal address is Carrera 7 No , 7 th floor. It began operations in September Its economic activity comprises the distribution of mass consumption products and the commercialization and distribution of animal nutrition products. On December 1, 2008, Alicorp Colombia S.A. merged with Productos Personales S.A. (Propersa) - company acquired in Alicorp Do Brasil Participações S.A. It was incorporated on September 17, 2012, in the city of Sao Paulo, Brazil. Its legal address is Calçada das Papoulas No. 74, Room 03, Condominio Centro Comercial Alphaville. It started its operations on January 22, It is engaged in holding interests in other Brazilian corporations, as shareholder or partner, and in rendering business administration services. Alicorp Ecuador S.A. It was incorporated on August 1, 1985, in Quito, Ecuador, with legal address in Calle Bartolome Sanchez , Office PB Carcelén Alto, Pichincha, Quito. This entity is a subsidiary of Alicorp S.A.A. as from May 4, It is engaged in commercializing all kinds of items. Alicorp Guatemala S.A. It was incorporated on September 30, 2009 in Guatemala, and began commercial operations on December 1, Its legal address is 2 Calle 23 80, zona 15, Vista Hermosa II Edificio Avante 13 th floor, office The Company's primary activity is the manufacturing, export, import, distribution and commercialization of mass consumption products, mainly food and cleaning products. Alicorp Holdco España S.L. It was incorporated in May 22, Its legal address is Paseo de Gracia, 21, 4th floor, Barcelona, Spain. It is mainly engaged in the acquisition, holding, use and administration, direction and management of security titles and/or shares

14 Alicorp Honduras S.A. It was incorporated on February 7, 2008, with legal address in the city of San Pedro de Sula, Departamento de Cortés, Honduras. The Company's main activity is the commercialization and distribution of animal nutrition products. Alicorp Inversiones S.A. It was incorporated on May 26, Its legal address is Av. Argentina 4793, Carmen de la Legua Reynoso, Callao, Peru. Its main activity is to develop all types of investments in Peru and abroad, and rendering general services. Alicorp Uruguay S.R.L. It is a limited liability company domiciled in Calle Yaguarón 1407, offices Montevideo, Uruguay. It is engaged in commercializing all forms of merchandise and raw materials in branches and sub-branches of food, cosmetics and personal care; animal nutrition, imports, exports, representations, commissions and consignations; shareholding, incorporation or acquisition of companies operating in the aforementioned branches. It is subsidiary of Alicorp S.A.A. as from May, Alimentos Peruanos S.A. It was incorporated in July 1, It is subsidiary of Alicorp S.A.A. as from December 20, Its legal address is Avenida Francisco Bolognesi 551, Santa Anita, Lima, Peru. It is mainly engaged in habilitating raw materials. Cernical Group S.A. It was incorporated in January 13, 2006, in Panama City, Panama. It is mainly engaged in promoting, establishing or developing companies or businesses. Cetecsal S.A. It was incorporated on October 31, Its legal address is Ruta 5 Sur, kilómetro 1170, comuna Castro, Chile. Cetescal is a subsidiary of Alicorp S.A.A. as from September 5, It is mainly engaged in studying and elaborating diets for fish and animal food, developing technologies and processes regarding genetics, technology and food adsorption, establishing labs and land and maritime cultivation centers. Consorcio Distribuidor Iquitos S.A. The Company was incorporated and started operations on October 21, Its legal address is Calle Cuzco No. 470, Distrito de Punchana, Provincia de Maynas, Loreto, Peru. Its economic activity is the distribution of all kinds of items or products, primarily oil and fats, pasta and flour in the jungle of Peru. As of December 31, 2013, the Subsidiary does not perform commercial operations

15 Downford Corporation It was incorporated in the British Virgin Islands and began operations on October 4, The stated purpose of the Company is to perform any legal commercial activity under the laws of the British Virgin Islands. It is a subsidiary of Alicorp S.A.A. since July 10, Farmington Enterprises Inc. It was incorporated in the British Virgin Islands and started operations on August 10, This entity is a subsidiary of Alicorp S.A.A. since October 20, In January 2009, it changed its address to Panama; and in June 2013, to Peru. The object of the entity is to undertake investment activities. It also owns 50% of the common shares of Molinera Inca S.A. Garuza Transportes S.A. It was incorporated on August 14, It is a subsidiary of Alicorp S.A.A. as from December 20, Its legal address is Avenida Francisco Bolognesi 551, Santa Anita, Lima, Peru. Garuza Transportes is mainly engaged in load transportation. Inbalnor S.A. It was incorporated on March 3, 2011, in Ecuador. Its legal address is in Ciudad de Milagro, Cantón Milagro, Provincia del Guayas. It is a subsidiary of Alicorp S.A.A. as from Inbalnor is engaged in producing animal food. Industria Nacional de Conservas Alimenticias S.A. It was incorporated on February 2, It is a subsidiary of Alicorp S.A.A. as from December 20, Its legal address is Avenida Francisco Bolognesi 551, Santa Anita, Lima, Peru. This company is mainly engaged in producing, commercializing and distributing canned food and sauces. Industrias Teal S.A. It was incorporated on January 4, 1936, in Lima, Peru. Its legal address is Av. Nicolas Ayllon 1779, Distrito de Ate. It is engaged in the mill industry and in producing and commercializing pasta, biscuits, pantone, candies and chocolates under Sayón brand. It is subsidiary of Alicorp as from January 4, Italo Manera S.A. The legal address is Ruta 229, Km 6.7, Bahia Blanca, Buenos Aires Argentina. Its main activity is the manufacture, commercialization and distribution of pasta, cakes and juices. It is a subsidiary of Alicorp Argentina S.C.A. since June 21, Molinera Inca S.A. It was incorporated in Peru on January 10, 1964 and it is a subsidiary of Alicorp S.A.A. since October 20, Its economic activity comprises grain milling, biscuit manufacturing, and marketing of own products and products from third parties. It has three production plants. Two of them are located in Trujillo, Carretera Panamericana Norte Km 557 and 558, respectively. The third plant is located in Carretera Paita Sullana Km 3.5, Province of Paita Piura. Its legal address is Carretera Panamericana Norte Km 557 District and Province of Trujillo La Libertad

16 Pastas Especiales S.A. The legal address is Av. Juan Manuel de Rosa No Bahía Blanca, Buenos Aires Argentina. Its main activity is the manufacture and commercialization of pastas and cakes. It is a subsidiary of Alicorp Argentina S.C.A. since June 21, Pastificio Santa Amália S.A. It was incorporated on September 4, 1969, in the city of Machado, Estado de Minas Gerais, Brazil. Its legal address is Rodovio Br 267, Km 2, industrial district of Machado. It started operating on September 30, It is a subsidiary of the Company as from February 5, It is mainly engaged in elaborating and commercializing mass consumption products such as pastas, jelly, chocolates and instant beverages, under Santa Amália brand. Prooriente S.A. It was incorporated on October 2, 2007, with legal address in Calle Cuzco No. 470 Distrito de Punchana, Provincia de Maynas, Loreto, Peru. The Company began operations in December 2007, for the stated purpose of commercializing all kinds of items or products, primarily oils and fats, pasta and flour in the jungle of Peru. S.G.A. & CO. S.A. It was incorporated on April 17, It is a subsidiary of Alicorp S.A.A. as from December 20, Its legal address is Avenida Francisco Bolognesi 551, Santa Anita, Lima, Peru. It is mainly engaged in distributing food products. Salmofood S.A. It was incorporated in May 26, 1993 and started operating on February 1, Its legal address is Ruta 5 Sur kilómetro 1170, comuna Castro, Chile. It is a subsidiary of Alicorp S.A.A. as from September 5, It is mainly engaged in producing food for farming, breeding and fattening up of fish, birds and animals in general. Sanford S.A.C.I.F.I. y A. The legal address is Ingeniero Enrique Butty 275, 11th floor, Buenos Aires, Capital Federal. Its main activity is the manufacture and commercialization of food products. It is a subsidiary of Alicorp Argentina S.C.A. since May 31, TVBC S.C.A. and Subsidiaries The legal address of TVBC S.C.A. and its subsidiary Sulfargen S.A. is Ingeniero Butty 275, 11th floor, Buenos Aires, Capital Federal, Argentina; and the legal address of subsidiary Alicorp San Juan S.A. is ruta 40 and calle 7, Pocito Aberestian, San Juan. TVBC S.C.A. has a stake of 99.9% of shares in Alicorp San Juan SA, which is mainly engaged in the manufacture and commercialization of personal care and home care products and 95% in shares of Sulfargen S.A. whose plant is currently idle. Both companies are subsidiaries of Alicorp S.A.A. since May 30,

17 Liquidation of non-operating companies As of December 31, 2013, the Company liquidated and closed operations of Alicorp Trading (Shenzhen) Ltd. Co. Liquidation did not affect liabilities or profit and loss. 2. SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies used by the Company and its subsidiaries for the preparation and presentation of the consolidated financial statements are summarized as follows: (a) Statement of compliance and basis of preparation and presentation The accompanying consolidated financial statements were prepared in conformity with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB) effective as of December 31, 2013 and 2012, which include International Financial Reporting Standards (IFRS), International Accounting Standards (IAS) and Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC) - adopted by the IASB. As it is explained below in the significant accounting policies section, the historical cost basis was used for this purpose, except for some items of properties and financial instruments measured by appraised value or fair value, as indicated in this note. The historical cost is generally based in the fair value of the consideration given for the exchange of assets. Fair value is the price that would be receive when selling an asset, or paid when transferring a liability in an organized transaction between market participants at a measure date, regardless of the fact that said price is directly observable or considerable through another appraisal technique. When estimating the fair value of an asset or liability, the Company considers the characteristics of said asset or liability in the event that market participants would want to consider them as of when setting a price as of measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on said basis, except transactions of share-based payment (which are within the scope of IFRS 2), leasing transactions (within the scope of IAS 17), and measurements somehow similar to fair value, but not fair value, such as net realizable value in IAS 2, or value in use in IAS 36. (b) Basis of consolidation The accompanying consolidated financial statements include the accounts of the Company and from those entities under its control (subsidiaries). The Company considers achieving control over an entity, when: (a) it has the power to direct its financial and operating policies, in order to obtain benefits from its activities, (b) it is exposed, or owns rights, on variable returns for its relation with the controlled entity, and (c) has the capacity of using its power to improve its returns. The Company reassesses the control over a controlled entity if events and circumstances indicate changes in one or more of the three aforementioned control elements. As of December 31, 2013 and 2012, financial statements include consolidated accounts of the Company and its subsidiaries described in Note 1 (e). All intra-group transactions have been fully eliminated. When necessary, adjustments are made to the financial statements of certain subsidiaries to comfort their accounting policies with those used by the Parent Company

18 Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as the case may. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this result having a deficit balance. Changes in the Group ownership in its subsidiaries, which do not result in a loss of control, are recorded as equity transactions. The carrying amounts of the ownership of the shareholders of the Company and that of the non-controlling interest of the subsidiaries are adjusted to reflect the changes in the respective ownership. Any difference between these amounts and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company. (c) Responsibility for information and estimates The Company s Management is responsible for the information contained in the consolidated financial statements. Certain estimates made to quantify some assets, liabilities, revenues, expenses and commitments recorded therein have been used based on the experience and other relevant factors. Final results could differ from those estimates. These estimates are reviewed on an ongoing basis. Changes in accounting estimates are prospectively recognized by recording the effects of changes in the corresponding consolidated statement of income for the year in which the corresponding revisions are conducted. The most important estimates and sources of uncertainty related with the preparation of the Company s consolidated financial statements refer to: - Determination of functional currency and recording of foreign currency transactions. - Revenue recognition. - Operating leases. - Impairment losses of certain assets (Notes 7, 9, 11, 13, 14 and 15). - Useful life of property, plant and equipment and other intangible assets. - Goodwill (Note 15). - Fair values, classification and risks of financial assets and liabilities (Note 4). - Provisions (Note 21). - Probability of contingencies (Note 37). - Current and deferred income tax (Note 30). (d) Functional and presentation currency The Company prepares and presents its consolidated financial statements with its subsidiaries in Peruvian nuevos soles, which is its functional currency. The functional currency is the currency of the main economic environment in which an entity operates, which has an impact on the selling prices of traded goods, among other factors. (e) Foreign currency The functional currency of the Company and its subsidiaries is the currency of the country in which each entity operates. Transactions in currencies other than the functional currency are deemed to be "foreign currency", and are recognized at the rates of exchange prevailing at the date of transactions. At the end of each reporting period, the balances of monetary items denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary items carried at fair value

19 that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items which are recognized at historical cost in foreign currencies are translated using rates of exchange prevailing at the date of transactions. Exchange differences arising on monetary items are recognized in profit or loss in the period in which they arise, except for: - exchange differences on foreign currency borrowings related to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on these borrowings; - exchange differences on transactions entered into in order to hedge foreign exchange risks in cases of transactions designated to hedge accounting, and - exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur in the foreseeable future (therefore forming part of the net investment in the foreign operation), which are recognized initially in other comprehensive income and reclassified to profit or loss for the period on repayment of the monetary items. For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group s foreign operations are translated into Currency Units using exchanges rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates ay the dates of the transactions are used. Exchange difference arising, if any, are recognized in other comprehensive income and accumulated in equity (attributed to non-controlling interests as appropriate). On the disposal of a foreign operation (i.e. a disposal of the Group s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss control over a jointly controlled entity that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss. In addition, in relation to a partial disposal of a subsidiary that does not result in the Group losing control over the subsidiary, the proportionate share of accumulated exchange difference are reattributed to non-controlling interest and are not recognized in profit or loss. For all other partial disposals (i.e. partial disposals of associates of jointly controlled entities that do not result in the Group losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss. Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognized in other comprehensive income and accumulated in equity. (f) Cash and cash equivalent Cash and cash equivalent include cash in banks and investments in time deposits with maturities under three months, respectively

20 (g) Financial instruments Financial instruments are contracts that give rise simultaneously to a financial asset in a company and a financial liability or equity instrument in another company. Financial assets and liabilities are recognized when the Company and its subsidiaries are part of contractual agreements of the corresponding instrument. Financial assets and financial liabilities are initially measured at fair value plus the transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, except for those classified at fair value through profit or loss, which are initially recognized at fair value and whose transaction costs directly attributable to the acquisition or issue of financial assets or financial liabilities are recognized immediately in profit or loss for the year. Financial assets Conventional purchase or sale of financial assets are recognized and written off using the trade date accounting, or at the settlement date accounting. The Company will apply the same method in a consistent way for all purchases and sales of financial assets that classify in the same way. The trade date accounting is when an entity commits to purchase or sale an asset. The accounting of the trade date refers to: (a) the recognition of the asset to be received and liability to be paid as of the trade date accounting, and (b) write off the asset being sold, the recognition of the eventual result of the disposition, and recognition of a receivable from the buyer as of the contracting date. Usually, interest do not accumulate (accrue) on the asset and corresponding liability until the liquidation date, when the security is transferred. The settlement date accounting is when an asset is delivered or received by the entity. The accounting by the settlement date refers to: (a) the recognition of the asset as of the day in which the entity receives it, and (b) write off the asset and the recognition of any result by disposition as of the day its delivery by the entity takes place. When the accounting of liquidation date is applied, an entity will account any change in fair value of the asset receivable, that takes place during the period starting as of the contracting date until the liquidation date, in the same way as it accounts the acquired asset, that is to say, the change in value will not be recognized in assets measured at amortized cost; but in the gains for the period for assets classified as financial assets measured at fair value through profit and loss; and will be recognized in other comprehensive income for investments in equity instruments. Financial assets are classified into the following specified categories: - Financial assets at fair value through profit or loss; - Held-to-maturity investments; - Loans and receivables; - Available-for-sale financial assets. Financial assets are classified as at fair value through profit or loss when the financial asset is either held for trading or, on initial recognition; it is designated by the Company and its subsidiaries to be recorded at fair value through profit or loss

21 A financial asset is classified as held for trading if: - it has been acquired principally for the purpose of selling it in the near term; or - on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or - it is a derivative that is not a financial guarantee contract, nor it is a derivative that is not designated and effective as a hedging instrument. A financial asset other than a financial asset held for trading may be designated as at fair value through profit or loss upon initial recognition if: - such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or - the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or - it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract (asset or liability) to be designated as at financial assets at fair value through profit or loss. Financial assets at fair value through profit or loss are stated at fair value, with any gain or losses arising on re-measurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset. Non-derivative financial assets with a fixed maturity date, whose payments are fixed or determinable amounts, and the Company and its subsidiaries have the effective intention and, additionally, the capacity of preserving until its maturity, are classified as held to maturity investments. These are recorded at amortized cost by applying the effective interest rate less any recognized accumulated impairment loss, recognizing income throughout the corresponding period. Trade receivable, loans and other non-derivative receivable with fixed or determinable payments that are not traded in an active market are classified as loans and receivable. These items are recorded at amortized cost by applying the effective interest rate method less any recognized accumulated impairment loss. Effective interest rate is the discount rate which exactly equalizes cash flows receivable or payable, estimated throughout the instrument s life. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. Available-for-sale investments are non-derivative financial assets specifically designated as available-for-sale, or classified as: (a) loans and receivable, (b) held-to-maturity investments, or (c) financial assets at fair value through profit or loss. These investments are valued at fair value. Profit and loss provided by variations in the fair value of these investments are directly recognized under Other comprehensive income, except for impairment value losses, interests calculated according to the effective interest rate and profit or loss for variation in exchange rate of debt instruments denominated in foreign currency, which are directly recognized in profit or loss for the period when they are produced. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in other comprehensive income is reclassified to profit or loss. Dividends of equity instruments classified as available-for-sale are recognized in profit or loss for the period when the rights entitling the Company and its subsidiaries to receive the corresponding payment are established

22 Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. Quoted market prices in an active market are the best evidence of fair value and should be used, where they exist, to measure the financial instrument. If a market for a financial instrument is not active, an entity establishes fair value by using a valuation technique that makes maximum use of market inputs and includes recent arm's length market transactions, reference to the current fair value of another instrument that is substantially the same or at discounted cash flow analysis, applying market interest rate for similar financial instruments (same term, currency, interest rates and similar equivalent risk assessments). Financial liabilities Financial liabilities and equity instruments are classified as either financial liabilities or as equity in accordance with the content of the contractual arrangements and the economic substance of the contract. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Financial liabilities held by the Company and its subsidiaries are classified either as financial liabilities at fair value or as other financial liabilities. Financial liabilities are classified as at fair value through profit or loss when the financial liability is either held for trading or at initial recognition have been designated by the Company as at fair value through profit or loss. A financial liability is classified as held for trading if: - it has been acquired principally for the purpose of repurchasing it in the near term; or - on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or - it is a derivative that is not a financial guarantee contract, nor it is a derivative that is not designated and effective as a hedging instrument. A financial liability other than a financial liability held for trading may be designated as at fair value through profit or loss upon initial recognition if: - such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or - the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or - it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract (asset or liability) to be designated as at fair value through profit or loss. Financial liabilities at fair value through profit or loss are stated at fair value. Profit or loss in fair value changes of these liabilities are recognized in profit or loss for the year when they are produced. Profit or loss recognized in profit or loss includes any interest paid on said financial liabilities. Other financial liabilities are subsequently measured at amortized cost using the effective interest method, recognizing interest expense throughout the corresponding period