Mantex, S.A. and Subsidiaries

Transcription

1 Mantex, S.A. and Subsidiaries Independent Auditors Report Consolidated Financial Statements For the years ended December 31, 2009 and 2008

2 MANTEX, S.A. AND SUBSIDIARIES TABLE OF CONTENTS Pages INDEPENDENT AUDITORS REPORT 1 CONSOLIDATED FINANCIAL STATEMENTS IN CONSTANT BOLIVARS FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008: Consolidated balance sheets 2-3 Consolidated statements of income 4 Consolidated statements of stockholders equity 5 Consolidated statements of cash flows 6 Notes to the consolidated financial statements 7-28

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4 MANTEX, S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2009 AND 2008 IN CONSTANT BOLIVARS AS OF DECEMBER 31, 2009 (In bolivars) ASSETS NOTES CURRENT ASSETS: Cash and cash equivalents 1, 2 and 21 28,049,511 19,337,465 Accounts receivable, net: Leasing of premises, guarantee advance and common expenses 8,736,038 21,824,745 Unconsolidated subsidiaries and related companies 17 1,549, ,972 Employees 787, ,380 Other 464, ,120 11,538,321 23,556,217 Allowance for doubtful accounts (66,472) (83,128) 11,471,849 23,473,089 Investment securities 1, 4 and 21 44,810,149 62,139,866 Advance to suppliers 4,911,389 5,672,445 Deferred income taxes , ,224 Prepaid expenses 3 7,462,284 9,133,502 Total current assets 97,030, ,163,591 REAL ESTATE INVESTMENTS FOR LEASING 1 and 5 1,695,774,176 1,356,194,095 REAL ESTATE INVESTMENTS IN PROGRESS 1 and 6-6,618,720 OTHER INVESTMENTS 1 and 7 79,135,361 79,298,107 PROPERTY, FURNITURE AND EQUIPMENT 1 and 8 13,271,144 11,878,111 DEFERRED CHARGES 1 and 9 3,010,217 5,013,373 OTHER ASSETS 33, ,299 TOTAL 1,888,255,248 1,579,894,296 See notes to the consolidated financial statements 2

5 MANTEX, S.A. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2009 AND 2008 IN CONSTANT BOLIVARS AS OF DECEMBER 31, 2009 (In bolivars) LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS' EQUITY NOTES CURRENT LIABILITIES: Bank loans 10 13,089,001 24,184,124 Current portion of long-term debt 11 1,167,555 4,743,123 Current portion of unsecured obligations 12 12,500,000 - Dividends payable 1,948,585 1,969,866 Accounts payable: Trade 10,901,235 7,588,455 Unconsolidated subsidiaries and related companies 17 5,949,562 10,031,103 Other 1,347, ,147 18,198,262 18,313,705 Accrued liabilities 13 4,574,116 2,891,011 Taxes payable 1 and ,173 - Total current liabilities 51,975,692 52,101,829 ADVANCES RECEIVED - 1,145,594 LONG-TERM DEBT 11 26,944,976 22,679,060 LONG-TERM UNSECURED OBLIGATIONS 12 25,000,000 46,896,486 GUARANTEE DEPOSITS 14 and 21 4,954,591 5,255,081 FUNDS AND ACCRUALS 1 5,068,135 4,077,724 DEFERRED CREDITS 1 35,506,511 33,933,707 Total liabilities 149,449, ,089,481 MINORITY INTERESTS ,139,294 45,405,772 STOCKHOLDERS' EQUITY 1 and 18 Restated capital stock (equivalent to nominal capital stock of Bs. 80,590,579) 133,639, ,639,102 Retained earnings: Legal reserve 13,363,911 13,363,911 Undistributed earnings 120,549, ,133,385 Total retained earnings 133,913, ,497,296 Unrealized gain or loss from investments 4 (1,695,795) - Unrealized gain or loss from holding of nonmonetary assets 1 1,263,809,680 1,100,262,645 Total stockholders' equity 1,529,666,049 1,368,399,043 TOTAL 1,888,255,248 1,579,894,296 See notes to the consolidated financial statements 3

6 MANTEX, S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 IN CONSTANT BOLIVARS AS OF DECEMBER 31, 2009 (In bolivars) NOTES REVENUES: Sale of premises 19-10,108,467 Real estate leasing 20 87,373,981 81,989,205 Other 4,478,046 4,224,162 TOTAL REVENUES 91,852,027 96,321,834 COSTS AND EXPENSES: Cost of sales of premises - 18,479,233 Administrative and general expenses 43,759,668 52,653,589 Depreciation 24,348,210 14,737,665 Other - 352,026 TOTAL COSTS AND EXPENSES 68,107,878 86,222,513 OPERATING INCOME 23,744,149 10,099,321 OTHER EXPENSES: Loss from sale of plant and machinery 7 - (7,487,003) TOTAL OTHER EXPENSES - (7,487,003) COMPREHENSIVE FINANCING INCOME (COST): Interest income (expense), net 5,666,783 (295,545) Gain or loss from sale of securities (6,052,638) 5,442,115 Monetary result for the period 1 2,882,938 8,469,682 TOTAL COMPREHENSIVE FINANCING INCOME 2,497,083 13,616,252 INCOME BEFORE PROVISION FOR INCOME TAXES AND MINORITY INTERESTS 26,241,232 16,228,570 PROVISION FOR INCOME TAXES: 1 and 16 Income taxes (9,351,837) (5,699,075) Deferred income taxes - (1,276,420) (9,351,837) (6,975,495) INCOME BEFORE MINORITY INTERESTS 16,889,395 9,253,075 MINORITY INTERESTS (3,308,223) (9,241,755) NET INCOME 13,581,172 11,320 EARNINGS PER SHARE See notes to the consolidated financial statements 4

7 MANTEX, S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 IN CONSTANT BOLIVARS AS OF DECEMBER 31, 2009 (In bolivars) Unrealized gain or loss Restated Retained earnings Unrealized from holding of Total capital Legal Undistributed gain or loss nonmonetary stockholders' NOTES stock reserve earnings Total from investments assets equity BALANCES AS OF DECEMBER 31, ,639,102 13,363, ,659, ,023,365-1,107,526,438 1,390,188,905 Net gain or loss from holding of nonmonetary assets (7,263,793) (7,263,793) Cash dividends declared (14,537,389) (14,537,389) - - (14,537,389) Net income ,320 11, ,320 BALANCES AS OF DECEMBER 31, ,639,102 13,363, ,133, ,497,296-1,100,262,645 1,368,399,043 Net gain or loss from holding of nonmonetary assets ,972, ,972,334 Cash dividends declared (14,165,406) (14,165,406) - - (14,165,406) Effect of minority portion on unrealized gain or loss from holding of nonmonetary assets (160,425,299) (160,425,299) Unrealized loss from investment securities (1,695,795) - (1,695,795) Net income ,581,172 13,581, ,581,172 BALANCES AS OF DECEMBER 31, ,639,102 13,363, ,549, ,913,062 (1,695,795) 1,263,809,680 1,529,666,049 See notes to the consolidated financial statements 5

8 MANTEX, S.A. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 IN CONSTANT BOLIVARS AS OF DECEMBER 31, 2009 (In bolivars) OPERATING ACTIVITIES: Net income 13,581,172 11,320 Adjustments to reconcile net income to cash provided by (used in) operating activities: Monetary result for the period (2,882,938) (8,469,682) Depreciation of real estate available for leasing, furniture and equipment 24,348,210 14,737,665 Gain (loss) from sale of investment securities 6,052,638 (5,442,115) Provision for income taxes 9,351,837 (6,975,495) Minority interests 3,308,223 9,241,754 Changes in operating assets and liabilities: Decrease (increase) in- Accounts receivable 8,094,991 (5,558,439) Advance to suppliers (416,519) (640,911) Real estate held for sale - 275,049 Deferred income taxes - (407,224) Prepaid expenses 518,176 (9,348,532) Other assets and deferred charges 1,716,469 (5,041,724) Increase (decrease) in- Accounts payable 3,942,125 (12,085,515) Dividends payable 414,192 23,952 Accrued liabilities 1,815, ,476 Income taxes payable 552,575 (1,475,069) Funds and accruals 2,004,830 2,291,690 Guarantee deposits and deferred credits 10,120,858 10,971,854 Net cash provided by (used in) operating activities 82,521,915 (17,452,946) INVESTING ACTIVITIES: (Increase) decrease in real estate investments for leasing (39,158,680) 13,087,176 Decrease (increase) in real estate investments in progress 6,618,720 (2,794,630) Decrease in other investments 162,746 18,270,371 Increase in investment securities (636,527) (56,697,751) (Increase) decrease in property, furniture and equipment (2,190,310) 2,751,407 Net cash used in investing activities (35,204,051) (25,383,427) FINANCING ACTIVITIES: Decrease in bank loans (1,565,086) (4,933,933) (Decrease) increase in current portion of long-term debt (2,911,887) 4,769,862 Increase in current portion of unsecured obligations 13,865,048 - Increase in long-term debt 4,405,319 2,058,591 (Decrease) increase in unsecured obligations (21,896,486) 46,896,486 Increase (decrease) in guarantee deposits 834,623 (15,174,742) Cash dividends declared (16,113,991) (14,561,341) Net cash (used in) provided by financing activities (23,382,460) 19,054,923 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 23,935,404 (23,781,450) EFFECT OF INFLATION ON CASH AND CASH EQUIVALENTS (15,223,358) (7,785,083) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF YEAR 19,337,465 50,903,998 CASH AND CASH EQUIVALENTS AT THE END OF YEAR 28,049,511 19,337,465 MONETARY RESULT FOR THE PERIOD CORRESPONDING TO: Operating activities 15,490,824 11,479,662 Investing activates (10,217,811) - Financing activities 12,833,282 4,775,103 Cash (15,223,358) (7,785,083) 2,882,938 8,469,682 ADDITIONAL INFORMATION TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS: Cash paid during the year for: Interests 17,136,620 19,516,190 Income taxes 839,216 15,627,545 See notes to the consolidated financial statements 6

9 MANTEX, S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 (In bolivars) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization The Company was incorporated on February 22, It is engaged in manufacturing, purchasing and entering into any type of transactions related to chemical substances; acquiring and assigning properties, managing assets under commission, entering into any type of agreements and acts related to the aforementioned business purposes, including granting and receiving loans, registering shares from other companies and issuing secured or unsecured bonds and obligations. Since 1999, the Company redirected part of its real estate operations, through the construction and start up of Centro Comercial Metrópolis Valencia in June On June 5, 1998, it incorporated Inmobiliaria , S.A. for the purpose of constructing, commercializing and managing real estate. During 2002, it incorporated Compañía Administradora , S.A. for managing assets, purchasing and selling, whether cash or credit, any type of real estate, chattels and securities. In 2004, Compañía Publicidad y Promoción , C.A. was incorporated for developing, preparing, commercializing and distributing advertising means. In 2005, Metrópolis Barquisimeto, C.A., Inmobiliaria Metrópolis 01999, C.A., Administradora Metrópolis 19600, C.A., Gestión Metrópolis, C.A. and Administradora Metrópolis Barquisimeto, C.A. were incorporated for the purpose of building and leasing real estate, as well as managing assets, purchasing and selling, whether cash or credit, any type of real estate and chattels and securities. During 2006, Estacionamiento Metrópolis 2006, C.A. was incorporated to operate and manage private areas for transit and parking lots, and in general, engaged in any other legal activity and Mantex Investment, Ltd. (Barbados) was incorporated, in order to carry out general investments. During 2007, Publicidad y Promoción Metrópolis Barquisimeto, C.A. was incorporated for the purpose of developing, preparing, commercializing and distributing advertising means and Estacionamiento Metrópolis Barquisimeto, C.A. was also incorporated for operating and managing private areas for transit and parking lots, and in general, engaged any other related business legal activity. Significant accounting policies The main accounting policies used by the Company and subsidiaries for the preparation of their consolidated financial statements are as follows: a. Basis of presentation The Company and subsidiaries are subject to the control of the Venezuelan Securities and Exchange Commission (CNV) and therefore, they must present their financial statements based on the accounting practices indicated by the Standards for the Preparation of Financial Statements of Entities ruled by the CNV, which do not significantly differ from accounting principles generally accepted in Venezuela (VEN- GAAP). 7

10 b. Consolidation As of December 31, 2009 and 2008, the consolidated financial statements include the accounts of Mantex, S.A. and its wholly-owned subsidiaries Inmobiliaria , S.A.; Administradora , S.A.; Mantex International Investment, Ltd.; Publicidad y Promoción , C.A.; Administradora Metrópolis 19600, C.A.; Estacionamiento Metrópolis 2006, C.A.; Gestión Metrópolis, C.A. and Mantex Investments, Ltd. (Barbados), as well as Metrópolis Barquisimeto, C.A.; Administradora Metrópolis Barquisimeto, C.A.; Estacionamiento Metrópolis Barquisimeto, C.A. and Publicidad y Promoción Metrópolis Barquisimeto, C.A. (50%-owned), and dormant companies: Plásticos Pet Internacional, C.A.; Viscosa Venezolana, S.A.; Inversiones Sigtow, S.A.; Inversiones 240, S.A., and Inversiones 7171, S.A. All significant intercompany balances and transactions have been eliminated in consolidation. c. Consolidated financial statements in constant bolivars The consolidated financial statements are presented in constant bolivars, for the purpose of eliminating the distortion generated by changes in the price levels in the Venezuelan economy. The Mixed Method was used to prepare the financial statements in constant bolivars. This method consists in substituting the measurement unit used in traditional accounting for a constant currency, restated at the date of the financial statements, subsequently incorporating the current or replacement values of property, furniture and equipment. For restatement purposes, the National Consumer Price Index (N.C.P.I.) for the metropolitan area of Caracas was used, which is issued by the Central Bank of Venezuela (BCV). The gain or loss from holding nonmonetary assets shown in the stockholders equity is represented by the difference between the values of real estate investments, furniture and equipment in constant bolivars, and their current or replacement values at closing dates. The realized gain or loss from holding nonmonetary assets corresponds to the difference between the depreciation expense in constant bolivars and the depreciation expense determined based on current or replacement values at closing date. Monetary items included in the balance sheets are presented at nominal value, since they reflect the monetary value of their components to the date of the last balance sheet. Nonmonetary items such as real estate investments, property, furniture and equipment and stockholders equity are stated in constant bolivars using the accumulated inflation factor from the date of acquisition or origin. Revenues, expenses and other monetary items are stated in constant bolivars based on the average inflation factor for the year. The monetary result for the period is calculated by applying during the period the inflation rates to net monetary assets or liabilities. It represents the gain or loss resulting from exposure to inflation from holding net monetary assets or liabilities during inflationary periods. The 2008 consolidated financial statements, formerly presented in constant bolivars at that date, are presented for comparative purposes in constant bolivars as of December 31, 2009, through the application of the annual variation in the National Consumer Price Index (NCPI). 8

11 The National Consumer Price Indexes at the beginning, end and average for the years ended December 31 are as follows: At the beginning of year At the end of year Average for the year Inflation for the year 25.06% 30.90% d. Translation of the financial statements of foreign subsidiaries The Company determined the functional currency of its foreign subsidiaries in accordance with the Standards for the Preparation of Financial Statements of Entities ruled by the CNV. Consequently, the financial statements of such subsidiaries were translated into bolivars for their inclusion in the accompanying financial information by translating monetary and nonmonetary items of the balance sheet at the current exchange rate; and by translating accounts of the statement of income at the average exchange rates for the corresponding year. The effects of including the financial statements of the subsidiaries translated into bolivars through this methodology are shown in stockholders equity under cumulative translation gain or loss from translation of subsidiary. e. Cash and cash equivalents Cash in banks and short-term investments maturing in three (3) months or less and are considered to be cash and cash equivalents. f. Real estate investments for leasing and in progress Real estate investments for leasing and in progress are presented at net replacement value determined by independent appraisers in December 2007 and April 2009, and restated at the closing date of the financial statements through the use of inflation indices. Depreciation is calculated based on the straight-line method over the remaining useful life of assets. Disbursements for maintenance and repairs are charged to income for the year as incurred, while disbursements for renewals or improvements are capitalized. Horizontal Property Regime, if applicable, is presented at net values. g. Investment securities Investment securities considered as trading investment securities are presented at their market value. The effects of fluctuation in market values of these investments are presented in income for the period. Investments considered as available-for-sale are presented at their fair value. The effects of fluctuation in fair value of these investments are presented in stockholders equity under Unrealized gain or loss from investments, until their realization through sale or disposal. Held-to-maturity debt securities are presented at their original investment cost, reduced by principal payments, plus or less accumulated amortization of differences between original cost and the value to be received upon maturity. Interests and amortizations of premiums or discounts of these investments are presented in income for the period. h. Other investments Long-term investments in affiliates over 20% in a company s equity are accounted for by using the equity method while those long-term investments of less than 20% in a company s equity are presented at the inflation-adjusted cost and cash dividends are considered as income for the year as earned. 9

12 The Company has recorded an impairment provision equal to the carrying amount for nonoperating investments. The Company has no obligation to financially support such entities. Other investments such as idle plant and equipment or held for sale or disposal are presented at their net replacement value determined by independent appraisers in December 2007 and April 2009, and restated at the closing date of the financial statements through the use of the inflation rates. Assets for which appraisals are not available are presented at acquisition cost adjusted for inflation. i. Property, furniture and equipment Property, furniture and equipment are presented at net replacement value determined by independent appraisers in December 2007 and April 2009, and restated at closing date of financial statements, through the use of inflation indices. Disbursements for maintenance and repairs are charged to income for the year as incurred, while disbursements for renewals or improvements are capitalized. Depreciation is calculated based on the straight-line method over the useful life of the different assets, as follows: Years Offices, furniture and fixtures Torre Credival Between 5 and 20 Other furniture and equipment Between 5 and 10 Vehicles 5 Management estimates that the book value of assets does not exceed their recovery value. Gains or losses resulting from the sale or disposal of a property, furniture and equipment item are determined as the difference between the proceeds from sale and the carrying value of the asset, which are recognized in the statements of income as realized. j. Deferred charges Expenses incurred during the development stage of Centro Comercial Metrópolis, net of the monetary result generated in that stage are deferred to be amortized over a period of five (5) years or less and are restated for inflation considering the origin date. k. Funds and accruals Funds are mainly generated by the companies administrating the malls in connection with advances received as revolving fund, fair fund, fund for advertising and promotion and reserve fund for common expenses; and the accruals correspond to those provided by the Labor Law which comprise 100% of the liability related to employee vested rights in conformity with effective Labor Law. l. Income taxes The provision for income taxes is calculated based on income reported for accounting purposes. The provision for income taxes represents the sum of the estimated current income taxes and deferred income taxes, if significant. Temporary differences mainly result from accounts receivable from leases and loss carryforwards. Current income taxes are determined by applying the income tax rates established by current tax law to net taxable income for the year. The deferred income taxes have been determined in accordance with the Statement of Accounting Principles Nº 3 (DPC-3 Accounting for income taxes Revised August 2003) issued in In accordance with said statement, deferred tax assets and liabilities should be recognized, corresponding to the amount of income taxes expected to be recovered or payable on temporary differences between reported book values of assets and liabilities and their corresponding tax bases. 10

13 Deferred tax assets and liabilities are determined by applying the tax rates established and decreed by the current tax law at the balance sheet date. The deferred tax asset is decreased through a valuation allowance from the amount that is estimated to be realized in the future. The recording of the deferred income tax asset is subjected to the assurance, beyond a reasonable doubt, of its realization. m. Long-lived assets The Company assesses the carrying amount of long-lived assets, whenever events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable. The calculation of impairment loss is based on the difference between the carrying amount and fair value of the asset. The calculation of the fair value of assets to be used through the Company s operations is based on the current value of estimated future cash flows. The fair value of assets expected to be sold or disposed of in the immediate future is equivalent at their net realizable value. n. Deferred credits Deferred credits mainly correspond to future sales and prepaid leases of premises at Metrópolis Barquisimeto and Metrópolis Valencia malls. o. Fair value of financial instruments The carrying amounts reported in the balance sheets for cash and cash equivalents, accounts receivable, notes and accounts payable, bank loans, shortterm loans and accruals and other short-term liabilities approximate their fair values due to the short-term maturity of these financial instruments. Consequently, these items have been excluded from the fair value disclosures in the notes to the consolidated financial statements. p. Operating leases Leases are classified as operating leases whenever the terms of the lease do not substantially transfer all the risks and rewards of ownership to the lessee, and they remain in the lessor. The Company has entered into lease agreements as a lessor. Leased assets are presented in real estate investment for leasing. These assets are amortized in accordance with the policies adopted for similar assets for own use, and revenues from lease agreements are recognized based on the agreement terms. q. Foreign currency The Company s functional currency is the Venezuelan bolivar. Consequently, transactions stated in currencies other than the bolivar are considered as foreign currency transactions, and recorded in bolivars using the exchange rates applicable at the transaction date. Transactions in foreign currency are recorded in bolivars using the official exchange rates applicable at the transaction date. Balances in foreign currency are recorded in bolivars at the end of the period using the official exchange rates applicable at the transaction date. The resulting exchange differences are recorded in the statement of income, based on that indicated in Note 21 to the financial statements. r. Revenue recognition Revenues from real estate operating leasing and other are recorded based on the monthly earned amount. s. Net earnings per share Net earnings per share are calculated based on the number of outstanding shares as of December 31, 2009 and 2008, which amount to 80,590,579 registered shares at a par value of Bs. 1 each. 11

14 t. Use of estimates in the preparation of the consolidated financial statements The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in Venezuela requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, their disclosure and the reported amounts of revenues and expenses. Final results could differ from those estimates. u. Reclassifications Certain items of the consolidated financial statements as of December 31, 2008 have been reclassified for comparative purposes to conform to the 2009 presentation. 2. CASH AND CASH EQUIVALENTS As of December 31, cash and cash equivalents are as follows: Cash and banks 15,406,175 16,980,952 Time deposits 12,643,336 2,356,513 28,049,511 19,337,465 As of December 31, 2009 and 2008, time deposits are represented by placements denominated in bolivars in local financial institutions, which earn interests at an average annual interest rate between 18% and 16%, respectively. 3. PREPAID EXPENSES As of December 31 prepaid expenses are as follows: Value-added tax (VAT) credit, net 1,233,048 2,967,987 VAT withholding 75% 1,420,620 2,306,480 Estimated income tax return to be recovered 2,764,300 1,964,167 Withheld income taxes 1,467,660 1,403,511 Insurance 488, ,107 Other 88, ,250 7,462,284 9,133,502 12

15 4. INVESTMENT SECURITIES As of December 31 investment securities are as follows: National Public Debt Bonds (TICC032019), issued by the Ministry of Finance of the Bolivarian Republic of Venezuela, nominal value of US$ 19,386,905, denominated in US dollars, due on March 21, 2019, at an annual interest rate of 5.25%, semiannually payable 21,034,171 52,749,037 National Public Debt Bonds (TICC042017), issued by the Ministry of Finance of the Bolivarian Republic of Venezuela, nominal value of US$ 2,692,500, denominated in US dollars, due on April 6, 2017, at an annual interest rate of 6.25%, semiannually payable 5,937, Sovereign Bonds issued by the Ministry of Finance of the Bolivarian Republic of Venezuela, nominal value of US$ 2,244,474, denominated in US dollars, due on October 13, 2024, at an annual interest rate of 8.25%, semiannually payable 4,637,307 - Commercial Papers to Bearer (Issuance 2009-I), due on August 19, 2010, nominal value of Bs. 15,530,000, at an annual interest rate of 20%, semiannually payable 13,201,097 - Commercial Papers to Bearer (Issuance 2008-I), due on August 31, 2009, at an annual interest rate of 21.99%, semiannually payable - 3,126,432 National Public Debt Bonds (TICC112013), ), issued by the Ministry of Finance of the Bolivarian Republic of Venezuela, nominal value of US$ 3,113,625, denominated in US dollars, due on November 22, 2013, at an annual interest rate of 7.13%, semiannually payable - 8,504,376 Commercial Papers to Bearer (Issuance 2008-I), due on August 31, 2009, at an annual interest rate of 22%, semiannually payable - 786,111 44,810,149 65,165,956 Discount from bond acquisition - (3,150,598) Premium from bond acquisition - 124,508 44,810,149 62,139,866 As of December 31, 2009 the Company recorded Bs. 1,695,795 in Unrealized gain or loss from investments that corresponds to the valuation of investments at their fair value. 13

16 5. REAL ESTATE INVESTMENTS FOR LEASING As of December 31, real estate investments for leasing are as follows: Centro Comercial Metrópolis Valencia 1,095,619,871 1,030,111,401 Centro Comercial Metrópolis Barquisimeto 435,754, ,511,713 Acetco Plant 233,880, ,880,457 Parking lot equipment 1,782,430 1,377,473 Carwash Car Service 2,674,530 2,674,530 1,769,712,224 1,407,555,574 Less accumulated depreciation (73,938,048) (51,361,479) 1,695,774,176 1,356,194,095 During 2008 economic period, premises corresponding to stages I and IIA were alienated, in accordance with the policies set forth by the Company s Board of Directors. During 2008 second six-month period, as part of the initial development plan of stage A (Operating since October 2006), and within the context of the initial master plan of Centro Comercial Metrópolis Valencia, the building of the second stage B was started, this place involves the construction of a parking lot building, with an initial capacity of 653 parking spots, and an extension to the shopping mall by including 70 small and medium format premises. This construction was finished by the end of During December 2007, independent appraisers conducted appraisals on Centro Comercial Metrópolis Valencia Valencia. In April 2009, independent appraisers conducted appraisals on Centro Comercial Metrópolis Barquisimeto, presenting an increase of Bs. 323,972,334. During 2006, Inmobiliaria , S.A. formally recorded the lease document of the first stage and the addendum to the second stage. By means of this legal procedure, Centro Comercial Metrópolis Valencia passed from being a real estate comprised of a lot of land and constructions to be a group of premises that might be sold under horizontal property regime. The Company has formalized insurance policies to cover possible risks to which different elements from real estate investments for leasing are exposed to, as well as the possible claims that may arise due to the execution of its activities, in the understanding that such policies sufficiently cover the risks to which they are exposed. 6. REAL ESTATE INVESTMENTS IN PROGRESS As of December 31, real estate investments in progress are as follows: Works in progress Metrópolis Valencia Shopping Center - 6,618,720 During 2008 second six-month period, the extension of Centro Comercial Metrópolis Valencia was initiated, with the construction of II B stage and the parking lot building, which was completed by the end of

17 7. OTHER INVESTMENTS As of December 31, other investments are as follows: Land and buildings not leased 66,612,597 66,612,597 Idle plant, vehicles and equipment to be sold or disposed 7,515,329 7,515,329 Investments in affiliates 5,007,435 5,007,435 Apartment in Valencia - 162,746 79,135,361 79,298,107 As of December 31, 2009, the Company sold the apartment located in Valencia. As of December 31, 2008, the Company sold the plant located in Maracay, property of Plásticos Pet Internacional for Bs. 1,960,000 (in historical values), generating a loss from sale presented in the consolidated statements of income of Bs. 7,487,003. During 2008, Inmobiliaria 20037, S.A. acquired 400,000 shares of Aéreo y Marítimo, Turismo y Servicio, C.A. for Bs. 5,002,292 (Bs. 4,000,000 in historical values). Investments in affiliates As of December 31, investments in affiliates are as follows: % Investments recorded under the equity method: Mantex Chemicals, S.A ,931,729 5,931,729 Energía y Servicios Enercenter, C.A Kelowna Investment, Ltd ,012, ,012,935 Hilos Magic H.M. de Venezuela, C.A ,629,327 8,629, ,573, ,573,991 Other investments recorded at cost: Aéreo y Marítimo, Turismo y Servicio, C.A ,002,292 5,002,292 Petpack, S.A. 40 8,624 8,624 Inmobiliaria Metrópolis 01999, C.A ,143 5,143 5,016,059 5,016,059 Less allowance for investments (157,582,615) (157,582,615) 5,007,435 5,007,435 As of December 31, 2009 and 2008, Mantex Chemicals, C.A., Kelowna Investment, Ltd. Hilos Magic H.M. de Venezuela, C.A, and Petpack, S.A. are dormant and therefore they are not included in consolidation. These were 100% provisioned. 15

18 8. PROPERTY, FURNITURE AND EQUIPMENT As of December 31, property, furniture and equipment are as follows: Office, furniture and fixtures - Torre Credival 19,292,912 19,015,289 Other furniture and equipment 7,806,054 5,019,739 Vehicles 1,080, ,122 28,179,824 25,015,150 Less accumulated depreciation (14,908,680) (13,137,039) 13,271,144 11,878,111 The Company has formalized insurance policies to cover possible risks to which different property, furniture and equipment items are exposed to, as well as the possible claims that may arise due to the performance of its activities, in the understanding that such policies sufficiently cover the risks to which they are exposed. 9. DEFERRED CHARGES As of December 31, deferred charges are as follows: Financial expenses and exchange fluctuations, net 24,395,281 24,395,281 Construction expenses 9,233,983 9,233,983 General and administrative expenses 4,044,586 4,044,586 Legal and incorporation fees 2,227,219 2,227,219 Commercialization expenses 6,978,214 6,978,214 Computer license 114, ,701 Monetary result (6,750,409) (6,750,409) 40,243,575 40,243,575 Less accumulated amortization (37,233,358) (35,230,202) 3,010,217 5,013,373 As of December 31, 2009 and 2008, deferred charges mainly correspond to expenses for work management, notary public and mercantile registry of subsidiary Metrópolis Barquisimeto, C.A. incurred during the construction of Centro Comercial Metrópolis Barquisimeto. 10. BANK LOANS As of December 31, bank loans are as follow: The Company maintains two promissory notes with Venezolano de Crédito Banco Universal, C.A., at an annual interest rate as of December 31, 2009 and 2008, of 22% and 28%, respectively. These promissory notes are secured with public debt bonds of the Bolivarian Republic of Venezuela (Note 4). The original amount of these promissory notes was Bs. 22,000,000 6,500,000 11,880,443 16

19 Loan with Banco Nacional de Crédito for Bs. 10,380,000, secured with first mortgage for the amount of Bs. 16,091,970 over a lot of land of 46,768,97 mts2, owned by Mantex, S.A. Such loan will be paid in 24 monthly installments of Bs. 270,783 (capital) each, and an installment of Bs. 4,152,000 due on October 9, 2010 at an annual fixed interest rate of 16.30% 6,589,001 12,303,681 13,089,001 24,184, LONG-TERM DEBT As of December 31, long-term debt is as follows: Loan with Banco Casa Propia, E.A.P. for Bs. 12,000,000. Such loan shall be paid in 120 monthly installments at a variable interest rate. As of December 31, 2009 and 2008 annual interest rates of 23% and 26%, respectively. This loan is guaranteed by a special and first mortgage for the amount of Bs. 24,600,000 over a part of Centro Comercial Metrópolis Shopping Center, property of the subsidiary Inmobiliaria , S.A. 11,834,711 6,252,865 Loan with Banco Casa Propia, E.A.P. on behalf of Metrópolis Barquisimeto, C.A. for Bs. 7,700,000. Such loan shall be paid in 120 monthly and consecutive installments at an annual interest rate of 16% during the first year and then the rate shall be equivalent to the rate established by BCV. During 2009 the average annual interest rate was 24%. This loan is guaranteed by a first mortgage for the amount of Bs. 15,785,000 over a group of properties at Centro Comercial Metrópolis Barquisimeto, owned by Metrópolis Barquisimeto, C.A. 6,749,032 8,857,010 Loan with Banco Casa Propia, E.A.P. on behalf of Metrópolis Barquisimeto, C.A. for Bs. 10,000,000. Such loan shall be paid in 120 monthly installments at a variable interest rate. As of December 31, 2009 and 2008, annual interest rates were 23% and 26%, respectively. This loan is guaranteed by a first mortgage for the amount of Bs. 20,500,000 over a group of properties at Centro Comercial Metrópolis Barquisimeto, owned by Metrópolis Barquisimeto, C.A. 9,528,788 12,312,308 28,112,531 27,422,183 Less current portion (1,167,555) (4,743,123) 26,944,976 22,679,060 17

20 The estimated amount of future minimum payments of long-term debt is as follows: As of December 31: ,167, ,352, ,715, ,176, ,759, ,499, ,438, ,965, ,558, ,477,900 28,112, LONG-TERM UNSECURED OBLIGATIONS At Extraordinary Stockholders Meeting held on September 27, 2007 the issuance of Unsecured Obligations to be offered to the public under The Capital Markets Law for Bs. 50,000,000 was approved. Additionally, at such meeting the designation of Banco Venezolano de Crédito, S.A., as a common representative of holders of commercial papers and unsecured obligations to be issued by the Company, was approved. Dated January 25, 2008 and in accordance with Resolution No , the Venezuelan Securities Commission (CNV) authorized the Company for the public offering of Unsecured Obligations up to Bs. 50,000,000 for a 4-year term. The Company issued unsecured obligations in local currency, between April 15, 2008 and July 14, 2008, in 3 issuances: (1) 2007-I-1 for Bs. 12,500,000, (2) 2007-I-2 for Bs. 12,500,000 and (3) 2007-I- 3 for Bs. 12,500,000, as follows: Series Nominal value authorized and issued in bolivars Issuance date Due date Annual weighted average yield Issuance 2007-I-1 12,500,000 4/15/2008 4/15/ % Issuance 2007-I-2 12,500,000 7/09/2008 7/09/ % Issuance 2007-I-3 12,500,000 7/14/2008 7/14/ % 37,500,000 Current portion (12,500,00) 25,000,000 As of December 31, 2009 and 2008, accrued interests payable amount to Bs. 1,334,618 and Bs. 1,975,071, respectively, which are presented in accrued liabilities. 18

21 Estimated future minimum payments of principal of long-term obligations in the following years are as follows: As of December 31: ,500, ,000, ,000,000 37,500, ACCRUED LIABILITIES As of December 31, accrued liabilities are mainly composed as follows: Parafiscal obligations 494, ,135 Labor benefits 205, ,337 Accrual for Law against the Illegal Trafficking and Consumption of Narcotic and Psychotropic Drugs (LOCPTICSEP) 609,804 - Other accruals 1,929, ,468 Accrued interests payable 1,334,618 1,975,071 4,574,116 2,891, GUARANTEE DEPOSITS As of December 31, 2009 and 2008, the Company has guarantee deposits received for Bs. 4,954,591 and Bs. 5,255,081, respectively, which correspond to deposits received from lessees upon entering into the lease agreement, which shall be returned upon expiration of the agreement. Most of the contracts mature in three years. 15. MINORITY INTERESTS Minority interests of preferred class B shares 12,739,906 12,739,906 Minority interest of common shares 196,399,388 32,665, ,139,294 45,405,772 Minority interests are recorded based on minority participation of stockholders. 16. PROVISION FOR INCOME TAXES Income taxes The provision for income taxes as of December 31 is as follows: Income taxes 9,351,837 5,699,075 Deferred income taxes - 1,276,420 9,351,837 6,975,495 19

22 During the years ended December 31, 2009 and 2008, the effective rate for income tax expense differs from the applicable tax rate to income before taxes. This difference is due to permanent items related to the determination of taxable income, the effects of which on the applicable tax rate are summarized as follows (in percentages over income before taxes): Bs. % Bs. % Tax and tax rate applicable to book income 8,899, ,494, Book adjustment for inflation (488,271) (2) (553,869) (3) Tax adjustment for inflation (10,797,022) (41) (2,058,682) (13) Deferred tax related to tax loss carryforwards 11,870, Other non-deductible expenses 4, ,739, Other non-taxable income (136,197) (1) (2,498,534) (15) Other ,389 5 Tax expense and tax rate applicable to book income 9,351, ,975, The Venezuelan Income Tax Law requires the annual determination of a regular adjustment for inflation of nonmonetary items, which is included in the net income tax reconciliation as a taxable or deductible item. The regular adjustment for inflation to property, furniture and equipment, and other similar assets is depreciated or amortized over the remaining useful tax lives of such assets. The total regular adjustment for the year is determined by the algebraic sum of the amount resulting from the different adjustments for inflation corresponding to nonmonetary items. This total reconciling item is considered as a long-term difference for the effects of deferred income tax calculation for the year. Likewise, in conformity with that legislation, the Company can carry forward operating tax losses, other than losses from the tax adjustment for inflation for up to three (3) years subsequent to the period in which they were incurred. The deductible tax effect that is not offset with the adjustment for inflation can be carried forward up to the following year after it is incurred. As of December 31, 2009, the Company maintains tax loss carryforwards for tax inflation readjustment of Bs. 35,692,806 (in historical values) that can be carried forward until In conformity with said legislation, the Company can carry forward investment tax credits for up to three (3) years subsequent to the period in which they were incurred. As of December 31, 2009, the Company does not maintain investment tax credits. As of December 31, 3009 and 2008, the Company recorded deferred income tax asset of Bs. 325,630 and Bs. 407,224, respectively, which is composed of the following items: Deferred income tax assets: Provisions and accruals 325, ,224 Difference in adjustment for inflation of fixed assets , ,224 20

23 17. TRANSACTIONS AND BALANCES WITH RELATED COMPANIES Accounts receivable and payable with affiliates and related companies are as follows: Accounts receivable: Petpack, S.A. 281, ,298 Rhodia Acetow Venezuela, C.A. (formerly Acetco, C.A.) 161, ,951 Inmobiliaria Metrópolis 01999, C.A. 9,489 11,867 Energía y Servicios Enercenter, C.A. 6,536 8,175 Inversora La Salle, C.A. y Cobranzas C.P., C.A. 1,090, ,681 1,549, ,972 Accounts payable: Carlos Bellosta 5,094,611 9,759,031 Inmobiliaria Metrópolis 01999, C.A. 854, ,072 5,949,562 10,031,103 The Company maintains a real estate lease agreement for Bs. 752,500 per year with Rhodia Acetow Venezuela, C. A. (formerly Acetco, C. A.). On July 1, 2005, the subsidiary Mantex International Investments, Ltd. entered into an automatically renewable agency agreement with Rhodia Acetow GMBH from Germany ( Rhodia ), for promoting and capturing new sale volumes opportunities in South America for its products made in Venezuela by Rhodia with a compensation of US$ 450,000 collected every quarter past due. Additionally, on January 1, 2007 Mantex International Investments, Ltd. entered into an agency agreement with Elizaville N.V. (Agent) from Curaçao Netherlands Antilles, for promoting new business opportunities in the Caribbean and Central America, to develop the shopping mall, with an annual compensation of US$ 440,000 for a 18-month period payable every six-month period past due. As of December 31, 2009 this agreement is not effective. The account payable to Carlos Bellosta corresponds to a loan on behalf of the subsidiary Metrópolis Barquisimeto, C.A. Such loan shall be paid through 120 monthly and consecutive installments. During the first six-month period the annual interest rate will be 19% at the beginning of the loan and during 2009, the average interest rate was 24%. This loan is secured with first mortgage for Bs. 16,000,000 over 105 premises of Centro Comercial Metrópolis Barquisimeto, owned by Metrópolis Barquisimeto, C.A. 18. STOCKHOLDERS EQUITY Capital stock and related matters As of December 31, 2009 and 2008, the Company s nominal capital stock is comprised of 80,590,579 fully registered and paid-in common shares of Bs. 1 each. The information regarding the Company s nominal capital stock is as follows (in historical bolivars): Authorized capital stock 100,000,000 Registered and paid-in capital stock 80,590,579 21

24 Dividends According to article 112 of the Capital Market Law, the companies that make public bidding of their shares shall establish in their bylaws the policy of dividends so that investors are informed on the matter. The stockholders meeting shall decide the amounts, frequency and the form of payment of the dividends. Likewise, it may decree extraordinary dividends in the form and manner they consider convenient. According to the aforementioned law, the Company must distribute among its shareholders at least 50% of the net profits obtained in each period after income taxes and the deduction of the legal reserves. From this percentage, at least 25% must be distributed in cash. In case the Company presents an accumulated deficit, the profits should be destined to offset said deficit and the surplus shall be distributed in the aforementioned manner. At a General Regular Stockholders Meeting, held on April 27, 2009, stockholders agreed to declare cash dividends for Bs. 9,691,593 (Bs. 8,059,058 in historical values) as minimum amount and Bs. 14,165,406 (Bs. 12,088,587 in historical values) as maximum amount, charged to undistributed earnings as of December 31, 2008 at (Bs. 0.10) and (Bs. 0.15) per share, based on the Company s capital stock calculation represented by 80,590,579 common shares. The Company declared the maximum amount of Bs. 14,165,406 (Bs. 12,088,587 in historical values). As of December 31, 2009, Bs. 1,948,585 is still payable. At a General Regular Stockholders Meeting, held on April 30, 2008, stockholders agreed to declare cash dividends for Bs. 14,537,389 (Bs. 9,670,873 in historical values) charged to undistributed earnings as of December 31, 2007 at (Bs. 0.12) per share, based on the Company s capital stock calculation represented by 80,590,579 common shares. Legal reserve The Commercial Code sets forth a provision of 5% of companies net income for establishing the legal reserve, until it reaches at least 10% of capital stock. This reserve cannot be distributed to stockholders as dividends during the existence of the Company. The Company considers the net income in constant bolivars to determine the calculation basis of the accrual corresponding to this reserve. Undistributed earnings The Company s stockholders consider the financial statements in constant bolivars for purposes of approvals established in the bylaws and the Venezuelan Code of Commerce. American Depositary Receipt (ADR) On May 1, 1992, the US Securities Exchange Commission authorized the American Depositary Receipt (ADR) Program, Level 1, for the Company. ADRs are negotiated in the Over-the-counter market under the MTXVY symbol, and each ADR represents fifteen (15) ordinary shares of Mantex S.A. The Bank of New York Mellon acts as depositary bank, while Venezolano de Crédito, C.A. Banco Universal acts as local custodian bank. As of December 31, 2009 and 2008, the number of outstanding ADR is 2,310,

25 19. REVENUES FROM SALE OF PREMISES As of December 31, revenues from sale of premises correspond to sales made by subsidiaries Inmobiliaria, , S.A. and Metrópolis Barquisimeto, C.A., which are distributed as follows: Centro Comercial Metrópolis Valencia - 9,051,421 Centro Comercial Metrópolis Barquisimeto - 1,057,046-10,108, REVENUES FROM REAL ESTATE LEASING They correspond to leases collected by the consolidated subsidiaries Inmobiliaria, , S.A. and Metrópolis Barquisimeto, C.A., for the use of premises in Metrópolis Valencia and Barquisimeto malls. These leases are pre-established in the agreements, the effectiveness of which ranges from one to three years upon subscription. Lease installments are determined in bolivars and they are increased through the consumer price index. The modalities of lease agreements are as follows: a. Simple lease agreement requiring guarantee deposit and/or bond. b. Lease agreements for preferred shareholders. Revenues from leasing of premises are distributed as follows: 1. Centro Comercial Metrópolis Valencia amounts to Bs. 48,108,509 in 2009 and Bs. 46,550,868 in 2008, net of discounts. As of December 31, 2009 and 2008, the occupancy percentage of premises is approximately 98.65% and 98.77%, respectively. 2. Centro Comercial Metrópolis Barquisimeto amounts to Bs. 21,356,007 in 2009 and Bs. 19,845,236 in 2008, net of discounts, which started operations in April As of December 31, 2009 and 2008, the occupancy percentage of premises is approximately 99.35% and 99.26%. 21. ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCY Since February 2003, the Venezuelan Government and the Central Bank of Venezuela have entered into several exchange agreements that rule the Foreign Currency Management Regime and establish the exchange rate applicable to transactions set forth in such agreements. From that date, the Foreign Exchange Administration Commission (CADIVI) is in charge of coordinating, administrating, controlling and establishing the requirements, procedures and restrictions that the execution of said agreement would require. CADIVI has issued certain rules related to the registrations, guidelines, requisites and conditions related to the regime of management of foreign currencies. The Company has not taken all the necessary proceeds to obtain the foreign currencies required for payment of its foreign currency liabilities. The acquisition of foreign currencies necessary for foreign currency transactions carried out by the Company in the normal course of operations will be dependent upon: (1) the approval of all the registrations requested by the related institutions; (2) the availability of foreign currencies to be established in the application of the standards referred to above; and (3) the actions to be performed 23