2004 Annual Report Corporación Interamericana de Entretenimiento, S.A. de C.V.

Transcription

1 2004 Annual Report Corporación Interamericana de Entretenimiento, S.A. de C.V.

2 Our Company CIE is the leading out-of-home entertainment company serving the Spanish and Portuguese speaking markets in Latin America and the United States. Through our unique vertically-integrated structure, we participate in a broad range of businesses and services, including the operation of entertainment venues and theme parks; the promotion and production of diverse live events such as concerts, theatrical productions, auto races, festivals, trade fairs, conferences and exhibitions; the marketing of commercial sponsorships and advertising placements; and the sale of tickets and concessions at our events and venues. We also operate the leading radio stations and Zoo in Buenos Aires, Argentina. Our Mission Contents To satisfy the leisure-time entertainment and amusement needs, desires and expectations of the diverse Latin American social groups, becoming their best entertainment option, as well as to become an efficient integral marketing tool for artists, producers, and any kind of product and service providers, thus building a business circle to generate and promote social and economic development for the people who participate in and interact with our organization. 1 Entertainment Guaranteed 2 Financial and Operating Data 3 Selected Financial and Operating Data 4 Letter to Shareholders 9 Corporate Structure 10 CIE Entertainment 18 CIE Las Américas 24 CIE Commercial 30 CIE Amusement Parks 36 CIE International 42 Fundación CIE 44 Board of Directors 45 Management s Discussion and Analysis 49 Consolidated Financial Statements 79 Executive Directors 80 Glossary of Terms 81 Investor Information

3 Millions of people enjoy CIE s out-of-home entertainment options each year, from our horse race track, Sports Books and Yaks, to theme parks and theater productions, to concerts and conventions. They know that the CIE name guarantees a quality experience. Behind the scenes, we re working hard to put all the pieces together, managing the entire value chain for each of our entertainment assets to ensure that audiences, content and corporate sponsors connect in a fun, meaningful way. That s... entertainment guaranteed.

4 Financial & Operating Data (figures expressed in millions of Mexican pesos as of December 31, 2004; except for number of employees) 11,867 13,650 14,715 14,206 15, Total Revenues EBITDA Total Assets 8,628 10,527 10,025 10,891 12,227 10,674 9,094 8,949 10,825 15,391 3,213 4,687 5,581 5,900 6,279 4,826 5,815 6,551 7,034 7,787 1,196 1,365 1,527 1,609 1, Number of Employees Enterprise Value (1) Property, Plant and Equipment (1) Market capitalization plus net debt. 2 CIE 2004: Entertainment Guaranteed

5 Selected Financial & Operating Data (figures expressed in millions of Mexican pesos as of December 31, 2004; except for number of outstanding shares and operating data) CAGR* Income Statement Revenues 7, , , , , % EBITDA (1) 1, , , , , % EBITDA margin 22.0% 22.9% 23.3% 23.5% 24.8% N.A. Operating income 1, , , % Operating margin 15.1% 15.9% 16.3% 16.7% 18.5% N.A. Comprehensive cost of financing % Income tax, tax on assets and employees profit sharing % Minority interest 0.6 (66.2) 42.0 (64.9) N.A. Majority net income 54.5 (1,274.6) (533.3) N.A. Balance Sheet Current assets 4, , , , , % Property, plant and equipment, net 6, , , , , % Deferred and other assets 4, , , , , % Total assets 15, , , , , % Total debt 5, , , , , % Total liabilities 7, , , , , % Stockholders equity 7, , , , , % Other Data EBITDA-to-gross interest expense ratio (times) N.A. Net funds generated by (used in) operating activities (259.9) N.A. Net funds provided by (used in) investing activities (888.2) (1,433.3) (1,592.4) (2,031.0) (2,927.8) N.A. Net funds provided by (used in) financing activities , , , % Market capitalization (2) 10, , , , , % Enterprise value (3) 15, , , , , % Outstanding shares at end of period (millions) % Events promoted 5,105 5,187 3,335 3,346 3, % Number of Employees 12,227 10,891 10,025 10,527 8, % (1) Earnings before interests, taxes, depreciation and amortization. (2) Number of outstanding shares at the end of period times share price. (3) Market capitalization plus net debt. * Compounded annual growth rate. N.A. Not apply. CIE 2004: Entertainment Guaranteed 3

6 Message to Shareholders & Employees Dear Colleagues & Shareholders: Every year, millions of people across our markets enjoy CIE s out-of-home entertainment options. From theme parks and theater productions, to concerts and conventions, our audiences trust CIE for quality entertainment. At the same time, our unique and segmented customer base is highly valued by advertising partners who rely on us to reach their consumers in a very personal way. In 2004, we launched CIE s new corporate image across all our markets, unifying the companies we acquired with the businesses we built. Already one of the most trusted and accepted companies in entertainment, CIE s consistent brand identity now allows audiences and partners everywhere to recognize and prefer our important portfolio of entertainment assets. They know that the CIE name stands for entertainment guaranteed. We take this guarantee very seriously, as our success depends on it. To customers, we guarantee that a ticket in hand means a seat at the show, that a thrill ride is also a safe ride, and that a winning wager is always honored. For performers, we guarantee venues that will fit their fans, promotions that will attract new ones, and unrivaled production support. To advertisers and sponsors, we guarantee they reach the right people at the right time with the right messages. CIE s business model integrates all aspects of the entertainment value chain, connecting audiences, content and advertisers in a meaningful way. We also extend a guarantee to our shareholders: that our passionate commitment to entertainment will propel our growing market leadership and optimize long-term shareholder returns. On behalf of the Board of Directors, we are pleased to report CIE s operating and financial results for the year ended December 31, 2004, and share with you our outlook for the year ahead. Operating Highlights In 2004, we reinforced our leadership position in the out-of-home 4 CIE 2004: Entertainment Guaranteed

7 From left to right: Jaime J. Zevada Coarasa Corporate Director of Finance Víctor Manuel Murillo Vega Chief Financial Officer Rodrigo H. González Calvillo Vice Chairman of the Board & Chief Operating Officer Alejandro Soberón Kuri Chairman of the Board & Chief Executive Officer Federico González Compeán Managing Director of CIE International José Manuel Alavéz González Corporate Director of Development George González Alvarado Managing Director of OCESA Entretenimiento Gabriel Lecumberri Pando Managing Director of CIE Las Américas Manuel Pérez Díaz Managing Director of CIE Commercial René Aziz Checa Managing Director of CIE Amusement Parks Alejandro Garza Díaz Managing Director of OCESA Commercial entertainment market with the muchanticipated opening of new venues and concepts, and a steady build-out and strengthening of our existing businesses. We also made significant progress on our internal reorganization, and are fine-tuning our new management model based on the five new business unit structure. During this process we eliminated an important part of redundancies, divested non-core and under-performing assets, and aligned employee incentives with corporate objectives. The new structure focuses management expertise on specific segments and markets within the outof-home entertainment industry. Our efforts to refocus and regroup are allowing us to execute a business plan that builds strong and well-positioned businesses. More than 5 million people attended our events or visited our venues in As a result of this, revenues rose 11%. Healthy economic growth in each of our key markets, as well as a rising share of discretionary spending devoted to leisure, contributed to our results. More importantly, we saw the resurgence of large-scale performances during the year, as many international recording artists resumed their Mexican and South American tours after war-related cancellations in Further gains came from an increase in betting, food and beverages at our Sports Books & Yaks units, as well as a greater number of live events in Brazil and the recovery in Argentina. At the same time, an increase in Cineminutos and billboard advertising, combined with greater utilization of the Centro Banamex exhibition and convention center, reinforced CIE s position as a leading choice among corporate clients to deliver their brand and product messages. At OCESA Entretenimiento, the dynamic concert calendar set the pace for a strong year. International performers such as Sting, The Cure, Cher, Annie Lenox, Backstreet Boys, Norah Jones and REM played to soldout crowds. In August, we announced an exclusive agreement with NASCAR to bring the Busch Series to Mexico City, starting in March of In the meantime, the success of the Champ Car World Series (formerly CART) and our own Corona Challenge, proved that the popularity of auto racing is growing in Mexico, and that CIE has the ability to manage these events profitably. In the Las Américas business unit, Centro Banamex hosted a record number of exhibitions and conventions in the year, leasing five million square meters of exhibition space and welcoming more than two million visitors. Per capita spending on betting, food and beverages at our off-track betting units increased year over year to Ps.588 from Ps.544 in We continued to expand our network of Sports Books & Yaks sites, with 31 of these off-track betting and numberbased gaming centers open at year-end, compared to 23 in the year ago period. Revenues are growing steadily, and cash CIE 2004: Entertainment Guaranteed 5

8 We extend a guarantee to our shareholders: that our passionate commitment to entertainment will propel our growing market leadership and optimize long-term shareholder returns. generated at sites open longer than one year is helping to offset higher operating expenses incurred by new units. In July, we inaugurated Granja Las Américas, an outdoor theme park at the Las Américas complex focused on nature, animals and the environment. The park s 23 pavilions are sponsored by marquis brands in the food and beverage, communications and banking industries, among others all enthusiastic about developing non-retail relationships with their future consumers. Attendance has exceeded expectations and over 200,000 people attended during the first six months of operation, including families, schools and youth groups. Our amusement parks in Mexico, Colombia and the United States drew over 7 million visitors in A major contributor was the August opening of Wannado City in Ft. Lauderdale, Florida. This attraction part amusement park, part educational experience allows children to discover and experience a variety of careers in a real-play setting. Our soft opening in late summer was battered by an unusually severe hurricane season that limited attendance in the opening months, but the number of visitors started to grow rapidly at year-end. Wannado City is a new and totally unique concept. We are enthusiastic about the park s performance in 2005, and looking ahead, hope to roll out the concept to additional cities in the United States. In our International business unit, a greater number of local and international productions, combined with reduced costs and expenses, improved Brazil s results for the year and strengthened its overall revenue contribution. The Argentine economy seems to have finally stabilized, and while our exposure to that market is limited, we brought our first regional tour there in several years, and have scheduled several more for Attendance and per capita consumption at the Buenos Aires Zoo was solid throughout the year, and we are now working with two top local promoters to develop medium-sized live-event productions. In Spain, where we pioneered the market for Broadway-style productions, our theatrical rights and exclusive venue contracts, that we obtained and developed with our Netherlands-based partner Stage Holding, were nearing expiration at year-end 2004 and early Acquiring new rights was going to be much more expensive than in the past, as the Company would now be facing a much more competitive market. We estimated that additional theater rights and content for our Spanish operations would have required a substantial investment in millions of Euros, the inflated pricing a reflection of such a highly competitive environment. Similarly, our exclusive rights to two theaters in Madrid were coming up for renewal, with only one of them having suitable terms and conditions to continue operations, while a new venue would have required an important investment. At the same time that we were evaluating whether to 6 CIE 2004: Entertainment Guaranteed

9 make these new investments in content and venues for the Spanish market, it was clear that our strategic focus was directed at generating free cash flow. We therefore decided not to renew our content and venue agreements in Spain. Although we have ceased active production of Broadway-style musicals in Spain, we will continue to participate in other forms of out-of-home entertainment in that market. Through our Commercial business unit, we provide corporate clients with comprehensive marketing solutions, enabling advertisers to target one of the most diverse and segmented customer bases in the region. Sponsors see entertainment as a powerful way of establishing emotional connections with their consumers, which helps develop brand loyalty. Our commercial revenues grew this year as programs such as Cineminutos and advertising space on billboards and pedestrian overpasses increased. One example of success in our Commercial business is the partnership with the 13 airports in the Grupo Aeroportuario Centro Norte. We provide electronic billboards that combine sponsored advertising that can be updated remotely, with departure, arrival, gate and baggage claim information. Advertisers gain access to millions of high-income travelers, and airports and passengers benefit through improved signage. Financial Highlights CIE posted a 11% increase in revenue in 2004, to a record Ps. 7,787 million. EBITDA totaled Ps. 1,710 million, an increase of 6% over The lower pace of EBITDA growth compared to revenue on a year-over-year basis reflects the combined impact of Wannado City s opening months, and higher operating expenses associated with the opening of eight new Sports Books & Yaks in the year. With 14 units remaining to be built under our concession, the final investment phase is under way. CIE continues to optimize operations and stabilize traffic at each new site, and as units reach their full revenue-generating capacity, the proportionate impact of a greater number of mature units will compensate for the short-term effect on EBITDA margins. We continued to finance working capital and capital expenditures with a mix of cash flow and, to a lesser extent, with bank loans. Capex in the year totaled Ps.794 million, with resources devoted to the continued roll-out of the Sports Books & Yaks network, final pre-opening investments at Wannado City, the completion of Granja Las Américas, and concession rights for pedestrian overpasses in Mexico. CIE has steadily reduced its negative free cash flow since 2000, and nearly reached the breakeven point in We look forward to generating positive free cash flow in 2005 as an increasing number of our assets optimize their performance. In 2004, the Company modified its debt profile, adjusting the maturity and denomination of its loans. We seek to structure our financing so that loan repayment schedules are tied to free CIE 2004: Entertainment Guaranteed 7

10 The new structure focuses management expertise on specific segments and markets within the out-of-home entertainment industry, while consolidating cross-company functions such as sponsorship marketing. cash flow generation, with debt denominated in the same currency in which repayment is expected. This minimizes the impact of inflation and exchange rates on interest and principle payments. A key development in this effort included the conversion into pesos of 69% of the principal value of CIE s UDI-denominated medium-term note, using a financial derivative instrument with the same maturity conditions as CIE s remaining loan package. Outlook 2005 CIE is leading the development of out-of-home entertainment in Mexico, and capitalizing on growth opportunities outside of our home market such as Wannado City in the United States that complement our core business strengths. Demographic trends, the convergence of content and commerce, and increasingly high barriers to entry all point to CIE s advantage. In 2005, CIE will benefit from a full year of operations at Wannado City and Granja Las Américas, a greater number of Sport Books & Yaks sites open throughout Mexico, the addition of NASCAR s Busch Series to our event lineup, and the return of Cirque du Soleil to Mexico. These developments, combined with the robust calendar of local and international concerts, live performances, conventions and expos that we have already scheduled, as well as an increase in the number of theater screens and overhead pedestrian passes on which we sell ads, will contribute to revenue growth in the year. Our guarantee of entertainment underlies our confidence in the Company s results. It s not just business for us: we share the same thrill at hearing a chart-topping performer, spending a day at the amusement park with our families, or taking in the racing action with our friends. And as we expand our range of out-of-home entertainment opportunities, we are confident that audiences, performers and sponsors alike will continue responding to that guarantee enthusiastically. We are privileged to work with a dynamic and creative team of employees whose hard work makes our guarantee of entertainment possible. We also wish to thank our shareholders, partners and clients for their continued confidence and support. To all, we are grateful for your loyalty and commitment to the Company s success. Alejandro Soberón Kuri Chairman of the Board and Chief Executive Officer Rodrigo H. González Calvillo Vice Chairman of the Board and Chief Operating Officer 8 CIE 2004: Entertainment Guaranteed

11 CIE Entertainment Concerts / Ticketing / Sporting events / Broadway-type musicals / Cultural events / Venues / Souvenirs / Food & beverage CIE Las Américas Corporate Structure Horse racing / Exhibition & Convention Center / Sports Books & Yaks / Granja Las Américas / Food & beverage CIE Commercial Sponsorships / Overpasses / Digital boards at airports / Static & rotational advertising / Naming rights / Telemarketing / Cineminutos CIE Amusement Parks Amusement parks / Theme parks / Aquatic parks / Wannado City / Food & beverage CIE International Concerts / Ticketing / Broadway-type musicals / Radio / Zoo / Sponsorships / Souvenirs / Food & beverage CIE 2004: Entertainment Guaranteed 9

12 Guaranteeing the best live entertainment in Mexico OCESA Entretenimiento guarantees the widest number of choices for the best live entertainment experiences in Mexico: concerts, theater performances, family, cultural and sporting events, folk festivals and car racing. OCESA Entretenimiento manages every aspect of the entertainment supply chain: venues, talent, concession and souvenir sales, ticketing, production, and corporate and special events planning. George González Alvarado George has been Director of the OCESA Entretenimiento Division since 2002, having developed several roles in the Group since 1991 in the Entertainment areas, and in regions such as Argentina, Brazil and Chile. Family, cultural & sporting events 8% Musical concerts 19% Special & corporate events 14% Broadway-type musicals 15% Alternative theatrical events 44% CIE Entertainment 2004 OCESA Entretenimiento is Mexico s largest and most diverse live entertainment company. From hit concerts and Broadway shows, to stock car races and local folk festivals, CIE guarantees entertainment for every budget. Backed by the media distribution network of our partner Televisa, OCESA Entretenimiento is a formidable competitor in an attractive market. In fact, Pollstar Magazine, the leading trade publication for the music concert and promotion industry, named OCESA Entretenimiento the leading concert and event organizer in Latin America. Our unique, verticaly integrated business model helps us guarantee success for the audience, the artist, the venue, the sponsors, and, ultimately, our shareholders. Because we manage every aspect of the entire entertainment value chain, we generate multiple revenue streams from box office and artist fees, to concessions and merchandising, to advertising thus lowering project risk and break-even attendance requirements. This is a significant competitive advantage over traditional venue operators and event promoters. In 2004, we produced 5,105 live events attended by 3.2 million people countrywide. International recording artists, many of whom had canceled performances a year earlier due to the Iraq War, returned to the concert circuit 10 CIE 2004: Entertainment Guaranteed

13 We guarantee to customers that a ticket in hand means a seat at the show. For performers, we guarantee venues that will fit their fans and unrivaled production support.

14 From top to bottom and left to right: Belinda, Champ Car World Series, Fiddler on the Roof, Cher, emotion guaranteed, Joseph and the Technicolor Dreamcoat, Kiss, Estadio Azul, Enrique Bunbury.

15 The Cure concert in September set a record for our Ticketmaster system, selling over 60,000 tickets in a four-hour window, a testament to the strength of our concert infrastructure. and made Mexico a prime stop on their international itinerary. The robust calendar of concerts staged in 2004 included 50 Cent, Black Eyed Peas, Blink-182, Michael Bolton, Norah Jones, Kiss, Annie Lenox, The Pet Shop Boys, REM, Sting, The Cure and Yanni, among many others. In total, we staged 53 concerts of international artists, selling over 464,000 tickets in the year. OCESA Entretenimiento operates the Ticketmaster business in Mexico, and holds the exclusive right to expand and consolidate ticketing operations in Central and South America. This include sales through the box office, call center, and via the Internet. In 2004, overall system sales totaled 14 million tickets in Mexico. This compares to sales in 2003 of 13 million tickets. OCESA Entretenimiento also produced national tours and concerts for popular Latin performers such as Belinda, Miguel Bosé, Chayanne, La Ley, Alejandro Sanz and Joan Sebastian. Over 1.3 million people attended these Latin concerts in OCESA Entretenimiento s family and sporting events during the year included shows by David Copperfield, Major League Baseball games, and the Monsters, Inc. production of Disney on Ice, which drew more than 350,000 spectators to 60 shows in a five-week period. In auto racing, we managed the Champ Car World Series (formerly CART) for the fourth consecutive year, and continued to improve efficiency and profitably. CIE provided specialized services for the Monterrey races in May, including ticketing, venue operation, and the sale of advertising sponsorships, food, beverages and merchandising. We produced the entire event for the November Mexico City races. The series drew big name sponsors and over 500,000 spectators CIE 2004: Entertainment Guaranteed 13

16 NASCAR is the number one spectator sport in the U.S. OCESA Entretenimiento has been entrusted to make NASCAR Mexico every bit as successful, based on our strong auto racing credentials. NASCAR s mass-market appeal and brand-loyal fans will enhance OCESA Entretenimiento s profile in the auto racing industry. attended races in both cities. While the 2005 Series is dependent on the reorganization of the Champ Car parent company in the United States, we look forward to making future Series races a success. In June, we launched the Corona Challenge, an 8-city, 14-race stock car circuit, in this initial debut of what we plan to be an annual event. Our auto racing experience and capability proved to be the decisive factor when in August, NASCAR (National Association of Stock Car Auto Racing) signed an exclusive agreement with CIE to bring their Busch Series to Mexico City, starting in CIE will organize, promote and manage the series, and has the exclusive right to sell advertising sponsorships, tickets, souvenirs and concessions. We also hold exclusive Mexican broadcast rights for the series, which will be held at the Hermanos Rodriguez racetrack. The facility, which underwent a $30 million renovation in 2002, already conforms to NASCAR race guidelines as determined by NASCAR officials during trial runs in In Broadway-type musicals, OCESA Entretenimiento premiered Joseph and the Technicolor Dreamcoat at the Centro Cultural Telmex in April. Les Misérables wrapped up its successful run in August after 21 months on stage, still playing to large crowds at closing. In November, we replaced that production with Fiddler on the Roof. Smaller productions of The Vagina Monologues, The Complete Abbreviated Works of William Shakespeare, Las Viejas Vienen Marchando, Proof and 14 CIE 2004: Entertainment Guaranteed

17 From top to bottom and left to right: Foro Sol, REM, Blink-182, David Bisbal, emotion guaranteed, Behind the scenes Cher, entertainment guaranteed, Fiddler on the Roof.

18 Entertainment guaranteed: behind the scenes at the Sting & Annie Lenox concert Back in 2003, OCESA Entretenimiento s talent booker began negotiations with Sting and Annie Lenox s manager to bring the renowned performers to Mexico. We guaranteed the complete package: a choice of prime venues, ticket sales through our Ticketmaster franchise, promotion, publicity, event security and entourage hospitality. The concert was scheduled for September 2004, and OCESA Entretenimiento went to work behind the scenes. Our team designed the publicity campaign and strategically placed ads promoting the concert. Ticketmaster geared up for the day tickets went on sale, 10 weeks before the event, and smoothly handled thousands of online and phone transactions. The concerts took place on September 13 th and 14 th at the Palacio de los Deportes, with all 31,000 seats having sold out on just a few days. Our guarantee extended to Sting & Annie Lenox s fans, who got their own full package: safe parking in a secure facility when they arrived, clear directions and guidance to their assigned seats, and crowd control and an easy exit once the performance ended. They enjoyed a variety of concessions during the show, and could purchase souvenirs that would remind them of this concert for years to come. Sponsors had their own guarantee an auditorium full of fans within a certain income bracket and demographic group. OCESA Entretenimiento worked with various companies to develop their advertising promotional campaigns in conjunction with the Sting & Annie Lenox concert. 16 CIE 2004: Entertainment Guaranteed

19 From top to bottom and left to right: Behind the scenes Fiddler on the Roof, Les Misérables, Julieta Venegas. Todos Tenemos Problemas Sexuales continued their performances in Mexico City. Traditional folk fairs are a unique way for CIE to guarantee entertainment in cities and towns that would not ordinarily host an international recording artist or a Broadway-type show. These events bring together folk music and dance performances, arts and crafts, food and activity booths, and small thrill rides at a price ideally suited for lower income families. Over 415,000 people attended the 25-day long Pachuca Fair, where 150 hours of Latin concerts, a shark exhibit and activities such as go-karts helped boost revenue beyond entrance fees. At the Texcoco Fair, also known as the Horse Fair, we drew 436,000 visitors to its equestrian exhibit, rodeo and other multiple attractions in the 24 day period. OCESA Entretenimiento was also subcontracted by the Mexico City municipal government to produce the Fiesta in Mexico City program, providing free live performances to low-income residents in the capital city. To accommodate the 417,000 attendees over a 24 day period, we relocated the fair from the Palacio de los Deportes to Foro Sol, a much larger venue that could accommodate the fair s bullfights, baseball games and concerts. With nearly 1.2 million people attending these events, compared to 1 million in 2003, OCESA Entretenimiento sees the growth potential of guaranteeing entertainment to underserved markets, bringing these communities affordable, quality entertainment. The number of corporate and special events OCESA Entretenimiento planned in 2004 increased, with companies such as Aetna, Daimler-Chrysler, Danone, HSBC, L Oreal, Pfizer, Sony, Toyota, Unilever and Wal-Mart relying on our special events services for their conferences, product and brand campaign launches and holiday parties. CIE 2004: Entertainment Guaranteed 17

20 Guaranteeing unique family entertainment options & unparalleled corporate services CIE Las Américas operates the premiere horse racetrack in Mexico, a nature-themed amusement park, a growing network of Sports Books & Yaks gaming facilities, and Latin America s most important exposition and convention center. Gabriel Lecumberri Pando In 1998 Gabriel joined the Group as Corporate Director of the Services Division. He also served as Corporate Director of the International Division, and since 2003, Gabriel has served as Director of CIE Las Américas. 4,623,317 5,902, Yaks Attendance The transformation of the Las Américas complex from a single racetrack six years ago into a world-class business and entertainment facility today is a remarkable success story for CIE. In 1998 we were granted a 25-year renewable concession to operate the Las Américas horse race track, and a 50-year renewable concession to develop the surrounding land. Situated in the heart of Mexico City, this 52-hectare parcel also offered a rare opportunity to enter Mexico s nascent gaming industry: the concession included authorization to develop 45 off-track betting centers to complement wagering at the racetrack itself. We modernized the track, upgraded amenities and added new services, attracting larger numbers of race fans and VIP spectators. In 1999 we opened the first Sports Books & Yaks gaming center, the flagship for a network of 31 sites as of year-end Overlooking the track, we built Centro Banamex, a modern, 198,000 square meter convention and exposition center that quickly became a choice venue for corporate event planners. With executives on the expo floor, race fans in the grandstands, and gaming enthusiasts at wagering screens, it was only natural that we would build an entertainment option for kids, making 18 CIE 2004: Entertainment Guaranteed

21 We guarantee the most advanced facilities for extraordinary corporate events. And at our racetrack and Sports Books, we guarantee that a winning wager is always honored.

22 From top to bottom and left to right: Hipódromo de las Américas, Centro Banamex, emotion guaranteed, Las Américas Complex, Yaks, Granja Las Américas, entertainment guaranteed, Horse races, amusement guaranteed, Sports Books.

23 With 31 sites open at year-end 2004, we are approaching our goal of 45 Sports Books & Yaks. The more established sites are helping absorb pre-operating expenses for the newer facilities. As the network matures, the temporary impact on margins will disappear and the proportional contribution of each site will increase. Las Américas a true family destination. In mid-2004, the Granja Las Américas theme park opened to immediate success. Hipódromo de las Américas For fans of professional horseracing, Hipódromo de las Américas is the place to go for a day at the races. Whether taking in the action from the grandstand or VIP seating, spectators are guaranteed warm hospitality and quality food and beverage choices, from gourmet restaurants to fast food concessions. We generate revenue through entry tickets, concession sales and a percentage of the total wager pool for each race. Known as pari-mutuel wagering, wagers are combined into a mutuel pool ; the payoff to winning customers is determined by the total amount of wagers in the pool and the allocation of those funds among the various kinds of wagers. Unlike traditional gambling, customers bet against each other, and we retain a pre-determined percentage of the total amount wagered. The remaining balance of the mutuel pool is distributed to the winners. In 2004 we limited regular race days to Fridays, Saturdays and Sundays, canceling most Thursday races based on a profitability-per-attendant analysis. Average per capita spending on wagers, food and beverages increased above the Ps.500 mark this year. Sports Books & Yaks Our Sports Books & Yaks network started as one off-track wagering facility for Hipódromo de las Américas races, as well as other simulcast sports and racing content that we imported. We added in another kind of pari-mutuel wagering numbers-based games where patrons match randomly drawn numbers posted on a central screen with rows of numbers on their own game cards. Today, the network enjoys growing success across Mexico. In 2004 we opened eight new sites in Villahermosa, Querétaro, Torreón, Tonalá and Cd. Nezahualcóyotl, as well as two more locations in Mexico City, bringing the total number of venues to 31, up from 23 in The concept behind Sports Books & Yaks was to change the way people wagered on sports and numbers, elevating it from a back-room or community center pursuit into a sophisticated gaming experience. Our strategy of building sites in shopping malls, retail zones and heavily-trafficked urban areas in some of the largest and mid-sized cities in Mexico helps attract a broad clientele. We guarantee customers superb hospitality in clean, well-lit facilities, outfitted with the latest technology, such as flat panel screens. The build-out of the Sports Books & Yaks network is an ambitious undertaking. On average, it takes a year to optimize operations and stabilize traffic at each new location. 752, , Sports Books Attendance CIE 2004: Entertainment Guaranteed 21

24 Sports Books & Yaks Units in Operation at Year End Now, the more mature sites are helping offset start-up costs at new sites. In fact, CIE s EBITDA margins have largely absorbed pre-operating expenses, even as the number of newer sites increases. As the network matures, we expect to generate proportionately higher returns. We plan to open up to 10 new sites in 2005, and the entire network of 45 sites should be fully operational in Centro Banamex Centro Banamex opened in 2002 as one of the most advanced venues of its kind in Latin America. The massive exhibit floor and numerous conference and meeting rooms are a choice location for multinational trade shows, large-scale expositions and corporate events. With a skilled facilities management team offering extensive logistical services and support, the success of our clients events is guaranteed. The center hosted 56 expos in 2004 compared to 47 in the previous year, and welcomed more than two million visitors through the doors, compared to 1.7 million in In Expo Comm is the largest IT and telecom event in Latin America. For the third consecutive year, conference organizers chose Centro Banamex as the home for Expo Comm in For months, we worked closely with their team to plan every detail of the convention. CIE guaranteed extensive logistical support such as set up, storage, shipping and receiving; electricity, phone and Internet connectivity for exhibitor booths; audio/visual services in conference rooms and auditoriums; catering coordination; cleaning and maintenance; parking and security; and access to the Las Américas entertainment venues. The four-day event brought together more than 23,000 attendees from 40 countries, 280 companies exhibiting 5,000 products in 20,000 square meters of exhibition space, and high profile keynote speakers and Entertainment guaranteed: behind the scenes with Expo Comm at Centro Banamex industry executives. Putting together a show of that size is a once a year event for Expo Comm, but for CIE and Centro Banamex, we do it dozens of times a year! 22 CIE 2004: Entertainment Guaranteed

25 In its first six months of operation, Granja Las Américas drew more than 200,000 visitors. Attendees are guaranteed an authentic outdoor experience in the heart of the city, while sponsors value the hands-on opportunity to connect with the family market in an educational setting. only our second full year of operations, we were pleased to see several returning clients, and with many expos already booked years in advance, we anticipate high utilization of our facilities going forward. Expos this year included: the Automobile Expo, Expo Comm, Expo Golf, Expo Niño, the Mexican Gift Show, the Sci-Fi & Toy Convention and others. We also hosted 832 conventions, corporate functions, product launches and social events in the year, a 17 % increase from This, in addition to the 418,000 full service meals and the 300,000 fast food transactions throughout the year. In total, Centro Banamex leased over 5 million square meters of exhibition and convention space during the year. families and school groups in the region. This nature-themed destination is comprised of pavilions such as a petting zoo, dairy barn and rock-climbing area, each sponsored by important companies seeking to connect with their youngest audiences in an educational and entertaining setting. The attraction covers nearly three football fields of space, and naturally, more than half of daily attendance is comprised of children. In 2004 La Granja welcomed more than 200,000 total visitors. Advance bookings for children s parties and school groups in 2005 are already strong Granja Las Américas The Granja Las Américas theme park opened in July 2004 and quickly became a popular attraction for Events in Centro Banamex CIE 2004: Entertainment Guaranteed 23

26 Guaranteeing corporate clients exceptional opportunities to connect with their consumers From advertising and promotions, to event sponsorships and naming rights, we enable companies to reach CIE s large, established and highly segmented customer base. Manuel Pérez Díaz Manuel has been part of the Group since 1996, becoming Director of the Commercial Division in Manuel started his career in the Group as manager of Make Pro. 1,342 1, Cineminutos: Number of Screens CIE s Commercial business unit provides corporate clients with two key ways to increase their visibility and reach specific market segments: sponsorships and advertising, both through our proprietary channels. We also provide support services such as corporate event planning and customer contact centers. Unlike mass marketing campaigns, our offerings can reach highly targeted audiences such as rock music fans, racing fans, movie buffs and recreational travelers. We serve companies in every industry, including prestigious international brands that rely on us to reach their Latin American audiences. Sponsorships We offer event sponsorships in several categories: sports, music and special attractions, which include Broadway-type shows and family events like Cirque du Soleil. Sponsors help CIE promote and produce these events, and benefit by associating their brands with the targeted audiences who attend. Even within each event, there are multiple sponsorship opportunities: signage at the venue, promotional activities at the event, VIP tickets, co-branded advertising and press releases, among others. The number and level of sponsorships depend on the prestige of the event and size of the venue. 24 CIE 2004: Entertainment Guaranteed

27 We guarantee to advertisers and sponsors that they will reach the right people at the right time with the right messages.

28 From left to right and top to bottom: Advertisements at Auditorio Nacional, Overpass billboards, Champ Car World Series, Advertisements at Airports Number of Overpasses In 2004 we secured sponsors for the 23 pavilions at Granja Las Américas, a nature-themed attraction at Mexico City s Las Américas complex. Our sponsors value the hands-on interaction they have with their future consumers and their parents. For example, a fruit juice company has a fruit farm and processing plant; a dairy company has live cows that can be milked; and a character from a well-known cereal company has an adventure course. Sponsors have each signed three-year renewable contracts for this venue, and attendance has exceeded expectations to date. CIE s prominent role in motor sports in recent years has drawn numerous sponsors, many of them companies with whom we had not had prior relationships. The Champ Car World Series in Monterrey and Mexico City attracted more than 22 and 37 sponsors in 2004 respectively. We inaugurated our own stock car circuit race this year, and sold the naming rights to Corona, Modelo s world-famous beer. The Corona Challenge is scheduled to be an annual event, and has a number of secondary sponsors. The NASCAR Busch Series in Mexico City, held in March 2005, is a premier sponsorship opportunity with many multi-national companies vying to participate. NASCAR is the number one spectator sport in the U.S. and is known for its brand-loyal fans, which is why the organizers chose to partner with CIE in Mexico they know we can deliver both audiences and sponsors. Advertising CIE maintains a unique and proprietary network of advertising properties that supplement our core sponsorship activities. These include: Cineminutos This fast-growing medium features ads on movie screens prior to the start of each film. CIE has exclusive contracts with two of Mexico s largest theater chains, Cinemark and Cinepolis, and in 2004 we 26 CIE 2004: Entertainment Guaranteed

29 increased the number of screens on which Cineminutos were aired by 4%, from 1,342 to 1,393 screens. Our efforts this year focused on expanding our reach throughout the country and increasing the number of advertisers. We segment theaters by their location, average ticket sales, the number of screens per theater and audience demographics. As a result, advertisers truly value this marketing channel because they can reach highly targeted audiences. Furthermore, recent surveys indicate that next day recall of Cineminutos is 78%, and the seven-day recall rate is 64%, compared to 41% for advertising on cable television. These figures will serve to bolster our sales in 2005, as we also expand the pre-film offering to include sponsored trivia questions. Overpass Billboards Under special contract with the municipal governments of Mexico City Entertainment guaranteed: behind the scenes with VISA on the Chayanne tour. In 2004 VISA signed on as the official sponsor of Chayanne s Latin American tour, which was produced by CIE and included 35 concerts in 23 cities in 10 countries. CIE guaranteed the credit card issuer numerous benefits, including advance ticket sales and special discounts to VISA cardholders; the VISA logo on all Ticketmaster tickets, envelopes, points of purchase, website and printed guides; television publicity; signage at every concert venue; and a select number of courtesy tickets and meet-and-greet passes for VIP events. The results were outstanding, not only for CIE and VISA, but for Chayanne as well, who performed to sold-out crowds for the entire tour. Our relationship with VISA successfully extends to other areas. They are the exclusive credit card at seven of our venues, and were the official sponsor of 25 Luis Miguel concerts and 60 performances of Disney on Ice s Monsters Inc. in CIE 2004: Entertainment Guaranteed 27

30 From left to right and top to bottom: Flat panel advertisements, Cineminutos, Airport advertisements Number of Ads on Overpasses metro zone, Guadalajara and Monterrey, CIE Commercial builds and maintains pedestrian walkways over busy thoroughfares, in exchange for the right to sell billboard ads on those overpasses. Billboard advertising is one of the most cost-effective forms of advertising, by impacting customers more often through a variety of products that we have designed to create the most visual awareness. Each day, tens of thousands of motorists see those ads, offering our clients high visibility and brand exposure. In 2004 the number of overpasses grew from 132 to 191, while total billboard ads increased 44%, from 497 in 2003, to 714 today. Airports We have an exclusive contract with the 13 airports of Grupo Aeroportuario Centro Norte, which serve approximately 11 million passengers a year at cities such as Monterrey, Acapulco and Mazatlán, to sell advertising in terminal corridors, boarding gates, baggage claim areas, parking lots, benches and billboards on access streets. In 2004 we began installing flat-panel electronic billboards and signage in the terminals, featuring live feeds of airport data such as arrivals and departures, while allowing advertisers to update their ad campaigns remotely on a real-time basis. In 2004 we were also awarded the contract to market ads on 33 jetbridges at the Mexico City airport. With estimated annual passenger traffic of 20 million, advertisers are particularly eager to participate in this channel. Soccer Stadiums Soccer stadiums are a highly desirable advertising location in a country where this sport is a national pastime and one of the most widely broadcast sporting events. CIE Commercial sells ads on rotational, static and dynamic panels at the stadiums of several First Division teams, providing national and 28 CIE 2004: Entertainment Guaranteed

31 From left to right and top to bottom: Flat panel displays at Salón 21, Advertisements at Airports, Naming rights. international coverage for our advertising clients. In 2004 we began reorganizing this business to focus on more profitable clients and teams and increased the number of dynamic electronic ads compared to traditional static ads. Media Innovations CIE Commercial offers clients creative support through our own in-house Media Innovations group. This team applies technology to the art of advertising and promotions, for results that create memorable campaigns. Examples include interactive games and PDA applications that feature client brands; original digital content and post-production; wraparound and digital billboard ads; marketing concepts and execution in nontraditional venues and spaces. Customer Contact Centers We leverage our phone center ticketing operations by providing corporate clients with outsourced customer interaction services, building lasting partnerships with them by enhancing the value of their customer contacts, relationships and information. The Company operates via partnership with SITEL and has grown to include two contact centers in Mexico City and one in Monterrey, with over 2,000 employees and 1,000 workstations. It is the undisputed leader in customer acquisition for leading national and multi-national banks in the Mexican marketplace. The Company s customer contact centers offer clients solutions and expertise across a full suite of services including: Customer Acquisition, Customer Care, Technical Support Help Desk, Risk Management and Professional Services (IT and Operational Consulting) to clients in various industries and sectors such as Banking, Internet, Technology and Media. CIE 2004: Entertainment Guaranteed 29

32 Guaranteeing year-round entertainment for children & families Each year, millions of children and families enjoy our theme parks. We are the largest amusement park operator in Latin America, and now, with Wannado City open in the United States, our real-play concept and sponsorship model is innovating the industry. René Aziz Checa René has been part of the Group since 1997, when he joined as Director of CIE s Amusement Park Division. René has more than 20 years of experience in the amusement park industry. 18,905 41,622 Aug Dec Wannado City : Attendance in 2004 We entered the amusement park industry in 1997 and set out to modernize our acquired properties into day-long destinations, featuring sophisticated rides and attractions and a variety of entertainment and concession options. We have since expanded our Latin American operations into 11 properties in Mexico and Colombia, becoming the largest theme park operator in the region, and in 2004, we opened our most ambitious project to date: Wannado City in Ft. Lauderdale, Florida. We welcomed 7 million visitors to our parks in 2004, reflecting new openings in Mexico and the U.S., and steady growth of 3-4% in our other Latin American properties. Wannado City Wannado City is a 140,000 square foot facility located in Florida s Sawgrass Mills Mall in Ft. Lauderdale, which draws over 25 million visitors annually. Wannado City is America s first indoor role-playing theme park, targeted at 3 to 13 year-olds. It recreates all the sites of a major city from the point of view of its kidizens, with multiple venues and hundreds of career possibilities. All venues are designed to allow kids to live out their dreams from learning to be a firefighter to piloting an aircraft to working at a television studio. Real-play empowers kids to become decision-makers and learn 30 CIE 2004: Entertainment Guaranteed

33 We guarantee a day of excitement for the entire family, that a thrill ride is also a safe ride, and that there s even something to learn when you re having fun.

34 From left to right and top to bottom: CICI Acapulco, Wannado City, Valle Fantástico, La Feria. Ps Ps Aug Dec Wannado City : Per Capitas in 2004 responsibility in a fun and entertaining setting. The park opened in August 2004 in the midst of a severe hurricane season, which impacted attendance in the early months. However, an invigorated marketing campaign and strong word of mouth rapidly accelerated attendance levels by year-end, requiring us to operate double shifts during peak vacation weeks in order to increase capacity and meet demand. We have successfully raised children s entrance fees three times since opening, generating the highest per capitas among our theme park properties. The Wannado City concept and business model are groundbreaking developments in the industry. The convergence of education and entertainment, while not new, has never before been executed on this scale in the out-of-home setting. In addition, we have enlisted corporate sponsors for a number of the career venues, with clear benefits. First, their presence in Wannado City adds a further level of realism to the attraction, allowing kids to sit behind a CNN anchor desk, for example, or stocking the aisles of a Publix Supermarket. Second, this hands-on interaction with future consumers is of tangible value to sponsors seeking experiential marketing opportunities. Third, the fees our marketing partners pay to participate in the venue directly offset our own capital expenditures, enhancing the park s profitability for CIE. We currently have 14 marketing sponsors and anticipate growing to 30 by year-end The Company sees 2005 as an opportunity to polish up operations and the overall experience at the park. The Wannado City concept is still so unique and new, that this fine-tuning is sure to last several months. Our one-of-a-kind U.S. theme park will focus on things like hours of operation, queue times, promotional offers, pricing, advertising and mass media placements, sponsorship targeting and many of the other components that comprise a successful venture such as this. Once this learning and fine-tuning is under our belt, the Company anticipates that as the park nears its one year 32 CIE 2004: Entertainment Guaranteed

35 From top to bottom and left to right: La Feria, amusement guaranteed, La Feria, Wannado City, Perimágico, CICI Acapulco, emotion guaranteed, Wannado City, CICI Acapulco.

36 Entertainment guaranteed: behind the scenes with real-play at Wannado City Wannado City guarantees kids real-play opportunities in over 200 kinds of jobs. Everything else at the venue from safety to logistics revolves around that concept so that kids have a seamless and realistic pretend play experience. The Wannado City economy runs on Wongas, the official currency earned and spent at the different venues. We encourage kids to open their own State Farm bank account using the check they receive upon entering. Deposits can be made throughout the day at the two bank branches or using the State Farm ATM Card for withdrawals. Kids can also become members of the Wannado City Chamber of Kids to redeem Wongas for discounts on future visits, events and other goodies. The Wannado City Department of Help employs WannaHelpers to assist visitors with directions, but they are also an integral part of the real-play experience, working throughout the city in jobs like police chiefs, master chefs and theater producers. Each group entering the park receives a WannaFinder locator bracelet. Kiosks throughout the park allow visitors to track group members in real-time. Exits for the park are at the air flight academy, and to pass through Immigration, all group members connected via WannaFinder must leave together. These innovations allow CIE to guarantee entertainment at a sophisticated level, and yet bring out the kid in all of us. 34 CIE 2004: Entertainment Guaranteed

37 We continue to upgrade and modernize our parks, add new attractions, and develop new concepts to increase traffic at each facility. anniversary we will be in a better position to make a decision on a successful future roll-out of the project. This is perhaps a more cautious approach to growth, but we believe it will be more than rewarded in terms of lowering the upfront investment and expected ROI time horizon. We are very optimistic about 2005 as Wannado City enters into the summer season. The Company is evaluating expansion opportunities in the United States and internationally. Our marketing, operational and financial partners are as eager as CIE is to replicate the success of Wannado City. Latin America Our 11 Latin American amusement parks cater to families of all income levels, making them a popular and affordable entertainment destination in each of their markets. In Mexico, parks include La Feria de Chapultepec, Perimágico and Planeta Azul in Mexico City, as well as México Mágico, which had a successful first full year of operation. In Guadalajara, we operate Divertido Guadalajara and Selva Mágica; and in Acapulco, we operate CICI Mágico, a popular water park. In December 2004, we opened Valle Fantástico in Puebla, the first amusement park in that city. Initial attendance over the holiday period was strong, and we anticipate over 500,000 visitors per year. Our two developments in Bogotá, Colombia are CICI Aquapark Bogotá and Salitre Mágico Bogotá, which was re-inaugurated in 2004 with upgraded facilities and a number of new attractions. We continue to upgrade and modernize our parks, add new attractions, and develop new concepts to increase traffic at each facility. In 2004, for example, we added Torre Coca-Cola at La Feria, which is a free-fall thrill ride purchased from a top German ride manufacturer that we had completely refurbished to our standards. Purchasing quality equipment from other parks allows us to pass on the savings as well as tried-and-true ride concepts to our visitors. The safety and well-being of our customers remain the top concern, however, we have an impressive track record when it comes to safety and maintenance. Each park undergoes a thorough safety audit twice a year to ensure compliance with strict internal and industry guidelines. In 2005 we will add an indoor rollercoaster that runs in Salitre Mágico, and expansion plans include an aquarium that is scheduled to be added in CIE 2004: Entertainment Guaranteed 35

38 Guaranteeing our entertainment expertise for international audiences Audiences everywhere seek quality out-of-home entertainment. CIE has taken its production and venue management skills, teamed with local partners, and built dynamic entertainment businesses in Spanish and Portuguese speaking markets where it has a competitive advantage. Federico González Compeán Federico is a founding member of the Company, and has been a Board member of CIE since He has also been Director of OCESA Presenta and producer of important musicals. At CIE, he has been Director of CIE Spain, the Content Division, and since 2003 has served as Director of CIE International Division. United States 77 Colombia 23 Brazil 700 Spain 243 Argentina 128 Number of Events in 2003 United States 67 Colombia 12 Brazil 677 Spain 321 Argentina 238 Number of Events in 2004 CIE s expertise in managing a vertically integrated business model that combines venue, promotion, artist management, sponsorship, ticketing, and merchandising is directly transferable to other markets. Growth outside of Mexico has allowed us to extend our guarantee of entertainment to other Spanish and Portuguese speaking markets, where we have cultural familiarity. The Company has taken a careful but strategic approach to international expansion, entering markets where there is a clear opportunity in the out-of-home entertainment segment, and where we have distinct competitive advantages. As we did in 2004, we also adjust our international portfolio to reflect those criteria, balancing growth and volatility to ensure optimal returns. CIE s operations outside of Mexico include live event promotion and venue operation in Argentina, Brazil, Chile and Spain, the latter of which we decided to exit at year-end; event promotion in the Latin U.S. market; and operation of the Buenos Aires Zoo in Argentina. In 2004 we produced nearly 2,000 live events internationally, drawing audiences that exceeded two million people. These events included the South American leg of several concert tours, which are a natural extension of our artist management and promotion 36 CIE 2004: Entertainment Guaranteed

39 We extend our guarantee of entertainment to other Spanish and Portuguese speaking markets in Argentina, Brazil, Colombia, Spain and the Latin market in U.S.

40 From left to right and top to bottom: Peter Pan, South Fest, Cabaret, G3 Festival. services domestically. We can produce a concert for international performing artists in Mexico and then guarantee them a high caliber continental tour ourselves. Similarly, our Broadway-type productions, for which we secure the Spanish and Portuguese rights, benefit from our international theatrical circuit through which we can rotate productions. Lastly, our commercial services allow corporate clients to extend their marketing and sponsorship campaigns to multiple markets, diverse venues and a wide cross-section of target audiences. Brazil Brazil is Latin America s largest entertainment market and after only five years of presence there, is CIE s most important international revenue producer, accounting for 5% of total revenues in We produced 702 events in Brazil during the year, guaranteeing entertainment for near 1,200,000 fans. Our holdings in São Paolo include Credicard Hall, DirecTV Music Hall and Teatro Abril; and in Rio de Janeiro, Claro Hall. We produce two main types of events in this market Broadway-type productions and live concerts. We premiered the musical Chicago in the second quarter at São Paolo s Teatro Abril, with good advance ticket sales. We also staged some smaller productions, including A Flor do Meu Bem Querer in São Paolo. For 2005 the Company will be introducing Phantom of the Opera at Teatro Abril, which will replace Chicago. Brazilian audiences of all ages enjoy a wide variety of domestic talent, which comprises the majority of our live concerts there. As a result, our cost structure and earnings are stable, despite any exchange rate fluctuations between the real and peso. In 2004 our continued expansion beyond the country s two largest cities, brought our productions into several other large urban areas and second-tier cities. Productions of Brazilian artists in 2004 included, among many others, Kid Abelha, Jorge Aragao, Bruno & Marrone, Chiclete Com Banana, Djavan, Fábio Junior, Gilberto Gil, Emmerson Nogueira, O Rappa, Zeca Pagodinho, Maria Rita and Lulu Santos. Among the international recording artists for whom we produced concerts in Brazil this year were Chrissie Hynde, Iron Maiden which attracted CIE s highest all-time attendance, Jethro Tull, Maroon 5 and Snoop Dogg. 38 CIE 2004: Entertainment Guaranteed

41 Entertainment guaranteed: behind the scenes with Chicago in Brazil The Broadway musical Chicago, which won six Tony awards in 1997, tells a timeless story with compelling music and choreography. CIE has guaranteed São Paolo audiences access to this all-time favorite Broadway production, performed by professional local actors in their native Portuguese language. To do this, we first guaranteed Chicago s creators an authentic and accurate translation, and worked with the cast and director to ensure that all elements of the production were true to the original. But a Broadway show is more than just a script and music. CIE guarantees the highest production quality with state-of-the-art sound and lighting; a multi-channel ticketing system, through Tickemaster, that fills the venue each night, and pleasurable theater-going experiences that include concessions and souvenirs. By year-end 2004, more than 150 thousand people had attended Chicago performances. CIE 2004: Entertainment Guaranteed 39

42 From top to bottom and left to right: Deborah Colker, Peter Pan, Marcelo D2, Radio in Argentina, Visa Fest, María Rita, emotion guaranteed, Nuevo Teatro Alcalá, Chanel.

43 The live event calendar for 2005 had nearly 300 days of live events scheduled months in advance, including 55 days of international touring artists such as Lenny Kravitz, Phil Collins and many others. Argentina CIE s first venture outside of Mexico was our acquisition of the Teatro Ópera in Buenos Aires in Since then, we have expanded our holdings and carefully managed our portfolio to minimize exposure to that market s volatility. Today, we manage several AM and FM radio stations, the Jardín Zoológico de la Ciudad de Buenos Aires (Buenos Aires Zoo), and through partnerships with top local promoters, we produce live concerts and events. In 2004 tickets sales grew 9% as the economy improved and we increased the number of live events scheduled. Performers included local and international artists such as Almafuerte, Alpha Blondie, Babasonicos, Rosario Flores, Intoxicados, Iron Maiden, Las Mil y Una Noches, Moonpark, Quilmes Rock, Shangri-Lá, and The Wailers. We also brought to Argentina our first Broadway-type production in several years, Stomp, which was very successful. Attendance at the zoo rose 28% in the year, with 985 thousand visitors enjoying this cherished urban attraction. With the country s debt crisis resolved and a government committed to financial reforms, CIE anticipates steady gains in its Argentine operations to reflect the growing demand for live entertainment. In 2004 we signed a 10-year contract with Obras Sanitarias, a 5,500 seat venue in Buenos Aires that will allow CIE to stage local musical talent, and re-launched a popular radio station to capitalize on growing ad budgets. Spain Spain was CIE s largest theatrical market in 2004, with concurrent productions of Cabaret, Phantom of the Opera and Cats at our venues in Madrid. Year over year revenues increased 35%. When we entered the Spanish market in 1999, we were innovators in bringing adapted large-scale Broadway-type performances to audiences there. By year-end 2004, when our current set of theatrical rights expired, the competition had markedly increased, making renewal of those rights more expensive. At the same time, CIE s exclusive use contracts at two of our venues were nearing their end, with suitable renewal terms challenging to secure for the same competitive reasons. An estimated renewal investment of 10 million euros for our Spanish content and venue rights, no longer fit with the Company s clear strategic focus on increasing positive free cash flow, and we decided to exit the market as of year-end with the natural conclusion of our business cycle. We will continue to explore future opportunities in Spain based on our clear investment criteria. United States Our operations in the United States are focused on guaranteeing live Latin entertainment to the large and growing Hispanic population, with a particular emphasis on Arizona, California, Colorado, Florida, Illinois, Nevada, New York and Texas. We produced 18 such events in , , Zoo s Attendance CIE 2004: Entertainment Guaranteed 41

44 Belinda, Godmother of Fundación CIE. In a country where there is so much to do, we have decided to contribute with what we do best. We want to create special moments, unique and unforgettable, for the sectors in our society that need them the most.

45 Fundación CIE, A.C. was born as a result of CIE s commitment to Mexico and the need to expand and enrich the sense of our daily activities. The foundation s goal is to create a systematic and innovative platform that will provide social support to help those in need. Fundación CIE s mission is: to Create Happiness for society s most vulnerable groups, by offering them an extension of our fundamental business activity: out-of-home entertainment. Through Fundación CIE, we are committed to bringing unforgettable moments of fun and enjoyment to everyone children, teenagers and adults who, for many reasons, do not have the opportunity to enjoy international entertainment events. As a result, Fundación CIE will offer 12 We Create Happiness events each year including: concerts, theatrical events, circus performances, visits to amusement parks, horse races, sporting events, auto races and traditional fairs, as well as to provide attendees with the opportunity to interact with national and foreign artists. We will invite 45,000 people who receive assistance from a variety of Private Assistance Institutions or Civil Associations to these events, free of charge. In addition, Fundación CIE seeks to expand its relationship with companies, institutions and artists that share the same interests and objectives by forming strategic alliances with them. In a country where there is so much to do, we have decided to contribute with what we do best: Create Happiness. At Fundación CIE, we are proud to be able to put the magic of emotions within the reach of the most vulnerable sectors of society and, above all, the power to make people happy. CIE 2004: Entertainment Guaranteed 43

46 Board of Directors Alejandro Soberón Kuri Chairman Chief Executive Officer, CIE B.S. in Business Administration / Universidad Iberoamericana Rodrigo H. González Calvillo Vice Chairman Chief Operating Officer, CIE B.S. in Business Administration / University of Southern California José Manuel Alavéz González Joint Member of the Board Corporate Director of Development, CIE Master in Business Administration / Instituto Panamericano de Alta Dirección de Empresas Roberto Albarrán Campillo Independent Member of the Board Chief Executive Officer, Jugos del Valle, Mexico Master in Finance / Boise State University Diego Cosío Barto Independent Member of the Board Vice President for Latinamerica and Chief Operating Officer, Blockbuster, Inc. Mexico B.S. in Economy / Instituto Tecnológico y de Estudios Superiores de Monterrey Carlos Elizondo Mayer-Serra Independent Member of the Board Dean and Professor Centro de Investigación y Docencia Económicas, Mexico Ph.D. in Politics / Oxford University Federico González Compeán Joint Member of the Board Managing Director, CIE International B.S. in Communications / Universidad Autónoma Metropolitana Alejandro Rodríguez Maurice Secretary Corporate Legal Director, CIE General Counsel / Escuela Libre de Derecho Mónica Lorenzo Gutiérrez Alternate Secretary Corporate Manager of Legal Department, CIE B.S. in Law / Universidad La Salle Alejandro Torres Hernández Statutory Auditor Partner, Gossler, S.C., Mexico Certified Public Accountant / Instituto Politécnico Nacional 44 CIE 2004: Entertainment Guaranteed

47 Management s Discussion & Analysis All figures in this document are expressed in millions of Mexican pesos of purchasing power as of December 31, 2004, unless otherwise specified, and have been prepared in accordance with Mexican Generally Accepted Accounting Principles ( Mexican GAAP ). Figures may differ due to rounding Var. % Income Statement: Revenues 7, , % Gross Profit 2, , % Gross Margin 36.7% 37.8% EBITDA 1, , % EBITDA Margin 22.0% 22.9% Majority Net Result 54.5 (1,274.6) 104.3% REVENUES CIE s consolidated revenues rose 11% in 2004 to Ps.7,787, compared with Ps.7,034 in The following diagram details the divisional contributions to consolidated revenues in 2004 and Entertainment Division Revenue totaled Ps.5,984 in the year, 11% more than the Ps.5,390 registered in the year ago period. (For a better and full detailed understanding of the operating events affecting annual results, please refer to the Operating Highlights at the back of this document.) This increase was principally driven by: a. The operation of the horse race track and its 31 Sports Books & Yaks units, compared to 23 in 2003, in addition to an increase in local and international exhibitions at Centro Banamex; the total number of expos reached 56 during the year in comparison to the 47 the year before; b. A strong schedule of live events in Argentina, Chile, Brazil and México, including sold-out performances of international recording artists such as REM, Norah Jones, Yanni, The Doors, Djavan Brazil Tour and others; and, c. The startup of Wannado City at Sawgrass Mills Mall in Fort Lauderdale during September, Partially offsetting these effects was lower live entertainment activity in the U.S. Latin market, and fewer presentations during the year in theatrical productions as compared with In addition, results in the year ago period benefited from Cirque Yearly Revenue Services % by Division in 2004 Yearly Revenue Commercial 1,011 13% Entertainment 5,984 77% Services % by Division in 2003 Commercial % Entertainment 5,390 77% CIE 2004: Entertainment Guaranteed 45

48 du Soleil performances in Mexico in the final three months of the year, which were not repeated in Commercial Division Revenue in the 2004 registered an increase of 10%, reaching Ps.1,011, compared with Ps.921 in the same period of This increase is primarily due to: a. A greater number of billboard advertisements on pedestrian overpasses. During the year, 714 ads were featured, a 44% increase over the 497 in 2003; b. Advertising sales at cinemas in Mexico, known as Cineminutos, increased the number of screens on which Cineminutos were projected by 4%, to reach 1,393 screens compared to the 1,342 recorded in the prior year. Higher Commercial performance was partially offset by the lower contribution of revenues from rotational and static advertising at soccer fields in Mexico. As stated during the year, the Company is reorganizing its business model on more profitable clients and teams. Services Division Revenue totaled Ps.792 in 2004, in comparison with the Ps.722 recorded in The 10% increase is mainly attributable to the tele-services activity in Mexico which continues to identify new potential users which in turn demand a higher capacity to handle the superior volume of telephone calls. This, in addition to an increase in Ticketmaster sales to public events in Latin America. Gross Profit Gross profit for the year reached Ps.2,856, 7% greater than the Ps.2,660 recorded in the same period of Gross margin adjusted 114 basis points to reach 36.7% as compared with the 37.8% gross margin registered in the same quarter of This was due, in part, to businesses with higher cost of sales as a percentage of revenues, including new Sports Books & Yaks units that have not yet reached full revenue-generating capacity, and startup phase of Wannado City, whose startup impact on gross margin should diminish as the attraction matures. EBITDA The Group recorded EBITDA ( Earnings before Interest, Taxes, Depreciation and Amortization ) of Ps.1,710, 6% increase over the Ps.1,609 of EBITDA margin for the year was 22.0%, a decline of Ps.101 or 92 basis points from the 22.9% margin recorded in This decrease in EBITDA margin reflects the combined impact of opening new Sports Book & Yak units in Mexico, and the startup of Wannado City in Florida both having a temporary effect on EBITDA margins while they approach maturity. 46 CIE 2004: Entertainment Guaranteed

49 Operating Income Income from operations in the year was Ps.1,173 versus Ps.1,118 for 2003, an increase of 5%. Operating margin for the year was 15.1%, 83 basis points lower than the 15.9% operating margin recorded in The decrease in EBIT margin is due in part to a lower EBITDA contribution and to a greater level of depreciation and amortization, which increased 9% from Ps.491 in 2003 to Ps.537 in the year. in our level of debt and bank commissions from several loans and derivative instruments executed in VAR % Interest Expense Net % Foreign Exchange (Gain) Loss Net (12.5) (183.5) N.A. Monetary Position (Gain) Loss (98.2%) Total % Comprehensive Cost of Financing ( CCF ) Comprehensive cost of financing increased 80%, from Ps.274 in 2003 to Ps.495 in This increase was primarily due to: a. A decrease in net exchange gain from Ps.184 in 2003 to Ps.13 in 2004, because of the effect of the appreciation of the peso on our U.S. dollar-denominated net liability position in 2003, and the devaluation of the peso on our U.S. dollardenominated net asset position in 2004; and, b. A 27% increase in net interest expense, from Ps.399 in 2003 to Ps.506 in 2004, mainly as a result of the combination of an overall year-to-year increase in interest rates of 345 basis points, a 9% increase These two factors were offset in part by a reduction in net monetary loss from Ps.59 in 2003 to Ps.1 in 2004, reflecting the effect of inflation on our net peso-denominated asset position, which decreased in 2004 as compared to Other Expenses During the period, CIE recorded Ps.282 as other expenses that are non-cash items. The following is a list of the items that have been included: a. A series of non-cash expenses derived from the closing of CIE s concerns in Spain (1) ; b. Allowance of doubtful accounts for the entire Company (approximately 3% of all accounts receivable). (1) Resulting from a growing competitive market for the production of Broadway-type musicals in the Spanish market, in addition to the expiration of theatrical rights and or the production of these musicals that the Company had on stage the last 24 months. The abovementioned summed up to a highly competitive environment for the renewal of three theater concessions which are currently operated by CIE (concessions that are reaching their expiration) have prompted the Company to conclude its presence in this market. CIE 2004: Entertainment Guaranteed 47

50 c. Restructuring charges for the rotational advertising business (during the second, third and fourth quarter). The following table outlines the debt structure as of December 31, 2004: 2004 % Debt As of December 31, 2004, the Company s total debt outstanding was Ps.5,145. During the year, the Group continued working on its debt structure and completed the following transactions: a. Unsecured debt for US$30 million aimed at refinancing CIE s short-term debt to long term, due in 2008 and rate based on LIBOR. Subsequently, the Company contracted a financial derivative instrument secured in Mexican pesos, of which the principal and interest rate are based on TIIE, thus reducing foreign exchange risk; and, b. Unsecured debt for US$20 million due in 2011 allocated at the Group s amusement park subsidiary in the United States. Proceeds were used in refinancing short-term debt incurred in the past for the construction and operation of Wannado City. Other developments included the conversion of 69%, or Ps.1,489, of CIE s UDI-denominated medium-term note principal value into Mexican pesos by contracting a financial derivative instrument with the same maturity conditions of that of CIE s program; thus reducing CIE s exposure to the evolving inflation in Mexico. Maturity Short Term (ntm) (*) 1,304 25% Long Term 3,842 75% ( ) Denomination Mexican Pesos 4,076 79% UDIs % Other Currencies 367 7% Total 5, % (*) Next 12 months. Provisions for Taxes CIE recorded Ps.251 in tax provisions in income taxes and tax on assets during the year. Majority Net Result The Company registered a majority net result of Ps.55 in the year, in comparison to a majority net loss of Ps.1,275 recorded in In 2003 the Company recorded a charge related to Bulletin C-15 regarding the book value versus fair market value of acquired assets for Ps.1,618 which affected net income for the period. 48 CIE 2004: Entertainment Guaranteed

51 Consolidated Financial Statements December 31, 2004 and 2003 Corporación Interamericana de Entretenimiento, S.A. de C.V. and Subsidiaries Contents 50 Report of Statutory Auditor 51 Report of Independent Accountants 52 Consolidated Balance Sheets 53 Consolidated Statements of Income 54 Consolidated Statements of Changes in Stockholders Equity 56 Consolidated Statements of Changes in Financial Position 57 Notes to the Consolidated Financial Statements 78 Auditing Committee Report

52 Report of the Statutory Auditor Alejandro Torres Hernández Certified Public Accountant To the General Shareholders Meeting of CORPORACIÓN INTERAMERICANA DE ENTRETENIMIENTO, S.A. DE C.V. I, the undersigned, as statutory auditor and in compliance with the dispositions of Article 166 of the Ley General de Sociedades Mercantiles (General Business Corporations Act) and CORPORACIÓN INTERAMERICANA DE ENTRETENIMIENTO, S.A. DE C.V., Bylaw, hereby submit to you my opinion on the truthfulness, sufficiency and reasonability of the information the Board of Director has presented to you related to this Corporation s operation during the year ended on December 31, I have attended the Shareholders Meeting and Board of Directors Meeting to which I have been duly convened, and obtained from both director and managers the operation information. Documents and records I considered necessary to review. My revision has been made in accordance with the generally accepted audit standards in Mexico. The attached financial statements have been prepared under the laws and regulations applicable to the corporation as an independent legal entity; therefore investment in subsidiaries capital stock has been valued following the equity method. Separated are presented the consolidated financial statements which, on the same date, have an accountant s report without exception. In my opinion, the accounting and reporting criteria and policies applied by the Corporation and considered by managers in preparing the reports presented by them to this Meeting, are both adequate and sufficient and have been applied consistently with the prior fiscal year. Therefore, such financial information reflect in a truthful sufficient and reasonable way the financial situation of CORPORACIÓN INTERAMERICANA DE ENTRETENIMIENTO, S.A. DE C.V., as of December 31, 2004, the results of its operations, the changes on the stockholder equity and changes in financial position for the year then ended, in accordance with the accounting principles generally accepted in Mexico. Alejandro Torres Hernández C.P.A. Statutory Auditor Mexico City, March 4 th, CIE 2004: Entertainment Guaranteed

53 Report of Independent Accountants Mexico City, March 4 th, 2005 To the General Stockholders Meeting and to the Board of Directors of CORPORACIÓN INTERAMERICANA DE ENTRETENIMIENTO, S.A. DE C.V., AND SUBSIDIARIES We have audited the accompanying consolidated balance sheets of CORPORACIÓN INTERAMERICANA DE ENTRETENIMIENTO, S.A. DE C.V. AND SUBSIDIARIES at December 31, 2004 and 2003, and the related consolidated statements of income, of changes in stockholders equity and of changes in financial position for the years then ended. These financial statements are the responsibility of the Company s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in Mexico. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and that they are prepared in accordance with accounting principles generally accepted in Mexico. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As is mentioned in Notes 2k and 16 of the accompanying financial statements, in 2003 the Company s management elected to adopt the provisions of Statement C-15 Impairment of the Value of Long-Lived Assets and their Disposal, issued by the Accounting Principles Commission of the Mexican Institute of Public Accountants, A.C., with the effects described in those Notes. That statement establishes general criteria for the identification and, if applicable, recording of losses from impairment or decrease in value of long-lived tangible and intangible assets, including goodwill. Additionally, it defines concepts such as net sales price and useful value for the valuation of long-lived assets. The financial statements at December 31, 2004 of certain subsidiaries, whose combined assets and sales represent 26% and 20%, respectively, of the consolidated totals at that date (31% and 17%, respectively, at December 31, 2003), were examined by other independent accountants, whose reports thereon have been furnished to us. Our opinion expressed herein, insofar as it relates to the amounts pertaining to these subsidiaries included in the consolidated financial statements, is based solely on the reports of the other independent accountants. In our opinion, based on our examinations and on the reports of the other independent accountants mentioned in the preceding paragraph, the aforementioned consolidated financial statements present fairly, in all material respects, the financial position of CORPORACIÓN INTERAMERICANA DE ENTRETENIMIENTO, S.A. DE C.V. AND SUBSIDIARIES at December 31, 2004 and 2003, and the results of their operations, the changes in their stockholders equity and the changes in their financial position for the years then ended, in conformity with accounting principles generally accepted in Mexico. PricewaterhouseCoopers Humberto Pacheco Soria Audit Partner CIE 2004: Entertainment Guaranteed 51

54 Consolidated Balance Sheets CORPORACIÓN INTERAMERICANA DE ENTRETENIMIENTO, S.A. DE C.V. AND SUBSIDIARIES (Note 1) Thousands of Mexican pesos (Ps.) of December 31, 2004 purchasing power December 31, Assets CURRENT ASSETS: Cash and marketable securities Ps. 623,271 Ps. 736,669 Accounts receivable (Note 4) 1,958,195 2,237,513 Inventories for sale and internal consumption 43,923 30,877 Cost of future events and prepaid expenses 2,075,091 1,230,672 Total current assets 4,700,480 4,235,731 Long-term accounts receivable 217, ,536 Investment in unconsolidating subsidiaries (Note 5) 121, ,462 Property, furniture and equipment - Net (Note 7) 6,278,911 5,899,458 Preoperating expenses and other assets - Net (Note 8) 2,050,011 2,076,469 Goodwill (includes amortization of Ps.982,669 and Ps.895,771 in 2004 and 2003, respectively) - Net (Note 16) 1,647,685 1,663,000 Total assets Ps. 15,016,189 Ps. 14,205,656 Liabilities and Stockholders Equity CURRENT LIABLITIES: Bank loans (Note 9) Ps. 1,303,319 Ps. 852,630 Suppliers 1,039, ,521 Other accounts payable 615, ,929 Revenue of future events and advances from customers 393, ,425 Other taxes payable 53,043 15,457 Total current liabilities 3,404,487 2,453,962 Long-term debt (Note 9) 3,842,114 4,126,583 Other liabilities 169,096 42,389 Contributions for future capital increases 112,777 Labor liabilities (Note 2n) 82,317 65,350 Deferred income tax (Note 12) 261, ,650 Total long-term liabilities 4,354,809 4,642,749 Total liabilities 7,759,296 7,096,711 Stockholders Equity (Note 10): Capital stock 395, ,641 Share premium 5,313,005 5,299,146 Deficit (291,304) (345,217) Cumulative translation adjustment (788,954) (732,765) Cumulative deferred income tax (53,043) (53,043) Majority stockholders equity 4,575,345 4,563,762 Minority interest 2,681,548 2,545,183 Total stockholders equity 7,256,893 7,108,945 Commitments and contingencies (Notes 14 and 15) Total liabilities and stockholders equity Ps. 15,016,189 Ps. 14,205,656 The accompanying seventeen notes are an integral part of these financial statements. 52 CIE 2004: Entertainment Guaranteed

55 Consolidated Statements of Income CORPORACIÓN INTERAMERICANA DE ENTRETENIMIENTO, S.A. DE C.V. AND SUBSIDIARIES Thousands of Mexican pesos (Ps.) of December 31, 2004 purchasing power Year ended December 31, Net sales (Note 6) Ps. 7,786,997 Ps. 7,033,745 Cost of sales (4,930,602) (4,373,769) Gross profit 2,856,395 2,659,976 Operating expenses (1,683,923) (1,542,062) Operating income 1,172,472 1,117,914 Comprehensive financing cost - Net (Note 11) (494,613) (274,297) Equity loss in unconsolidating subsidiaries (Note 5) (84,706) (295,963) Other expenses - Net (282,271) (5,675) Income before tax provision and extraordinary item 310, ,979 Provision for income tax (Note 12): Current (276,150) (164,280) Deferred 19,781 (34,441) (256,369) (198,721) Income before extraordinary item 54, ,258 Extraordinary item - Impairment for the value of long-lived assets (Note 16) (1,617,902) Consolidated net income (loss) for the year Ps. 54,513 Ps. (1,274,644) Distribution of the consolidated net income (loss) for the year: Majority stockholders Ps. 53,913 Ps. (1,208,397) Minority interest 600 (66,247) Ps. 54,513 Ps. (1,274,644) Earnings (loss) per share (Note 13): Basic (figures in Mexican pesos) Ps Ps. (3.91) The accompanying seventeen notes are an integral part of these financial statements. CIE 2004: Entertainment Guaranteed 53

56 Consolidated Statements of Changes in Stockholders Equity CORPORACIÓN INTERAMERICANA DE ENTRETENIMIENTO, S.A. DE C.V. AND SUBSIDIARIES FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (Notes 2a and 10) Thousands of Mexican pesos (Ps.) of December 31, 2004 purchasing power Capital stock Issued Unpaid Net Balances at December 31, 2002 Ps. 396,023 Ps. (382) Ps. 395,641 Amortization of cost of executives stock plan Net change in minority interest Comprehensive loss for the year Balances at December 31, ,023 (382) 395,641 Amortization of cost of executives stock plan Net change in minority interest Comprehensive loss for the year Balances at December 31, 2004 Ps. 396,023 Ps. (382) Ps. 395,641 The accompanying seventeen notes are an integral part of these financial statements. 54 CIE 2004: Entertainment Guaranteed

57 Cumulative (Deficit) Cumulative deferred Majority Total Share retained translation income stockholders Minority stockholders premium earnings adjustment tax equity interest equity Ps. 5,284,130 Ps. 863,180 Ps. (932,584) Ps. (53,043) Ps. 5,557,324 Ps. 2,640,539 Ps. 8,197,863 15,016 15,016 15,016 (29,109) (29,109) (1,208,397) 199,819 (1,008,578) (66,247) (1,074,825) 5,299,146 (345,217) (732,765) (53,043) 4,563,762 2,545,183 7,108,945 13,859 13,859 13, , ,765 53,913 (56,189) (2,276) 600 (1,676) Ps. 5,313,005 Ps. (291,304) Ps. (788,954) Ps. (53,043) Ps. 4,575,345 Ps. 2,681,548 Ps. 7,256,893 CIE 2004: Entertainment Guaranteed 55

58 Consolidated Statements of Changes in Financial Position CORPORACIÓN INTERAMERICANA DE ENTRETENIMIENTO, S.A. DE C.V. AND SUBSIDIARIES Thousands of Mexican pesos (Ps.) of December 31, 2004 purchasing power Year ended December 31, Operations: Consolidated net income (loss) for the year Ps. 54,513 Ps. (1,274,644) Charges (credits) to income not affecting resources: Depreciation and amortization 453, ,018 Amortization of goodwill 84, ,376 Provision for seniority premium and other benefits 31,666 26,422 Amortization of cost of executives stock plan 13,859 15,016 Deferred income tax (19,781) 34,441 Equity loss in unconsolidating subsidiaries 7, ,963 Net change in working capital, except cash and marketable securities and bank loans (96,344) (555,831) Resources provided by (used in) operating activities before extraordinary item 529,048 (967,239) Extraordinary item - Impairment of the value of long-lived assets 1,617,902 Resources provided by operating activities 529, ,663 Financing: Bank loans obtained - Net 166, ,040 Translation adjustment effects (56,189) 199,819 Net change in minority interest 135,765 (29,109) Resources provided by financing activities 245, ,750 Investment: Acquisition of property, furniture and equipment and preoperating expenses and other assets - Net (936,567) (1,156,706) Goodwill (29,022) Loss for increase in the capital stock of unconsolidating subsidiaries 77,347 Initial valuation by equity method of investment in unconsolidating subsidiaries (276,569) Resources used in investment activities (888,242) (1,433,275) Decrease in cash and marketable securities (113,398) (212,862) Cash and marketable securities at beginning of year 736, ,531 Cash and marketable securities at end of year Ps. 623,271 Ps. 736,669 The accompanying seventeen notes are an integral part of these financial statements. 56 CIE 2004: Entertainment Guaranteed

59 Notes to the Consolidated Financial Statements CORPORACIÓN INTERAMERICANA DE ENTRETENIMIENTO, S.A. DE C.V. AND SUBSIDIARIES DECEMBER 31, 2004 AND 2003 (Monetary figures expressed in thousands of Mexican Pesos (Ps.) of December 31, 2004 purchasing power and thousands of U.S. Dollars, except exchange rates, value of UDI s and earnings per share data) NOTE 1 - ACTIVITIES OF THE COMPANY CORPORACIÓN INTERAMERICANA DE ENTRETENIMIENTO, S.A. DE C.V. ( CIE or the Company ) was incorporated on August 21, 1995, under Mexican law for a duration of 99 years. CIE is the parent, directly or indirectly, of the companies mentioned below, which are grouped in the following divisions: Entertainment - Production and promotion of live shows. Commercial - Sale of sponsorship advertising rights to events and entertainment venues. Services - Rendering of telemarketing services. Horse racetrack - Operation and exploitation of the permit to organize live horse races and bet- placing; as well as the operation of sports betting in Mexico, through the Libro Foráneo (simulcasting) system. CIE has subsidiaries in the following countries: Mexico, Argentina, Brazil, Chile, Panama, Colombia, the United States of America, Spain and Holland. In 2004 and 2003 CIE and its subsidiaries carried out the following significant operations: In February 2004, CIE, through Impulsora de Centros de Entretenimiento Las Américas, S.A. de C.V., fulfill its commitments established in 2003 (see Note 14j) to increase by Ps.228,798, the capital of the unconsolidating subsidiary, Estudio México Films, S.A. de C.V. ( EMF ). As a result of which, there was an increase in the CIE shareholding in EMF from 50% to 75%, through the subscription of non-voting rights shares, representing a Ps.77,347 loss for CIE due to the shareholding increase in the capital of unconsolidating subsidiary, which was included in the statement of income under equity loss in unconsolidating subsidiaries. On July 3, 2004, CIE, through Administradora Mexicana de Hipódromo, S.A. de C.V., commenced operations of Granja Las Américas in Mexico City. On August 12, 2004, CIE, through The Original Creators Miami Inc., commenced operations of the indoor park Wannado City in Fort Lauderdale, Florida. On December 22, 2004, CIE, through its Spanish subsidiaries, decided to sell to Stage Holding, an important theatrical promoter in Continental Europe, its participation in the theatrical business in Spain. During the first quarter of 2003, CIE ceased to control the subsidiaries engaged in the production and distribution of motion pictures, and therefore announced changes in the method for accounting recognition of the income arising from the business. Up to December 31, 2002, the financial statements of the above-mentioned subsidiaries were consolidated, and as from 2003, the investment in shares of those companies is valued by the equity method. See Note 5. On July 4, 2003, through its Spanish subsidiaries, CIE went into a joint venture with Stage Holding, an important theatrical promoter in Continental Europe. On November 12, 2003, CIE through Administradora Mexicana de Hipódromo S.A. de C.V., began the development of Granja Las Américas, a new concept in family entertainment within Mexico City s Las Américas Complex. In November 2003, CIE, through Controladora Comercial CIE, S.A. de C.V., carried out a 12,973 U.S. Dollar capital increase in its subsidiary CIE Brasil, S.A., as a result of which, there was a reduction in the CIE shareholding in CIE Brasil, S.A. from 95% to 91%, representing a Ps.28,586 loss for CIE due to the reduction in its participation in the stockholders equity of subsidiaries, which was included in the statement of income under other expenses. CIE 2004: Entertainment Guaranteed 57

60 Following are the principal CIE subsidiaries, which CIE effectively controls and in which it holds 50% or more of the capital stock: Company Main activity Intermediate holding companies: Impulsora de Centros de Entretenimiento Las Américas, S.A. de C.V. Ocesa Entretenimiento, S.A. de C.V. CIE Internacional, S.A. de C.V. Latin Entertainment, Inc. Controladora de Contenidos, S.A. de C.V. Holding company. Holding company. Holding company. Holding company for companies engaged in radio-broadcasting in Argentina and internet companies. Holding company for subsidiaries, including those located in Argentina. Entertainment Division: Operadora de Centros de Espectáculos, S.A. de C.V. Administrator of entertainment venues and holding company. Ocesa Anfiteatro, S.A. de C.V. Holding company; operates entertainment venues. OCESA Presents, Inc. Artists agency. Grupo Mantenimiento de Giros Comerciales Internacional, S.A. de C.V. Holding company; operates amusement parks. Mat Theatrical Entertainment, S.A. de C.V. Owner of rights to theater productions. Generamúsica y Algo Más, S.A. de C.V. Records producer (dormant company). Opera Show, S.A. de C.V. Operator of an entertainment venue. CIE America Holdings, C.V. Holding company for subsidiaries located in the United States of America. Grupo Automovilístico Nacional y Deportivo, S. de R.L. de C.V. Promoter of car racing events. Venta de Boletos por Computadora, S.A. de C.V. Automated ticket sales. Show Off, S.A. de C.V. Management of local and foreign artists abroad Mexico. Servicios de Protección Privada Lobo, S.A. de C.V. Security and protection services. Services Division: Grupo Sitel de México, S.A. de C.V. Servicios Corporativos CIE, S.A. de C.V. Commercial Division: Publitop, S.A. de C.V. Representaciones de Exposiciones México, S.A. de C.V. Unimarket, S.A. de C.V. Make Pro, S.A. de C.V. Holding company; renders telemarketing services. Holding company; renders administrative services to other group companies. Sale of advertising for display on pedestrian overpasses. Promoter of fairs and exhibitions and holding company. Sale of rotating advertising for sports events. Advertising and sponsorship intermediary. Horse racetrack: Administradora Mexicana de Hipódromo, S.A. de C.V. ( AMH ) Entretenimiento Recreativo, S.A. de C.V. Organizing of live horse races and bet placing, as well as other gambling permitted by law. Owner of equipment and systems for electronic gambling centers and other games. 58 CIE 2004: Entertainment Guaranteed

61 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in Mexico ( Mexican GAAP ), and accordingly are stated in thousands of Mexican pesos of December 31, 2004 purchasing power. The significant accounting policies, including the concepts, methods and criteria relative to the recognition of the effects of inflation on the financial information, are summarized as follows: a. The consolidated financial statements include the accounts of all the companies mentioned in Note 1. All significant intercompany balances and transactions between the consolidated companies have been eliminated in consolidation. The consolidation was carried out on the basis of audited financial statements of the majority of the subsidiaries. The financial statements of foreign subsidiaries classified as foreign entities are restated on the basis of the National Consumer Price Index ( NCPI ) or equivalent for the country in which each entity reports its operations, and are subsequently converted at the rate of exchange in effect at the close of the year. The effects of changes in the applicable exchange rates are included directly in stockholders equity as Cumulative translation adjustment. b. Investments in marketable securities, which have been declared as trading securities by management, are initially recorded at acquisition cost and valued at the end of each accounting period at fair value, which is similar to their market value. The difference between fair value and acquisition cost is recorded in the statement of income as financial income. The fair value is the value at which a financial asset can be exchanged or a financial liability can be liquidated between interested and willing parties in an arm s-length transaction. c. The investments in derivative financial instruments are intended to reduce the risk of adverse movements in interest rates, exchange rates and inflation rates, and are recognized in the balance sheet as assets stated at fair value. Realized and unrealized gains or losses on these instruments are recorded based on their fair value, at the balance sheet date or at execution date. d. Inventories are stated at average cost and are restated by using factors derived from the NCPI. The values so determined do not exceed market value. Cost of sales is restated by applying factors derived from the NCPI. e. The costs of future events include advances, deposits, advertising paid in advance and other costs related to future events. Said costs are charged to income when the events take place. Costs identified with events which will take place after one year are stated at restated value, determined by applying NCPI factors to the historical acquisition costs. f. Up to December 31, 2002, CIE held control of the subsidiary Estudio México Film, S.A. de C.V., and therefore included the Company in consolidation. However, as mentioned in Note 5, as from 2003, CIE no longer exercises control of the Company, and as from that year, the investment in shares of unconsolidating subsidiary is valued by the equity method, according to which, the acquisition and/or contribution cost of those shares is modified by the proportionate part of the changes in the stockholders equity accounts made after the date of acquisition and/or contribution. The equity loss in unconsolidating subsidiaries is shown separately in the 2004 and 2003 statements of income. g. Property, furniture and equipment and the related accumulated depreciation are stated at cost, restated by applying factors derived from the NCPI to the historical cost. Depreciation is calculated by the straight-line method, based on the estimated useful lives of the assets, on both the historical cost and the restatement increments. Investments made in connection with Las Américas Complex concessions will be amortized by the straight-line method over a period of 25 years for the horse-racing operation and 50 years for the real estate operation. h. Intangible assets are recognized in the balance sheet provided they are identifiable, provide expected economic benefits and the Company has control over such benefits. Intangible assets with an indefinite useful life are not amortized and intangible assets with a definite life are amortized systematically, based on the best estimate of their useful life determined in accordance with the expected future economic benefits. The value of these assets is subject to an annual evaluation for impairment. See point k. below. i. Preoperating expenses and other assets and the related accumulated amortization are stated at cost, restated by applying factors derived from the NCPI to the historical amounts. Amortization and evaluation of impairment was calculated as mentioned in point k. below. CIE 2004: Entertainment Guaranteed 59

62 j. Goodwill, represents the excess of the cost of shares of subsidiaries over their book value, is amortized by the straight-line method to restated value and its net value is subject to annual impairment tests. As from 2005, the date on which Statement B- 7 Business Acquisition, issued by the Accounting Principles Commission ( APC ) of the Mexican Institute of Public Accountants, A.C. ( MIPA ), went into effect, goodwill is not longer amortized and its value is subject to annual impairment tests, as mention in point k. below and Note 17. k. In 2003, the Administration of the Company adopted, Statement C-15 Impairment of the Value of Long-Lived Assets and their Disposal, issued by APC of MIPA, which establishes, among other things, the general criteria for the identification, and, when applicable, the recording of impairment losses or decrease in the value of long-lived assets, tangible and intangible, including goodwill. The adoption of this Statement, generated at December 31, 2003 a reduction in the value of fixed assets, intangible and other assets by Ps.1,617,902, amount that is presented as extraordinary item in the statement of income. See Note 16. At December 31, 2004, the application of this statement did not have any effect on the company s financial position or net income. l. The Company s liabilities represent present obligations and the liability provisions recognized in the balance sheet represent present obligations whose settlement will probably require the use of economic resources. These provisions have been recorded based on management s best estimate of the amount needed to liquidate the present liability; however, actual results could differ from the provisions recognized. m. Income tax, asset tax and employees statutory profit sharing are computed and recorded by the comprehensive asset-and-liability method, which consists of recognizing deferred taxes effects on all temporary differences between the book and tax values of assets and liabilities. Note 12 includes an analysis of the consolidated temporary differences at December 31, 2004 and 2003, on which deferred taxes were recognized. n. Seniority premiums to which employees are entitled upon termination of employment after 15 years of services, as well as the obligations under the retirement plans established for the employees, to which the employees do not contribute, are recorded as a cost of the years in which the respective services are rendered, based on actuarial studies made by independent experts, carried out using the projected unit credit method. Following is a summary of the principal financial data relative to these plans: December 31, Projected benefit obligation Ps. (84,435) Ps. (80,581) Unamortized transition liability 7,177 8,977 Unamortized actuarial (losses) gains (8,431) 3,831 Amendment to plan 3,372 2,423 Projected net liability Ps. (82,317) Ps. (65,350) Actual benefit obligation Ps. 75,821 Ps. 52,087 Net cost for the year Ps. 31,666 Ps. 26,422 The unamortized actuarial losses and the transition liability are recognized through charges to income based on the average remaining service life of the employees expected to receive the benefits (approximately 10 years). Other compensation based on seniority to which employees may be entitled in the event of dismissal or death, in accordance with the Federal Labor Law, is applied to income in the year in which it becomes payable. 60 CIE 2004: Entertainment Guaranteed

63 o. Revenue of future events represents income from future presentations and is applied to income on the date on which the presentations are made. Advance ticket sales are recorded as deferred income until the event takes place. Income from future events or services to be rendered over a period of more than one year are stated at restated value, determined by applying factors derived from the NCPI. p. Transactions in foreign currencies are recorded at the rates of exchange prevailing on the dates they are entered into and/or settled. Assets and liabilities denominated in these currencies are stated at the Mexican peso equivalents resulting from applying the exchange rates in effect at the balance sheet date. The differences arising from fluctuations in the exchange rates between the dates on which transactions are entered into and those on which they are settled, or the balance sheet date, are charged or credited to income. q. The different components of the stockholders equity represent the amount of these items expressed in pesos of purchasing power as of the balance sheet date, and are determined by applying factors derived from the NCPI to the historical amounts. r. The cost of the executives stock plan represents the difference between the market value of the shares at the time of subscription and the amount paid, and is amortized over the term in which the executives will render the related services, normally 15 years. At December 31, 2004, the average remaining term over which the cost of the plan will be amortized was 10 years, see Note 10b. In the event that an executive leaves the Company before the agreed term, either as a result of resignation or dismissal, he is required to return the shares corresponding proportionately to the years in which his services will not be rendered, or the equivalent in money at the market value of the related shares. The difference between the market value of the shares at the date of subscription and at the date on which the executive leaves the Company is recorded in income in the year in which the employment terminates. s. The liability arising from deferred rents represent the commitments derived from the lease agreement entered into for the space located in the commercial center denominated Sawgrass Mills, in Florida, U.S.A. This liability is credited to income by the straight-line method, based on the term of the lease agreement. The aforementioned lease agreements sets forth the rights to receive 40% of the cost of construction, up to an amount not exceeding 15 million U.S. dollars, corresponding to lease rebates, provided the amount in question is capitalized as per generally accepted accounting principles, and is recognized as a deferred credit, to be amortized in the period in which said rebate is received according to contract terms. t. The result on net monetary position represents the inflationary gain (loss), as measured by the NCPI, on the Company s monthly net monetary assets and liabilities during the year. u. Comprehensive loss is represented by the net income (loss) for the year, plus the translation adjustment arising in connection with foreign subsidiaries, and items required by Mexican GAAP to be reflected in stockholders equity but which do not constitute capital contributions, reductions or distributions. It is restated on the basis of NCPI factors. CIE 2004: Entertainment Guaranteed 61

64 NOTE 3 - FOREIGN CURRENCY POSITION The amounts in this note are stated in thousands, except for exchange rates. At December 31, 2004 and 2003, the Company and its subsidiaries had the following monetary assets and liabilities in foreign currencies: U.S. Argentine Colombian Chilean Brazilian dollars pesos pesos pesos Euros reals 2004 Assets 41,838 27,077 5,339,043 1,095,856 1,276 44,079 Liabilities (66,235) (20,894) (28,387,979) (1,063,660) (975) (55,316) Net position (24,397) 6,183 (23,048,936) 32, (11,237) 2003 Assets 22,619 32,291 8,837, ,209 16,479 52,607 Liabilities (18,306) (16,257) (32,110,805) (3,474,176) (9,732) (54,060) Net position 4,313 16,034 (23,273,773) (2,836,967) 6,747 (1,453) The exchange rates with the Mexican peso at December 31, 2004 and 2003 were the following: U.S. dollar Ps Ps Argentine peso Colombian peso Chilean peso Euro Brazilian real At March 4, 2005, date of issuance of the audited financial statements, the exchange rates had not varied significantly. At December 31, 2004 and 2003, the Company had the following position in nonmonetary assets of foreign origin whose replacement cost can be determined only in U.S. dollars ( Dls. ): December 31, Inventories Dls. 1,446 Dls. 696 Furniture and equipment 105,495 54,286 Deferred costs and expenses 32, ,035 Dls. 139,246 Dls. 176, CIE 2004: Entertainment Guaranteed

65 The principal foreign currency transactions carried out by the Company in the years ended December 31, 2004 and 2003, are summarized below. These transactions have been converted to Dls., which is the most common foreign currency: Year ended December 31, Income from services Dls. 150,839 Dls. 99,038 Other income - Net 2,520 33,201 Purchases (129,131) (66,432) Operating expenses (62,059) (56,133) Artistic talent (16,057) (12,840) Interest paid - Net (1,995) (2,219) NOTE 4 - ANALYSIS OF ACCOUNTS RECEIVABLE Accounts receivable are analyzed as follows: December 31, Customers - Net Ps. 1,354,329 Ps. 1,099,518 Recoverable value added tax 412, ,338 Recoverable income tax 49,373 Related parties 53,321 75,725 Other receivables 89, ,932 Ps. 1,958,195 Ps. 2,237,513 NOTE 5 - INVESTMENTS IN SHARES OF UNCONSOLIDATING SUBSIDIARIES At December 31, 2004, the investment in shares of unconsolidating subsidiaries included mainly 75% of the capital stock of Estudio México Films, S.A. de C.V. ( EMF ). However, CIE ceased to exercise control of the Company in 2003, and it was therefore, not included in consolidation. The balance of investments in shares of unconsolidating subsidiaries at December 31, 2004 and 2003 is analyzed as follows: Participation in the stockholders equity of unconsolidating subsidiaries at the beginning of the year Ps. 206,462 Ps. 276,568 Accounts receivable to be capitalized 225,857 (1) Loss by increase in the capital stock of unconsolidating subsidiary company (1) (77,347) Equity loss for the year (7,359) (295,963) (2) Balance of the investment in shares of unconsolidating subsidiaries at end of year Ps. 121,756 Ps. 206,462 CIE 2004: Entertainment Guaranteed 63

66 (1) See commitment in Note 14j. (2) The equity in unconsolidating subsidiaries for the year includes Ps.105,692 corresponding to advance recognition of the provisions of Statement C-15 Impairment of the Value of Long-Lived Assets and their Disposal issued by the APC of the MIPA. See Note 16. NOTE 6 - SEGMENT INFORMATION Information about net sales, operating income and total assets by segment for the years ended December 31, 2004 and 2003, is shown below: Net sales Year ended December 31, Division: Commercial Ps. 1,010,867 Ps. 921,328 Entertainment 5,983,795 5,390,418 Services 792, ,999 Consolidated total Ps. 7,786,997 Ps. 7,033,745 Operating income Year ended December 31, Division: Commercial Ps. 152,538 Ps. 118,214 Entertainment 857, ,970 Services 162, ,730 Consolidated total Ps. 1,172,472 Ps. 1,117,914 Total assets December 31, Division: Commercial Ps. 2,500,102 Ps. 2,067,123 Entertainment 47,048,444 45,515,083 Services 1,437,589 1,882,229 50,986,135 49,464,435 Eliminations (35,969,946) (35,258,779) Consolidated total Ps. 15,016,189 Ps. 14,205, CIE 2004: Entertainment Guaranteed

67 Following is an analysis of net sales for the years ended December 31, 2004 and 2003, by geographic sector: Net sales Year ended December 31, Mexico Ps. 6,523,307 Ps. 5,863,079 Foreign 1,263,690 1,170,666 Total Ps. 7,786,997 Ps. 7,033,745 NOTE 7 - ANALYSIS OF PROPERTY, FURNITURE AND EQUIPMENT The investment in property, furniture and equipment is as follows: December 31, Annual depreciation and amortization rates (%) Land Ps. 38,882 Ps. 41,549 Buildings, mainly constructions in concessioned and permited venues 3,713,477 3,362,373 2 and 5 Leasehold improvements 1,901,997 1,543,986 5 Amusement park equipment 1,059, , and 10 Furniture and equipment 656, , Computer and peripheral equipment 475, , and 30 Billboards and related structural equipment 129,318 84, to 33 Transportation equipment 69,099 57, and 25 Radio and communications equipment 55,376 49, and 8 Other 122, ,991 Various 8,182,911 7,176,421 Accumulated depreciation (2,206,751) (1,770,017) 5,976,160 5,406,404 Construction in progress 263, ,680 Advances to suppliers 4,825 Ps. 6,278,911 Ps. 5,899,458 CIE 2004: Entertainment Guaranteed 65

68 NOTE 8 - ANALYSIS OF PREOPERATING EXPENSES AND OTHER ASSETS Preoperating expenses and other assets are analyzed below: December 31, Preoperating prepaid expenses - Net Ps. 1,539,373 Ps. 1,561,015 TV advertisement paid in advance - Net 209, ,798 Other - Net 300, ,656 Ps. 2,050,011 Ps. 2,076,469 NOTE 9 - ANALYSIS OF LONG-TERM BANK LOANS AND DERIVATIVE FINANCIAL INSTRUMENTS Long-term bank loans, classified by currency at December 31, 2004, are analyzed as follows: Mexican Foreign Due date pesos currency Total 2006 Ps. 237,778 (2) Ps. 93,671 (3) (4) (7) Ps. 331, ,429,410 (1) (2) 44,598 (7) 2,474, ,778 (2) 386,598 (6) (7) 624, ,778 (2) 96,457 (7) (5) 334, ,598 (7) 44, ,448 (7) 33,448 Ps. 3,142,744 Ps. 699,370 Ps. 3,842,114 (1) In March and April 2000, the Company made a public offering of 6,353,866 medium-term promissory notes with a par value of 100 investment units ( UDI s ) per note, payable over a seven-year period, detailed as follows: Restated Historical Historical value of value of value of Historical public Annual UDI at UDI at value of offering at interest Date of Number of date of December 31, public December 31, fixed issuance Due date UDI s offered issuance 2004 offering 2004 rate 16/03/00 16/03/07 436,697,300 Ps Ps (a) Ps. 1,200,000 Ps. 1,489, % 27/04/00 27/04/07 198,689, , , % 635,386,600 Ps. 1,750,000 Ps. 2,191, CIE 2004: Entertainment Guaranteed

69 The medium-term promissory notes are unsecured. Restated value of UDI at December 31, 2004 was Ps (a) At December 31, 2004 CIE holds a derivate financial instruments ( swap ), which secures the value of the UDI in Ps until an amount of 436,697,300 UDI s, contracted in June 21, 2004 and maturing on March 17, (2) This amount corresponds to the long-term portion of four notes contracted by the subsidiary AMH amounting to Ps.551,000 and Ps.400,000 (includes three notes), payable to Banco Inbursa, S.A. Capital is payable semiannually as from September 2005 in equally installments. Interest for the first note are determined at the 28-day inter-banking equilibrium ( TIIE ) rate for this period, plus 2 percentage points. Interests on the remaining notes are determined considering a fixed annual rate of 10.30%. Short-term portion of the loans amounting to Ps.118,875, is included in the bank loans caption in the balance sheet. (3) The most significant amount is a Dls.7,250 unsecured loan contracted by the subsidiary Latin Entertainment, Inc. Interests are determined considering the London Interbanking Offered Rate ( Libor ) plus 3.5 percentage points. (4) Includes two unsecured notes of a total amount of 361,601 Colombian pesos, contracted by the subsidiary Reforestaciones y Parques, S.A. with Colombian banks. Interests are determined considering, in general terms, the average annual fixed deposit rate plus 7 percentage points. Some of these notes are secured by the ticket income or the cession of the rights by sponsorship of the contractors. (5) Includes 13 unsecured notes of a total amount of 10,914,547 Colombian pesos, contracted by the subsidiary Reforestaciones y Parques, S.A. with Colombian banks. Interest is determined considering, in general terms, the average annual fixed deposit rate plus 8 percentage points. Some of these notes are secured by the ticket income or the cession of the rights by sponsorship of the contractors. (6) This amount corresponds to a Dls.30,000 loan to CIE, dated August 3, 2004, from Credit Suisse First Boston Bank. Interests are determined considering the Libor rate plus 3.3 percentage points. In the same day, CIE contracted a swap to fix the exchange rate at Ps per one U.S. dollar, additionally to convert the interest rate to 28-day TIIE rate plus 3.3 percentage points. The loan and swap maturing on February 15, (7) This amount corresponds to a Dls.20,000 loan, which is payable quarterly from 2006 to Interests are determined considering the rate established by the lending bank plus 1.35 percentage points, as prescribed in the same note. (8) On December 27, 2002, CIE contracted with a Mexican bank a loan with annual principal payments until At the same time, at December 31, 2004 and 2003 there was an account receivable from the same banking institution for the same amount and payments terms; thus, in preparing the consolidated financial statements, these amounts were offset. At December 31, 2004, CIE holds a swap, contracted on May 8, 2003, and maturating on July 6, 2005, which ensures a fixed rate of 9.55% on short-term bank loans, up to Ps.200,000. Certain bank loans establish some conditions to do and not to do, which were complied with at December 31, 2004, except for the minimum visitor-attendance requirement established in one of the loans, which was not met. This situation could cause the interest rate to increase by 2 percentage points during the period of noncompliance. At the date of issuance of the audited financial statements, the Company s management is in the process of obtaining the waiver from the bank and renegotiating other clauses. CIE 2004: Entertainment Guaranteed 67

70 NOTE 10 - STOCKHOLDERS EQUITY a. Analysis of stockholders equity Stockholders equity at December 31, 2004, was composed as follows: Mexican pesos of December Historical Inflation 31, 2004 amount increment purchasing power Capital stock Ps. 309,203 Ps. 86,438 Ps. 395,641 Share premium 3,737,438 1,575,567 5,313,005 Deficit (873,535) 582,231 (291,304) Cumulative translation adjustment (788,954) (788,954) Cumulative deferred income tax (43,524) (9,519) (53,043) Ps. 3,129,582 Ps. 1,445,763 Ps. 4,575,345 The income for the year is subject to the legal provision requiring at least 5% to be set aside to increase the legal reserve until it reaches an amount equivalent to 20% of the capital stock. Dividends paid are not subject to income tax if paid from the Net Tax Profit Account ( NTPA ). Any dividends paid in excess of this account are subject to a tax equivalent to 42.85%, 40.84% or 38.91% depending on whether paid in 2005, 2006 or 2007, respectively. The tax is payable by the Company and may be credited against its income tax in the same year or the following two years. Dividends paid from previously taxed profits are not subject to tax withtholding or additional tax payment. In the event of a capital reduction or any other excess of stockholders equity over capital contributions, the latter restated in accordance with the provisions of the Income Tax Law, is accorded the same tax treatment as dividends. The capital stock at December 31, 2004 was represented by common nominative shares with no par value, analyzed as follows: Number of shares Description Amount 30,955,386 Series B, Class I shares, representing the fixed minimum portion of the capital stock Ps. 30, ,598,467 Series B, Class II shares, representing the variable portion of the capital stock 278, ,553,853 Subtotal 309,553 (349,950) Unpaid treasury shares corresponding to Series B, Class II shares (350) 309,203,903 Capital stock in historical Mexican pesos 309,203 Restatement increase 86,438 Capital stock in Mexican pesos of December 31, 2004 purchasing power Ps. 395, CIE 2004: Entertainment Guaranteed

71 b. Executives stock plan The Company has a stock subscription plan for its executives (the plan), which entitled participants to subscribe shares from the variable portion of the capital stock, under the terms and conditions determined by the technical committee managing the plan. The shares assigned to the plan are handled through two trusts, one corresponding to the 1999 stock plan and the other one to 2002 stock plan. One of the conditions for share subscription is that the executive in question must remain in the employment of the company for a period of at least 15 years from the date on which the shares are subscribed, related to the first stock plan. The cost of the plan is represented by the difference between the market value of the shares at the time of subscription and the amount paid by the executives. This item is included in preoperating expenses and other assets, and for the purpose of presentation in the consolidated financial statements the unamortized portion is offset against share premium. The amortization of the plan cost amounted to Ps.13,859 in 2004 and Ps.15,016 in Amortization of the plan cost is calculated by the straight-line method, during the following ten years. c. Share subscription and stock option plan for executives and employees At the ordinary stockholders meeting held on April 26, 2001, the stockholders agreed to establish a share subscription and stock option plan for executives and employees, on May 30, 2002, the notification was published of subscription for stockholders not having waived their preferential right in the April 2001 meeting and who wish to participate in this subscription. The plan s operating rules stipulate that a third of the shares subscribed by company executives and employees may be sold annually as from the month twenty five of subscription. Therefore, as a net benefit from their participation in this plan, they will obtain the increase in market value of the subscribed shares, less the corresponding interest. The plan is for a five-year term, as from the subscription date. Should the participants decide not to sell their shares, they will lose all rights earned. If the market value of the shares at the date of sale is below the established subscription price, the Company will cover the difference. At the June 17, 2002 meeting of the Board of Directors, the subscription of shares was confirmed, and a portion thereof was reserved for the aforementioned share subscription and stock option plan. As a result, on June 14 and 17, 2002, 6,103 Series B, Class II shares were subscribed by the stockholders exercising their preferential right, and 3,310,280 Series B, Class II shares were subscribed by company executives and employees, at a subscription price per share of Ps (historical pesos), considering a theoretical par value of one Mexican peso plus a share premium subscription of Ps (historical pesos). At December 31, 2004, the market value per share was of Ps (historical pesos). At December 31, 2004 and 2003, 349,950 of the plan s shares were unsubscribed and remain in the Company treasury. In accordance with the instructions of the Trust s Technical Committee, on June 30, 2004, a total of 185,800 shares were sold, originally corresponding to six employees who ended their employment with CIE. NOTE 11 - COMPREHENSIVE FINANCING COST The comprehensive financing cost was analyzed as shown below: Year ended December 31, Banking commissions paid Ps. (28,920) Ps. (31,398) Interest paid - Net (477,129) (367,393) Exchange gain - Net 12, ,453 Loss on net monetary position (1,066) (58,959) Comprehensive financing cost - Net Ps. (494,613) Ps. (274,297) CIE 2004: Entertainment Guaranteed 69

72 NOTE 12 - INCOME TAX, ASSET TAX AND EMPLOYEES STATUTORY PROFIT SHARING Income tax CIE and its subsidiaries do not consolidate for tax purposes. In the years ended December 31, 2004 and 2003, certain subsidiaries individually determined taxable income amounting to Ps.903,499 and Ps.694,515 (amounts in historical pesos), respectively. The difference between book and tax results is due mainly to timing differences, in which some items are included in taxable income or deducted for book or tax purposes in different periods, as well as to the use of different methods and criteria for recognizing the effects of inflation for book and tax purposes. In 2004 and 2003, some subsidiaries totally or partially utilized prior years tax losses amounting to Ps.228,675 and Ps.203,809, respectively. The tax benefit of such utilization was Ps.75,462 and Ps.69,295, respectively. In the years ended December 31, 2004 and 2003, CIE and certain of its subsidiaries determined tax losses amounting to Ps.647,281 and Ps.781,655, respectively. At December 31, 2004 CIE and certain of its subsidiaries had unused tax losses for a total of Ps.2,727,609, which may be offset against future profits through the dates shown below. These losses may be restated by applying factors derived from the NCPI up to the year in which they are utilized: Expiration date Historical Restated December 31, amounts amounts 2005 Ps. 369 Ps. 1, , ,315 5, ,465 2, ,070 8, , , , , , , , , , ,184 Ps. 2,727,609 Ps. 3,052,450 At December 31, 2004 and 2003, the principal temporary differences giving rise to deferred taxes were as follows: December 31, Inventories Ps. (35,358) Ps. (25,179) Property, furniture and equipment - Net (698,920) (644,143) Provisions and asset valuation allowances 165, ,590 Preoperating expenses (1,486,231) (1,225,308) Tax loss carryforwards of Mexican and foreign subsidiaries - Net 2,314,023 2,193,329 Costs and revenues of future events - Net (1,289,952) (1,382,187) (1,030,639) (946,898) Income tax rate 30% 33% Deferred income tax (309,192) (312,476) Less - Recoverable asset tax 47,910 16,826 Net deferred income tax liability Ps. (261,282) Ps. (295,650) 70 CIE 2004: Entertainment Guaranteed

73 As a result of the amendments to the Income Tax Law approved on November 13, 2004, the income tax rate will be reduced annually beginning in 2005, 2006 and 2007 until it reaches a nominal rate of 30%, 29% and 28%, respectively. Asset tax At December 31, 2004 and 2003 CIE and a number of its subsidiaries determined asset tax amounting to Ps.57,645 and Ps.19,801, respectively. Since their asset tax liability exceeded their income tax payable in those years, or because they had tax losses, or because their tax profits were offset by prior years tax losses, a portion of these balances was included in the deferred income tax computation, as a recoverable asset tax. Asset tax may be recovered in any of the ten years following that in which it is paid, to the extent the company s income tax liability exceeds its asset tax in those years. The recoverable tax may be restated by applying factors derived from the NCPI. Employees statutory profit sharing Employees statutory profit sharing was calculated by applying the 10% rate to the basis determined in accordance with the rules established in the Mexican Income Tax Law. For the years ended December 31, 2004 and 2003, the Company obtained no taxable income for this purposes. NOTE 13 - EARNINGS PER SHARE The basic earnings per share is calculated by dividing the majority net income for the year by the weighted average of common shares outstanding during the year. The weighted average of shares used for this calculation was 309,203,903 in 2004 and For the years ended December 31, 2004 and 2003, the basic earnings (loss) per share was Ps.0.17 and (Ps.3.91), respectively. NOTE 14 - COMMITMENTS Following is a summary of commitments of CIE and its subsidiaries at December 31, 2004: Related to the Entertainment Division: Operadora de Centros de Espectáculos, S.A. de C.V. ( OCESA ) and other subsidiaries have the following commitments: a. Commitments derived from revocable temporary administrative permits and lease agreements from various Government institutions and third parties, to operate entertainment venues and public entertainment, the most important of which are: Venues (1) Commencement or renewed date Corporate Offices s CIE January 2, 2004 Auditorio Coca Cola - Fundidora (Monterrey, N.L.) October 29, 1993 Palacio de los Deportes, Foro Sol and Autódromo Hermanos Rodríguez (Mexico City) April 28, 2003 Teatro Metropólitan (Mexico City) April 21, 2004 Teatro Blanquita (Mexico City) November 1, 2004 Corporated office Entertainment Division March 22, 2001 Centro Cultural Telmex April 14,1999 Salón 21 May 23, 2003 CIE 2004: Entertainment Guaranteed 71

74 These permits and contracts establish payments which vary based on total income, number of events and other aspects. Certain companies having these permits are committed to modernize the facilities and/or invest a minimum amount during the lifetime of the permits of contract. Terms vary from 2 to 50 years. b. In 2001 and 2002 a number of contracts related to the administration and organization of two races of the Serial Cart Championship Auto Racing Teams, Inc. ( CART ) in Mexico were signed (as well as for the commercialization of the T.V. rights of the above-mentioned events). The organization rights are for a five-year period, beginning in 2002 until Under these agreements, the Company is required to make an annual payment to CART for the organization costs and rights during the term of the agreements. c. In June 2004, OCESA entered into an agreement with National Association for Stock Car Auto Racing, Inc. ( Nascar ), to conduct an event in March 2005; involving a race of the Nascar Bush Series at the Autódromo Hermanos Rodríguez in Mexico City. Under this agreement, OCESA is required to pay a fixed amount for conducting the event. In addition, a subsidiary of OCESA acquired the commercial representation rights of the Nascar trademarks in Mexico up to 2013, against payment of a commission for the amounts obtained, but guaranteeing a minimum income for Nascar. In addition, this company acquired the rights to act as agent for the commercialization of the broadcasts of the Nascar Series in Mexico, against payment of a commission on the amounts obtained. Grupo Mantenimiento de Giros Comerciales Internacional, S.A. de C.V. ( Grupo Mágico ) and some of its subsidiaries have the following commitments: d. Commitments derived from revocable temporary administrative permits and lease agreements from various Government institutions, to operate amusements parks, the most important of which are: Venues (1) Commencement or renewed date La Feria de Chapultepec (Mexico City) May 1, 2003 Parque El Salitre Mágico (Bogota, Colombia) December 22, 1998 El CICI (Acapulco, Gro., Mexico) March 18, 1998 México Mágico (formerly El Planeta Azul) (Mexico City) May 1, 2003 These permits and contracts establish payments which vary based on total income, number of events and other aspects. Certain companies having these permits are committed to modernize the facilities and/or invest a minimum amount during the lifetime of the permits. Terms vary from 5 to 22 years. (1) There is no guarantee that an extension will be granted on those permits or contracts, or that the new conditions agreed to will be the same. Nevertheless, the Company s management, based on its experience, considers that the permits and contracts will be renewed under terms similar to those currently in effect. e. On October 9, 2002, The Original Creators Miami, Inc. ( TOCM ), a subsidiary of Grupo Mágico, signed a shopping center lease with Sunrise Mills Limited Partnership. This agreement requires that Sunrise Mills, in its capacity as lessor, grant the use of the facilities denominated Sawgrass Mills Shopping Center to TOCM for a period of 20 years, as from June 1, 2004 or as from the date on which the lessee opens its facilities to the public. f. At December 31, 2004, Grupo Mágico had future commitments arising from operating lease agreements. Minimum lease payments are stipulated in said agreements. g. Additionally, at December 31, 2004 certain Grupo Mágico subsidiaries had future commitments arising from leasing agreements for rides and attractions used in their operations. The commitments are secured by the assets being acquired. 72 CIE 2004: Entertainment Guaranteed

75 h. On October 23, 2003 CIE signed a lease contract with the Government of State of Mexico, for the venue denominated Recinto Ferial Texcoco, for a period of ten years as from the date of this contract. This venue is in charge of the development of an annual event denominated Feria del Caballo. This contract establishes annual payments increased by the NCPI for the Feria del Caballo event and a percentage on total income for other events. Additionally CIE is committed to modernize the facilities. Related to horse racetrack operations: i. One of the subsidiaries was granted authorizations pertaining to the Hipódromo de las Américas, which are, firstly, the Ministry of the Interior permit for the operation and exploitation of live horse races, including on-site betting as well as betting under the Libro Foráneo system (simulcasting), and, secondly, the concessions granted by the Ministry of the Civil Service (formerly General Controller s Office) for the use and exploitation of two pieces of real estate belonging to the Federal Government, the first for use as a horse-racing track and the second for the construction and operation of a hotel, a convention and exhibition center, and a cultural and family entertainment venue. Other commitments: j. On March 25, 2003, CIE signed a debt-recognition agreement with Sociedad de Inversión de Capitales Inbursa, S.A. de C.V. ( SINCA Inbursa ) under which it agrees to increase the capital of the unconsolidating subsidiary Estudio México Films, S.A. de C.V. ( EMF ) in an amount equivalent to total accounts payable of EMF and its subsidiaries owed to companies of the CIE group; without giving rise to an increase in CIE shareholding exceeding 75%, such increase was made by the subscription of non-voting rights shares. When CIE made the capital increase this gave rise to a Ps.77,347 loss from participation in the capital of unconsolidating subsidiary. At December 31, 2003, company management reclassified its accounts receivable from EMF and its subsidiaries by Ps.225,857 under investment in shares of unconsolidating subsidiary in order to properly present the effects of the commitment described in the preceding paragraph. k. As from June 17, 2002, CIE is guarantor and jointly liable with respect to a bank loan of Ps.65,500, which can be increased up to Ps.120,000. This loan was contracted by the Trust related to the stock option plan for company executives, and is renewable annually until the Trust is extinguished. l. At December 31, 2004, CIE is guarantor and jointly liable with respect to a bank loan of Ps.155,993, contracted by one of its unconsolidating subsidiaries. NOTE 15 - CONTINGENCIES Following is a summary of the main contingencies of CIE and its subsidiaries: a. OCESA is involved in litigation concerning the extension of the lease agreement for the Teatro Orfeón. In management s opinion, the lawsuit will be favorably resolved and therefore no liability has been recorded in this connection. b. Tax authorities have initiated reviews at OCESA, with the intention of verifying the suitable fulfillment of the tax applicable provisions, corresponding to the years 1995, 1999, 2000, 2001 and 2002, which are currently in progress. The Administration of the Company has determined not to reserve any amount, due to the fact that tax liabilities have not been determined, and that they have sufficient defenses so that the results of the audit would be favorable or, if applicable, has defenses necessary to obtain favorable results in the case of possible tax controversies. c. OCESA is currently undergoing an official tax audit for foreign trade purposes, corresponding to the years 2000, 2002, 2003 and 2004, which are currently in review by tax authorities. The Administration of the Company has determined not to reserve any amount, due to the fact that tax liabilities have not been determined, and that they have sufficient defenses so that the CIE 2004: Entertainment Guaranteed 73

76 results of the audit would be favorable or, if applicable, has defenses necessary to obtain favorable results in the case of possible tax controversies. d. On May 2, 2003, the Ministry of Finance advised Administradora Mexicana de Hipódromo, S.A. de C.V. ( AMH ) of different amounts of taxes assessed on property leases, in this case the Hipódromo de las Américas complex. The taxes assessed were Ps.127,071 (restated omitted tax), plus the respective fines and surcharges. AMH filed an appeal against that tax assessment, and a request was made for cancellation of the administrative procedure for execution, for which purpose, the tax assessment was guaranteed by means of an administrative attachment of the business. The appeal was overruled, and AMH therefore filed another appeal at the Federal Administrative and Tax Court, which has not yet been resolved. The foregoing means that the entire AMH business has been pledged to guarantee the tax assessment in order to be in a position to continue with the litigation against the assessed tax. This does not mean that the company s assets will be taken over or sold off, since the administrative process must first be carried out, and if necessary the respective judicial process, and once it has been decided whether or not the assessed tax is actually payable, the respective economic consequences for AMH will be known. At the date of issuance of the audited financial statements, management has not recorded any provision for this item, as in its opinion and its attorneys, AMH will obtain favorable results. e. On August 19, 2004, AMH received notification from the Comisión de Avalúos de Bienes Nacionales (currently the Instituto de Administración y Avalúos de Bienes Nacionales), of initiation of the administrative procedures for revocation of the June 30, 1998 concession titles granted to AMH, arising from failure to reach a conclusion regarding the matter mentioned in the point above. During the last quarter of 2004, AMH expressed its interest in concluding the aforementioned revocation procedures, in accordance with the provisions of the Bienes Nacionales Law, through conciliatory agreements. This request was accepted by the administrative authorities. At the date of issuance of the audited financial statements, this conciliation process has not been concluded. AMH s legal advisors consider there is a good possibility of the revocation procedures being concluded through the aforementioned conciliatory agreements, which would in no case, imply the revocation of the concessions. f. On October 18, 2002, CIE sold 40% of the shares of its subsidiary, Ocesa Entretenimiento, S.A. de C.V. ( Ocen ). Under the related agreement, CIE agreed to adjust the sale price in the event of failure to obtain the results guaranteed by CIE over a period of three years ( the EBITDA ). In accordance with the aforementioned agreement, the sale price adjustment is calculated based on the difference between the actual EBITDA accumulated over a three-year period and the amount of the guaranteed EBITDA. The difference will be multiplied by 40%, which constitutes the sale price adjustment. Part of this adjustment must be reimbursed in cash and, if it exceeds the maximum reimbursement amount, CIE is required to deliver a part of its Ocen shares to the buyer. The value of the aforementioned shares will be calculated according to the formula established in the agreement, and the payment established therein must, in no case, exceed 9.9% of Ocen shares. There is always a possibility of the guarantee not being covered, which could result in a price adjustment based on the aforementioned formula. g. Under the provisions of the Income Tax Law, parties carrying out operations with related parties, either resident in Mexico or abroad, are subject to tax limitations and obligations as concerns determination of transfer prices, which must be similar to those negotiated with unrelated parties in comparable operations. In order to comply with the Law, the Company has documented most of its transactions with related parties, however, the interpretation of the tax authorities could differ from that of the Company, possibly generating an economic impact for the Group. 74 CIE 2004: Entertainment Guaranteed

77 NOTE 16 - EXTRAORDINARY ITEM The APC of the MIPA issued Statement C-15 in December 2002, which establishes the criteria allowing for identification of situations involving the possible impairment in the value of long-lived tangible and intangible assets. That statement went into effect on January 1, Although the new accounting provisions need not be implemented until 2004, CIE management has decided to carry out the study and, at December 31, 2003, recognize in advance impairment of assets requiring that recognition. It should be mentioned that the growth of CIE over the last few years was based to a great extent on acquisitions that have allowed it to achieve its current size and scope. The value of each acquisition, including goodwill, preoperating expenses and research and development of future projects, was depreciated and amortized as per Mexican GAAP. The value assigned to the assets acquired reflects the market conditions in effect at the time of the acquisition. The change in economic conditions within certain business lines in which the Company operates are the root cause for assuming impairment in the value of said business lines. Determination of impairment and the respective adjustment in the value of assets are the result of the difference between the book value of the assets at the date of valuation (December 2003) and the useful value of those assets (present value of the future generation of cash flow). The results of advance application of Statement C-15 and of determination of impairment of some of the Company s business units were based on the following general assumptions: a. Business plans and operating budgets of the companies. b. Budgeting goals and guidelines. c. Prevailing conditions at the companies and in the industries, including expectations arising from general market changes. d. An analysis of fixed and variable costs and of operating expenses. e. The development stage considering necessary future operating time. f. The discount of future flows by means of a discount rate appropriate to each line of business. g. Comparing the useful value of each of the cash generating units to their book value. h. Determination of impairment as a result of the preceding point. Based on the use of the above assumptions, the effect of the adjustment for impairment for each of the cash generating units is as follows: 1. Radio operations in Argentina The Company operates nine radio broadcasting frequencies in Argentina, which were appraised in order to determine the useful value of each. By applying the present value technique, future cash flows were discounted at a rate of 11.61% in dollars. 2. Film Production and distribution operation The motion picture business in Latin America has been affected by macroeconomic conditions in the region, which has resulted in lower income from that business unit, indicating possible impairment. By discounting projected future cash flows for this business, based on business plans, experience, and management assumptions, discounted at a rate of 13.40% and 14.70% for film production and distribution, impairment of the Company s film inventory has been reflected. 3. Buenos Aires, Argentina Zoo operation Economic conditions in Argentina, mainly the devaluation of the currency, have resulted in the zoo operation suffering adjustments to income, which, together with the fixed and variable cost structure, have meant that, in general terms, the useful value of the cash generating unit is below book value. CIE 2004: Entertainment Guaranteed 75

78 The impairment adjustment determined for that business unit is reflected in goodwill, determined by discounting future cash flows at a rate of 9.83%. 4. The U.S. operation The U.S. business has undergone restructuring and renegotiation of artists contracts representing an adjustment for these concepts. 5. Operation of the Internet business The evolution of the Internet companies in which CIE has become involved led to a restructuring of that operation, which concluded with the operating merger of El Foco Punto Com and Ticketmaster Online. As a result, the Company recognized that certain assets, mostly obsolete computer equipment, cannot be sold, which represents an impairment of fixed assets. At the same time, preoperating expenses were cancelled. 6. Corporate assets Additionally, aside from the impairment adjustment in the above-mentioned business units, the Company decided to recognize certain items in income that do not represent a cash outlay, after an in-depth analysis of documents and accounts receivable and investments and expenses incurred in new business over the last five years, many of which are directly or indirectly related to the above-mentioned units. The assets that were included in the impairment evaluation are: accounts receivable, the acquisition of assets, theatrical rights, rights to football teams, advertising rights and investments in research and development for new products and projects in which the Company has become involved, as well as other costs and expenses. On the basis of the foregoing, the effect on the different subsidiaries of the Company is shown in a Ps.1,617,902 extraordinary item in the 2003 statement of income. NOTE 17 - NEW ACCOUNTING STANDARDS The following accounting standards, which were issued by the APC of the MIPA, went into effect on January 1, Management considers that the adoption of theses standards will not have a significant effect on the financial information: Statement B-7, Acquisitions of Businesses This statement establish, among other things, the purchase method as the only method of accounting for the acquisition of a business, changes to the accounting treatment of goodwill, eliminating the amortization of goodwill as from the date on which that statement went into effect and making it subject instead to annual impairment tests. The statement also provides specific rules for the acquisition of minority interest and the transfer of assets or the exchange of shares between entities under common control. Amendments to Statement D-3, Labor Obligations These amendments provide additional valuation and disclosure rules for recognizing severance payments due to causes other than restructuring. 76 CIE 2004: Entertainment Guaranteed

79 Amendments to Statement C-2, Financial Instruments These amendments require that the effects of valuing investments available for sale be recorded in stockholders equity and not in income for the year, and include rules for determining the effects of impairment of financial instruments. Statement C-10, Derivative Financial Instruments and Coverage Hedging This statement, besides detailing recording, valuation and disclosure criteria applicable to all derivative financial instruments, requires that the effectiveness of hedges of cash flows and of net investment in subsidiaries located abroad be evaluated and that the effective portion of the gains or losses on hedging instruments be recognized within comprehensive income. CIE 2004: Entertainment Guaranteed 77

80 Letter of the Audit Commitee To the Board of Directors of CORPORACIÓN INTERAMERICANA DE ENTRETENIMIENTO, S.A. DE C.V. In compliance with paragraph 5(a) of Article 14 Bis 3 of Mexico s Securities Exchange Law (Ley del Mercado de Valores) and on behalf of the Audit Committee of CORPORACIÓN INTERAMERICANA DE ENTRETENIMIENTO, S.A. DE C.V., this report is to inform you of our activities in the year ended December 31, In carrying out our work we have adhered to the recommendations of the Best Corporate Practices Code (Código de Mejores Prácticas Corporativas). In addition, the Company s Statutory Auditor was called in under the terms of the aforementioned law to assist in the Committee s meetings. In accordance with the Committee s responsibilities, we undertook the following activities: 1. After a process of analysis and evaluation, which included the fees amount, we recommended to the Board of Directors to hire the firm that made the external auditing process for the year During our interviews with the external auditor, we made sure they accomplished the requirements of independence and rotation of their supervision personnel. We also checked the procedures and reach of their auditing tests, as well as the comments they developed on the inner control. 3. Examined the financial statements of the Company as of December 31, 2004, the auditor s report and the accounting policies used in their preparation. After reviewing the comments of the external auditor, we recommended to the Board of Directors that the financial statements be presented for the consideration of the Shareholders Assembly. 4. Reviewed the organizational structure of the Internal Auditor function, and established internal control groups in the corporate area as well as in each of the Divisions which comprise the Company s subsidiaries. 5. Relevant operations were properly informed by management of the Company pursuant to paragraph 4(d) of Article 14 Bis 3 of Mexico s Securities Exchange Law (Ley del Mercado de Valores) 6. Interviewed the Company s legal advisors and legal department in order to ascertain the Company s legal condition. We reviewed corporate documentation, governmental permits, litigation and judicial contingencies. The Audit Committee had no significant observations regarding these matters. Lic. Roberto Albarrán Campillo Chairman of the Audit Committee 78 CIE 2004: Entertainment Guaranteed

81 Executive Directors Alejandro Soberón Kuri Chief Executive Officer Rodrigo H. González Calvillo Chief Operating Officer José Manuel Alavéz González Corporate Director of Development Alfredo Arratia del Castillo Corporate Director of Human Resources Alejandro Garza Díaz Managing Director of OCESA Commercial Víctor Manuel Murillo Vega Chief Financial Officer Guillermina Pilgram Santos Corporate Director of Public Relations Executive Directors(*) Divisional Directors René Aziz Checa Managing Director of CIE Amusement Parks George González Alvarado Managing Director of OCESA Entretenimiento Federico González Compeán Managing Director of CIE International Gabriel Lecumberri Pando Managing Director of CIE Las Américas * In alphabetical order, except for Chief Executive Officer & Chief Operating Officer. Manuel Pérez Díaz Managing Director of CIE Commercial CIE 2004: Entertainment Guaranteed 79

82 Glossary of Terms & Definitions All references to the following terms have the indicated meaning, unless otherwise specified: ADR: American Depositary Receipt. Agents or Agency: Intermediaries between the artistic talent and the event promoters. AM: Amplitude Modulation; a radio frequency. BMV: The Mexican Stock Exchange. Box-Office: The total number of tickets sold for a live event. It also refers to the place where tickets are sold for the live events. CETES: Mexican Federal Bonds. Champ Car World Series: International automotive racing series, previously known as the CART Series. CNBV: Mexican National Banking and Securities Commission (the regulatory authority for banking and securities). Disney: A registered trademark of The Walt Disney Company. EBITDA: Equity Before Interests, Taxes, Depreciation and Amortization, also know as Operative Cash Flow. Entertainment Venues: Buildings that are used to host live events. Exhibition Space: The area or space that is used to exhibit products and services. FM: Frequency Modulation; a radio frequency. Full length movies: Film productions that last for more than an hour and twenty minutes. GDF: The Mexico City Government. GDP: Gross Domestic Product. Grupo Mágico: Grupo Mantenimiento de Giros Comerciales Internacional, S.A. de C.V., a subsidiary that operates CIE s Amusement Parks Division in Mexico, Colombia and the United States of America. IMCP: Mexican Institute of Public Accountants. Indeval: The Mexican Securities Depository Institute; an entity that provides services relating to the custody, administration, and transfer of securities, as well as the clearing and settlement of transactions. INPC: The Mexican National Consumer Price Index. IPyC: The Mexican Price and Quotation Index of the BMV. Issuer: Refers to CORPORACIÓN INTERAMERICANA DE ENTRETENIMIENTO, S.A. DE C.V. and its Subsidiaries IVA: Value-Added Tax. LIBOR: London Interbank Offering Rate. Mexico: The United States of Mexico. Musicals, theatrical productions or Broadway-type productions: Upscale events, plays or musical shows produced under the terms and specifications of the license. NBA: National Basketball Association. NFL: National Football League. OCEN: OCESA Entretenimiento, S.A. de C.V.; a strategic join venture between Televisa and CIE for the operation and development of live events in Mexico. PCGA: Mexican Generally Accepted Accounting Principles (Mexican GAAP). Promoters: Independent professionals or agencies that hire and promote an artist for one or more of their shows. Ps. o Pesos: The legal currency in Mexico. PWC: PricewaterhouseCoopers (external auditor). Region: Depending on the context, the term could apply to Latin America, the United States or Spain. RNV: National Securities Registration Office (formerly known as RNVI or National Securities and Intermediaries Registration Office). Royalties: A previously agreed upon payment that is made to writers and/or the owners of industrial or intellectual property rights. Seating capacity: The number of seats available for live events. SINCA Inbursa: SINCA Inbursa, S.A. de C.V.; Inbursa Venture Capital, a subsidiary of Grupo Financiero Inbursa, S.A. Souvenir: An article or object, used for publicity purposes, that pertains to a certain event, person or place. Sponsorship rights: The rights granted to hire, finance, market and operate a live event. Sports Book: An enclosed area where sports betting is permitted under Mexican Law, under the off-track betting book registration format. Sports Book is a registered trademark of CIE. Tele-marketing: Services provided to third parties through phone centers that make and receive phone calls. Theme Park: An amusement park with specific types of entertainment. Ticketmaster: A registered Trademark of Ticketmaster Corp. TIIE: The Mexican Interbank Equilibrium Rate. Tours: A series of live events with similar contents and characteristics that takes place within a defined region during a certain time period. UDI: An investment unit whose value is linked to the Mexican inflation rate. U.S.A. or U.S.: United States of America. USD or US$: The legal currency of the United States of America. Yak: An enclosed area where numbersbased games are permitted under Mexican Law. Yak is a registered Trademark of CIE. Zoo: The term refers to the Jardín Zoológico de la Ciudad de Buenos Aires (The Buenos Aires Zoo), which is operated by the Group. 80 CIE 2004: Entertainment Guaranteed

83 Investor Information Design: milenio3.com.mx Printing: Earthcolor, Houston Headquarters Paseo de las Palmas 1005 Col. Lomas de Chapultepec 11000, Mexico, D.F. (5255) Fax (5255) CIE Brazil Av. das Nações Unidas, , São Paulo, Brasil (5511) Fax (5511) CIE Argentina Capitán Ramón Freire 932 C1426AVT, Buenos Aires, Argentina (5411) Fax (5411) CIE Spain Antonio Maura 12-3ª Pta , Madrid, España (34) Fax (34) CIE New York 200 West 57th Street Suite , New York, NY (212) Fax (212) Wannado City W. Sunrise Blvd. Anchor D 33323, Sunrise, FL (954) Fax (954) Independent Accountants PRICEWATERHOUSECOOPERS Mariano Escobedo 573 Col. Rincón del Bosque 11580, Mexico, D.F. (5255) Fax (5255) Fax (5255) Information on CIE s shares & UDI-denominated notes Corporación Interamericana de Entretenimiento, S.A. de C.V., listed its Series B shares on the Mexican Stock Exchange ( BMV ) in December 1995, under the ticker symbol CIE B. In addition, the Company completed two public offerings of seven-year Public Relations Guillermina Pilgram Santos gpilgram@cie.com.mx UDI-denominated notes in March and April 2000 on the BMV, whose ticker symbols are CIE P00U and CIE P002U, respectively. (5255) Fax (5255) Share Ticker Symbols Bloomberg CIEB MM Investor Contacts Reuters CIEB MX Corporate Finance: Jaime J. Zevada Coarasa Infosel CIE B jzevada@cie.com.mx (5255) Fax (5255) UDI-Denominated Notes Ticker Symbols Bloomberg EC y EC Reuters CIEFL00UP=MX Investor Relations: Juan Carlos Sotomayor Salinas jsotomayor@cie.com.mx Corporate Web Site (5255) Fax (5255) Banking Communications: Conrado Ramírez Sordo cramirez@cie.com.mx (5255) Fax (5255) IR and PR Communications: Jesús Martínez Rojas jesus@irandpr.com (5255) Explanatory Note Except for the historic information provided within this 2004 Annual Report ( the document ), statements included in this document regarding the Company's business outlook and anticipated financial/operating results or regarding the Company's growth potential, constitute forward-looking statements and are based on management expectations regarding the economic conditions in Mexico and the countries where CIE operates as well as the fluctuation of the Mexican Peso compared to the U.S. dollar and/or other currencies. The use of registered brands, commercial brands, logotypes, photographic material and images within this document is exclusively for illustrative purposes and is not meant to violate the rights of the creators and/or intellectual property laws applicable in the countries in which CIE, its subsidiaries, and those companies with which CIE maintains or has maintained commercial or business relationships, operate.

84 Paseo de las Palmas 1005 Col. Lomas de Chapultepec 11000, Mexico, D.F. (5255) Fax (5255)