GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Consolidated
Transcription
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Consolidated
GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Consolidated Financial Statements As of December 31, 2008 and 2007 ( Wi t ht heI nde pe nde ntAudi t o r ’ sRe por tThe r e o n) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Consolidated Balance Sheet As of December 31, 2008 and 2007 (Stated in thousands of nuevos soles) Assets Current assets: Cash and banks and restricted funds (note 4) Accounts receivable: Trade (note 5) Related parties (note 6) Consortiums (note 7) Other accounts receivable (note 8) Inventories, net (note 9) Prepaid taxes and expenses (note 10) Available-for-sale non-financial assets Total current assets 2008 2007 143,628 ------------ 141,946 ------------ 377,480 1,576 8,485 80,168 -----------467,709 -----------158,623 54,747 1,997 -----------826,704 233,564 641 1,921 81,256 -----------317,382 -----------79,257 44,386 2,207 -----------585,178 Li a bi l i t i e sa ndSt oc k ho l de r s ’Eq ui t y Current liabilities: Bank loans (note 16) Trade accounts payable Related parties (note 6) Consortiums (note 7) Other accounts payable (note 17) Commercial papers (note 18) Current portion of long-term debt (note 19) Total current liabilities Long-term debt (note 19) Deferred income tax (note 23.e) Deferred income Long-term accounts receivable (note 11) 16,862 23,437 6,641 2,314 Investments (note 12) 126,496 111,980 Property, plant, and equipment (note 13) 433,729 318,673 Goodwill (note 14) 31,551 34,458 Other assets, net (note 15) 99,125 71,975 ------------ ------------ Deferred income tax (note 23.e) Total liabilities St oc k hol de r s ’e qui t y : Capital stock (note 20) Legal reserve (note 21) Other reserves (note 21) Retained earnings Minority interest Tot a ls t oc k hol de r s ’e q ui t y 2008 2007 108,359 184,361 1,465 20,008 212,623 41,979 21,476 185,669 5,666 5,597 135,767 - 90,123 -----------658,918 66,052 -----------420,227 236,970 218,469 30,471 22,569 4,181 -----------930,540 ------------ 5,539 -----------666,804 ------------ 389,798 26,503 3,262 146,625 44,380 -----------610,568 299,423 13,514 4,388 130,012 33,874 -----------481,211 ------------ ------------ 1,541,108 ======= 1,148,015 ======= Commitments and contingencies (note 24) Total assets 1,541,108 ======= See the accompanying notes to the consolidated financial statements. 1,148,015 ======= Total liabilities ands t oc k h ol de r s ’ equity (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Consolidated Income Statement For the years ended December 31, 2008 and 2007 (Stated in thousands of nuevos soles) Valuation of works (note 25) Income from services rendered Sale of merchandise and other Total revenue Cost of works (note 25) Cost of rendered services Cost of sales of merchandise and property Total cost 2008 2007 1,339,842 446,402 41,466 -------------1,827,710 -------------- 1,019,200 384,726 36,048 ------------1,439,974 ------------- ( 1,130,416) ( 264,458) ( 33,346) -------------( 1,428,220) -------------- ( 865,549) ( 245,514) ( 29,884) ------------( 1,140,947) ------------- Gross profit Operating, administrative and general expenses (note 26) Operating profit Other (expenses) income: Financial, net (note 27) Results attributable to associates Various, net Exchange difference, net Pr of i tbe f or ewor k e r s ’pr of i ts h a r i ng and income tax Wor k e r s ’pr of i ts h a r i ng( n ot e22) Income tax (note 23) Profit before minority interest Minority interest Net profit for the year Earnings per basic share in S/. (note 28) See the accompanying notes to the consolidated financial statements. 399,490 299,027 ( 104,554) -------------294,936 -------------- ( 79,014) ------------220,013 ------------- ( ( 30,155) 3,704 8,643 ( 44,143) -------------( 61,951) -------------232,985 ( 12,958) ( 65,994) -------------154,033 ( 6,844) -------------147,189 ======== 0.263 ======== 22,744) 4,029 ( 2,526) 8,426 ------------( 12,815) ------------207,198 ( 9,721) ( 59,159) ------------138,318 ( 8,418) ------------129,900 ======== 0.303 ======== (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Consolidated Statement of Changes i nSt oc k hol d e r s ’Equi t y For the years ended December 31, 2008 and 2007 (Stated in thousands of nuevos soles) Capital stock (note 20) Legal reserve (note 21) Other reserves (note 21) Balances as of December 31, 2006 235,787 3,373 Capitalization Transfer to legal reserve Adjustments Dividends paid Recording of unrestricted reserves Treasury shares Net profit for the year 63,970 334) ------------299,423 10,141 ------------13,514 7,000 ( 2,612) -------------4,388 91,042 ( 667) ------------389,798 ======== 12,989 ------------26,503 ======== ( 1,126) ------------3,262 ======== Balances as of December 31, 2007 Capitalization Transfer to legal reserve Dividends paid Adjustment Treasury shares (note 20) Net profit for the year Balances as of December 31, 2008 ( See the accompanying notes to the consolidated financial statements. Retained earnings - 101,386 63,970) 10,141) 114 ( 20,277) ( 7,000) 129,900 -------------130,012 Minority interest 25,456 Total st oc k ho l de r s ’ equity 366,002 ( ( 8,418 ------------33,874 114 ( 20,277) ( 2,946) 138,318 ------------481,211 ( ( ( ( 3,662 6,844 ------------44,380 ======== ( 25,981) 3,098 ( 1,793) 154,033 ------------610,568 ======== 91,042) 12,989) 25,981) 564) 147,189 -------------146,625 ======== (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Consolidated Statement of Cash Flows For the years ended December 31, 2008 and 2007 (Stated in thousands of nuevos soles) 2008 Operating activities: Net profit for the year Adjustment to net result that do not affect the cash flow of operating activities Depreciation Deterioration of intangible assets Amortization of other assets Profit attributable to associates and subsidiaries Loss on sale of assets Net variations in assets and liabilities: Trade accounts receivable Other accounts receivable Inventories Prepaid expenses and taxes and other assets Available-for-sale non-financial assets Trade accounts payable Other accounts payable Net cash provided by operating activities Investing activities: Sale of property, plant, and equipment Acquisition of minority interest Purchase of intangible assets Purchase of investments Purchase of fixed assets Net cash used in investing activities 2007 147,189 ( 61,346 2,907 12,757 12,955) 2,295 ( 129,900 ( 58,528 2,904 5,161 19,418) 7,955 137,341) 28,282 ( 79,366) ( 10,361) 210 ( 1,306) 68,314 --------------81,971 --------------- ( ( ( ( 44,759) 23,847) 41,974) 30,771) 48,842 31,299 --------------123,820 --------------- 10,385 ( 21,117) ( 6,607) ( 183,693) --------------( 201,032) --------------- 8,630 ( 4,865) ( 12,092) ( 3,874) ( 149,537) --------------( 161,738) --------------- (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Consolidated Statement of Cash Flows, (cont.) 2008 Financing activities: Loans received, net of amortizations Securitization bonds, net of amortization Dividends paid Commercial papers Repurchase of own shares Net cash provided by investing activities Net increase (decrease) in cash Cash and cash equivalents at the beginning of the year Variation in restricted funds Cash at end of year 122,993 16,455) 25,981) 41,979 ( 1,793) --------------120,743 ( ( 1,682 123,726 1,622 --------------127,030 ========= See the accompanying notes to the consolidated financial statements. 2007 78,140 25,140) 20,277) ( 2,946) --------------29,777 ( ( ( 8,141) 137,647 ( 5,780) --------------123,726 ========= (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements December 31, 2008 and 2007 (1) Business Activity Graña y Montero S.A.A. (hereinafter the Group) was incorporated on August 12, 1996 as the holding company of Grupo Graña y Montero. Its main activity is to invest in subsidiaries and related parties. Additionally, as from September 2005, it renders services of general management, financial management, commercial management, legal advisory and human resources management (prior to that date, it rendered business advisory services) to said c ompa n i e s .TheCompa ny ’ sl e g a ld omi c i l ei sl oc a t e da tAv .Pa s e o del aRe públ i c a Nº 4675, Surquillo. Likewise, as from year 2006, Graña y Montero S.A.A. has been engaged in the leasing of offices to the Group companies and to third parties. Year 2008 consolidated financial statements will be submitted to Board of Directors and Ge ne r a lSt oc k hol de r s ’Me e t i n gwi t h i nt het e r mse s t a b l i s he db yl a wf o rt hes e pa r a t e financial statements of Graña y Montero S.A.A. (a) Subsidiaries: The consolidated financial statements of the Group include assets, liabilities, revenues and expenses of the following subsidiaries: GyM S.A. is engaged in the business of civil construction, electromechanical assembly, buildings, management and development of real property projects and other related services. GMP S.A. is engaged in the exploitation, production, treatment, and trading of oil, natural gas and its derivatives, as well as the storage and delivery of fuels. GMD S.A. is engaged in providing IT solutions in the Peruvian corporate market. GMI S.A. Ingenieros Constructores is engaged in providing services of advisory and engineering consultancy, execution of surveys and projects, project management and works supervision. Concar S.A. is engaged in the operation and maintenance of highways on concession. Fashion Center S.A. is engaged in developing and operating the conditioning and fitting out project for commercial and recreational use of the area of Parque Salazar of the District of Miraflores. Until June 30, 2007, Larcomar S.A. was engaged in the operation of the project that is currently operated by Fashion Center S.A. Survial S.A., is engaged in the execution of the concession agreement of phase 1 of Southern Inter-oceanic highway. Concesión Canchaque S.A., is engaged in the execution of the concession agreement of the Buenos Aires –Canchaque highway. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) .2. GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (b) Consortiums: Additionally, the consolidated financial statements of the Group include assets, liabilities, revenue and expenses of the consortiums in which it participates as venturer, through its subsidiaries, and where there is jointly control, being the most important the following: Consortiums Percentage of interest GyM S. A. ’ s GYM S.A. - Skanska del Perú S.A. GYM S.A. JJC Contratistas Generales S.A. Chinecas Constructores Transmantaro Consorcio La Quinua 6 Consorcio Héroes Navales Consorcio Collique GyM besco Consorcio Constructor IIRSA Norte Consorcio GyM -Eyvisac Consorcio Pasco Consorcio GyM Concar Consorcio BAC Consorcio Vial Ayahuaylas 50.00 60.00 50.00 50.00 50.00 50.00 17.00 70.00 75.00 10.00 50.00 5.00 GMDS. A. ’ s Consorcio Ransa Comercial S.A. - GMD S.A. Consorcio Telefónica del Perú SAA- GMD S.A. Consorcio Corporación TX Consorcio Cosapi Data GMD 50.00 50.00 50.00 50.00 GMIS. A. ’ s GMI OIST Mot Lima Pariacoto 33.00 60.00 GMPS. A. ’ s Consorcio Terminales 50.00 CONCARS. A. ’ s Consorcio GYM Concar Consorcio Vial Ayahuaylas 90.00 90.00 Gr añayMont e r oS. A. A. ’ s Joint Torre Siglo XXI Asociación T6 58.00 50.00 (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) .3. GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements In this regard, the consolidated financial statements include the following amounts coming from consortiums and joint ventures: In thousands of S/. 2008 2007 Assets Liabilities Revenues Expenses 105,345 ======== 94,489 ======== 219,786 ======== 186,184 ======== 88,134 ======== 57,956 ======== 126,097 ======== 104,730 ======== The Group operates its divisions and/or business segments as described in note 29. (2) Main Accounting Principles and Practices Main accounting principles applied in the preparation of consolidated financial statements are detailed below. These principles and practices have been applied consistently to all years presented in these financial statements; unless otherwise indicated. (a) Basis for the Preparation of Financial Statements The consolidated financial statements are prepared and presented in accordance with Accounting Principles Generally Accepted in Peru, which comprise the International Financial Reporting Standards (IFRS) authorized through resolutions issued by the Consejo Normativo de Contabilidad - CNC (Peruvian Accounting Board). The IFRSs include the International Accounting Standards (IAS) and the pronouncements of the Standing Interpretations Committee (SIC). In Peru, the CNC authorized as of December 31, 2008, current IAS 1 to 41, IFRSs 1 to 8, SICs 1 to 32, and all the pronouncements from 1 to 14 issued by the current Interpretations Committee (IFRIC). The consolidated financial statements have been prepared in conformity with the historical cost principle. The preparation of the consolidated financial statements in conformity with accounting principles requires the use of certain critical accounting estimates. It also requires from Management the use of its judgment in the process for the a ppl i c a t i ono ft heGr o up’ sa c c o un t i ngpol i c i e s .Cr i t i c a le s t i ma t e sa nda c c ou n t i ng criteria are described in note 2.d. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) .4. GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (b) Consolidated Financial Statements The consolidated financial statements comprise the financial statements of Graña y Montero S.A.A., and the financial statements of the subsidiaries and consortiums detailed in note 1. Subsidiaries The subsidiaries are all entities over which the Company has authority to govern their operating and financial policies generally for being holder of more than half of voting shares. Subsidiaries are consolidated from the date on which their control is transferred to the Company. They are de-consolidated from the date the control ceases. The Company uses the purchase method to record the acquisition of subsidiaries. The cost of acquisition is measured as the fair value of assets delivered, equity instruments issued, and liabilities incurred or assumed at the date of the exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities assumed in a business combination are initially measured at fair value at the acquisition date. The excess of the purchase price over the fair v a l ueo ft h eCompa ny ’ s interest in identifiable net assets acquired is recorded as goodwill in the assets. I ft hec os ti sl owe rt ha nt hes u bs i di a r y ’ sf a i rv a l ueofne ta s s e t s( b a dwi l l ) ,t he difference is recognized directly in the income statement. Transactions, balances and unrealized gains among the companies that the Group controls are eliminated. Also, unrealized losses are eliminated unless the transaction provides evidence of impairment in the value of the assets transferred. Consortiums The Compa ny ’ si nt e r e s ti nj oi ntly controlled entities is recorded by the proportionate consolidation method, through which the Company includes in the relevant components of its consolidated financial statements the proportionate shareholding of its interest in revenue and expenses, assets and liabilities and individual cash flows of the joint venture. Significant transactions between the Company and joint ventures have been eliminated. Minority Interest Interests from third parties, that are not part of the Group, are shown as minority interests under the equity in the consolidated balance sheet and in the consolidated income statement. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) .5. GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (c) Functional Currency and Foreign Currency Transactions i) Functional and presentation currency The items included in the financial statementsofe a c hoft heGr o up’ se nt i t i e sa r e stated in the currency of the primary economic environment in which the entity operates (functional currency). The consolidated financial statements are pr e s e nt e di nn ue v oss ol e swh i c hi st heGr oup ’ sf u nc t i on a la ndpr e sentation currency. ii) Foreign currency transactions and balances Foreign currency transactions are translated into functional currency using exchange rates ruling at the dates of the transactions. Gains or losses on exchange differences resulting from the collection and/or payment of such transactions and from translating monetary assets and liabilities stated in foreign currency at exchange rates ruling at year-end closing are recognized in the income statement. (d) Critical Accounting Estimates and Criteria The estimates and criteria used are continuously evaluated and are based on historical experience and other factors, including the reasonable expectation of occurrence of future events depending on the circumstances. i) Critical Accounting Estimates and Criteria The Group makes estimates and assumptions regarding the future. By nature, resulting accounting estimates, very rarely will be the same as the respective actual results. However, it is the opinion of Management that estimates and assumptions applied by the Group do not have significant risk as to produce a material adjustment to the balances of assets and liabilities for next year. Review of carrying amount and provision for impairment The Group applies the guidelines stated in IAS 36 to determine whether a permanent asset requires from a provision for impairment. This determination requires the use of professional judgment by Management to analyze the indicators that might present impairment as well as the determination of value in use. In this last case, it is required to apply judgment in the preparation of future cash flows that include the projection of the level of future operations of the Group, projection of economic factors that affect income and costs, as well as the election of the discount rate to be applied in this flow. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) .6. GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Taxes Interpretations of applicable tax legislation are required when determining obligations and tax expenses. The Group looks for professional counseling in tax matters before taking any decision on it. Although Management considers that its estimates are prudent and appropriate, interpretation differences may arise with tax authorities affecting the charges for taxes in the future. ii) Critical Judgment in the Application of Accounting Policies Management has exercised its critical judgment when applying accounting policies for the preparation of the accompanying financial statements, as explained in the corresponding accounting policies. (e) Cash and Cash Equivalents Cash and cash equivalents comprise cash in hands, overnight, time and sight deposits held at banks with original maturities between two and three months. (f) Financial Instruments A financial instrument is as any contract that gives rise to both a financial asset in one entity and a financial liability, or equity instrument in another. In the case of the Group, financial instruments correspond to primary instruments such as accounts receivable, accounts payable, and shares representing capital share in other companies. Financial instruments are classified as asset, liability or equity according to the substance of the contract. The interest, dividends, gains, and losses generated by a financial instrument, and classified as liability, are recorded as income or expense in the income statement. The payment to holders of financial instruments classified as equity is recorded directly against equity. The financial instruments are compensated when the Group has the legal right to compensate them, and Management has the intention of paying them on a net basis or negotiating the asset, and paying the liability simultaneously. Fair value is the amount for which an asset could be exchanged between knowledgeable, purchaser and a seller, or a liability settled between a debtor and ac r e di t ori na na r m’ s length transaction. I n Ma na g e me n t ’ so pi n i o n ,t hecarrying amount of financial instruments as of December 31, 2008 and 2007, is substantially similar to their fair values due to their short period of realization and/or maturity. The recognition and valuation criteria of those accounts are disclosed in the accounting policies related to those notes. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) .7. GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (g) Trade Accounts Receivable and Provision for Doubtful Accounts Accounts receivable are initially recorded at their fair value and are subsequently valued at amortized cost, less the provision for deterioration. The provision for deterioration of trade accounts receivable is determined when there is objective evidence that the Group will not collect all the amounts overdue according to terms originally established. Management considers that the balances of trade accounts receivable as of December 31, 2008 and 2007 do not present uncollectibility risks. Trade accounts receivable are presented net of the advances received from clients provided that they are related with the same work agreement and said agreement establishes the possibility of compensation. (h) Inventories Inventories are valued at construction, acquisition and/or contribution costs, which do not exceed the net realizable value. The cost of construction materials is determined through the weighted average method, except in the case of inventories in transit, determined by the specific identification method. The net realizable value is the estimated selling price in the ordinary course of business, less cost to sale, and the commercialization costs. For the reductions of inventory carrying amounts at realizable value, a provision for inventory impairment is recorded in the results of the period when those reductions occur. (i) Financial Assets The Group classifies its investments in the following categories: i) marketable financial assets, ii) loans and accounts receivable, iii) Held-to-maturity investments, and iv) available-for-sale financial assets. The classification depends on the purpose for which investments were acquired. Management determines the classification of its investments as of the date of their initial recognition and reassesses this classification as of every closing date. Financial assets at fair value through profit or loss A financial asset is classified in this category if it was mainly acquired in order to be sold in the short term or if it is so assigned by Management. Derivative financial instruments are also classified as marketable unless they are designated as hedges. Assets in this category are classified as current assets if they are held-for-trading or available-for-sale within 12 months as from the balance sheet date. During 2008 and 2007, the Group did not hold any investment under this category. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) .8. GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Loans and accounts receivable Loans and accounts receivable are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides with money, goods or services directly to a debtor, with no intention to trading the account receivable. They are included in current assets, except for those with maturities exceeding 12 months after balance sheet date. These ones are classified as non-current assets. Loans and accounts receivable are included in accounts receivable from commercial affiliates and various accounts receivable in the balance sheet (note 2.g). Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities acquired with the intention and ability to hold them to maturity. During 2008 and 2007, the Group did not hold any investment under this category. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets designated in this category or that do not classify in any of the other categories. These assets are shown as non-current assets unless Management has express intention to sell the investment within 12 months after the date of the balance sheet. During 2008 and 2007, the Group did not hold any investment under this category. Recognition and Measurement Investment purchases and sales are recognized as of the trade date, date on which the Group commits to purchase or sale the asset. Transaction costs related to financial assets recorded at fair value through profit and losses are recognized in the income statement. Financial assets are derecognized when the rights to receive cash flows from investments have expired or have been transferred, and the Group has substantially transferred all risks and rewards derived from ownership. Available-for-sale financial assets and held-for-trading assets are subsequently recognized at fair value. Loans, accounts receivable, and held-tomaturity investments are measured at their amortized cost using the effective interest method. Realized and unrealized gains and losses arising from changes in the fair value of t he“ h e l d-for-t r a di ng ”c a t e g or ya r ei nc l u d e di nt h ei nc omes t a t e me nt ,i nt h e period they are originated. Unrealized gains and losses arising from changes in the fair value of non-monetary securities, classified as available-for-sale, are recognized in equity. When securities classified as available-for-sale are sold or (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) .9. GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements impaired, accumulated fair value adjustments are included in the income statement as gains or losses on investment in securities. Fair value of quoted investments is based on current bid prices. If market is not active (or securities are not listed), the Company establishes the fair value by using valuation techniques. The Group evaluates at each balance sheet date, if there is objective evidence of the impairment of a financial asset or group of financial assets. (j) Available-for-Sale Non-Financial Assets Assets are classified as available for sale when their carrying amount is expected to be recovered through their sale, when there is a plan for such a sale, and it is highly probable that their sale occurs in the short-term. These assets are valued at the lower of their cost or at their realizable value, less cost to sell. (k) Investments in Subsidiaries, Associates and Consortiums These investments are recorded at equity method of accounting, crediting the cash dividends at carrying amount. (l) Property, Plant, and Equipment Property, plant, and equipment are recorded at cost, less accumulated depreciation (note 13). Historical cost includes disbursements directly attributable to the acquisition of these items. Subsequent costs attributable to the goods of the fixed asset improving their original performance are capitalized; other costs are recognized in the results. Lands are not depreciated. Depreciation of plant and equipment and vehicles r e c og ni z e da s“ La r g eEqu i pme nt ”i sc a l c u l a t e dba s e dont he i rus eho u r s ,i n relation to the estimated useful hours of these assets. The depreciation of other a s s e t st h a tdono tqu a l i f ya s“ La r g eEqui pme nt ”i sc a l c u l a t e dbys t r a i g htl i n e method to assign its cost less its residual value during the estimated useful life, as follows: Years Buildings and premises Plant and equipment Vehicles Furniture and fixtures Various equipment Between 5 and 33 Between 5 and 10 Between 5 and 10 Between 4 and 10 Between 4 and 10 (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 10 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements The residual value and the useful life of an asset is reviewed and adjusted, if necessary, as of the date of each balance sheet. The carrying amount of an asset is written off immediately at its recoverable amount when the carrying amount of the asset exceeds its recoverable value. Gains and losses for sale of fixed assets correspond to the difference between the income from the transaction and the asset carrying amount. Those are included in the income statement. Assets under construction are capitalized as a separate component of property, plant and equipment. At completion, the cost is transferred to the appropriate category. Work-in-progress is not depreciated. (m) Finance Lease Agreements Lease and/or sale agreements with a leaseback agreement on plant and equipment, through which the Group substantially assumes all risks and rewards related to the property of leased assets, are classified as finance lease and are capitalized at the inception of the lease terms, at an amount equal to the fair value of leased property, or if lower, to the present value of the minimum lease payments. Lease payments are apportioned between the reduction of the outstanding liability and the finance charge so as to produce a constant periodic rate of interest on the remaining balance of the liability. Obligations for finance and/or sale leases with finance leaseback agreements, net of financial charges, are included in the Longterm Debt account in the balance sheet. The financial cost is charged to results over the lease period. The cost of assets acquired through finance lease and/or sale with finance leaseback agreement is depreciated over their estimated useful life. (n) Public Service Concession Arrangements In conformity with IFRIC 12 Service Concession Arrangements, officially approved for application in Peru since 2008, disbursements incurred in relation to public service concession arrangements operated by Consorcio Terminales, a consortium in which subsidiary Graña y Montero Petrolera S.A. has a 50% interest, are recorded as intangible assets because cash flows are conditional on usage levels of public service by users. Revenue and costs relating to construction of public infrastructure works are recognized by reference to the stage of completion, while revenue and expenses related to rendering of public services are recognized on an accrual basis. Until 2007, disbursements related to infrastructure upgrade of the terminals of the Consortium were recorded as fixed assets. As a result of this adoption, as of December 31, 2008, Consorcio Terminales has reclassified its Premises, Plant, and Equipment account to Intangible Assets account at a net cost of S/. 14.49 million (S/. 18.81 million as of December 31, 2007 for comparative purposes) corresponding to improvements made on terminals (note 15). This change of accounting policy has not resulted in (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 11 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements modification of useful life periods of intangible assets previously shown as fixed assets because the criteria used is still the maturity of concession arrangement. (o) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of t heGr ou p ’ si nt e r e s to ft h ei de n t i f i a bl ene ta s s e t so fas u bs i di a r ya so ft h e acquisition date. Likewise, the goodwill arising during the acquisition of minority interest in a subsidiary represents the excess of cost of the additional investment over fair value of net identifiable assets as of the date of acquisition. Goodwill is reviewed to determine whether a recognition of provisions for impairment is required. It is recorded at cost less accumulated provisions for impairment. Impairment losses are recognized in the income statement and are not reversed. Gains and losses from the sale of subsidiaries or associates include the carrying amount of goodwill related to the sold entity. Goodwill is allocated to cash-generating units to conduct impairment tests. Each of those cash-g e ne r a t i ngun i t sr e pr e s e n t st heGr oup ’ si nv e s t me nti ne v e r yp l a c e where it operates per primary reporting segment (note 14). (p) Other Assets Concessions included in Other Assets item of the balance sheet are recognized as such based on the forecast that these will generate future economic benefits for the Group. Concessions are recorded at cost. These fees are amortized at straight-line method based on the remaining maturity of concession agreements. Repairs of highways and works in parking lots are capitalized, and regular maintenance of highways and parking lots are recognized in expenses when they are incurred. Investments in exploration, development and subscription rights of concession agreements are amortized as from the period when income from its exploitation is obtained until the maturity of the respective agreements. On the other hand, if it were the case, investments in exploration and exploitation, referred to those exploration agreements in which it has been determined that results are not successful, are charged to the results in the period when this situation is determined, after the compensation attributable to the interests of third parties in said investments. Costs related to the development or maintenance of software are recognized in results when incurred. However, costs that are directly related to single and identifiable software, that are controlled by the Group and that will provide future economic benefits higher than their cost in more than one year, are recognized as intangible assets. Direct costs related to the development of software include personnel costs and an aliquot part of general expenses. Development costs of capitalized software are amortized by straight-line method in the estimate of its useful life, without exceeding five years. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 12 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (q) Impairment of Non-Financial Assets Assets that have an indefinite useful life and are not subject to amortization, are tested annually for impairment. Assets that are subject to depreciation or amortization are reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. Impairment losses are the amount by which the asset carrying amount exceeds its recoverable amount. The recoverable amount of assets corresponds to the higher net amount obtainable from its sale or its value in use. In order to assess the impairment, assets are grouped into the lowest levels for which identifiable cash flows are generated (cash-generating units). (r) Loans Loans are initially recognized at their fair value, net of transaction costs incurred. These loans are subsequently recorded at their amortized cost, and any resulting difference between the funds received (net of transaction costs) and the redemption value is recognized in the income statement over the period of the loan using the effective interest method. Loans are classified as current liability unless the Group has the unconditional right to differ settlement of the liability for at least twelve months after the balance sheet date. (s) Provisions Provisions are recognized when the Company has a present legal obligation, either legal or constructive, as a result of past events, and when it is probable that an outflow of resources will be required to settle the obligation, and it is possible to reliably estimate its amount. Restructuring cost provisions comprise lease termination penalties and employee termination payment. Provisions for future operating losses are not recognized. When there are a number of similar obligations, the probability that an outflow of resources will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized although the likelihood of outflow for any specific item included in the same class of obligations may be small. Provisions are recognized at present value of expenditures expected to be required to settle the obligation using pre-tax rates that reflect the current market assessment of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognized as interest expense in the income statement. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 13 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (t) Share of the Profits TheGr oupr e c og ni z e sal i a b i l i t ya nda ne x pe ns ef o rwor k e r s ’pr o f i ts ha r i ngi n profits equivalent to 5% and 10% of taxable base determined according to the current tax legislation for each subsidiary. (u) Income Tax Current income tax is determined according to current tax provisions (note 23). Deferred income tax is recorded using the liability method, recognizing the effect of temporary differences that arise between the tax base of assets and liabilities and its balance in the financial statements. Deferred tax assets are only recognized as it is probable to have taxable benefits in the future against the credits that can be used. The effect of these temporary differences is also considered in the calculation of wor k e r s ’p r o f i ts ha r i ng . (v) Capital Stock Common shares are classified as equity. Treasury Shares When the capital stock recognized as equity is repurchased (treasury shares) in conformity with the IFRSs, the payment made including any cost directly related ( ne to ft a x e s )i sde duc t e df r om t heGr o up’ se q ui t yun t i ls ha r e sa r ea mor t i z e d , reissued or sold (this repurchase has a different connotation under article 105 of Companies Act). When such shares are subsequently reissued or sold, any payment received, net of incremental costs directly attributable to the transaction and effects corresponding to income tax, is included in the equity (note 20). (w) Dividend Distribution Dividend distribution to stockholders is recognized as liability in the financial s t a t e me nt si nt h ep e r i odwhe ndi v i de ndsa r ea ppr ov e dbyGe ne r a lSt o c k hol d e r s ’ Meeting. (x) Contingent Liabilities and Contingent Assets Contingent liabilities are not recognized in financial statements. They are only disclosed in the notes to financial statements unless the possibility of an outflow of economic resources is remote. Contingent assets are not recognized in financial statements, and they are only disclosed when an inflow of economic benefits is probable. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 14 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (y) Revenue Recognition The Group recognizes revenues when the amount can be reliably measured, it is probable that future economic benefits will flow to the Group, and specific criteria are met per type of revenue as described below. Revenues are recognized in the results as follows: Income from work valuations Income from work valuations and their respective costs are recognized as such when executing them, according to work progress. Additionally, such income and costs are adjusted to recognize the final projected profit margin of works which is monthly reviewed. Income is invoiced prior approval of works owners. Sale of goods Ordinary revenues from sale of goods are recognized and recorded when the products are delivered and the significant risks and rewards of ownership of the goods are transferred to the buyer, and the collection of corresponding accounts receivable is fairly certain. Rendering of services Revenues from rendered services are recognized in the accounting periods in which the services are rendered, by reference to the stage of completion of the service, determined based on the services performed to date as a percentage of total services to be performed. Revenue and costs for services rendered are recognized as such when the services are rendered. Interest and dividends Interest income is recognized on a time proportion basis, using the effective interest method. Revenues from dividends are recognized when the right to receive the payment has been established. (z) New Accounting Pronouncements Certain standards and interpretations have been issued and are effective internationally. In Peru, the CNC, through Resolution 040-2008-EF/94, dated March 14, 2008, has officially approved the application of the following standards and interpretations as from year 2009: (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 15 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements - IAS 32 Financial Instruments –Presentation (revised 2006). This standard has been modified to incorporate the IFRS 7 requirements. - IFRS 7 Financial Instruments: Disclosures. This standard adds certain new disclosures to improve the information contained in financial statements and replaces the disclosure requirements of IAS 32 Financial Instruments: Disclosure and Presentation. - IFRS 8 Operating Segments. This standard requires that an entity shall disclose information to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which the Company operates. - IFRIC 13 Customer Loyalty Programs. - IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. Likewise, as from January 1, 2009, various revisions to current IFRS and IAS are effective internationally as well as the new interpretations of issued standards (IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 16 Hedges of a Net Investment in a Foreign Operation, IFRIC 17 Distributions of Non-cash Assets to Owners); CNC has not yet approved them. - IFRIC 10 Interim Financial Reporting and Impairment (effective for periods beginning on or after January 1, 2007). - IFRIC 11 IFRS 2: Group and Treasury Share Transactions (effective for periods beginning on or after March 1, 2007). - Review of IFRS 3 Business Combinations and IAS 27 Consolidated and Separate Financial Statements (modifications effective for periods beginning on or after July 1, 2009). Management estimates that the adoption of these standards, as from effectiveness da t e ,wi l ln o tha v es i g ni f i c a nte f f e c t sont heGr oup’ sf i na nc i a ls t a t e me nt s . (3) Financial Risk Management TheGr o up’ sa c t i v i t i e sma ye xpos ei tt oav a r i e t yoff i na nc i a lr i s k sr e l a t e dt ot h ee f f e c t sof fluctuations in the debt and equity market prices, fluctuations in foreign exchange rates, i nt e r e s tr a t e s ,a ndf a i rv a l ue soff i na nc i a la s s e t sa n df i na n c i a ll i a b i l i t i e s .TheGr oup ’ s general program for the administration of risks is mainly focused on financial market unpredictability, and seeks to minimize pot e n t i a la dv e r s ee f f e c t so nt h eGr oup ’ sf i na nc i a l behavior. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 16 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Administration and Finance Management is in charge of the administration of risk following the policies approved by the Board of Directors. The Administration and Finance Management identifies, evaluates, and covers the financial risks in close cooperation with operating units. (i) Currency risk The Group's activities and indebtedness in foreign currency exposes it to exchange rate fluctuation risk, especially concerning the U.S. dollar. In order to reduce the Gr oup’ se xpos ur e ,i tc ond u c t se f f o r t st ok e e pa na p pr opr i a t eba l a n c i n gbe t we e n assets and liabilities and between income and expenses in foreign currency. Balances in U.S. dollars (US$) as of December 31 are summarized as follows: In thousands of US$ 2008 2007 Assets: Cash and banks Trade accounts receivable Other accounts receivable ) Liabilities: Bank loans Trade accounts payable Other accounts payable Long-term debts (including current portion) Net liability position 18,372) 32,065) 107,353)98 38,680) ) 51,728 45,232) --------------------------177,453 115,977) --------------------------( 36,884) ( 41,524) ( 79,727) ( 73,804) -------------( 231,939) -------------( 54,486)) ======== ( 14,805) ( 35,908) ( 29,073) ( 67,559) -------------( 147,345) -------------( 31,368) ======== These balances have been stated in nuevos soles (S/.) at the following exchange rates established by the SBS (Superintendency of Banking, Insurance, and Private Pension Fund Administrators) ruling as of December 31: In S/. 2008 2007 1 US$ - Buy rate (assets) 1 US$ - Sell rate (liabilities) 3.137 3.142 2.995 2.997 As of December 31, 2008 and 2007, the Group and its subsidiaries recorded gains on exchange for S/. 249.10 million and S/. 65.70 million, and losses on exchange for S/. 293.24 million and S/. 57.28 million, respectively. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 17 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (ii) Interest rate risk The Gr o up’ si nc omea ndope r a t i ngc a s hf l owsare independent from the changes in t hema r k e ti n t e r e s tr a t eb e c a us et h eGr o up’ sdebt is substantially subject to fixed rate. Only the short-term debt corresponding to bank loans that finance working capital are subject to fluctuation of interest rates. The Group has taken a mediumand long-term debt at variable rate that subsequently was fixed using hedging transactions (Swaps). (iii) Credit risk The Group does not have significant credit concentration risk. Concerning the loans to its related parties, the Company has established measures aimed at assuring recoverability of such loans. TheGr ou p’ sc e r t i f i c a t e so ft i med e p os i t sa r el i mi t e dt of ou rs oundf i na n c i a le nt i t i e s in order to avoid risk concentration. (iv) Liquidity risk Prudent management of liquidity risk implies keeping enough cash and marketable securities, financing available through a proper number of credit sources, and the capacity of closing positions in the market. The Company maintains an average debt maturity greater than the DEBT/ EBITDA ratio; additionally, the Group holds overnight deposits and certificates of time deposits for an approximate amount of US$ 6.7 million destined to face cash demands that new projects or investments may require. Finally, the program of commercial papers obtained during 2006 was renewed in year 2008 for 2 additional years, enabling lines amounting to US$ 20 million that contribute to reduce the dependence on lines granted by the financial system, to diversify financing sources. (4) Cash and Banks and Restricted Funds They comprise the following: In thousands of S/. 2008 2007 Cash and checking accounts Overnight and time deposits Collateral account Restricted funds 88,494 38,536 -------------127,030 16,598 -------------143,628 ======== 51,861 71,865 -------------123,726 4,743 13,477 -------------141,946 ======== (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 18 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements As of December 31, 2008, the Group holds checking accounts and time deposits at local banks in local and foreign currency for approximately S/. 64.32 million and US$ 19.99 million, respectively (S/. 58.4 million and US$ 21.6 million, respectively, as of December 31, 2007). As of December 31, 2007, the Collateral Account amounting to S/. 4.7 million, (equivalent to US$ 1.6 million) corresponded to a fund held at Banco de Crédito del Perú as a collateral f o rt h ec ompl i a nc ebondoft heConc e s s i onAg r e e me ntof“ Ej eMu l t i moda lSurTr a mo3 ( I I RSASurTr a mo3) ” . TheCompa nyr e c ov e r e dt h i sc ol l a t e r a ldu r i n g2008. As of December 31, 2008, restricted funds mainly includes US$ 4 million (US$ 4.5 million as of December 31, 2007) from subsidiary GMP S.A. held at Banco de Crédito del Perú, to guarantee obligations of a related party. (5) Trade Accounts Receivable Trade accounts receivable comprise invoices receivable and provisions pending invoicing mainly related to income from work valuations, income from rendered services, and sale of merchandise and property. As of December 31, 2008 and 2007, trade accounts receivable are shown net of advances from clients for S/. 54.5 million and S/. 38.81 million, respectively. Those invoices receivable have current maturity, do not accrue interest, and do not have specific collaterals. Aging of accounts receivable is as follows: In thousands of S/. 2008 2007 Current 30 days past due Past due over 30 days Total 341,936 29,665 5,879 -------------377,480 ======== 229,783 1,390 2,391 -------------233,564 ======== As of December 31, 2008, trade accounts receivable mainly increased due to balances related to stage of completion of contract of Concesión Canchaque S.A. for S/. 66.97 million and Survial S.A. S/. 45.66 million. Those balances are guaranteed by the Peruvian government once OSITRAN issue the corresponding Certificados de Avance de Obra - CAO (work completion certificates). (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 19 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (6) Related Parties The movement of accounts receivable and payable with related parties for the year ended December 31, 2008, is as follows: In thousands of S/. Receivable: GME S.A. Norvial S.A. Other minor Payable: GME S.A. Norvial S.A. Other minor Balances as of 12.31.2007 Additions Deductions Balances as of 12.31.2008 104 362 175 -----------641 ======= 4 9,316 734 -----------10,054 ======= ( 8,844) ( 275) -----------( 9,119) ======= 108 834 634 -----------1,576 ======= ( 5,646) (( 7) ( 92) -----------( 5,745) ======= 1 1,464 -----------1,465 ======= 5,647 7 12 -----------5,666 ======= 7 1,544 -----------1,551 ======= Accounts receivable and payable have current maturity and do not have specific guarantees. (7) Consortiums As of December 31, this item comprises: In thousands of S/. 2008 2007 Receivable Payable Receivable Payable Consorcio Constructor IIRSA-Norte Consorcio Héroes Navales Consorcio La Quinua Constructora Uyuni S.A. GyM JJC Contratistas Generales S.A. GyM S.A. –Skanska del Perú S.A. GyM S.A. (Constructores Transmantaro) Consorcio GyM EVISAC Consorcio Pasco Consorcio GYM Concar Consorcio Terminales Consorcio Chinecas GYM-JJC Consorcio BAC Consorcio proyecto Chinquitirca Consorcio Vial Ayahuaylas 7,427 23 1,030 5 -----------8,485 ======= 14,526 20 3,299 13 2 80 1,618 450 -----------20,008 ======= 130 1 117 30 1,643 -----------1,921 ======= 3,742 12 132 1,689 22 -----------5,597 ======= (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 20 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Accounts receivable and payable to consortiums are mainly related to loans for working capital and lease of equipment. (8) Other Accounts Receivable They comprise the following: In thousands of S/. 2008 2007 Guaranty deposits for agreements (a) Advances to suppliers (b) Current portion of long-term account receivable Various (c) 16,977 24,304) 4,625) 34,262 --------------80,168) ======== 16,046) 26,772) 2,825) 35,613) -------------81,256) ======== (a) Guarantee deposits as of December 31, 2008, are related to the following works: Edificio Casa de Celda for S/. 2.6 million, Edificio Capital Nivel Superior for S/. 2.1 million, Hotel Libertador for S/. 2.1 million, C1 EPC11 Malvinas for S/. 1.8 million, Main Civil Work LNG and Cashiriari civil works for S/. 0.90 million, Túnel La Granja for S/. 1.0 millions, Main Civil Works for S/. 1.0 million, Minera Yanacocha for S/. 0.77 million, Rio Tinto Minera Limitada SAC for S/. 0.56 million, Doe Run Perú for S/. 0.32 million (Sedapal Blocks 6, 7 and 10 for S/. 6.5 million, LNG camps for S/. 2.8 million, LNG Underground for S/. 1.7 million, LG tank foundations for S/. 1.3 million, Malvinas EPC 11 Extension for S/. 1.2 million as of December 31, 2007). (b) Advances given to suppliers correspond to Consorcio Constructor del Sur for S/. 4.5 million, JJC S.A. for S/. 4.46 million, Golf Millenium for S/. 3.7 million, Buildings LNG for S/. 1.5 million, Lease of Block 58 for S/. 1.4 million, Edificio Oficinas Capital for S/. 1.0 million, Topping Plant Huayuri for S/. 1.0 million, Parques de Riva Agüero for S/. 1.1 million, and advances for imports and their corresponding procedures for S/. 2.9 million (Golf Millenium for S/. 6.2 million, San Gabán Transmission Line for S/. 0.8 million, Edificio Santo Toribio for S/. 1.1 million, Novotel Hotel for S/. 0.9 million, Clinica Ricardo Palma for S/. 0.55 million, Ministry of Transportation and Communications for S/. 5.1 million, and advances for imports and their corresponding procedures for S/. 7.2 million as of December 31, 2007). (c) Various accounts receivable as of December 31, 2008, include the balance with Intertítulos, resulting from the regular withholding of Securitization Bonds for S/. 7.72 million, the balance receivable corresponds to Compensation Fund for S/. 4.0 million related to the regulatory framework of the Hydrocarbons Act and lease of equipment and reimbursable expenses receivable from CONIRSA for S/. 4.6 million (regular withholding of securitized bonds for S/. 7.67 million with Intertítulos, and leases of equipment and reimbursable expenses receivable from CONIRSA for S/. 10.1 million as of December 31, 2007). (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 21 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (9) Inventories They comprise the following: In thousands of S/. 2008 2007 Land (a) Work-in-progress (b) Construction materials (c) Merchandise and supplies (d) Inventories in transit Provision for inventory obsolescence 37,219) 61,427 50,879 9,309) )258 --------------159,092) ( 469) --------------158,623 ========= 16,074 21,178 30,362 10,915 873 --------------79,402) ( 145) --------------79,257 ========= (a) Land As of December 31, 2008, this item mainly comprises a land acquired in 2008 which will be allocated in 2009 to a real estate project to be developed by the Group for a value of S/. 33.3 million and lands at Playa Las Lomas del Mar, land T2 at Centro Empresarial Camino Real totaling S/. 3.7 million (as of December 31, 2007, it comprised the land at Playa Las Lomas for S/. 2.2 million, lands T2, T8, T9 for S/. 5.5 million, Malecón Cisneros for S/. 6.3 million, and Balta 1070 for S/. 2 million). (b) Work-in-process As of December 31, work-in-process mainly comprise the Parques de El Agustino project amounting to S/. 33.4 million, Javier Prado 200 project of S/. 5.8 million, Los Juncos for S/. 4.9 million, Diez Canseco for S/. 5.4 million, Real 8-9 Building for S/. 2.6 million, Garzón for S/. 2.3 million (as of December 31, 2007, it comprised Los Parques del Agustino for S/. 16.2 million, and Javier Prado 200 for S/. 4.9 million). (c) Construction materials As of December 31, 2008, these materials correspond mainly to the following works: Topping Plant Huayuri for S/. 8.9 million, Topping Plant Corrientes for S/. 6.4 million, Andoas Plus 2007 for S/. 6.2 million, Edificio Casa de Celda for S/. 1.8 million, Telecomunicaciones –Planta Interna for S/. 1.6 million (Andoas Plus for S/. 6.2 million, Malvinas EPC 11 Extension for S/. 3.1 million as of December 31, 2007). (d) Supplies and Merchandise They mainly comprise accessories and supplies for computing and communications equipment for S/. 2.4 million and supplies in general for the exploitation of blocks and for the gas plant of the subsidiary GMP S.A. for S/. 5.2 million. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 22 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (10) Prepaid Taxes and Expenses They comprise the following: In thousands of S/. 2008 2007 Sales tax credit Corporate tax credit /Temporary Tax on Net Assets (ITAN) Prepaid insurances Other 32,938 12,321 4,666 4,822 --------------54,747 ========= 11,982 17,651 762 13,991 --------------44,386 ========= (11) Long-term Accounts Receivable They comprise the following: Name of Debtor Type of transaction Consorcio Terminales (a) Loan Maturity August 2011 Petróleos del Perú S.A. (b) Agreement Various In thousands of US$ In thousands of S/. Authorized Total Current amount 2008 2007 2008 2007 Non-current 2008 2007 3,800 6,531 8,118 2,577 2,112 3,954 6,006 794 9,144 8,274 2,048 713 7,096 7,561 1,276 Proyectos Inmobiliarios Consultores S.A. Philip Morris S.A. Loans - - 1,276 - - - Agreement October 672 - - - - - - Various 1,655 2,389 1,655 - - 2,389 1,655 TGP S.A. Inversiones Larcomar S.A. 2008 - - - 3,024 - - - 3,024 - - 1,689 1,655 - - 1,689 1,655 Proyecto Especial Kovire Agreement - - 1,450 1,646 - - 1,450 1,646 Other - - 285 614 - - 284 614 ----------- ----------- ----------- ----------- Sunat Claim ----------- ----------- 21,488 26,262 4,625 2,825 16,862 23,437 ====== ====== ====== ====== ====== ====== (a) In August 2003, the Subsidiary GMP S.A. granted to Consorcio Terminales S.A. a loan for US$ 9.2 million with funds obtained in the issuance process of securitization bonds. As of December 31, 2008, the balance of this debt is shown at consolidation percentage of the Consortium (50%) for S/. 6.53 million (S/. 8.27 million as of December 31, 2007). This account receivable accrues interest at an annual rate of 9.65%. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 23 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (b) Long-term accounts receivable from Petróleos del Perú S.A. amounting to S/. 9.14 million (S/. 8.27 million as of December 31, 2007) are related to Consorcio Terminales and represent additional investments finished by the Consortium and destined to the modernization and enlargement of the terminals under the agreement signed by both entities. These investments are work-in-progress and will be transferred to Petróleos del Perú S.A. after corresponding technical audit and upon written approval by such entity. The value resulting from such determination will be considered for their invoicing. (12) Investments It comprises the following: Quantity of shares Associates: Norvial S.A. CONIRSA S.A. Proyectos Inmobiliarios Consultores S.A. Inmobiliaria Almonte S.A. Transportadora de Gas del Perú S.A.A Oiltanking Investments Bolivia S.A. (a) Promotores Asociados de Inmobiliarias S.A. Inmobiliaria Viena S.A. Oiltanking Andina S.A.C. Sierra Morena S.A. Inversiones Larco Mar S.A. Inversiones Real Once S.A. CONCIN S.A. Other investments Capital shareholding in % 2008 2007 Carrying amount in thousands of S/. 2008 2007 10,422,200 190 398 3,299,740 1,250,000 160,963 41,732 2,759,909 775,000 4,973,115 513,380 1,138,473 - 34.00 19.00 17.91 13.82 0.60 49.00 41.12 13.99 50.00 33.33 20.15 29.07 17.00 - 34.00 19.00 17.91 13.82 0.60 49.00 41.12 13.99 50.00 33.33 20.15 29.07 10.20 - 37,675 23,847 14,609 8,645 5,465 5,098 4,051 2,691 1,673 1,617 1,111 4,037 3,423 2,032 ----------115,974 ----------- 31,626 15,595 12,197 8,645 5,645 5,098 4,051 2,691 1,290 5,713 1,110 4,037 3,285 2,063 ----------103,046 ----------- 2,806,500 1,914,701 19.00 19.00 19.00 19.00 6,016 4,506 ----------10,522 ----------126,496 ====== 5,430 3,504 ----------8,934 ----------111,980 ====== Consortiums: CONIRSA Tramo 3 CONIRSA Tramo 2 (a) Oiltanking Investment Bolivia S.A. On July 28, 2000, Oiltanking GHbH (hereinafter OT), GMP S.A. and Graña y Montero S.A.A. incorporated Oiltanking Investment Bolivia S.A., with a shareholding of 51%, 48%, and 1% respectively, in order to incorporate Compañía Logística de Hidrocarburos Boliviana S.A. (hereinafter CLHB), for the operation of multi-purpose pipelines and storage plants owned by Yacimientos Petrolíferos Fiscales Bolivianos (hereinafter YPFB). On May 1, 2006, the Bolivian government enacted Supreme Decree 28701 which e s t a bl i s he st h e“ na t i ona l i z a t i ono fhy dr oc a r bo n s ” .Th r oug ht hi sde c r e e ,5 0 % pl u s1s ha r e of certain Bolivian companies including CLHB is adjudicated to YPFB. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 24 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements As a result of this decree in May 2006, Management took the decision to change the investment accounting method in Bolivia, from Equity Share Value to Cost Method. As of December 31, 2006, 50% of investment value related to CLHB was considered as accounts receivable and a 100% provision was recorded amounting to S/. 11.9 million, which was presented as investment write-off in the income statement of year 2006. Oiltanking GMBH and the Management of GMP S.A. have had a series of meetings with officers from the Bolivian government to establish a fair price for shares. Recent changes of Bolivian Authorities have delayed the closing of the negotiations. However, in December 2008, an agreement was reached in which YPFB would pay the price per share as stipulated in the Supreme Decree 29542 (US$ 20) and assume the debt of US$ 8 million. The Group is waiting for the issuance of the Supreme Decree confirming the agreement; it is estimated that this operation will be completed during 2009. As of December 31, 2008 and 2007, the financial statements do not include assets, liabilities, income and expenses of OTIB due to jointly loss of control as a consequence of the decrease of its interest, resulting from the nationalization. (13) Property, Plant, and Equipment The movement of the Property, Plant, and Equipment account and the corresponding accumulated depreciation for the period ended December 31, 2008 and 2007 is the following: Year 2008 In thousands of S/. Balances as of 12.31.2007 Cost: Land Building and premises Plant and equipment Furniture and fixtures Vehicles, various equipment, and other In-transit units Work-in-progress Accumulated depreciation: Building and premises Plant and equipment Furniture and fixtures Vehicles, various equipment, and other Net cost Additions Deductions 1,660 139,109 210,755 15,719 4,788 40,585 4,134 ( 475) ( 5,384) ( 12,046) ( 2,533) 125,978 6,103 46,659 ----------545,983 ----------- 22,871 10,505 128,570 -----------211,453 ======= ( 4,902) ( 23) ( 19,405) -----------( 44,768) ======= 14,810 130,108 8,070 4,022 36,059 2,275 ( 1,280) ( 11,424) ( 2,376) 74,322 ----------227,310 -----------318,673 ======= 18,990 -----------61,346 ======= ( 3,330) -----------( 18,410) ======= Adjustments ( Reclassifications Balances as of 12.31.2008 36) 266 ( 4,684) ( 370) 35 35,069 132,087 ( 3,239) 1,184 173,848 366,697 13,711 1,015 ( 4,818) -----------( 8,627) ======= ( 5,404) ( 13,165) ( 145,383) -----------======= 139,558 3,420 5,623 -----------704,041 ------------ 241) 10) 565 5,665 210) 18,117 160,167 7,749 ( 6,020) -----------======= 84,279 -----------270,312 -----------433,729 ======= ( ( 317 -----------66 ======= ( (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 25 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Year 2007: In thousands of S/. Balances as of 12.31.2006 Cost: Land Building and premises Plant and equipment Furniture and fixtures Vehicles, various equipment, and other In-transit units Work-in-progress Accumulated depreciation: Building and premises Plant and equipment Furniture and fixtures Vehicles, various equipment, and other Net cost Additions Deductions Adjustments Reclassifications Balances as of 12.31.2007 1,665 155,750 268,656 17,283 73,770 50,850 3,331 ( 90,370) ( 115,602) ( 5,076) 781 137 ( ( 5) 41) 6,070 44 1,660 139,109 210,755 15,719 109,664 3,596 9,116 ----------565,730 ----------- 35,234 2,507 58,210 -----------223,902 ======= ( 12,462) ( 53) ( 22,265) -----------( 245,828) ======= 1,208 53 ( 7,666) 125,978 6,103 46,659 -----------545,983 ------------ 23,892 202,758 9,297 3,307 34,655 2,886 ( 12,310) ( 106,994) ( 4,192) ( ( 68,767 ----------304,714 ----------261,016 ======= 14,802 -----------55,650 ======= ( 299 -----------38 ======= 9,596) -----------( 133,092) ======= 1,598 -----------======= -----------2,179 ======= 79) 261) 79 ( 50) 50 -----------======= 14,810 130,108 8,070 74,322 -----------227,310 -----------318,673 ======= As of December 31, 2008, property, plant, and equipment accounts include assets acquired under the modality of finance lease for approximately S/. 113.78 million (S/.106.53 million as of December 31, 2007). In 2008, the movement of work-in-progress is mainly related to investments of Subsidiary Graña y Montero Petrolera S.A. in the construction of a new gas plant (note 19.a). (14) Goodwill It comprises the highest value paid by subsidiary GyM S.A. to obtain the total capital stock of GMA S.A. reg a r di ngt hev a l ueo fi t sc or r e s p ondi ngi nt e r e s ti ns t o c k h ol de r s ’e q ui t y .Th e balance as of December 31, 2008 of S/. 26.7 million (S/. 29.6 million in 2007) is shown net of impairment loss of S/. 2.9 million. Likewise, in February 2007, Graña y Montero S.A.A. acquired 1,103,509 shares at market value that represented an additional shareholding of 5.47% in the subsidiary GMD S.A., paying an amount of S/.4.9 million; thus, increasing its shareholding from 83.21% to 88.68%. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 26 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements The highest value paid on fair value of net assets acquired through this share block was S/. 4.8 million and was recognized as goodwill in the balance sheet. The evaluation of impairment of this goodwill was made using the value in use of the corresponding cash-generating unit. The key criteria for the calculation of the value in use have been: a) projection period: 10 years, b) Growth rate: 6% and perpetual growth up to 3%, and c) discount rate: 11%. The results of this evaluation did not determine impairment in the carrying amount. (15) Other Assets The annual movement of the other assets item comprises the following Year 2008: Cost: Block I (a) Block V (a) Consorcios Terminales (note 2.n) Concessions and Rights Licenses and software projects (b) Surface rights (c) Development of CV Tacna Other minor Accumulated amortization: Block I Block V Consorcios Terminales (note 2.n) Concessions and Rights Licenses and software projects (b) Surface rights (c) Development of CV Tacna (d) Other minor Net cost Balances as of 12.31.2007 In thousands of S/. Deductions and/or Additions adjustments Balances as of 12.31.2008 49,785 10,340 29,014 9,545 25,730 13,441 123 4,117 -----------142,095 ------------ 18,066 1,305 878 3,115 5,929 11,196 -----------40,489 ======= ( ( ( 67,800 11,217 29,718 9,545 28,243 13,441 6,052 15,313 -----------181,329 ------------ 19,187 7,224 19,606 6,134 17,500 409 60 -----------70,120 -----------71,975 ======= 4,855 749 3,026 682 1,598 274 1,210 365 -----------12,759 ======= ( ( ( 23,991 7,545 22,471 6,816 19,063 683 1,210 425 -----------82,204 -----------99,125 ======= 51) 428) 174) ( 602) -----------( 1,255) ======= 51) 428) 161) ( 35) -----------( 675) ======= (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 27 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Year 2007: Balances as of 12.31.2006 Cost: Block I (a) Block V (a) Consorcios Terminales (note 2.n) Concessions and Rights Parque Ovalo Gutiérrez Concession Licenses and software projects (b) Surface rights (c) Development of CV Tacna Other minor Accumulated amortization: Block I (a) Block V (a) Consorcios Terminales (note 2.n) Concessions and Rights Parque Ovalo Gutiérrez Concession Licenses and software projects (b) Surface rights (c) Other minor Net cost In thousands of S/. Deductions and/or Additions adjustments 32,296 8,752 28,659 9,545 9,512 17,689 12,383 4,795 -----------123,631 ------------ 17,489 1,588 428 3,770 11,537 123 1,696 -----------36,631 ======= 16,981 6,878 16,704 5,454 2,948 13,029 839 3,475 -----------66,308 -----------57,323 ======= 2,206 376 2,941 682 254 1,128 389 60 -----------8,036 ======= ( 73) ( 9,512) 4,271 ( 10,479) ( 2,374) -----------( 18,167) ======= ( ( ( ( 30) 39) 2) 3,202) 3,343 ( 819) ( 3,475) -----------( 4,224) ======= Balances as of 12.31.2007 49,785 10,340 29,014 9,545 25,730 13,441 123 4,117 -----------142,095 -----------19,187 7,224 19,606 6,134 17,500 409 60 -----------70,120 -----------71,975 ======= Costs capitalized in the balance of this account are mainly referred to: (a) Investment expenses in exploration, development and subscription rights obtained through oil exploitation agreements of blocks I and V and the right obtained for the concession in the administration of oil distribution terminals owned by PETROPERU S.A. (b) Costs related to the acquisition of certain software licenses and Oracle implementation. (c) Surface rights –Fashion Center S.A., correspond to the value of concession of the right of use of surfaces granted by Municipality of Miraflores in December 1995, for a term of 60 years. Until May 2007, the surface right was granted in favor of Larcomar S.A. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 28 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (d) Costs incurred for the development of road conservation services, as per contract entered into between the Special Project on Peruvian Transport Infrastructure –PROVIAS Nacional and Consorcio GyM –Concar. Those costs are recognized in the results according to related income and for the effective period of the contract. (16) Bank Loans They comprise the following: In thousands of S/. 2008 2007 Banco de Crédito del Perú Banco Continental Bancolombia Interbank Scotiabank 33,024 37,784 23,565 7,140 6,846 -------------108,359 ======== 21,476 -------------21,476 ======== As of December 31, 2008, this item comprises bank loans in local and foreign currency for working capital. These obligations have current maturity and accrue interest rates ranging from 3.5% to 10.15% (5.30% to 5.45% in 2007), respectively. (17) Other Accounts Payable They comprise the following: In thousands of S/. 2008 2007 Taxes, remunerations, and profit sharing (a) Advances for work agreements (b) Various (c) 91,303 36,714 84,606 -------------212,623 ======== 61,662 34,716 39,389 ------------135,767 ======== (a) Taxes, remunerations, and profit sharing comprise mainly income tax for S/. 22.62 million, sales tax for S/. 15. 82mi l l i o n,wor k e r s ’pr of i ts ha r i ngf orS/ .1 0. 9 0mi l l i on , provision for vacations payable for S/. 16.53 million, contributions and social laws for S/ . 13. 38( i n c omet a xf orS/ .4 . 87mi l l i on,s a l e st a xf o rS/ .17. 88mi l l i on ,wor k e r s ’pr o f i t sharing for S/. 5.60 million, provision for vacations payable for S/. 12.42 as of December 31, 2007). (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 29 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (b) Advances for work agreements correspond mainly to advances received from Ministry of Transportation and Communications for the special project on Peruvian Transportation Infrastructure amounting to S/. 21.26 million and advances received for the Centro de Distribución NASA UNIQUE works for S/. 10 million, Roasting and Acid plant mainly for S/. 8.2 million, Electrical and Instrumentation works for S/. 6.9 million, Buildings LNG for S/. 5.9 million, Edificio Golf Millenium for S/. 5 million, Concesionaria Vial del Sur S.A. for S/. 1.58 million, Perenco Perú Limited for S/. 0,50 million (the special project on Peruvian Transportation Infrastructure for S/. 13.9 million, Inmobiliaria Viena for S/. 5.9 million, Río Tinto Minera for S/. 3.5 million, Consorcio Héroes Navales for S/. 3.0 million, and Planta de Indio - Banco Continental for S/. 2.2 million as of December 31, 2007). (c) Various accounts payable mainly comprise accounts payable to JJC for S/. 22 million corresponding to Joint Venture in the Buenos Aires –Canchaque highway project , Playa Kontiki for S/. 2 million, Besco for S/. 2.2 million and provision for severance indemnities for S/. 5.5 million (S/. 8.1 million and S/. 7.4 million as of December 31, 2007, respectively). As of December 31, 2007, various accounts payable comprised mainly S/. 7.3 million of the provision for severance indemnities, S/. 1.9 million corresponding to provision for bonuses, S/. 3.9 million for various accounts payable in works and S/. 2.3 million corresponding to the current portion of the financing with Hewlett Packard Perú S.R.L., S/. 1.2 million to the current portion of the debt with Cisco Systems, and S/. 0.9 million for loan from stockholders. (18) Commercial Papers On October 3, 2008, Graña y Montero S.A.A. renewed for two years the line up to US$20 mi l l i oni nt h ec a p i t a lma r k e t st of i na n c eownwor k i ngc a pi t a lope r a t i on sors u bs i di a r i e s ’ . During July and November, commercial papers were issued for US$ 7 million each time, at an interest rate of 5.6966% and 7.023%, respectively, and are effective for 12 months for both issuances. (19) Long-term Debt It comprises the following: In thousands of S/. Total 2008 2007 Bank debt (a) Securitization bonds (b) Financial debt Debt with third parties Various provisions 224,475 75,276 ----------299,751 18,666 8,676 ----------327,093 ====== 159,893 91,731 ----------251,624 26,197 6,700 ----------284,521 ====== 2008 Current 2007 54,014 32,416 ----------86,430 3,693 ----------90,123 ====== 38,424 27,628 ----------66,052 ----------66,052 ====== Non-current 2008 2007 170,461 42,860 ----------213,321 14,973 8,676 ----------236,970 ====== 121,469 64,103 ----------185,572 26,197 6,700 ----------218,469 ====== (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 30 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (a) Bank debt Bank debt detail Banco de Crédito: Bolivia Banco Continental Citibank (i) Citileasing (i) Interbank Banco de Crédito del Perú Banco de Crédito del Perú Banco de Crédito del Perú Banco de Crédito del Perú Interleasing América Leasing Banco Interamericano de Finanzas Scotiabank Interbank Banco de Crédito del Perú BNP Panamá Other minor Type of obligation Total Maturity 2008 2007 In thousands of S/. Current 2008 2007 Non-current 2008 2007 Loan Leasing Loan Leasing Leasing 2010 2010 2014 2014 2014 9,803 70,049 48,880 14,483 8,719 27,402 46,506 2,011 7,680 3,081 4,906 1,572 2,860 2,021 7,792 62,369 45,799 9,577 7,147 24,542 44,485 Guarantee 2009 5,142 6,403 - - 5,142 6,403 Leasing 2012 19,803 22,322 9,263 13,751 10,540 8,571 Promissory note 2009 1,142 - 1,142 - - - Loan Leasing Leasing 2010 2011 2010 10,520 18,465 3,889 19,182 5,752 5,189 8,098 2,622 5,758 2,523 5,331 10,367 1,267 13,424 3,229 Leasing Leasing Promissory note 2012 2011 2009 5,504 8,337 1,226 2,500 3,380 2,245 2,464 3,262 1,226 1,152 1,093 2,245 3,040 5,075 1,348 2,287 Leasing Loan 2012 19,955 1,760 ---------224,475 ====== 999 ---------159,893 ====== 543 7,073 903 ---------- ---------54,014 38,424 ====== ====== 12,882 857 ---------170,461 ====== 456 ---------121,469 ====== (i) In March 2007, the subsidiary Graña Montero Petrolera S.A. signed a financial lease contract with Citileasing S.A. for US$ 15 million for 8 years at a rate of 6.85% to finance part of the construction of the new gas plant. On March 13, 2008, an amendment to the contract was signed to expand the amount of US$ 20 million; and on May 8, 2008, a second amendment was signed to the contract expanding the amount to US$ 23 million. On October 1, 2008, Citibank NY disbursed a loan of US$ 22 million, according to the credit contract dated September 19, 2008, which was destined to settle leasing transactions with Citileasing S.A. This loan has a grace period of 6 months and will be paid in 90 monthly installments as from April 2009. Guarantees supporting this obligation are: mortgage on the land where Parinas Gas Plant is built, collateral on equipment and assignment of flows from sales to clients such as Repsol, Llama Gas, Zeta Gas and Herco. The agreed rate was Libor + 0.25%. In order to reduce the rate risk, a rate swap was made fixing the rate at 6.2% as from April 2009, when the amortization of the loan will begin. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 31 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (b) Securitization Bonds I nOc t obe r20 03,byme a nso fpu b l i cbi d,t het ot a l i t yo f“ Se c u r i t i z a t i on Bonds from Gr a ñaMon t e r oa ndSub s i d i a r i e s ” - First Issuance was placed for US$50 million, with maturity in 2011 and with a return of 7.5% of annual nominal interest rate. Thea mor t i z e dc os tofde b tf o rt he“ Se c u r i t i z a t i onBon dsf r om Gr a ñayMon t e r oa n d Subs i d i a r i e s ”i t e mha sbe e nde t e r mi n e da sf o l l ows : In thousands of 2008 US$ Original capital Amortized capital Total debt Plus: Accrued interest Transaction costs ) Less: Prepaid costs Amortization of transaction costs Amortized interest Total amortized cost Less current portion Non-current amortized cost 2007 S/. US$ S/. 50,000) ( 26,647) ------------23,353) ------------- 157,097) ( 83,725) ------------(73,372) ------------- 50,000) ( 19,940) ------------30,060(( ------------- 149,847) ( 59,757) ------------90,090 ------------- 15,532) (7,774) ------------(23,306) ------------- 48,802) (24,426) ------------73,228) ------------- 13,518) 6,681) ------------20,199) ------------- 40,513) 20,023 ------------60,536) ------------- ( 2,582) ( 5,126) ( 14,992) ------------( 22,700) ------------23,958) ( 10,317) ------------13,641) ======= ( 8,113) ( 16,106) ( 47,105) ------------( 71,324) ------------75,276) ( 32,416) ------------42,860) ======== ( 2,572) ( 4,193) ( 12,874) ------------( 19,639) ------------30,620) ( 9,222) ------------21,398) ======= ( 7,708) ( 12,566) ( 38,621) ------------( 58,895) ------------91,731) ( 27,628) ------------64,103 ======= The Company and the subsidiaries GMI S.A. Ingenieros Consultores, GMD S.A., Concar S.A., Graña y Montero Petrolera S.A., and GyM S.A. shall comply with the maintenance of certain financial indicators, in addition to certain clauses related to events of economic and contractual nature, detailed in the corresponding Certificate of Incorporation of Securitization Bonds. The indicators mentioned as of December 31, are detailed as follows: Ratio Consolidated debt to equity Consolidated debt coverage Consolidated current liquidity GMP S.A. debt to equity GMP S.A. debt coverage GMP S.A. current liquidity Required ratio Maximum 2.65 Minimum 1.20 Minimum 0.50 Maximum 1.40 Minimum 1.30 Minimum 1.00 (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 32 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements I n Ma na g e me nt ’ so pi n i on ,t he s eo bl i g a t i o nsdo n otl i mi tno ra f f e c tt he Gr oup ’ s operations and are being satisfactorily complied. The payment schedule of Securitization Bonds is the following: In thousands of US$ S/. Years 2009 2010 2011 7,218 7,771 8,364 --------------23,353 ======== 22,680 24,414 26,278 -------------73,372 ======== (20) Capital Stock As of December 31, 2008, authorized, subscribed and paid-in capital, according to the Comp a ny ’ sby l a wsa n da me nd me nt si sr e pr e s e n t e dby558, 2 84, 190c ommo ns h a r e swi t h a par value of S/. 0.70 each (428,223,833 common shares as of December 31, 2007 with a par value of S/. 0.70 each). As of December 31, 2008, quote per common share has been S/. 2.00 (on June 3, 2008, the Company issued 130,060,057 shares which explain the decrease in the price of shares) and its trading frequency has been 83.47% on average (S/. 6 per common share as of December 31, 2007 and its business frequency of 97.60% on average). Ge ne r a lSt o c k hol de r s ’Me e t i ng ,he l do nMa r c h3 1 ,2 008 ,a pp r ov e dt hec a pi t a l i z a t i o no f results corresponding to the profit of year 2007 for S/. 91.04 million after applying the amount of S/.12.99 million to the legal reserve account, and allocate dividends for S/ .2 5 . 98mi l l i on( Ge ne r a lSt oc k hol d e r s ’Me e t i ng ,he l donMa r c h31,2007,a pp r ov e dt o capitalize results corresponding to the profit of year 2006 for S/. 63.97 million, apply to the legal reserve account the amount of S/. 10.14 million, record the unrestricted reserve account for S/. 7 million, and authorize dividends for S/. 20.23 million). As of December 31, 2008, the shareholding structure of Graña y Montero S.A.A. is as follows: Total Percentage of individual Number of percentage of shareholding stockholders interest Up to 1.00 From 1.01 to 5.00 From 5.01 to 10.00 Over 10 848 10 6 1 ----------865 ====== 13.25 30.29 35.41 21.05 ----------100.00 ====== (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 33 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Treasury shares AtGe ne r a lSt o c k hol d e r s ’Me e t i ng ,da t e dMa r c h3 1,2007,a ndba s e dona r t i c l e104of Companies Act, the Company established the policy to hold in portfolio up to 2% of own shares to be used in the total or partial payment of Annual Allowances of the main executives of Grupo Graña y Montero. Accordingly, as of December 31, 2008 and 2007, the Company holds 1,468,562 and 476,507 treasury shares, respectively (notes 2.v and 21). (21) Legal Reserve and Other Reserves Pursuant to Companies Act, the Company is required to allocate 10% of its net annual income to a legal reserve. This allocation is required until the reserve equals 20% of paidin capital. The legal reserve must be used to compensate losses in the absence of earnings or non-restricted reserves, and must be restored with future earnings. This reserve may also be capitalized, but it shall be subsequently restored. In 2008, the amount of S/. 12.99 million was applied to the Legal Reserve account (S/.10.14 million in 2007). Other reserves comprise unrestricted reserves established in 2007 for S/. 7 million. As of December 31, 2008 and 2007, such amount is shown net of higher value paid for the acquisition of treasury shares compared to its corresponding par value of S/. 1.13 million and S/. 2.61 million, respectively (note 20). (22) Wor k e r s ’Pr of i tSh a r i ng Ac c or d i ngt oc ur r e n tl e g i s l a t i oni nPe r u,wo r k e r s ’p r of i ts ha r i ngi nt heCompa ny ’ spr o f i t sa nd its local subsidiaries fluctuates between 5% and 10% of the computed net income of the separate financial statements and the participation in its management should be carried out through committees destined to improve production and productivity. Additionally, the current legislation in Peru establishes that in the case of capital increase by public subscription of shares, the Company and its local subsidiaries are obliged to offer their workers the first option in the subscription of shares in no less than 10% of capital increase. Expe ns e sf o rwor k e r s ’p r o f i ts ha r i n gi sb r o k e ndowna sf o l l ows : In thousands of S/. 2008 2007 Current Deferred ( 13,133) 175 --------------( 12,958) ======== ( 5,885) ( 3,836) -------------( 9,721)) ======== (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 34 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (23) Tax Matters (a) According to current legislation, the consolidated determination of taxes is not allowed; Graña y Montero S.A.A. and its Subsidiaries have made this determination individually. (b) Management of the Company and its Subsidiaries’considers that it has determined tax base and tax loss applying the income tax regime according to current tax legislation, which requires adding and deducting from the results shown in the financial statements, the items that such legislation recognizes as taxable and non-taxable, respectively. For years ended December 31, 2008 and 2007, the income tax rate is 30%. (c) Expenses for income tax are broken down as follows: In thousands of S/. 2008 2007 Current Deferred ( 72,724) 6,730 --------------( 65,994) ======== ( 34,966) ( 24,193) -------------( 59,159)) ======== (d) The determination of income tax of Graña y Montero S.A.A., GyM S.A. and GMD S.A. considers the attributable result of each joint venture in the percentage of interest in each of them. On the other hand, the consortiums that keep independent records are considered taxpayers of the Income Tax Regime; therefore, all the income tax resulting from commercial operations shall be attributed. (e) Certain subsidiaries of the Group have determined the deferred tax on temporary differences originated by items that have a different treatment for tax and accounting purposes. As of December 31, 2008, assets and liabilities for deferred income tax shown in the balance sheet amount to S/. 6.64 million and S/. 30.47 million, respectively (S/. 2.31 million of assets and S/. 22.57 million of deferred liabilities as of December 31, 2007) which is mainly generated due to the deferral of work profits, different depreciation rates, finance lease transactions and provisions for tax contingencies. (f) The Group and its subsidiaries have current agreements for the fractionating payment of the tax debt amounting to S/. 8.74 million (S/. 9.81 million as of December 31, 2007), which are included in the Debt with Third Parties item. The requested fractionating payment of tax debts will mature between years 2011 and 2012. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 35 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (g) Tax Administration is empowered to review and, if it were the case, correct the income tax and tax loss carry forward determined by the Company in the last four years, beginning on the tax return filing date (years subject to review). TheCompa n y ’ st a xr e t ur n sf or2004 t h r oug h2 00 8 are subject to review by tax authorities. According to current legislation, the Group and its subsidiaries are jointly responsible with companies merged in previous years and whose periods are open to review, before any contingency that may be originated by transactions made prior to the dates of the respective mergers. Since there could be differences in the interpretation by the Tax Authorities concerning the standards applicable to the Group and its Subsidiaries, it is not possible to foreseen, to date, if there would be additional tax liabilities as a result of eventual reviews. Any additional taxes, delays or interest, if produced, are recognized in the results of the year in which the difference of criteria with Tax Authorities is resolved. Management estimates that there will not be significant liabilities as a result of these possible reviews. (h) As from 2001, for income tax and sales tax purposes, transfer pricing for transactions carried out with economically-related parties, and with companies domiciled in territories with low or null taxation, shall be supported with documentation and information about the valuation methods used, and the criteria considered, for the pricing. Management of the Group and its Subsidiaries considers that for income and sales tax purposes, pricing regarding transactions such as those aforementioned has been made in accordance with tax legislation; consequently, no significant liabilities will arise as of December 31, 2008. (i) Temporary Tax on Net Assets (ITAN).- As from January 1, 2005, this tax shall be levied on corporate income generators subject to income tax regime. As from 2008, the tax rate is 0.5% applicable to the amount of net assets that exceed S/. 1 million. The amount actually paid may be used as a credit against payments on account of income tax regime or against the payment for regularization of Income Tax of the corresponding fiscal period. (24) Contingencies, Guarantees, and Commitments (a) Contingencies As a result of tax reviewing processes on the subsidiary GyM S.A., corresponding to periods 1999 and 2001, the Peruvian Tax Authorities (SUNAT) has issued tax assessment resolutions and corresponding fines, totaling approximately S/. 29 million. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 36 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements In this regard, GyM S.A has made the corresponding claims, which are pending resolution. Management and their legal advisors estimate that those claims will be resolved in favor of the subsidiary. However, the Company, in order to cover any tax contingency, has recorded a provision of S/. 6.7 million, which is included in the Various Provision account. Management estimates that part of the adjustments made in the determination of tax results of years 1999 and 2001 has a temporary effect, and will be recovered by the Company, provided that the aforementioned temporary effects be included in the determination of the taxable net income of non-prescribed fiscal periods at the date when the case is resolved. As of December 31, 2008, other subsidiaries of the Company have received tax assessment resolutions from the Tax Authorities for approximately S/.2.00 million, substantially referred to the income tax and sales tax, which are under claim process. Also, there are claims from third parties for S/. 18.60 million. In the opinion of the compa ni e s ’ Management and their legal advisors, the aforementioned claims will be declared well-founded and therefore, no liabilities will arise additionally to the ones timely paid. (b) Guarantees The Company holds a partial guarantee agreement with IDB and FMO that corresponds to 37.5% of the pending balance of the bonds. In this respect, the Group has participated in the establishment of a trust fund managed in order to support the partial guarantee granted by the two financial entities through the delivery of the shares of Promoción Inmobiliaria del Sur S.A., Inmobiliaria Almonte S.A.C. and Inmobiliaria San Silvestre S.A. to Scotiabank Perú S.A.A. (trustee), as guarantee. Those shares are valued at US$ 18.01 million. (c) Commitments Letters of guarantee for approximately US$ 86.9 million and S/.92.9 million (US$ 96.8 million and S/. 60.5 million in 2007), stand by of US$ 15.4 million (US$ 29.8 million in 2007), guarantee policies for US$ 13.1 million and S/.5.3 million (US$ 7.3 million and S/. 9.8 million in 2007) and credit letters for US$ 0.5 million that guarantee agreements signed with third parties and bank loans with maturities until year 2011. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 37 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (d) Collaterals As of December 31, 2008, the Group has approximately US$ 18 million in collaterals granted in favor of local and foreign financial institutions that guarantee credit lines and other operations granted by such institutions. (25) Valuation and Cost of Works As of December 31, income and costs distributed per operating division of the subsidiary GyM S.A. are the following: 2008 Income Civil works division Electromechanical division Buildings division Real estate division Various works 592,305 391,113 258,594 16,763 81,067 -------------1,339,842 ======== In thousands of S/. 2007 Cost Income 532,352 319,773 231,479 7,690 39,122 -------------1,130,416 ======== 565,906 253,291 119,445 12,634 67,924 -------------1,019,200 ======== Cost 513,076 200,602 106,460 9,120 36,291 -------------865,549 ======== (26) Operating, Administrative, and General Expenses The operating, administrative, and general expenses for the years ended December 31, include the following items: In thousands of S/. 2008 2007 Personnel charges Services rendered by third parties Various charges for operations Taxes Provisions for the period Depreciation and amortization 56,459 23,606 8,625 991 2,365 12,508 -------------104,554 ======== 42,767 17,755 6,502 708 2,563 8,719 -------------79,014 ======== (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 38 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (27) Financial Income (Expenses) Financial income and expenses for the years ended December 31 comprise: In thousands of S/. 2008 2007 Financial income Interest on allocation of debt and loans granted Other financial income Financial expenses Interest on bank obligations Interest and expenses on securitization bonds (note 19) Interest on lease agreements Expenses for discounted documents Interest on tax fractionating payment Other financial expenses Financial expenses, net 3,041) 5,573) --------------8,614) --------------( 7,203) ( 8,627) ( 11,007) (( 24) ( 715) ( 11,193) --------------( 38,769) --------------( 30,155) ======== 954) 8,420) -------------9,374) -------------( ( ( 3,717) 12,334) 2,961) ( 648) ( 12,458) -------------( 32,118) -------------( 22,744) ======== (28) Basic Earnings per Share The earnings per share have been determined as follows: Attributable earnings (in thousands of nuevos soles) Weighted average of shares outstanding of S/.0.7 each. Basic earnings per share (in S/.) 2008 2007 147,189 ========= 129,900 ========= 558,284,190 ========= 0.263 ========= 428,223,833 ========= 0.303 ========= Basic earnings per share are calculated by dividing the net profit corresponding to common stockholders by the weighted average number of common shares outstanding as of the financial statements date. (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 39 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (29) Segment Reporting Segment reporting is only required for companies whose securities are publicly traded and for companies that are in the process to issue securities in the securities market. In these consolidated financial statements, the basic format of the report comprises business segments, while the secondary format of the report comprises geographical segments. Basic reporting schedule –business segments: For the year ended December 31, 2008: In thousands of S/. Construction Sales Oil 1,339,842 Gross profit 209,427 Operating profit 150,062 Systems Engineering Concessions 115,032 80,162 ( 45,719) 19,784 30,701) 18,965) 15,174 7,195 17,244 10,657 13,760 ( 11,551) ( 6,044) ( 4,764) ( 3,114) ( 880) ( 3,802) Other income and expenses, net ( 27,303) ( 7,684) ( 2,951) ( 731) ( Taxes 116,715 ( Net profit 44,352) 83,570 ( 28,569) 72,363 1,827,710 225,241) Financing income (expenses), net Pre-tax profit Total 105,439 96,018) 113,152 Other 1,130 ( 55,001) 15,633 987) ( 143 624) 30,155) (31,796) 9,706 ( 2,556) 10,018 294,936 ( 7,497 6,231 5,615) 399,490 2 232,985 3,127 ( 78,952) 3,675 12,833 154,033 Assets 717,527 330,354 59,290 49,280) 197,577 187,080 1,541,108 Liabilities 470,141 167,585 46,960 26,831) 162,061 56,962 930,540 Equity 247,386 162,759 12,330 22,449) 35,516 130,117 610,568 Other Total For the year ended December 31, 2007: In thousands of S/. Construction Sales Oil Engineering Concessions 183,930) 96,015 67,968 45,284 27,577 Gross profit 153,651 80,710 13,780 19,272) 12,497) 19,117 Operating profit 108,476 72,808) 3,260 10,124 6,518 18,827 Financing income (expenses), net 1,019,200 Systems ( Other income and expenses, net Pre-tax profit Taxes Net profit ( 3,545) 739) ( 3,439) ( 836) 2,224 326 ( 730) ( 654) 107,155 72,395 ( 909) 38,040) 69,115 ( ( 23,344) 49,051) 219 ( 690) 8,634 ( 3,016) ( 906) ( 13,279) 1,439,974 299,027 2 220,013 ( 22,744) 401 8,363 9,930 6,013 13,911 207,199 ( 2,266) ( 2,433) ( 68,880) 5,618 3,747 11,478 138,319 Assets 540,084 221,829 62,947 23,173) 42,327 257,655 1,148,015 Liabilities 341,777 103,430 50,759 12,931) 27,394 130,513 666,804 Equity 198,307 118,399 12,188 0,242) 14,943 127,142 481,211 ) (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 40 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements Secondary reporting schedule –geographical segments: For the year ended December 31, 2008: Peru Sales Gross profit Operating profit Financial expenses, net Other income and expenses, net Profit bef o r ewo r k e r s ’p r o f i ts ha r i ng and income tax Taxes Net profit In thousands of S/. Other Total 1,827,710 399,490 294,936) ( 30,155) ( 31,796) )- 1,827,710 399,490 294,936) ( 30,155) ( 31,796) 232,985 78,952) 154,033 )- ( ( Assets Liabilities Equity 1,541,108 930,540 610,568 - 232,985 78,952) 154,033 1,541,108 930,540 610,568 For the year ended December 31, 2007: Peru Sales Gross profit Operating profit Financial expenses, net Other income and expenses, net Profit bef o r ewo r k e r s ’p r o f i ts ha r i ng and income tax Taxes Net profit Assets Liabilities Equity In thousands of S/. Other 1,420,680 296,152 217,138) ( 22,744) 9,930 ( 204,324) 68,031) 136,293 1,144,792 665,606 479,186 Total 19,294) 1,439,974 2,875) 299,027 2,875) 220,013) ( 22,744) 9,930 ( 2,875) 207,199 849) ( 68,880) 2,026) 138,319 3,223 1,198) 2,025) 1,148,015 666,804 481,211 (Continued) (FREE TRANSLATION FROM SPANISH. THE ACCOUNTING PRINCIPLES REFERRED TO ARE THOSE GENERALLY ACCEPTED IN PERU) . 41 . GRAÑA Y MONTERO S.A.A. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (30) Subsequent Event St oc k ho l d e r s ’Me e t i n g so fGy M S. A.a ndGMV S. A( r e l a t e dc ompa ny ) ,he l donNov e mbe r 24, 2008, approved the spin-off project, through which GyM S.A. segregated an equity block composed of assets and liabilities associated to the real estate business line, being GMV S.A. the beneficiary of such equity block. This spin-off, effective as from January 1, 2009, aims at achieving specialization in the construction business management and the real estate business by GyM S.A and by GMV S.A., respectively. As a consequence of the segregation of the equity block established in the spin-off project, on January 1, 2009, GyM S.A. reduced its capital stock by the amount of S/. 71.97 million, thus the capital stock of GyM S.A. decreased from S/. 163.69 million to S/. 91.72 million with the subsequent invalidation of the shares subjected to decrease and the modification of the fifth article of the by-laws. Assets, liabilities and equity transferred to GMV S.A. on January 1, 2009, were as follows: In thousands of S/. Assets Liabilities Equity 98,338 ====== 17,150 ====== 81,188 ====== (Continued)
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