LISTING PROSPECTUSControladora Mabe, S.A. de C.V. US$130,893,000 7.875% Senior Guaranteed Notes due 2019 Controladora Mabe, S.A. de C.V. engaged in a private exchange offer for any and all of its outstanding 6.500% Senior Guaranteed Notes due 2015 (the “old notes”) held by eligible holders for its 7.875% Senior Guaranteed Notes due 2019 (the “new notes”). In connection with the exchange offer, the Company solicited consents from holders of old notes to proposed amendments to the indenture pursuant to which the old notes were issued. The purpose of the consent solicitation was to eliminate the majority of the restrictive covenants and an event of default applicable to the old notes. The exchange offer and consent solicitation expired on June 11, 2012, resulting in the issuance of US$130,893,000 of new notes on June 14, 2012 (the “settlement date”). The new notes form a single series with the Company’s 7.875% Senior Guaranteed Notes due 2019 that were originally issued on October 28, 2009 (the “existing notes” and, together with the new notes, the “notes”). Application has been made to have the new notes and the Rule 144A old notes listed on the Official List of the Luxembourg Stock Exchange and admitted to trading on the Euro MTF Market. The new notes will bear interest at a rate of 7.875% per annum from and including April 28, 2012, payable semi-annually, in arrears, on April 28 and October 28 of each year commencing October 28, 2012. The new notes will mature on October 28, 2019. The new notes will be unconditionally guaranteed by certain of our subsidiaries. The new notes and the guarantees will be our and our subsidiary guarantors’ senior unsecured obligations. The new notes and the guarantees will rank equally with all of our and our subsidiary guarantors’ respective existing and future senior unsecured and unsubordinated indebtedness, subject to statutory priorities. The new notes will rank junior to all of our and our subsidiary guarantors’ secured indebtedness, to the extent of the value of the assets securing such indebtedness. The new notes will be structurally subordinated to liabilities of our non-guarantor subsidiaries, including trade payables. We may redeem the notes, in whole or in part, at a redemption price equal to the principal amount of the notes plus the “make-whole” premium, accrued interest and any additional amounts as described under the heading “Description of the New Notes—Optional Make-Whole Redemption”. We may also redeem the notes, in whole but not in part, at a price equal to 100% of their principal outstanding amount, plus accrued and unpaid interest, in the event of certain changes in Mexican tax laws. Additionally, if a change of control triggering event as described in this listing prospectus under the heading “Description of the New Notes—Repurchase at the Option of Holders Upon a Change of Control Triggering Event” occurs, we may be required to offer to purchase the notes from the holders. Investing in the notes involves risks. See “Risk Factors” beginning on page 8. The new notes have not been registered, and will not be registered, under the Securities Act or any state securities laws, and the new notes may not be offered or sold except pursuant to an effective registration statement or pursuant to transactions exempt from, or not subject to, registration under the Securities Act. Accordingly, the new notes are being offered and issued only in the United States to qualified institutional buyers (as defined in Rule 144A) pursuant to Rule 144A under the Securities Act and outside of the United States, to certain persons, other than U.S. persons, in offshore transactions meeting the requirements of Rule 903 of Regulation S under the Securities Act. THIS LISTING PROSPECTUS IS SOLELY OUR RESPONSIBILITY AND HAS NOT BEEN REVIEWED OR AUTHORIZED BY THE MEXICAN NATIONAL BANKING AND SECURITIES COMMISSION (COMISIÓN NACIONAL BANCARIA Y DE VALORES, OR “CNBV”). THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER WILL BE NOTIFIED TO THE CNBV FOR INFORMATION PURPOSES ONLY AND SUCH NOTICE DOES NOT CONSTITUTE A CERTIFICATION AS TO THE INVESTMENT VALUE OF THE NEW NOTES OR OUR SOLVENCY. THE NEW NOTES MAY NOT BE OFFERED OR SOLD IN MEXICO, ABSENT AN AVAILABLE EXEMPTION UNDER THE MEXICAN SECURITIES MARKET LAW (LEY DEL MERCADO DE VALORES). IN MAKING AN INVESTMENT DECISION, ALL INVESTORS, INCLUDING ANY MEXICAN CITIZEN WHO MAY PARTICIPATE IN THE EXCHANGE OFFER OR ACQUIRE NEW NOTES FROM TIME TO TIME, MUST RELY ON THEIR OWN EXAMINATION OF US AND THE SUBSIDIARY GUARANTORS. Exclusive Dealer Manager and Solicitation Agent BofA Merrill Lynch July 13, 2012 INTRODUCTION Controladora Mabe, S.A. de C.V. is a corporation with variable capital (sociedad anónima de capital variable) organized under the laws of the United Mexican States (“Mexico”). Unless otherwise indicated or except as the context otherwise may require, references in this listing prospectus to “we,” “us” or “our” are to Controladora Mabe, S.A. de C.V. and its subsidiaries. References to the “subsidiary guarantors” in this listing prospectus are to Mabe, S.A. de C.V., Mabe México, S. de R.L. de C.V. and Leiser, S. de R.L. de C.V., the guarantors of the old notes and the new notes. You should rely on the information contained in this listing prospectus. We have not, and the dealer manager and solicitation agent has not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the dealer manager and solicitation agent is not, making an offer to sell, or seeking offers to buy, the new notes in any jurisdiction where the offer or sale is not permitted. This listing prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any new notes by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation. You should assume that the information contained in this listing prospectus is accurate only as of the date on the front cover of this listing prospectus. Our business, financial condition, results of operations and prospects may have changed since that date. Neither the SEC, any state securities commission nor any other regulatory authority, has approved or disapproved the new notes; nor have any of the foregoing authorities passed upon or endorsed the merits of the exchange offer and the consent solicitation or the accuracy or adequacy of this listing prospectus. Any representation to the contrary is a criminal offense. In any Member State of the European Economic Area that has implemented Directive 2003/71/EC (together with any applicable implementing measures in any Member State, the “Prospectus Directive”), this communication is only addressed to and is only directed at qualified investors in that Member State within the meaning of the Prospectus Directive. This listing prospectus has been prepared by us solely for use in connection with the listing of the notes on the Official List of the Luxembourg Stock Exchange and admission to trading on the Euro MTF Market. The exchange offer and consent solicitation contemplated in this listing prospectus were made pursuant to an exemption under the Prospectus Directive, as implemented in Member States of the European Economic Area, from the requirement to produce a prospectus for offers of new notes. Accordingly any person making or intending to make any offer within the European Economic Area of new notes that were the subject of the exchange offer and the consent solicitation contemplated in this listing prospectus should only do so in circumstances in which no obligation arises for us, the subsidiary guarantors or the dealer manager and solicitation agent to produce a prospectus for such offer. None of us, the subsidiary guarantors and the dealer manager and solicitation agent has authorized, nor do we, the subsidiary guarantors or the dealer manager and solicitation agent authorize, the making of any offer of new notes through any financial intermediary. You must: comply with all applicable laws and regulations in force in any jurisdiction in connection with the possession or distribution of this listing prospectus and the purchase, offer or sale of the new notes; and obtain any consent, approval or permission required to be obtained by you for the purchase, offer or sale by you of the new notes under the laws and regulations applicable to you in force in any jurisdiction to which you are subject or in which you make such purchases, offers or sales; and none of we, the subsidiary guarantors and the dealer manager and solicitation agent shall have any responsibility therefor. The new notes are subject to restrictions on transfer. See “Transfer Restrictions.” ii You acknowledge that: you have been afforded an opportunity to request from us, and to review, all additional information considered by you to be necessary to verify the accuracy of, or to supplement, the information contained in this listing prospectus; you have not relied on the dealer manager and solicitation agent or any person affiliated with the dealer manager and solicitation agent in connection with your investigation of the accuracy of such information or your investment decision; and no person has been authorized to give any information or to make any representation concerning us, the subsidiary guarantors or the new notes, other than as contained in this listing prospectus and, if given or made, any such other information or representation should not be relied upon as having been authorized by us, the subsidiary guarantors or the dealer manager and solicitation agent. In making an investment decision, you must rely on your own examination of us and the subsidiary guarantors and the terms of this exchange offer and the consent solicitation, including the merits and risks involved. We have taken reasonable care to ensure that the information contained in this listing prospectus is true and correct in all material respects and is not misleading in any material respect as of the date of this listing prospectus, and that there has been no omission of information which, in the context of the exchange offer and the consent solicitation, would make any statement of material fact herein misleading in any material respect, in light of the circumstances existing as of the date of this listing prospectus. We accept responsibility accordingly. The dealer manager and solicitation agent is not making any representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this listing prospectus. You should not rely upon the information contained in this listing prospectus, as a promise or representation, whether as to the past or the future. The dealer manager and solicitation agent has not independently verified any of such information and assumes no responsibility for its accuracy or completeness. None of us, the subsidiary guarantors and the dealer manager and solicitation agent, nor any of our and their respective representatives, is making any representation to you regarding the legality of an investment in the new notes. You should consult with your own advisors as to legal, tax, business, financial and related aspects of an investment in the new notes. You must comply with all laws applicable in any place in which you buy, offer or sell the new notes or possess or distribute this listing prospectus, and you must obtain all applicable consents and approvals. None of us, the subsidiary guarantors and the dealer manager and solicitation agent shall have any responsibility for any of the foregoing legal requirements. NOTICE TO NEW HAMPSHIRE RESIDENTS NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE UNIFORM SECURITIES ACT (“RSA 421-B”) WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. iii TABLE OF CONTENTS Page Summary of the New Notes........................................................................................................................................... 1 Risk Factors ................................................................................................................................................................... 8 Description of the New Notes...................................................................................................................................... 18 Transfer Restrictions.................................................................................................................................................... 40 Taxation ....................................................................................................................................................................... 45 Legal Matters ............................................................................................................................................................... 53 General Information .................................................................................................................................................... 54 Annex A – Information About the Company Page Available Information................................................................................................................................................ A-2 Service of Process and Enforcement of Civil Liabilities ........................................................................................... A-3 Cautionary Statement Regarding Forward-Looking Statements ............................................................................... A-4 Presentation of Financial and Other Information....................................................................................................... A-6 Summary.................................................................................................................................................................... A-9 Capitalization ........................................................................................................................................................... A-23 Selected Consolidated Financial Information .......................................................................................................... A-24 Management’s Discussion and Analysis of Financial Condition and Results of Operations .................................. A-31 Business ................................................................................................................................................................... A-53 Management ............................................................................................................................................................ A-74 Principal Shareholders and Related Party Transactions .......................................................................................... A-79 Independent Accountants ........................................................................................................................................ A-80 Index to Financial Statements .................................................................................................................................... F-1 iv ....... interest and premium............ rank senior to all of our and the subsidiary guarantors’ existing and future subordinated indebtedness...Summary of the New Notes The summary below describes the principal terms of the new notes.... and be structurally subordinated to all indebtedness (including trade payables) of our non-guarantor subsidiaries..... The “Description of New Notes” section of this listing prospectus contains a more detailed description of the terms and conditions of the new notes. Notes Offered ... See “Description of New Notes— Note Guarantees...L....... Interest Rate ..... de C......” Ranking ...... As of March 31.. 2019. and Leiser..................... Mabe...V.......... Interest on the notes will accrue at a rate of 7...... after giving effect to the exchange offer and the consent solicitation and the issuance of the new notes....875% Senior Guaranteed Notes due 2019.............. such as tax and labor obligations.. of which US$4 million would have been indebtedness of non-guarantor subsidiaries (excluding guarantees and intercompany loans)...... Guarantees ... Issuer ....... Mabe México.... Certain terms and conditions described below are subject to important limitations and exceptions.......... Interest Payment Dates ......................... de C......... 2012 (the most recent interest payment date for the existing notes)...... de R.... The new notes and related guarantees will: rank equally with all of our and our subsidiary guarantors’ existing and future senior unsecured indebtedness................................. 1 ..... Controladora Mabe................ rank effectively junior to all of our and our subsidiary guarantors’ existing and future secured indebtedness with respect to and up to the value of the assets securing such indebtedness........................L......... Maturity Date .............875% per year from April 28............ on the new notes will be fully and unconditionally guaranteed on a senior unsecured basis by our subsidiary guarantors identified in this listing prospectus............................. 2012........ S. The payment of principal.............................A..V.........V..... 7....... de R......... S.......... assuming that all old notes were tendered prior to or on the early participation date and we did not round down the amount to be issued to any tendering holder........A... S.......V....... Subsidiary Guarantors .. we and our subsidiaries would have had consolidated total indebtedness of US$704 million. if any.. S. de C.. subject to statutory priorities..... April 28 and October 28 beginning on October 28...... October 28.............. de C............. 2012....... ....... See “Description of New Notes— Withholding Tax Redemption................ or interest............................. as a result of certain changes in Mexican tax laws applicable to payments under the new notes........ at a makewhole redemption price plus accrued interest and additional amounts as described under the heading “Description of New Notes—Optional Make-Whole Redemption..... will not be less than the amount holders would have received in the absence of any such withholding or deduction.......... in which case...... The indenture governing the new notes limits our ability to.............” Certain Covenants ......................................” Additional Amounts .................... The new notes will be issued in the form of one or more global notes without coupons... We may redeem the new notes..... for the accounts of its participants including Clearstream and Euroclear.... unless required by law.............. as depositary................ if any.. in whole but not in part.... The new notes will be issued in minimum denominations of US$100.. If we experience a change of control triggering event.... among other things. will be made without withholding or deduction for or on account of any present or future taxes levied by any jurisdiction in which we or any subsidiary guarantor is organized or resident for tax purposes or through which payment is made..... See “Description of New Notes—Form............... See “Description of New Notes—Covenants... registered in the name of a nominee of DTC......” Book Entry.. See “Description of New Notes—Additional Amounts... after any such withholding or deduction...” Listing ... Form and Denominations .... plus any accrued and unpaid interest to the date of purchase.. interest or other amounts due on the notes... Application has been made to list the new notes on the Official List of the Luxembourg Stock Exchange and to trading on the Euro MTF Market........................ in whole or in part.. The Euro MTF Market is not a regulated 2 . and any additional amounts that may be payable on the new notes.......000 and integral multiples of US$1. All payments by us or our subsidiary guarantors in respect of the new notes...... See “Description of New Notes— Repurchase at the Option of Holders Upon a Change of Control Triggering Event..... each holder of the new notes will have the right to require us to purchase all or a portion of that holder’s new notes at 101% of the principal amount of the new notes on the date of purchase........ we become obligated to pay additional amounts in respect of interest payments under the new notes in excess of those attributable to a Mexican withholding tax rate of 10%. create liens and enter into sale and leaseback transactions without equally and ratably securing the notes. premium.. In the event that.” Change of Control .......... at our option at any time upon notice at 100% of their principal amount plus accrued and unpaid interest. if any.......Tax Redemption .” Optional Redemption ... we or a subsidiary guarantor will pay such additional amounts as may be required so that the net amount received by the holders of the new notes in respect of principal........000 in excess thereof. the new notes will be redeemable. Denomination and Title.. whether of principal.... subject to specified exceptions and limitations.............. 3 .................. See “Risk Factors” beginning on page 8 in this listing prospectus for a discussion of risk factors relating to us......................... we cannot assure you that the application will be approved.......... Trustee... Paying Agent and Transfer Agent ... Mexico and the notes............................. Transfer Restrictions .......... our business. our industry............................... absent an available exemption under Article 8 of the Mexican Securities Law (Ley de Mercado de Valores). Accordingly................ and will not register.......... the notes may not be offered or sold in Mexico....... We have not registered... the new notes under the Securities Act............... The Bank of New York Mellon (Luxembourg) S....................market for the purposes of the Markets in Financial Instruments Directive 2004/39/EC. See “Transfer Restrictions...... The Bank of New York Mellon Luxembourg Listing Agent........... Risk Factors .A.. Governing Law .......... However........ The new notes will be subject to restrictions on transfer and may only be offered in transactions exempt from or not subject to the registration requirements of the Securities Act.. State of New York...... Registrar.........” The notes have not been registered in Mexico with the National Securities Registry (Registro Nacional de Valores) maintained by the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores)......... Paying Agent and Transfer Agent ........ Under the indenture. will be effectively subordinated to the claims of any such subsidiary’s creditors. 2012. including trade creditors. including limitations on liens. we must offer to buy back the notes for a price equal to 101% of the principal amount of the notes. before making a decision about investing in the new notes. respectively. of which US$4 million would have been indebtedness of non-guarantor subsidiaries (excluding guarantees and intercompany loans). plus any accrued and unpaid interest to the date of repurchase. We are subject to restrictive covenants in the instruments governing our debt that limit our flexibility in operating our business. Certain of our subsidiaries are not guarantors and our obligations with respect to the new notes and the obligations of the subsidiary guarantors under the related guarantees will be effectively subordinated to all liabilities of these non-guarantor subsidiaries. if a Change of Control Triggering Event occurs. In August 2011. We may not have sufficient funds available 8 . tax authorities and holders of debt issued by that subsidiary. The terms of our debt contain various covenants and other restrictions that limit our ability to engage in specified types of transactions. 2012. and the consequent rights of holders of new notes to realize proceeds from the sale of any of those subsidiaries’ assets. If a Change of Control Triggering Event (as defined in the new notes indenture) occurs. 2012. in September 2011. Realization of these risks could materially adversely affect our business. The risk factors below describe certain risks relating to our business and an investment in the new notes. We may not be able to raise the funds necessary to finance the change of control offer required by the indenture if a Change of Control Triggering Event occurs. as well as all other information in this listing prospectus. consolidations. the old notes indenture and the indenture governing the notes (the “new notes indenture”) contain various restrictive covenants. entering into sale and leaseback transactions (in the case of the new notes indenture only) and on mergers. we are also required to maintain a minimum net worth. In addition. In addition. The guarantors of the new notes will not include all of our subsidiaries and holders of the notes will not have any claim against those subsidiaries that are not guarantors of the notes. sales and leases. consolidations and related transactions. a minimum consolidated net interest coverage ratio and a maximum consolidated leverage ratio. However. accession and waiver agreement that lowered the minimum interest coverage ratio through June 30. our non-guarantor subsidiaries accounted for 60% and 61% of our net sales and 49% and 51% of our EBITDA. financial condition and results of operations. For the year ended December 31. As of March 31. including the notes. assuming that all old notes were tendered prior to or on the early participation date and we did not round down the amount to be issued to any tendering holder. You should consider carefully the following factors. Additional risks and uncertainties not currently known to us that we currently deem to be immaterial may also materially adversely affect us and could result in the loss of all or part of your investment in the new notes. among others. our financial information is presented on a consolidated basis. we would have had consolidated total indebtedness of US$704 million. We are subject to various restrictive covenants under our US$150 million export prepayment credit agreement. including limitations on liens.RISK FACTORS Investing in the new notes involves risk. mergers. after giving effect to the exchange offer and the issuance of the new notes. we notified the lender under that agreement that we did not believe we would be able to meet the minimum interest coverage ratio and. payments to us by our subsidiaries may be subject to local restrictions on repatriation of earnings or currency exchange. dispositions of property and on our subsidiaries making restricted payments. 2011 and the three months ended March 31. Under the agreement. Any right that we or the subsidiary guarantors have to receive assets of any of the non-guarantors subsidiaries upon the liquidation or reorganization of those subsidiaries. including dividend payments if a default or event of default under the agreement exists. we entered into an amendment. all of which is structurally senior to the notes. we may be required to refinance substantially all of our debt. The guarantees may not be enforceable. Under Mexico’s Reorganization Proceeding Law (Ley de Concursos Mercantiles). may be satisfied in Mexico. You should be aware that no separate action exists or is enforceable in Mexico for compensation for any shortfall. A similar provision exists in the old notes indenture. does not prevent the guarantees from being valid. binding and enforceable against the subsidiary guarantors that are Mexican entities. Payments of judgments against us or the subsidiary guarantors on the new notes would be in pesos. and priorities recognized in.S. and claims of secured creditors. and instruments governing our other debt also contain covenants and. to the extent funds are sufficient. The new notes will be fully and unconditionally guaranteed. contain cross-default provisions that may cause all of the debt issued under such instruments to become immediately due and payable as a result of a default under an unrelated debt instrument. In the event that proceedings are brought against us or the subsidiary guarantors in Mexico. Any future debt we incur may also contain requirements to repurchase notes upon a Change of Control Triggering Event. trigger cross-default provisions in our other debt instruments. The contracts governing our debt. the relevant proceedings. based upon the Mexican subsidiary guarantor being deemed not to have received fair consideration in exchange for the giving of such guarantee. we will be in default under the new notes indenture. in some cases. any such default could require us to sell our assets or otherwise curtail operations in order to satisfy our obligations to our creditors. and (v) would be subject to certain statutory preferences. in the event that a subsidiary guarantor in Mexico becomes subject to a reorganization proceeding (concurso mercantil) or to bankruptcy (quiebra). an obligation. which may. the relevant guarantee may be deemed to have been a fraudulent transfer and declared void. you may suffer a U. we would need to raise funds from alternative sources. which is payable in Mexico. which may not be available to us on favorable terms. our obligations under the new notes (i) would be converted into pesos and then from pesos into UDIs (instruments denominated in pesos that automatically adjust the principal amount of an obligation to the inflation rate officially recognized by Banco de México) and would not be adjusted to take into account any devaluation of the peso relative to the U. whether resulting from a judgment or by agreement. (iv) would cease to accrue interest from the date the concurso mercantil is declared. on a timely basis or at all. if we or any of the subsidiary guarantors were declared bankrupt (quiebra) or became subject to a reorganization proceeding (concurso mercantil). Any failure to comply with these covenants could result in an event of default under the applicable instrument. 9 . Such rate is currently determined by Banco de México and published every banking day in the Federal Official Gazette (Diario Oficial de la Federación). however. either to enforce a judgment or as a result of an original action brought in Mexico. in turn. dollar occurring after such conversion. Under the Monetary Law of the United Mexican States (Ley Monetaria de los Estados Unidos Mexicanos). by certain of our subsidiaries and provide a basis for a direct claim against the subsidiary guarantors. If we fail to repurchase the notes in those circumstances. in Mexican legal tender at the rate of exchange in effect on the date on which payments are made. including the notes. denominated in a currency other than Mexican legal tender. we and the subsidiary guarantors would not be required to discharge those obligations in a currency other than Mexican legal tender.S. In such event. dollar shortfall if you obtain a judgment or a distribution in bankruptcy in Mexico. The indenture governing the notes contains certain covenants. it is possible that the guarantees may not be enforceable under Mexican law. require us and our subsidiaries to meet certain financial ratios and tests. holders of new notes may find it difficult to collect payment on the new notes. on a joint and several basis. (iii) would be subject to the outcome of. social security and labor claims. As a result. If we or our subsidiary guarantors were to be declared bankrupt. While Mexican law does not prohibit the giving of guarantees and. as a result. which could result in the related debt and the debt issued under other instruments becoming immediately due and payable. including tax. (ii) would be satisfied at the time claims of all our creditors are satisfied.to us to make any required repurchases of the notes upon a Change of Control Triggering Event. Alternatively. the market for similar securities. and a majority of our net sales and the net sales of certain of our subsidiary guarantors are derived from sources in Mexico and outside of the United States.” The collection of interest on interest may not be enforceable in Mexico. and will not be. see “Transfer Restrictions. the new notes issued in reliance on Regulation S under the Securities Act will have different CUSIP and ISIN numbers than those of the existing notes issued on October 28. As a result. We and all of our subsidiary guarantors are companies organized under the laws of Mexico. A majority of our assets and the assets of certain of our subsidiary guarantors are located in Mexico and outside of the United States. depending upon many factors. We cannot assure you as to the development or liquidity of any trading market for the new notes. If an active market for the new notes does not develop or is interrupted. general economic conditions. even if the new notes are listed on the Euro MTF Market. There are restrictions on your ability to transfer the new notes. We cannot assure you that trading markets will develop or be maintained. See “Enforcement of Civil Liabilities. Such exemptions include offers and sales that occur outside the United States in compliance with Regulation S under the Securities Act and in accordance with any applicable securities laws of any other jurisdiction and sales to qualified institutional buyers as defined under Rule 144A under the Securities Act. or for the account or benefit of. the new notes issued pursuant to Rule 144A under the Securities Act will have different CUSIP and ISIN numbers than those of the existing notes issued on October 28.You may not be able to effect service of process on us or to enforce judgments against us in Mexican courts. Almost all of our directors and executive officers. 2009 pursuant to Regulation S under the Securities Act and will not be fungible for trading purposes with such existing notes. The new notes have not been. including judgments predicated on the civil liability provisions of the U. the registration requirements of the Securities Act and applicable state securities laws. Risks Related to Our Business The loss of our joint venture or any deterioration in our relationship with GE or the loss of a substantial part of our sales to GE would adversely affect our business. federal securities laws or other laws of the United States. Currently there is no market for the new notes. the new notes may trade at a discount. The new notes will initially not be fungible with the existing notes. 2009 in reliance on Rule 144A under the Securities Act and will not be fungible for trading purposes with such existing notes and until 40 days after settlement date. If a market for the new notes were to develop. the liquidity of the new notes. financial condition and results of operations. or to enforce against such parties judgments of courts located outside Mexico predicated on civil liabilities under the laws of jurisdictions other than Mexico. as a result. we may delist the new notes if the provisions of the European Transparency Obligations Directive (2003/2004/COD) become unduly onerous or burdensome. Mexican law does not permit the collection of interest on interest and. the market price and liquidity of the new notes may be adversely affected. registered under the Securities Act or any state securities laws and may not be offered or sold within the United States or to.” The new notes will initially not be fungible with the existing notes. including prevailing interest rates. persons except pursuant to an exemption from. and an active trading market for the new notes may not develop. Application is expected to be made to list the new notes on the Official List of the Luxembourg Stock Exchange for trading on the Euro MTF Market.S. However. Until the first anniversary of the settlement date. U. the accrual of default interest on past due ordinary interest accrued in respect of the new notes may be unenforceable in Mexico. 10 . and the directors and executive officers of many of our subsidiary guarantors.S. and our operating performance and financial condition. are Mexican residents. or in a transaction not subject to. it may not be possible for investors to effect service of process outside Mexico on us or our directors or executive officers or on those subsidiary guarantors. the ratings assigned to our debt by credit rating agencies. For a discussion of certain restrictions on resale and transfer. financial condition and results of operations for the foreseeable future. U. The termination of our joint venture agreement with GE. Our sales may be adversely impacted by the termination of our production of the refrigerators mentioned above and would be adversely impacted by any additional terminations and. The demand for our products and. financial condition and results of operations We are a holding company and depend on income from our subsidiaries. in the absence of default by us. if GE manufactures and sells any products we manufactured under the joint venture agreement.41% interest in our company. See “Business—The General Electric Joint Venture” for additional information regarding the termination provisions in our joint venture agreement with GE. among other things. our other agreements with GE would also be terminated. interest rates. We expect to stop production of “Antarctica” bottom freezer refrigerators and “Side by Side” refrigerators with GE by 2014 as a result of GE’s recent termination of the 2006 Contract Manufacturing Agreement and a portion of the 1998 Contract Manufacturing Agreement. the level of mortgage refinancing. would have an adverse effect on our business. As a result of our joint venture agreement. The occurrence of any or all of these events may adversely affect our business. reduce production or file for bankruptcy protection. the availability of consumer credit. including the 1998 Contract Manufacturing Agreement and the 2012 Dryer Manufacturing Agreement.S. 2011 and the three months ended March 31. and foreign currency exchange rates. consequently. 2012. Our net sales attributable to GE in 2010. 11 . Any material adverse change in GE’s business or in our relationship with GE would have an adverse effect on our business. which may cause some of our suppliers to seek to renegotiate supply terms with us. In addition. represented 25%. We could be unsuccessful in renewing our trademark. it may be terminated by mutual agreement of the parties or by either party upon a material breach and. convertibility and interest rate risks and impair our results of operations and our ability to raise capital or service our debt. Higher unemployment rates. housing starts. however. higher fuel and other energy costs. adversely affect our business. Such economic downturns may also subject us to increased foreign currency exchange rate.S.We operate as a joint venture with GE. Our joint venture agreement with GE does not have a fixed termination date. Global economic downturns in the Mexican. and higher tax rates also adversely affect demand. our results of operations have been negatively affected by the downturns in the economy in Mexico and may be negatively affected by future downturns in the Mexican. GE licenses to us trademarks and patents for certain of our products and provides us access to relevant technology used in the manufacture of our products. which currently holds a 48. GE is our principal customer based on aggregate product sales. Changes in economic conditions could adversely affect demand for our products. and may continue to. Furthermore. and global economies may negatively affect the demand for our products and our results of operations. A number of economic factors. consumer confidence and debt levels. and global economies. respectively. our customers may be unable to obtain financing to purchase products and may be unable to meet their payment obligations to us in the event of such future economic downturns. in particular. generally affect demand for our products. or any deterioration of our relationship with GE or any significant disagreement among our shareholders. The decline in economic activity and conditions in the markets in which we operate has. of our consolidated net sales. GE has the right to terminate its manufacturing agreements with us. financial condition and results of operations. The termination of one or more of our manufacturing agreements with GE or any substantial reduction in our sales to GE may have a material adverse effect on our business and results of operations. GE’s rights to manufacture and sell products that we currently manufacture under our joint venture agreement is currently subject to negotiation among GE and our other shareholders and may be resolved by arbitration. U. 21% and 23%. retail trends. financial condition and results of operations. gross domestic product. affecting. upon a termination of the joint venture agreement. Such downturns could also affect the financial condition of our suppliers. technology licenses and/or other agreements or arrangements with GE upon their expiration on terms equivalent to the existing ones or in forming similar alliances with other partners. sales of existing homes. and terms. Cleanup obligations that might arise at any of our manufacturing sites. distribution. is a holding company that derives substantially all of its cash from its subsidiaries. selling price. sales person incentives. For more information regarding costs associated with environmental regulation. 12 . We face intense competition in the home appliance industry and failure to successfully compete may negatively affect our business and financial performance. especially global competitors with low-cost sources of supply. volume rebates. In the past. will depend on cash flows generated by the operations or borrowings of its subsidiaries. packaging. In addition to energy. duties. or honor our other obligations. These costs or other effects of new or revised environmental and health and safety laws or regulations. LG and Samsung are large. copper. have aggressively priced their products and/or introduced new products in order to increase market share. We incur. and the integration of our Brazilian operations has caused our fixed costs to increase during 2011. as well as distributions based on its subsidiaries’ ability to make cash available to Controladora Mabe in the form of debt repayment. transmissions. services and brand names. There can be no assurance that the financial condition of Mabe Brazil will not deteriorate further or will improve in the future. its ability to service its indebtedness. Several of these competitors. as well as our ability to make payments under the new notes. fines or penalties or the suspension of production for failing to comply with environmental and health and safety regulations. we could be subjected to future liabilities. well-established companies that rank among the Global Fortune 150 and have demonstrated a commitment to success in the global market. and we expect to continue to incur. dividends or otherwise. nickel. financial condition and results of operations. However. co-marketing funds. or changes in the interpretation of existing laws and regulations. Higher cost of raw materials may increase our cost of sales and reduce our profit margins. financial condition and results of operations. innovation. Environmental and health and safety laws and regulations may adversely affect us. enamel and glass. quality. In the event that Controladora Mabe does not receive distributions from its subsidiaries. including the new notes. cost. Any adverse change in the financial condition or results of operations of our subsidiaries could affect our business. auto igniters. many of which have strong consumer brand equity. see “Business—Environmental Matters. or the imposition of more stringent environmental laws in the future could adversely affect our business. If we are unable to successfully compete in this highly competitive environment. our competitors. Additionally. financial condition and results of operations. in each of our product lines and markets. compressors. We have continually and successfully priced our products and/or introduced new products in order to increase our market share or to enter new markets. restrictions or fluctuations in exchange rates or otherwise. results of operations and financial condition. which may limit Mabe Brazil’s ability to pay dividends to Controladora Mabe. our cost of sales would increase and our margins would be reduced to the extent we are unable to pass on these increased costs to our customers. Controladora Mabe’s subsidiary Mabe Brazil had negative equity. including the new notes. and financial incentives. our business and financial performance could be negatively affected. higher compliance costs. natural gas. which may adversely affect our business. which may be impractical for us to do in a recessionary environment or for other reasons. including as a result of shortages. and any inability to protect them could reduce the value of our products. paint. such as cooperative advertising. Controladora Mabe’s ability to receive dividends or other distributions from our subsidiaries may also be limited by current or future debt agreements and tax or corporate laws. If the prices of these raw materials increase. such as Whirlpool. expenses relating to compliance with the current and any new environmental and health and safety laws and regulations. Accordingly. it may be unable to make required principal and interest payments on its indebtedness. Competition in the global market is based on a number of factors including performance.V. 2012. plastics.. we face intense competition from a growing number of competitors. as of March 31. the issuer of the new notes. S.Controladora Mabe. In particular. motors.” Our intellectual property rights are valuable. gas valves. de C. could adversely affect our business. Prices of these materials are subject to significant fluctuations and they may increase in the future. product features and design. basic raw materials and components used in the manufacture of white line products include steel.A. we had more than 22. including those that may result from the closing of our Montreal plant. Additionally.400 employees throughout the Americas. Our employees are affiliated with several labor unions and labor relations with each of these labor unions are governed by collective bargaining agreements which are required to be negotiated separately for each union. 2012. business and financial condition. In the event that any of our products prove to be defective. product features and processes. which would adversely affect our business. These downgrades may make it more difficult for us to obtain financing in the future at all. we may need to recall or redesign such products. There can be no guarantee that our insurance coverage against certain product liability claims will continue to be available on acceptable terms or that such coverage will be adequate for liabilities we incur. our failure to obtain or adequately protect our intellectual property rights. any claim or product recall that results in significant adverse publicity may negatively affect our business. Furthermore. While we attempt to protect our intellectual property rights through patents. 2011. we are exposed to product liability claims in the event that the use of any of our products results in personal injury or property damage. or at interest rates that our business can support. which could materially and adversely affect our business. on September 30. third parties may claim that we have infringed on their intellectual property that may cover some of our technology. financial condition and results of operations. Adverse developments in the Mexican and international credit markets. our product innovations or our manufacturing processes may substantially diminish our competitiveness and adversely affect our business. We may incur material claims and damages relating to product liability. services and brand names in foreign jurisdiction. including higher interest rates. to BB+. In addition. Any such claim. Standard & Poor’s downgraded their rating of our debt to BB+. marketer and manufacturer of products designed for human use. with adverse consequences to our financial condition and results of operations. We have applied for patent protection in numerous jurisdictions with respect to certain innovations.We have approximately 150 patents globally and numerous trademarks and licensing agreements that we consider to be a valuable aspect of our business. including our short-term obligations. the laws of certain countries in which we do business do not recognize intellectual property rights or protect them to the same extent as United States law. financial condition or results of operations. or outside of. We may also face class action litigation related to product liabilities. brand names. A successful claim in excess of. have in the past and may in the future increase our cost of borrowing or refinancing maturing indebtedness. trademarks. We cannot assure you that we will be able to refinance any indebtedness we may incur. which would adversely affect our reputation. As a result. and we could be subject to legal claims and challenges from third parties or other manufacturers. and on February 7. Moreover. If we are not able to access sources of funding in the future. We cannot assure you that the relevant governmental authority will approve any of our patent applications. In addition. which could adversely affect our business. Any deterioration of labor relations with our employees could adversely affect our business. these factors could weaken our competitive advantage with respect to our products. products and services. At March 31. which our insurance policy does not cover. our available insurance coverage may have a material adverse effect on our financial performance. reduced liquidity or decreased interest by financial institutions in lending to us. including the old notes and the existing notes. Approximately twothirds of our employees are represented by labor unions. As a distributer. Fitch Ratings downgraded their rating of our debt. financial condition and results of operations. financial condition and results of operation will be adversely affected. litigation or proceeding regarding patents or other intellectual property could be costly and we may be subject to significant damages or injunctions against development and sale of certain products. We cannot predict the outcome of negotiations with labor unions. 2012. results of operations and financial condition. See “Business—Our Products—Dryers” for 13 . copyrights and trade secret laws on a continuous basis. our business. our intellectual property rights could be invalidated or others could design around our patents and the patents may not be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage. In particular. dollar may have an adverse effect on us and could result in an increase in our cost of financing. Risks Related to Mexico and the Countries Where We Operate Adverse conditions in Mexico or in the other countries where we operate could adversely affect us. our business. The next election will take place in July 2012. as well as market conditions and prices for our securities. We derived 20%. Argentina has recently experienced certain economic instability. political.S. Significant changes in laws.S. financial condition and result of operations. inflation. The decline in economic activity and conditions in the Mexico. Any recurrence of similar crises could adversely affect our business. The lack of alignment between the legislature and the President of Mexico could result in deadlock and prevent the timely implementation of political and economic reforms. interest rates and taxation. Our operations. Social and political instability in Mexico or other adverse social or political developments in or affecting Mexico could adversely affect our business. the imposition of foreign tariffs and other trade barriers. the United States and the other markets in which we operate has. Fluctuations in the value of the currencies of the countries in which we operate relative to the U. and other operating expenses are invoiced in the currencies of the countries in which we operate and are not directly affected by the relative value of such currency to the U. legal and economic instability. because a portion of our cost of goods sold. but not limited to currency fluctuations. adversely affect our business. as well as any adverse political events in the countries where we have operations.more information on the closing of this plant. Despite the positive economic performance of the economies of the countries where we operate in recent years. will not occur. Political and social events in Mexico may affect our operations. social and economic situation could adversely affect our business. Accordingly. Presidential elections in Mexico occur every six years. price instability. the real appreciation or depreciation of such currency relative to the U. It is also possible that political uncertainty resulting from the upcoming elections may adversely affect Mexico’s economic situation. and the absence of a clear majority by a single party could continue. the United States and Brazil. In addition. Recently. dollar may have a negative effect on our operating margins. including. the United States and Brazil. our operations in Venezuela are subject to risks relating to the volatility of the local currency and to the foreign exchange controls imposed by the Venezuelan government. We operate primarily in emerging markets countries. results and financial condition are dependent in part upon the level of economic activity in Mexico. including labor costs. We cannot predict how future government policies in either Argentina or Venezuela will impact our business. However. dollar.S. government price controls and the ability to collect accounts receivable. We are a Mexican company with a significant portion of our assets located in Mexico and most of our sales derived from the manufacturing of products in Mexico. financial condition and results of operations in those countries. these countries have suffered through prolonged and severe economic and political crises in the past. our business may be negatively affected by the deterioration of economic and political conditions in Mexico. import/export restrictions.S. 21% and 23% of our consolidated net sales in 2011 from Mexico. These and other future developments in the Mexican political or social environment may cause disruptions to our business operations and decreases in our sales and net income. respectively. dollar. public policies and/or regulations that affect Mexico’s political. Substantially all of our net sales are either denominated in or linked to the value of the U. 14 . which in turn could have a material adverse effect on Mexican economic policy and on our business. We cannot be certain that further contractions in these economies. work stoppages. financial condition and results of operations for the foreseeable future. If any significant differences or conflicts arise during such negotiations. and may continue to. results of operations and financial condition. financial condition and results of operations could be adversely affected. no single party has succeeded in securing a majority in the senate or the Cámara de Diputados (House of Representatives). extended payment terms and the ability to collect accounts receivable. Operations in Venezuela represented 3% of our consolidated net sales in 2011 and 4% of our consolidated net sales for the three months ended March 31.S. For the year ended December 31. the peso – dollar exchange rate is determined on the basis of the free market float and published by Banco de México. the imposition of tariffs and other trade barriers. any of which could negatively adversely affect our business. If we cannot successfully manage the challenges of our international operations. 20% from sales in Mexico.With respect to Mexico.S. 2012. Any change in such policy or in the exchange rate itself. inflation. on our results of operations and financial condition. our financial performance may suffer. legal and economic instability. political. dollars and we generally hedge our foreign currency exposure in accordance with our policy of hedging liabilities that will affect cash flow. In spite of the fact that 26% of our consolidated net sales for 2011 were in U. Accordingly. dollars and other currencies for the purpose of making timely payments of interest and principal on the notes and any U. either positive or negative. which has experienced significant volatility in recent years.S.S. In addition. dollar-denominated debt that we may incur in the future. 13% from exports to the Andean Region. could limit our access to U. could have a considerable impact. Our financial condition and results of operations might be negatively affected due to the fact that our sales are denominated in bolivars (Venezuela’s currency). 23% from exports to Brazil. the ability to repatriate cash to Mexico. government price controls. Developments in Venezuela may adversely affect our business. financial condition and results of operations. work stoppages and disruptions in the shipping of imported and exported products. 2011. Mabe Venezuela may not be able to pay dividends to us or import some of the raw materials they require as a result of the foreign exchange controls imposed by the Venezuelan government. we face numerous risks associated with conducting international operations. 10% from exports to Canada. import/export restrictions and the availability of required import/export licenses. exchange rate fluctuations. There is no guarantee that Banco de México will maintain its current exchange rate policy. Any such measure. 5% from exports to Central America and 4% from exports to other countries. we derived 21% from exports to the United States. We expect that sales outside of Mexico will continue to account for a significant percentage of our net sales in the foreseeable future. and 15 . 4% from exports to Argentina. financial condition and results of operations. if adopted. including the notes. including the following: the changes in the regulatory requirements of Mexico and the other countries in which we operate. of our total consolidated net sales. dollars and inhibit our ability to service our debt. as a result of market conditions over which we have no control. we are still exposed to the risk that any depreciation of the currencies of the countries in which we operate or the enactment of exchange controls may limit our ability to service our indebtedness or transfer or convert such currency into U. however. GAAP. nor have we registered securities with Mexico’s National Registry of Securities. GAAP and IFRS. executive officers and major shareholders reside outside of the United States. 2012. 2012. a significant portion of the assets of our directors. executive officers and controlling persons and substantially all of our assets are located outside of the United States. Accordingly. 2011 and our unaudited interim balance sheet as of March 31. 2012. Moreover. Any change in the tax regulations in any of the markets in which we operate may have an adverse effect on our business. the IASB standards and IFRIC interpretations used to prepare the IFRS financial information included in the Financial Statements were those issued and effective as of March 31. Díaz Estrada y Facha García. it may not be possible for you to effect service of process within the United States upon these persons or to enforce against any of them or us in United States courts judgments predicated upon the civil liability provisions of the federal securities laws of the United States. The consolidated financial statements included in this listing prospectus are prepared using MFRS. (ii) an increase in our liabilities associated with employee benefits and (iii) an increase in our deferred income tax liabilities resulting principally from the adjustments described in (i) and (ii). 16 . information regarding us and our operations may not be readily available or disseminated into the market or to the public. An analysis of the principal differences between IFRS and MFRS and an estimate of the effect of IFRS on our consolidated opening balance sheet as of January 1. our consolidated transitional balance sheet as of December 31. the IFRS standards and IFRIC interpretations that will be applicable at December 31. with an official IFRS adoption date of January 1. which we believe will result in an increase in the value of our property. we cannot assure you as to the dissemination of information into the market regarding us or the notes. It may be difficult to enforce civil liabilities against us or our directors and executive officers. Our corporate disclosure and accounting standards differ from those in the United States and elsewhere. the prolonged continuation of the current global economic crisis. Latin American countries propose amendments to tax laws on a regular basis. may differ from those applied in preparing the IFRS financial information included herein. We are a sociedad anónima de capital variable (a limited liability variable capital corporation) organized under the laws of Mexico. Many of our directors. which could have an adverse effect on the market price and liquidity of the notes. In addition.S. the date for reporting our first set of financial statements under IFRS. since Mabe is not a United States registrant. We have been advised by our Mexican counsel. and available information may differ from information prepared by companies which are public in the United States or information applicable and made available by companies the securities of which are registered with Mexico’s National Registry of Securities or with the SEC. Since we are currently in the process of converting our financial statements to IFRS. machinery and equipment and our total assets and an increase in our depreciation and amortization expense. 2012. the presentation of Mexican financial statements and reported earnings may not be comparable to those companies whose financial statements are prepared in accordance with U.S. As a result. however. Our financial information prepared under IFRS may not be comparable to our financial information prepared under MFRS. IFRS differs in certain significant respects from MFRS and U. we believe that the primary impact of this accounting change on our financial statements will be (i) the revaluation of our fixed assets. financial condition and results of operation. Therefore. We will be reporting under IFRS for the year ended December 31. our consolidated financial information presented under IFRS for fiscal year 2012 may not be comparable to our financial information for previous periods prepared under MFRS. 2012 is set forth in Note 3 to the Annual Financial Statements and to the Interim Financial Statements included elsewhere in this listing prospectus.S. 2011. Changes in tax laws in the jurisdictions where we operate may adversely affect us. it is not yet possible to determine in a definitive manner the possible effects that IFRS will have on our financial information. GAAP or IFRS. which differ in certain material respects from U. that there is doubt as to the enforceability. including those that will be applicable on an optional basis. As a result of the adoption of IFRS. 17 .in original actions in Mexican courts. of liabilities predicated solely on United States federal securities laws and as to the enforceability in Mexican courts of judgments of United States courts obtained in actions predicated upon the civil liability provisions of United States federal securities laws. Registrar. including the definitions therein of certain terms. to issue additional notes under the Indenture on the same terms and conditions (other than the original issue date and interest commencement date) and with the same CUSIP numbers as the existing notes and the new notes being offered hereby in an unlimited aggregate principal amount (the “Additional Notes”). 18 . General The new notes will be general unsecured and unconditional obligations of the Issuer. and not to any of its Subsidiaries. and (iii) (a) until the first anniversary of the settlement date. subject to certain obligations having priority under applicable law. the Issuer would have had consolidated total indebtedness of US$704 million. 2009 in reliance on Rule 144A under the Securities Act and will not be fungible for trading purposes with such existing notes and (b) until 40 days after settlement date. each as defined in the Indenture. Copies of the Indenture are available at the Issuer’s principal executive offices. As used herein. The existing notes were initially issued in an aggregate principal amount of US$350 million. 2009 pursuant to Regulation S under the Securities Act and will not be fungible for trading purposes with such existing notes. will be treated as a single class for all purposes of the Indenture. Unless the context otherwise requires. S. The existing notes were issued on October 28. the Subsidiary Guarantors and the Trustee. 2009 under the Original Indenture. the new notes issued in reliance on Regulation S under the Securities Act will have different CUSIP and ISIN numbers than those of the existing notes issued on October 28.A. 2012 (together with the Original Indenture.V. 2012.” references to the notes include any Additional Notes actually issued. for all purposes of the Indenture and this “Description of New Notes. As of March 31. the Issuer had consolidated total indebtedness of US$704 million. as Trustee (the “Trustee”). de C. (ii) interest on the new notes payable on October 28. The new notes will. The notes and the Additional Notes. The new notes will form a single series with the existing notes (the new notes and the existing notes collectively referred to as the “notes”) and will have substantially the same terms and conditions as the existing notes.DESCRIPTION OF THE NEW NOTES The new notes were issued under an Indenture dated as of October 28. 2012 (the most recent interest payment date of the existing notes). after giving effect to the exchange offer and the issuance of the new notes. the “Indenture”) among the Issuer. except that: (i) the new notes will be issued on the settlement date. As of the same date. assuming that all old notes were tendered prior to or on the early participation date and we did not round down the amount to be issued to any tending holder. at all times.000 of new notes on the settlement date. the new notes issued pursuant to Rule 144A under the Securities Act will have different CUSIP and ISIN numbers than those of the existing notes issued on October 28. including waivers and amendments. as well as at the offices of the Trustee. The Issuer issued an aggregate principal amount of US$130. Paying Agent and Transfer Agent. however. The notes will be unconditionally and irrevocably guaranteed on a general unsecured senior basis by each of our Subsidiary Guarantors.893. rank pari passu in right of payment among themselves and at least equally with all other present and future unsecured and unsubordinated obligations of the Issuer. none of which was secured indebtedness. as supplemented by a Supplemental Indenture dated as of June 14. and at the offices of the Luxembourg Paying Agent and Transfer Agent. 2012 will accrue from April 28. and are qualified in their entirety by reference to. vote together with the existing notes as from the settlement date. The following summaries of certain provisions of the notes and the Indenture do not purport to be complete and are subject to. without the consent of the Holders. The Issuer is entitled. if any. In this description. of which US$4 million would have been indebtedness of non-guarantor subsidiaries (excluding guarantees and intercompany loans). the term “Issuer” refers only to Controladora Mabe. the term “Holder” or “Noteholder” means the person in whose name a note is registered in the register (the “Register”) which the Issuer shall cause the Registrar to maintain for the notes. The notes will. the Subsidiary Guarantors and The Bank of New York Mellon. all the terms and conditions of the notes and the Indenture. 2009 (the “Original Indenture”) among the Issuer. de R. 2012.V. will be the Subsidiary Guarantors. 2011. payable semi-annually. either (i) to the person in whose name such note is registered at the close of business on a special record date to be fixed by the Trustee not more than 15 nor less than 10 days prior to the date fixed by the Issuer for payment thereof or (ii) in any other lawful manner not inconsistent with the rules of any applicable securities exchange if deemed practicable by the Trustee. The notes will not be secured by any of our assets.V. de C. and Leiser.A. de C.V.The new notes will bear interest at a rate of 7. Notwithstanding the foregoing.A. and Leiser. Note Guarantees Each Subsidiary Guarantor will unconditionally guarantee the performance of all Obligations of the Issuer under the Indenture and the notes. in arrears. The diagram below illustrates the relationships among the Subsidiary Guarantors: 19 . de R. and 42% of our consolidated net assets.L. de C. on any Interest Payment Date shall cease to be payable to the Holder registered on such date. any interest which is payable. except for certain obligations given priority under applicable law.L. an “Interest Payment Date”). The Issuer shall pay interest on overdue principal at the rate borne by the notes plus 1%. de R. de C. Ranking and Holding Company Structure We are a holding company and our principal assets are shares that we hold in our Subsidiaries.A.V. The notes will mature on October 28. S. 2012. de R. S. 39% of our consolidated net sales and 49% of our consolidated EBITDA as of and for the three months ended March 31. S. you will be one of our unsecured creditors. as of and for the year ended December 31.V.” Mabe. de C. but which is not punctually paid or duly provided for. In the event of a bankruptcy or liquidation proceeding against us.875% per annum from and including April 28.V.A. are each 100% owned subsidiaries of Mabe. 40% of our consolidated net sales and 51% of our consolidated EBITDA. to the person in whose name such note (or any predecessor note) is registered at the close of business on the April 15 or October 15 that precedes the respective Interest Payment Date. on April 28 and October 28 of each year commencing October 28. whether or not a Business Day. S. S. Interest on the notes will be computed on the basis of a 360-day year of twelve 30-day months. de C. The notes will not be subordinated to any of our other unsecured debt obligations. the notes would rank equally in right of payment with all our other unsecured and unsubordinated debt. and shall be payable. These Subsidiary Guarantors (in addition to Controladora Mabe on a standalone basis) directly accounted in aggregate for 45% of our consolidated net assets. de C. Mabe México. S. Mabe México. The Obligations of each Subsidiary Guarantor in respect of its Note Guarantee will be limited to the maximum amount as will result in the Obligations not constituting a fraudulent conveyance.V. As a result.. de C. by owning the notes. at the election of the Issuer. S. is a 100% owned subsidiary of Controlodora Mabe. See “Risk Factors––Risk Factors Related to the New Notes––The guarantees may not be enforceable. The Indenture does not limit the amount of Indebtedness or other obligations that may be incurred by the Issuer or its Subsidiaries.V.L.L. Mabe. 2019 on which date they will be redeemed at 100% of principal amount outstanding. fraudulent transfer or similar illegal transfer under applicable law. S. 2012 (each.” Each Subsidiary Guarantor will be released and relieved of its Obligations under its Note Guarantee in the event there is a Defeasance or Covenant Defeasance of the notes as described under “––Defeasance. purchase. de R.000. international trade. but not limited to buying. such non-guarantor Subsidiaries will pay the holders of their debt and their trade creditors before they will be able to distribute any of their assets to us.V.V. de C. as well as at the offices of the Trustee. engages in the manufacture.A.L. import. sale.L. industrial or agriculture products as well as their parts and components. de C. domestic.L. See “Risk Factors—Risk Factors Related to the New Notes—Certain of our subsidiaries are not guarantors and our obligations with respect to the notes and the obligations of the subsidiary guarantors under the guarantees will be effectively subordinated to all liabilities of these non-guarantor subsidiaries. engages in the manufacture. Mexico. de C. S. purchase.A. Mabe México. in the case of DTC or a Holder of US$1. de C. Not all of our Subsidiaries will guarantee the notes. Any transfer documents will be available at the Issuer’s principal executive offices. The Subsidiary Guarantors will waive the right to any defenses to which any of them may be entitled under applicable Mexican law. S.V. Mabe. All other payments on the notes will be made at the office or agency of the Paying Agent within the City and State of New York in the United States or at the office of the Paying Agent in Luxembourg unless the Issuer elects to make interest payments by check mailed to the Holders at their address set forth in the Register. import. Leiser. S. de R. export and other operations related to commercial.V. de C. sale. Transfer and Exchange A Holder may transfer or exchange notes in accordance with the provisions of the Indenture. S.” Methods of Receiving Payments on the Notes Payments on the notes may be made. among other things. S. the registration of intellectual property and the management of finances and securities. 20 . Distrito Federal.A. All of the Subsidiary Guarantors are operating companies. The registered address of each Subsidiary Guarantor is: Paseo de las Palmas 100. engages in a variety of commercial activities including.S. manufacturing. will also initially act as Paying Agent and Transfer Agent in Luxembourg.000 or more in aggregate principal amount of notes. The Issuer may change the Paying Agent or Registrar without prior notice to the Holders of the notes. de R. de C. maintenance and repair of all types of household gas and electric appliances as well as their parts and components. the Issuer is not required to transfer or exchange any notes for a period of 15 days before a selection of notes to be redeemed.V. export.Controladora Mabe. selling and managing real estate. S. Registrar. Mabe. Holders will be required to pay all taxes due on transfer. Paying Agent and Transfer Agent. liquidation or reorganization of our non-guarantor Subsidiaries. the Registrar and the Trustee may require a Holder. research and development. by wire transfer to a U. Leiser. de C. Mabe México.A. de R. The Bank of New York Mellon (Luxembourg) S.L. to furnish appropriate endorsements and transfer documents in connection with a transfer of notes.V. Also. The Issuer. Paying Agent and Registrar for the Notes The Trustee will initially act as Paying Agent and Registrar. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving notice to the Issuer to such effect respecting such account no later than 30 days immediately preceding the relevant due date for payment. Ciudad de Mexico. In the event of a bankruptcy. The Issuer is not required to transfer or exchange any notes selected for redemption. and at the offices of the Luxembourg Paying Agent and Transfer Agent.V. Colonia Lomas de Chapultepec. S. Postal Code 11000. with respect to each Reference Treasury Dealer and any redemption date. however. in whole or in part. in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the notes. payments of interest on the notes will be payable to the Holders of those notes registered as such at the close of business on the relevant record dates according to the terms and provisions of the Indenture. the average. provided.m. so long as the acquisition does not otherwise violate the terms of the Indenture. at any time and from time to time. the notes are not redeemable at the Issuer’s option. the date of redemption and any Additional Amounts (as defined below) payable in respect of such interest. at the time of selection and in accordance with customary financial practice. as set forth in the daily statistical release designated H. with respect to any redemption date. at the Issuer’s option at a redemption price equal to the greater of (i) 100% of the principal amount of the notes to be redeemed and (ii) the sum of the present values of the Remaining Scheduled Payments of principal and interest on the notes to be redeemed (exclusive of interest accrued to the redemption date) discounted to that redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points. “Remaining Scheduled Payments” means. “Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Issuer to act as the “Independent Investment Banker. the amount of the next succeeding scheduled interest payment thereon will be reduced by the amount of interest accrued thereon to that redemption date. “Treasury Rate” means. provided.” “Reference Treasury Dealer” means Banc of America Securities LLC and HSBC Securities (USA) Inc. On and after any redemption date. The notes will be redeemable.m.Optional Make-Whole Redemption Except as described below. the average of the Reference Treasury Dealer Quotations for that redemption date. that if any of the foregoing shall cease to be a primary US Government securities dealer in New York City (a “Primary Treasury Dealer”). In connection with such optional redemption. “Reference Treasury Dealer Quotation” means. of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker by such Reference Treasury Dealer at 3:30 p. open market purchase or otherwise. Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of the notes to be redeemed. assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for that redemption date. with respect to any redemption date. but not including. (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding that redemption date. the Issuer shall substitute therefor another nationally recognized investment banking firm that is a Primary Treasury Dealer. Notwithstanding the foregoing. that if that redemption date is not an interest payment date with respect to such notes. the remaining scheduled payments of the principal thereof and interest thereon that would be due after the related redemption date but for such redemption.15(519) (or any successor release) published by the Federal Reserve Bank of New York and designated “Composite 3:30 p. Quotations for US Government Securities” or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day. as determined by the Independent Investment Banker. prohibited from acquiring the notes by means other than a redemption. however. whether pursuant to a tender offer. the rate per annum equal to the semi-annual equivalent yield to maturity (computed as of the third Business Day immediately preceding that redemption date) of the Comparable Treasury Issue. the following defined terms apply: “Comparable Treasury Issue” means the United States Treasury security selected by the Independent Investment Banker that would be utilized. (New York City time) on the third Business Day preceding that redemption date. “Comparable Treasury Price” means.. interest will cease to accrue on the notes or any portion thereof called for redemption unless the Issuer defaults in the payment of the redemption 21 . or their respective affiliates which are primary United States government securities dealers. with respect to each note to be redeemed. however. plus accrued and unpaid interest on the principal amount of the notes being redeemed to. The Issuer is not. the Withholding Tax Redemption Price. or any political subdivision or taxing authority thereof or therein. Any notes that are redeemed or purchased by the Issuer will be cancelled and may not be reissued or resold. and so long as it is required by the rules of such exchange.” The election of the Issuer to redeem the notes shall be evidenced by a certificate (a “Withholding Tax Redemption Certificate”) of a financial officer of the Issuer. which certificate shall be delivered to the Trustee.9%.” upon the mailing by first-class postage prepaid to each Holder at the address of such Holder as it appears in the Register not less than 15 days nor more than 90 days prior to the Withholding Tax Redemption Date. after the date of the Original Indenture. as a whole but not in part. not less than 30 days nor more than 90 days prior to the Withholding Tax Redemption Date. The Issuer shall. which amendment or change is enacted and becomes effective.price. The Issuer will publish such notices in a leading newspaper of general circulation in Luxembourg. at a redemption price equal to 100% of the principal amount thereof plus accrued and unpaid interest. if any. and 22 . rules or regulations made by the legislative branch or any competent governmental authority of Mexico. The notice of Withholding Tax Redemption shall state: the Withholding Tax Redemption Date. notify the Trustee in writing of such Withholding Tax Redemption Date and of all other information necessary to the giving by the Trustee of notices of such Withholding Tax Redemption. or (ii) any amendment to or change in the generally applicable regulations or official publicly disclosed interpretations relating to such laws. for so long as the notes are listed on the Euro MTF Market. The Issuer may at any time purchase notes in the open market or otherwise at any price.bourse. Notice of Withholding Tax Redemption shall be given by the Trustee to the Holders. which is expected to be the Luxemburger Wort. or which interpretation is announced and becomes effective. Such notice shall be irrevocable and upon its delivery the Issuer shall be obligated to make the payment or payments to the Trustee referred to therein at least two Business Days prior to such Withholding Tax Redemption Date. at the election of the Issuer. This tax is withheld in Mexico. the Issuer may choose to have notice of redemption made on the Luxembourg Stock Exchange’s website www. but will be paid by the Issuer or an applicable Subsidiary Guarantor in order that the net amounts receivable by the Holders after such withholding shall equal the respective amounts which would have been receivable in respect of the notes in the absence of such withholding in accordance with the terms described under “–– Additional Amounts” and “Taxation– –Mexican Federal Taxation. The Trustee shall be entitled to rely conclusively upon the information so furnished by the Issuer in the Withholding Tax Redemption Certificate and shall be under no duty to check the accuracy or completeness thereof. to and including the Withholding Tax Redemption Date (the “Withholding Tax Redemption Price”) and any Additional Amounts payable in respect of such interest if.lu. in principal amount equal to the unredeemed portion of the note so presented. a new note or notes. Additionally. or any political subdivision or taxing authority thereof or therein affecting taxation. the Issuer will execute and the Trustee will authenticate and deliver to us on the order of the Holder thereof. the sum of all other amounts due to the Holders under the notes and the Indenture. in accordance with the provisions under “––Notices. Upon presentation of any note redeemed in part only. of authorized denominations. the Issuer has become required to pay any Additional Amounts in excess of those attributable to Taxes (as defined below) that are imposed and withheld at a rate of 10% on or from any payments of interest under the notes. The current withholding tax rate with respect to the notes is 4. that on the Withholding Tax Redemption Date the Withholding Tax Redemption Price will become due and payable upon each such note to be redeemed. Withholding Tax Redemption The notes are subject to redemption (“Withholding Tax Redemption”) at any time (a “Withholding Tax Redemption Date”). in each case. at the Issuer’s expense. as a result of (i) any amendment to or change in the laws or rules of Mexico. the imposition. provided. that money sufficient therefor has been deposited with the Trustee for the Holders. or (z) being or having been present or engaged in a trade or business therein other than the mere holding of such note or the receipt of any amounts due in respect thereof. residence. the place or places where the notes to be redeemed are to be surrendered for payment of the Withholding Tax Redemption Price. and premium. settlor. deducted or withheld but for the failure by such Holder or beneficial owner of such note to comply with any certification. unless the withholding or deduction of such Taxes is required by law. or withheld or deducted from. which Additional Amounts shall be due and payable when the amounts to which such Additional Amounts relate are due and payable. settlor. treaty. assessments or governmental charges of whatever nature imposed or levied by any jurisdiction in which the Issuer. beneficiary. whether before or after such payment by the Issuer to the Trustee for the benefit of the Holders. Notwithstanding anything to the contrary herein or in the Indenture or in the notes. (iii) to any Taxes that are imposed on. stamp. or possessor of a power over. Upon surrender of any such notes for redemption in accordance with such notice. become due and payable at the Withholding Tax Redemption Price. (ii) to any estate. on the Withholding Tax Redemption Date. and (y) at least 60 days prior to the first payment date with respect to which the 23 . or any political subdivision or taxing authority thereof or therein (“Taxes”). information or other reporting requirement concerning the nationality. Notice of Withholding Tax Redemption having been given as aforesaid. The funds paid to the Trustee shall be used to redeem the notes on the Withholding Tax Redemption Date. corporation or partnership) and the relevant taxing jurisdiction (or any political subdivision or territory or possession thereof or area subject to its jurisdiction) including. gift. identity or connection with Mexico or the relevant taxing jurisdiction of the Holder or beneficial owner of such note if (x) such compliance is required or imposed by a statute. without limitation. member. payments made to the Holder or beneficial owner of a note to the extent such Taxes would not have been so imposed. inheritance. the Issuer or an applicable Subsidiary Guarantor will pay such additional amounts (“Additional Amounts”) as may be necessary in order that the net amounts receivable by the Holders after such withholding or deduction shall equal the respective amounts which would have been receivable in respect of the notes in the absence of such withholding or deduction. except that no such Additional Amounts shall be payable with respect: (i) to any Taxes which would not have been imposed but for the existence of any present or former connection between the Holder or beneficial owner of the note (or between a fiduciary. and the occurrence of an Event of Default. duties. regulation or rule in order to make any claim for exemption from. sales. member or shareholder of. if any. such Holder or beneficial owner or such fiduciary. if such Holder or beneficial owner is an estate. such Holder or beneficial owner. transfer or personal property Taxes. such notes shall be paid by the Paying Agent on behalf of the Issuer on the Withholding Tax Redemption Date. however. or an applicable Subsidiary Guarantor is organized or resident for tax purposes or through which payment is made. or reduction in the rate of. identification. then neither the Holders nor the Trustee on their behalf shall any longer be entitled to exercise any of the rights of the Holders under the notes other than the rights of the Holders to receive payment of such amounts from the Paying Agent. Additional Amounts All payments of principal of. if a Withholding Tax Redemption Certificate has been delivered to the Trustee and the Issuer shall have paid to the Trustee for the benefit of the Holders (i) the Withholding Tax Redemption Price and (ii) all other amounts due to the Holders and the Trustee under the notes and the Indenture. trust. beneficiary. (y) having had a permanent establishment or branch therein. In that event. withholding or deduction of any Taxes. shall not entitle either the Holders or the Trustee on their behalf after such payment to declare the principal of any notes then outstanding to be due and payable on any date prior to the Withholding Tax Redemption Date. the notes to be redeemed shall. shareholder or possessor (x) being or having been a citizen or resident thereof. and interest on the notes by the Issuer or the Subsidiary Guarantors will be made without withholding or deduction for or on account of any present or future taxes. regulations and administrative practice (such as IRS Forms W-8BEN and W-9) or (b) Article 195. Section II. or (v) to any combination of (i). In addition. the limitations on the Issuer’s and the Subsidiary Guarantors’ obligation to pay Additional Amounts set forth in clause (iii) above shall not apply if (a) the provision of information. such mention shall be deemed to include mention of the payment of Additional Amounts to the extent that. whichever occurs later. documentary or other similar taxes and other duties (including interest and penalties) (a) payable in Mexico or the United States (or any political subdivision of either jurisdiction) in respect of the creation. regulations or administrative practice) than comparable information or other reporting requirements imposed under U. of the Mexican income tax law (or such successor of such Article). are hereinafter referred to as “Excluded Taxes”).S. upon request therefor. Whenever either in the Indenture or in this listing prospectus there is mentioned. issue. except to the extent that the holder of such note would have been entitled to Additional Amounts in respect of such Taxes on presenting such note for payment on any date during such 15-day period. the payment of principal (and premium. Additional Amounts are. such clause (iii) shall not be construed to require that a non-Mexican pension or retirement fund or a non-Mexican financial institution or any other Holder register with the Ministry of Finance and Public Credit for the purpose of establishing eligibility for an exemption from or reduction of Mexican withholding tax or to require that a Holder or beneficial owner certify or provide information concerning whether it is or is not a taxexempt pension or retirement fund. in any context. issue and offering of the notes. in such context. in writing. the Issuer shall have notified all the record Holders of notes as of the date of notification. that such Holders or beneficial owners of the notes will be required to provide such information or documentation. tax law. registration. if any). if any. together with accrued and unpaid interest thereon. and (b) payable in Mexico (or any 24 . for which no Additional Amounts are payable. as applicable. Notwithstanding the foregoing. of the notes. Section II. (iv) to or on behalf of a holder of a note in respect of Taxes that would not have been imposed but for the presentation of such note by such Holder for payment on a date more than 15 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for and notice thereof given to Holders. at any time at 100% of the principal amount.S. regulation or rule in order to apply Article 195. and will set forth such other information necessary to enable the Trustee to pay such Additional Amounts to Holders on the payment date. Copies of such documentation will be made available to the Holders or the Paying Agent. Section II. were or would be payable in respect thereof. (ii). (iii) or (iv) above (the Taxes described in clauses (i) through (iv). rules. and Mexican law. of the Mexican income tax law (or a substantially similar successor of such Article) is in effect. but not less than all.” The Issuer will provide the Trustee with documentation evidencing the payment of Mexican taxes in respect of which the Issuer or any Subsidiary Guarantor has paid any Additional Amounts. in form. the Issuer will pay any stamp. of the Mexican income tax law (or a substantially similar successor of such Article). redemption price. In the event that the Issuer has become or would become required to pay any Additional Amounts in excess of those attributable to Taxes that are imposed and withheld at a rate of 10% or more as a result of certain changes affecting Mexican tax laws. the Issuer will deliver to the Trustee an Officers’ Certificate stating the fact that such Additional Amounts will be payable and the amounts so payable. if the Issuer or any Subsidiary Guarantor will be obligated to pay Additional Amounts with respect to such payment (other than Additional Amounts payable on the date of the Original Indenture). to the redemption date. At least 30 days prior to each date on which any payment under or with respect to the notes is due and payable. documentation or other evidence described in such clause (iii) would be materially more onerous. to a Holder or beneficial owner of a note (taking into account any relevant differences between U. the Issuer or an applicable Subsidiary Guarantor cannot obtain such information.Issuer shall apply this clause (iii). the Issuer may redeem all. unless the provision of the information. In addition. documentation or other evidence described in clause (iii) is expressly required by statute. See “–– Withholding Tax Redemption. documentation or other evidence on its own through reasonable diligence and the Issuer or an applicable Subsidiary Guarantor otherwise would meet the requirements for application of Article 195. in procedure or in the substance of information disclosed. interest or any other amount payable under or with respect to any note. in the case of any subsequent redemption or retirement. with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the covenant described above. each Holder of notes will have the right to require the Issuer to repurchase all or any part of such Holder’s notes pursuant to the offer described below (the “Change of Control Offer”) at a purchase price (the “Change of Control Purchase Price”) equal to 101% of the principal amount thereof. the circumstances and relevant facts regarding the Change of Control Triggering Event. to each Holder of notes. and (b) send. The Issuer’s obligation to make an offer to repurchase the notes as a result of a Change of Control Triggering Event may be waived or modified at any time prior to the occurrence of such Change of Control 25 . the Issuer will deposit with the paying agent funds in an amount equal to the Change of Control Purchase Price in respect of all notes or portions thereof so tendered. if any. the “Change of Control Payment Date”). to the extent applicable. the definition of Excluded Taxes will not include stamp or transfer Taxes defined in clause (ii) thereof).political subdivision thereof) in respect of the subsequent redemption or retirement of the notes (other than. at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Issuer and purchases all notes validly tendered and not withdrawn under such Change of Control Offer. the Issuer shall: (a) cause a notice of the Change of Control Offer to be sent at least once to the Dow Jones News Service or similar business news service in the United States. which shall be. subject to any contrary requirements of applicable law. a notice stating: that a Change of Control Triggering Event has occurred and a Change of Control Offer is being made pursuant to the covenant entitled “Repurchase at the Option of Holders Upon a Change of Control Triggering Event” and that all notes timely tendered will be accepted for payment. and the procedures that Holders of notes must follow in order to tender their notes (or portions thereof) for payment. Repurchase at the Option of Holders Upon a Change of Control Triggering Event Upon the occurrence of a Change of Control Triggering Event. The Issuer will publish such notices in a leading newspaper of general circulation in Luxembourg. for so long as the notes are listed on the Euro MTF Market and so long as it is required by the rules of such exchange. by courier. with a copy to the Trustee. except for this purpose. which is expected to be the Luxemburger Wort. Excluded Taxes. On the Business Day immediately preceding the Change of Control Payment Date. the Change of Control Purchase Price and the purchase date. The Issuer will comply. at such Holder’s address appearing in the Register. to the purchase date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date). and the procedures that Holders of notes must follow in order to withdraw an election to tender notes (or portions thereof) for payment. The Issuer will not be required to make a Change of Control Offer following a Change of Control Triggering Event if a third party makes the Change of Control Offer in the manner. plus accrued and unpaid interest. a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed (such specified date. Within 30 days following any Change of Control Triggering Event. the Issuer will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue of such compliance. developed. owns or is entitled to such property. provided. that the foregoing restriction shall not apply to: (i) any Lien on (A) any Operating Property acquired. extended or improved by the Issuer or any Subsidiary (singly or together with other Persons) after the date of the Original Indenture or any property reasonably incidental to the use or operation of such Operating Property (including any real property on which such Operating Property is located). that the principal amount of Indebtedness or Guarantee secured thereby shall not exceed the principal amount of Indebtedness or Guarantee so secured at the time of such extension. products. in whole or in part. in each of cases (A) and (B) to the extent such Lien is created. renewal or replacement shall be limited to all or a part of the property which secured the Lien so extended. (v) any Lien existing on the date the Original Indenture. in either such case which (a) is not created as a result of or in connection with or in anticipation of any such transaction and (b) does not attach to any other Operating Property other than the Operating Property so acquired. developed. renewal or replacement. or any Indebtedness of. unless. or (B) any shares or other ownership interest in. (iii) any Lien on any Operating Property acquired from a Person which is merged with or into the Issuer or any Subsidiary or any Lien existing on Operating Property of any Person at the time such Person becomes a Subsidiary. construction. renewals or replacements). however. Notwithstanding the foregoing. or within 270 days after. of any Lien referred to in the foregoing clauses (1) through (5) inclusive. or (y) contemporaneously with. any Person which holds. See “— Amendments and Waivers. constructed. however. nor will it permit any Subsidiary to. that the aggregate amount of such 26 .” Covenants The Indenture provides that the following restrictive covenants will be applicable to the Issuer and its Subsidiaries. concurrently with the issuance or assumption of such Indebtedness or Guarantee or the creation of such Lien. extension or improvement (including costs such as escalation. extended or improved. (iv) any Lien which secures Indebtedness or a Guarantee owing by a Subsidiary to the Issuer or any other Subsidiary. incurred or assumed (x) during the period such Operating Property was being constructed. revenue or profits. development. provided. the notes shall be secured equally and ratably with (or prior to) such Indebtedness or Guarantee. development. or (vi) any extension. Limitation on Liens The Issuer will not. extension or improvement in order to secure or provide for the payment of all or any part of the purchase price or other consideration of such Operating Property or the other costs of such acquisition.Triggering Event with the written consent of the holders of a majority in principal amount of the notes. provided. such acquisition or the completion of such construction. interest during construction and financing and refinancing costs). renewal or replacement (or successive extensions. (ii) any Lien on any Operating Property existing at the time of acquisition thereof and which (a) is not created as a result of or in connection with or in anticipation of such acquisition and (b) does not attach to any other Operating Property other than the Operating Property so acquired. renewed or replaced (plus improvements on such property). the Issuer or any Subsidiary may issue or assume Indebtedness or a Guarantee secured by a Lien which would otherwise be prohibited under the provisions of the Indenture described in this section or enter into a Sale and Leaseback Transaction that would otherwise be prohibited by the provision of the Indenture described under “—Sale and Leaseback”. however. issue. and that such extension. assume or suffer to exist any Indebtedness or Guarantee. if such Indebtedness or Guarantee is secured by a Lien upon any Operating Property of the Issuer or any Subsidiary. in each case. the due and punctual payment of the principal of and interest on all the outstanding notes or obligations under the Note Guarantee as applicable. by a supplemental indenture. without effectively providing that the notes will be secured equally and ratably with such Sale and Leaseback Transaction. as the case may be. In case of any such consolidation. unless after giving effect thereto: (i) the Issuer or such Subsidiary would be entitled pursuant to the provisions of the Indenture described above under “—Limitation on Liens” to issue or assume Indebtedness or a Guarantee (in an amount equal to the Attributable Value with respect to such Sale and Leaseback Transactions) secured by a Lien on such Operating Property without equally and ratably securing the notes. nor will it permit any Subsidiary to. Guarantees or Attributable Value from Sale and Leaseback Transactions as described below outstanding at such time that was previously incurred pursuant to this paragraph by the Issuer and its Subsidiaries. with the same effect as if it had been named in the Indenture as such obligor or Subsidiary Guarantor. and (iii) the Issuer shall have delivered to the Trustee an Officers’ Certificate and opinion of counsel from each of the United States and Mexico stating that such consolidation. shall not exceed the greater of US$200. any Person other than the Issuer or a Subsidiary Guarantor. in each case owing to a Person other than the Issuer of any Affiliate of the Issuer. Consolidation. an amount equal to the net proceeds thereof and. consolidate with or merge into.Indebtedness. in the case of a sale or transfer for cash. shall have happened and be continuing. as obligor on the notes. or convey or transfer its properties and assets substantially as an entirety to. in the ordinary course of business. conveyance or transfer (other than a lease). Certain Definitions The following terms have the following definitions in the Indenture: 27 . conveyance or transfer and such supplemental indenture comply with the foregoing provisions relating to such transaction. and no event which. plant or equipment of the Issuer or that of any Subsidiary to be used by or for the benefit of the Issuer or any Subsidiary. and the performance of every covenant in the Indenture on the part of the Issuer or the Subsidiary Guarantor. Guarantee or Attributable Value of such Sale and Leaseback Transactions of the Issuer and its Subsidiaries (without duplication) together with the aggregate amount (without duplication) of Indebtedness. after notice or lapse of time or both. no Event of Default. enter into any Sale and Leaseback Transactions with respect to any Operating Property. within 12 months after the effective date of such Sale and Leaseback Transaction. Sale and Leaseback The Issuer will not. an amount equal to the fair market value (as determined in good faith by the board of directors of the Issuer) of the Operating Property so leased (A) to the retirement. Merger. in the case of a sale or transfer otherwise than for cash. (ii) immediately after giving effect to such transaction.000. such successor corporation or limited liability company or similar entity will succeed to and be substituted for the Issuer or the Subsidiary Guarantor. development. or (ii) the Issuer or such Subsidiary shall apply or cause to be applied. unless (i) the successor Person shall be a corporation or limited liability company or similar entity organized and existing under the laws of Mexico or the United States (or any State thereof or the District of Columbia) or any country that is a member of the European Union and shall expressly assume. For purposes of this covenant. would constitute all or substantially all the property of the Issuer on a consolidated basis. to be performed or observed. shall be deemed to be the transfer of all or substantially all the property of the Issuer. or (B) to the acquisition. would become an Event of Default. merger. purchase. extension or improvement of any fixed or capital assets or other real and tangible property. merger. as the case may be. construction. and the Issuer will not cause or permit any Subsidiary Guarantor to. Sale or Conveyance The Issuer and each Subsidiary Guarantor may not. of (i) Indebtedness of the Issuer ranking at least on a parity with the notes or (ii) Indebtedness of any Subsidiary of the Issuer.000 and 10% of Consolidated Tangible Assets. if held by the Issuer instead of such Subsidiaries. the conveyance or transfer of all the property of one or more Subsidiaries of the Issuer which property. renewal. “Business Day” shall mean any day other than a Saturday. whether through the ownership of voting securities. according to MFRS. The term “control” means the possession. provided. exchange or hedging transaction or other financial derivatives transaction (other than (i) any such agreements or instruments directly related to Indebtedness otherwise incurred in compliance with the Indenture and (ii) any such agreements as are entered into in the ordinary course of business and are not for speculative purposes or the obtaining of credit). that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. at any time.S. “Change of Control Triggering Event” means the occurrence of a Change of Control. or (3) under any agreement or instrument in respect of an interest rate or currency swap. direct or indirect. “Consolidated Tangible Assets” means. be extended) discounted from the respective due dates thereof to such date at a rate per annum equivalent to the interest rate inherent in such lease (as determined in good faith by the Issuer in accordance with generally accepted financial practice). or is controlled by. at least 34% of the Voting Stock of the Issuer or (ii) the Joint Venture Agreement. or any successor statute or statutes thereto. however. that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. with respect to any Person (without duplication) (a) any obligation of such Person (1) for borrowed money. such specified Person. as amended. contingent or otherwise (including an aval). the total amount of assets of the Issuer and its consolidated Subsidiaries less Intangible Assets of the Issuer and its consolidated Subsidiaries. any and all shares. “Exchange Act” means the U. provided. as of the end of the fiscal year immediately preceding such date. between General Electric Company and certain direct and indirect shareholders of the Issuer. a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in The City of New York or Mexico. Securities Exchange Act of 1934. dated as of May 20.” “controlled by” and “under common control with” have correlative meanings. any other Person who directly or indirectly through one or more intermediaries controls. under any reimbursement obligation relating to a letter of credit (other than letters of credit payable to suppliers in the ordinary course of business). directly or indirectly. participations or other equivalents (however designated and whether or not voting) of corporate stock. any and all partnership or other equity or ownership interests of such Person. deferral. including each class of common stock and preferred stock of such Person. with respect to any specified Person. the total net obligation of the lessee for rental payments during the remaining term of the lease (including any period for which such lease has been extended or may. and (3) any warrants. as amended. “Capital Stock” means: (1) with respect to any Person that is a corporation. rights or options to purchase any of the instruments or interests referred to in clause (1) or (2) above. modification. (2) with respect to any Person that is not a corporation. extension or refunding of any liability of the types referred to in clause (a) above. terminated or no longer in full force and effect. at the option of the lessor. the terms “controlling. either (i) General Electric Company or any successor thereto ceases to own. “Indebtedness” means. modified or supplemented from time to time. by contract or otherwise. and (b) any amendment. of the power to direct or cause the direction of the management and policies of a Person. “Attributable Value” means as to any particular lease under which the Issuer or any Subsidiary is at any time liable as lessee and any date as of which the amount thereof is to be determined. however. or entered into for the purpose of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part). under any reimbursement obligation relating to a financial bond or under any reimbursement obligation relating to a similar instrument or agreement. as of any date of determination. of any Person directly or indirectly guaranteeing any Indebtedness of any other Person. supplement. contingent or otherwise. interests.“Affiliate” means. “Change of Control” means. For the purpose of determining any particular amount of Indebtedness under this 28 . The term “Guarantee” used as a verb has a corresponding meaning. 1987. (2) for the payment of money relating to any obligations under any capital lease of real or personal property. or is under common control with. “Guarantee” means any obligation. The term “Guarantee” shall not apply to a guarantee of intercompany Indebtedness among the Issuer and the Subsidiaries or among the Subsidiaries. directly or indirectly. For purposes of this definition. shall at any time be cancelled. S. S. lien or security interest. warehouse or distribution center and is used in the ordinary course of its business. write-ups of assets over their carrying value at the end of each fiscal year. “Person” means any individual. individually or. “Intangible Assets” means. in the absence of contingencies. Highly Leveraged Transactions The Indenture does not include any debt covenants or other provisions which afford Holders of the notes protection in the event of a highly leveraged transaction. “Sale and Leaseback Transaction” means an arrangement relating to property now owned or hereafter acquired by the Issuer or any Subsidiary whereby the Issuer or Subsidiary transfers such property with the intention of taking back a lease pursuant to which rental payments are calculated to amortize the purchase price of such property substantially over the useful life thereof and the Issuer or such Subsidiary leases for a period greater than three years from such Person. in the case of a series of related transactions. de C. is not of material importance to the business conducted or assets owned by the Issuer and its Subsidiaries taken as a whole. as of any date of determination. unamortized deferred charges. “MFRS” means accounting principles in accordance with Mexican Financial Reporting Standards. joint-stock company. with respect to any Indebtedness any principal. goodwill.definition. interest (including. entitled to vote for the election of directors (or persons performing similar functions) of such Person. “Issue Date” means October 28. 2009.V. corporation. “Operating Property” means. Guarantees of (or obligations with respect to letters of credit) Indebtedness otherwise included in the determination of such amount shall not be included. in the aggregate. the Indenture. in the good faith opinion of the board of directors. other than any such property which. copyrights.. de C.V. limited liability company or government or other entity. de R. de R. and all other items which would be treated as intangibles on the balance sheet of the Issuer and its consolidated Subsidiaries (except unamortized debt discount and expense). association. in each case having ordinary voting power to elect or appoint directors. post-petition interest). service marks. “Subsidiary” means any corporation or other business entity of which the Issuer owns or controls (either directly or through one or more other Subsidiaries) more than 50% of the issued share capital or other ownership interests. Mabe México. partnership. except that all references to 10% in Rule 1-02(w) are replaced with 5%.L. damages and other liabilities payable under the documentation governing such Indebtedness. “Subsidiary Guarantor” means each of Mabe. without limitation. fees. including in the case of the notes and the Note Guarantees. penalties. trademarks. “Lien” means any mortgage. “Significant Subsidiary” means a Subsidiary of the Issuer constituting a “Significant Subsidiary” of the Issuer in accordance with Rule 1-02(w) of Regulation S-X under the Exchange Act in effect on the date hereof. other than leases between the Issuer and a Subsidiary or between Subsidiaries.L. joint venture. S. any real and tangible property owned by the Issuer or any Subsidiary that constitutes all or any part of any manufacturing facility. de C. “Voting Stock” means Capital Stock of any Person. “Obligations” means. trade names.V.A. the first date of issuance of notes under the Indenture. managers or trustees of such corporation or other business entity (whether or not capital stock or other ownership interests or any other class or classes shall or might have voting power upon the occurrence of any contingency). according to MFRS. with respect to the Issuer and its consolidated Subsidiaries. even if the right to vote has been suspended by the happening of such a contingency. pledge. trust. “Note Guarantee” means any guarantee of the Issuer’s Obligations under the notes and the Indenture provided by a Subsidiary Guarantor pursuant to the Indenture. patents. the holders of which are ordinarily. unincorporated organization. and Leiser. reimbursements. indemnifications. Reporting Requirements 29 . The Issuer will provide the Trustee and the Trustee will provide the Holders with: (i) annual financial statements audited by an internationally recognized firm of independent public accountants within 150 days of the end of each fiscal year. In addition. upon request of such Holder.000. covenant. (iii) the Issuer or any of its Significant Subsidiaries shall fail to pay when due (whether at maturity. among other things. upon redemption or otherwise. so long as the notes are listed on the Euro MTF Market. or to any prospective purchaser designated by such Holder. financial and other information required to be delivered under Rule 144A(d)(4) (as amended from time to time and including any successor provision) unless. individually or in the aggregate. and such failure continues for 60 days after notice. at the time of such request. by registered or certified mail. or default in the payment of any interest in respect of such notes if such default continues for 30 days after any such interest becomes due in accordance with the terms thereof. including furnishing to any Holder of a note or beneficial interest in a global note. Events of Default The Indenture provides that each of the following events constitutes an Event of Default with respect to the notes: (i) default in the payment of the principal of any note after any such principal becomes due in accordance with the terms thereof. to the Issuer by the Trustee or to the Issuer and the Trustee by the Holders of at least 25% in principal amount of the outstanding notes. the maintenance of corporate existence and maintenance of books and records. the Issuer is subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act or is exempt from such requirements pursuant to Rule 12g3-2(b) under the Exchange Act (as amended from time to time and including any successor provision). in each case for the Issuer and its Subsidiaries. Other Covenants The Indenture contains certain other covenants relating to. and (ii) copies (including English translations of documents in other languages) of all public filings made by the Issuer with any stock exchange or securities regulatory agency within ten days after filing. if such 30 . English translations of any of the foregoing documents prepared in another language will be provided. specifying such failure and requiring it to be remedied and stating that such notice constitutes a notice of default under the Indenture. agreement. upon redemption or acceleration or otherwise) the principal of any Indebtedness in excess. Copies of the Indenture are available at the offices of the Issuer.000 (or the equivalent thereof in other currencies). These annual and quarterly financial statements will be prepared in accordance with MFRS and such annual financial statements will be accompanied by a summary management discussion on the results of operations of the Issuer and its Subsidiaries for the periods presented. Available Information The Issuer shall take all action necessary to provide information to permit resales of the notes pursuant to Rule 144A under the Securities Act. the Trustee and the Luxembourg Paying Agent and Transfer Agent. warranty or obligation contained in the notes or the Indenture not otherwise expressly included as an Event of Default in (i) above. and quarterly financial statements within 60 days of the end of each of the first three fiscal quarters of each fiscal year. (ii) failure to observe or perform any other term. the Issuer will make available the information specified in subparagraphs (i) and (ii) above at the specified office of the Luxembourg Paying Agent for the notes. of US$20. (iv) a decree or order by a court having jurisdiction shall have been entered adjudging the Issuer or any of its Significant Subsidiaries as bankrupt or insolvent.failure shall continue for more than the original period of grace. or any Person acting on behalf of any Subsidiary Guarantor. If an Event of Default specified in clause (iv) or (v) above shall occur. if any. Subject to the provisions of the Indenture relating to the duties of the Trustee.000. If any other Event of Default shall occur and be continuing. however. or a decree or order of a court having jurisdiction for the appointment of a receiver or liquidator or conciliador or for the liquidation or dissolution of the Issuer or any of its Significant Subsidiaries. applicable thereto and the period for payment has not been expressly extended. unless such Holders shall have offered to the Trustee reasonable indemnity satisfactory to it. all or substantially all of its assets are transferred to the Issuer or another Significant Subsidiary of the Issuer. shall have been entered. The Holders of a majority in aggregate principal amount of the outstanding notes will have the right to direct the time. shall be immediately due and payable. aggregating US$20. provided. in case the Issuer shall fail to comply with its obligations under the Indenture or the notes and such failure shall be continuing. concurso mercantil or quiebra of or by the Issuer or any of its Significant Subsidiaries and such decree or order shall have continued undischarged or unstayed for a period of 120 days. Any such declaration may be annulled and rescinded by written notice from the Trustee or the Holders of a majority of the aggregate principal amount of the notes then outstanding to the Issuer if all amounts then due with respect to the notes are paid (other than amount due solely because of such declaration) and all other defaults with respect to the notes are cured. unless (i) such Holder has previously given to the Trustee written notice of a continuing Event of Default and (ii) the Holders of at least 25% in aggregate principal amount of the outstanding notes shall have made a written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee. and such decree or order shall have continued undischarged and unstayed for a period of 120 days. that any Significant Subsidiary may be liquidated or dissolved if. (v) the Issuer or any of its Significant Subsidiaries shall institute any proceeding to be adjudicated as voluntary bankrupt. (iii) such Holder or Holders have offered to the Trustee indemnity reasonably satisfactory to it. method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. to the extent such action does not conflict with the provisions of the Indenture or applicable law. by written notice to the Issuer (and to the Trustee if given by Holders). or (vii) except as permitted by the Indenture. or shall consent to the filing of any such petition. The right of the Holders to give such acceleration notice shall terminate if the event giving rise to such right shall have been cured before such right is exercised.000 or more. together with accrued interest thereon. or shall consent to the filing of a bankruptcy proceeding against it. or shall file a petition or answer or consent seeking reorganization. together with accrued interest thereon. or shall consent to the appointment of a receiver or liquidator or conciliador or trustee or assignee in bankruptcy or insolvency of it or its property. pursuant to such liquidation or dissolution. denies or disaffirms such Subsidiary Guarantor’s obligations under its Note Guarantee. the maturity of all outstanding notes shall automatically be accelerated and the principal amount of the notes. concurso mercantil or quiebra. (vi) failure by the Issuer or any of its Significant Subsidiaries to pay one or more final judgments against any of them. the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the Holders. (iv) the Trustee for 60 days after receipt of such notice has failed to institute any such proceeding and (v) no 31 . the Trustee or the Holders of not less than 25% of the aggregate principal amount of the notes then outstanding may. declare the principal amount of the notes. or approving as properly filed a petition seeking reorganization. which judgment(s) are not paid. No Holder of any note will have any right to institute any proceeding with respect to the Indenture or the notes or for any remedy thereunder. discharged or stayed for a period of 60 days or more. immediately due and payable. any Note Guarantee is held to be unenforceable or invalid in a judicial proceeding or ceases for any reason to be in full force and effect or any Subsidiary Guarantor. gain or loss for U.S. The Issuer may at any time terminate its Obligations under the Indenture with respect to the covenants described above under “––Covenants” (other than the covenant described under “––Covenants ––Consolidation. such limitations do not apply to a suit individually instituted by a Holder of a note for enforcement of payment of the principal of.S. including: (i) to exercise Defeasance. Dollars. Dollar amount expressed to be due to a Holder under any note. such note on or after respective due dates expressed in such note. including those regarding any trust established for a Defeasance. government obligations. If the U. federal income tax matters reasonably acceptable to the Trustee (subject to customary exceptions and exclusions) confirming that (A) the Issuer has received from. for the benefit of the Holders of the notes. Dollars in respect of any sum expressed to be due to such Holder from the Issuer or any Subsidiary Guarantor will only constitute a discharge to us to the extent of the U. except for certain Obligations. the Issuer must deliver to the Trustee an Opinion of Counsel of recognized standing with respect to U. the Issuer and the Subsidiary Guarantors will jointly and severally indemnify the Holder against any loss the Holder sustains as a result. Any amount that a Holder receives or recovers in a currency other than U. Dollar amount which the Holder is able to purchase with the amount received or recovered in that other currency on the date of the receipt or recovery or. In order to exercise either Defeasance or Covenant Defeasance. Sale or Conveyance”). the holders of the outstanding notes will not recognize income.S. Merger. or there has been published by. (ii) (iii) will give rise to a separate and independent cause of action. In any event. and any omission to comply with such Obligations shall not constitute a Default with respect to the notes issued under the Indenture (“Covenant Defeasance”). order. if it is not practicable to make the purchase on that date.S. or interest on. Defeasance The Issuer may at any time terminate all of its Obligations with respect to the notes (“Defeasance”). will apply irrespective of any indulgence granted by any Holder. claim or proof for a liquidated amount in respect of any sum due under any note. federal income tax purposes as a result of such Defeasance and will be subject to U. federal income tax law. and based thereon such Opinion of Counsel shall confirm that. and (iv) will continue in full force and effect despite any other judgment. on the first date on which the Holder is able to do so. However. if it was not practicable to make the purchase on that date. the Issuer must irrevocably deposit in trust. The indemnities described above: (i) constitute a separate and independent obligation from the other obligations of the Issuer and the Subsidiary Guarantors.S. with the Trustee money or U. the Issuer and the Subsidiary Guarantors will jointly and severally indemnify a Holder against the cost of making any purchase of U. in either case to the effect that.S. on the first date on which the Holder were able to do so. it will be sufficient for a Holder to certify in a satisfactory manner that such Holder would have suffered a loss had an actual purchase of U. Dollar amount is less than the U. destroyed.S. the Internal Revenue Service a ruling or (B) since the Issue Date there has been a change in the applicable U. Currency Indemnity The Issuer and each Subsidiary Guarantor will pay all sums payable under the Indenture or the notes solely in U. to replace mutilated. 32 . in such amounts as will be sufficient to pay the principal of and interest on such notes to the redemption date specified by the Issuer in accordance with the terms of the Indenture without reinvestment and comply with certain other conditions.S.S. Dollars been made with the amount received in that other currency on the date of receipt or recovery or.S. Dollars. For the purposes of this paragraph.S. or a combination thereof. lost or stolen notes and to maintain agencies in respect of notes. In addition.direction inconsistent with such request shall have been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the outstanding notes. the Holder will also be required to certify in a satisfactory manner the need for a change of the purchase date.S. bourse.S. or of curing.lu/Accueil. in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred. Amendments and Waivers The Indenture may be amended by the Trustee and the Issuer for the purpose of curing any ambiguity. the Issuer must deliver to the Trustee an Opinion of Counsel of recognized standing with respect to U. In addition. and (ii) to exercise Covenant Defeasance. or (ii) if such Luxembourg publication is not practicable. federal income tax on the same amounts. whether or not it shall be published in Saturday. gain or loss for U. that no such modification or amendment to either the Indenture or to the terms and conditions of the notes may. federal income tax matters reasonably acceptable to the Trustee (subject to customary exceptions and exclusions) confirming that the holders of the outstanding notes will not recognize income. consent. however. on the website of the Luxembourg Stock Exchange (http://www. the Note Guarantees or the notes.federal income tax on the same amounts. notices will be mailed to Holders of notes at their registered addresses. and so long as it is required by the rules of such exchange. that would: (i) change any installment of interest with respect to any note or reduce the principal amount of or interest with respect to any note. correcting or supplementing any defective provision contained therein. Notices shall be deemed to have been given on the date of publication as aforesaid or. including in connection with a redemption. by acceptance thereof. and future compliance therewith or past default by the Issuer (other than a default in the payment of any amount. Modification and amendments to the Indenture or to the terms and conditions of the notes may also be made. to conform the text of the Indenture. Notices From and after the date the notes are listed on the Euro MTF Market. in the same manner and at the same times as would have been the case if such Defeasance had not occurred. the notes or the Note Guarantees to any provision of this “Description of New Notes” to the extent that such provision in this “Description of New Notes” was intended to be a verbatim recitation of a provision of the Indenture. all notices to Holders of notes will be published in English: (i) in a leading newspaper having a general circulation in Luxembourg (which is expected to be the Luxemburger Wort). (ii) change cash prices at which the notes may be redeemed by the Issuer. or by the adoption of resolutions at a meeting of Holders of the notes by the Holders of at least a majority in aggregate principal amount of the outstanding notes. either with the written consent (including consents obtained in connection with a tender offer or exchange offer for the notes) of the Holders of at least a majority in aggregate principal amount of outstanding notes.S. 33 .S. to release a Subsidiary Guarantor in accordance with the terms of the Indenture. without the consent or the affirmative vote of the Holder of each note so affected. due on the notes or in respect of covenant or provision which cannot be modified and amended without the consent of the Holders of all notes so affected) may be waived. on the date of the first such publication. Sunday or holiday editions. if published on different dates. to provide for the assumption of the Issuer’s obligations under the Indenture and the notes as permitted under the Indenture. provided.jsp) or in one other leading English language newspaper being published on each day in morning editions. to all of which each Holder of the notes shall. or in any manner which may be deemed necessary or desirable and which shall not adversely affect the interests of any of the Holders of the notes in any material respect. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U. beneficial interests in Regulation S Global Notes may only be transferred to a person who takes delivery in the form of an interest in Restricted Global Notes upon receipt by the Trustee of a written certification from the transferor (in the form provided in the Indenture) to the effect that such transfer is being made to a person that the transferor reasonably believes is a qualified institutional buyer in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction. “Regulation S Global Notes”) and will be deposited with The Bank of New York Mellon as custodian for DTC and registered in the name of DTC or its nominee for the accounts of Euroclear and Clearstream (as indirect participants in DTC). To the extent that either the Issuer or any Subsidiary Guarantor has or hereafter may acquire or have attributed to it or them any sovereign or other immunity under any law. New notes issued to qualified institutional buyers in reliance on Rule 144A under the Securities Act initially will be represented by one or more global notes in definitive. will thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in such other global note for as long as it remains such an interest. cease to be an interest in such global note and become an interest in the other global note and. fully registered form without interest coupons (collectively. change the time at which the Change of Control Offer relating thereto must be made or at which the notes must be repurchased pursuant to such Change of Control Offer. persons in reliance on Regulation S under the Securities Act will be represented by one or more global notes in definitive.S. Any beneficial interest in one of the global notes that is transferred to a person who takes delivery in the form of an interest in the other global note will. whether before.” Prior to or on the 40th day after the settlement date. payment with respect to principal of or interest with respect to the notes is payable. upon transfer.S. Denomination and Title The new notes will be represented by Regulation S Global Notes (as defined below) and Restricted Global Notes (as defined below) (each sometimes referred to herein as a “global note” and together sometimes referred to herein as the “global notes”). to the fullest extent permitted by law. New notes issued in offshore transactions to non-U. (iv) change the currency in which. accordingly. such immunity in respect of any claims or actions regarding its or their obligations under the notes or the Note Guarantees. “Restricted Global Notes”) and will be deposited with The Bank of New York Mellon as custodian for DTC and registered in the name of DTC or its nominee. 34 . respectively.(iii) reduce the premium payable upon a Change of Control Triggering Event or. Governing Law. at any time after a Change of Control Triggering Event has occurred. or change the required place at which. and construed in accordance with. fully registered form without interest coupons (collectively. Borough of Manhattan and have appointed an agent for service of process with respect to any actions brought in these courts arising out of or based on the Indenture or the notes. or (v) change the time at which any note may be redeemed. Restricted Global Notes and Regulation S Global Notes will be subject to certain restrictions on transfer and will bear a legend to that effect as described under “Transfer Restrictions. Form. The Issuer and the Subsidiary Guarantors have consented to the jurisdiction of the U. the laws of the State of New York. only upon receipt by the Trustee of a written certification from the transferor (in the form provided in the Indenture) to the effect that such transfer is being made in accordance with Rule 903 or Rule 904 of Regulation S. Federal and New York State courts located in the City of New York. Jurisdiction The notes and the Indenture will be governed by. each of the Issuer and each Subsidiary Guarantor has agreed to waive. on or after such 40th day. Beneficial interests in Restricted Global Notes may be transferred to a person who takes delivery in the form of an interest in Regulation S Global Notes. or reduce the above-stated percentage of principal amount outstanding notes required to modify or amend the Indenture or the terms or conditions of the notes or to waive any future compliance or past default. So long as DTC. In such capacities. Ownership of beneficial interests in the global notes will be shown on. In addition. The Issuer also expects that payments by DTC 35 . No service charge will be made for any registration of transfer or exchange of notes. or the Issuer elects to discontinue use of the system of book-entry transfers through DTC or a successor depository. DTC or its custodian will credit.The Issuer has initially appointed the Trustee at its office in New York City specified on the inside back cover hereof as Registrar. After the 40th day after the settlement date. upon receipt of any payment of principal or interest in respect of a global note representing any notes held by it or its nominee. as the registered owner of the global note representing such notes. or its nominee. supervising. Ownership of beneficial interests in a global note will be limited to persons who have accounts with DTC (“DTC Participants”) or persons who hold interests through DTC Participants. The new notes will be issued only in fully registered form.000 and integral multiples of US$1. will immediately credit DTC Participants’ accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such global note as shown on the records of DTC or its nominee. records maintained by DTC or its nominee (with respect to interests of DTC Participants) and the records of DTC Participants (with respect to interests of persons other than DTC Participants). in minimum denominations of US$100. and the transfer of that ownership will be effected only through. or indirectly through organizations that are DTC Participants. as the case may be. None of the Issuer. Principal Paying Agent and Transfer Agent for the notes.000 in excess thereof. Unless DTC notifies the Issuer that it is unwilling or unable to continue as depositary for a global note or ceases to be a “clearing agency” registered under the Exchange Act. if they are participants in such systems. among other things. owners of beneficial interests in a global note will not be entitled to have any portion of such global note registered in their names. on its internal system. Global Notes Upon the issuance of Regulation S Global Notes and Restricted Global Notes. The Issuer expects that DTC or its nominee. Euroclear and Clearstream will hold interests in the Regulation S Global Notes on behalf of their participants through customers’ securities accounts in their respective names on the books of their respective depositaries. (i) maintaining a record of the aggregate holdings of notes represented by the global notes and accepting notes for exchange and registration of transfer. as the case may be. without coupons. Investors may hold their interests in Regulation S Global Notes directly through Euroclear or Clearstream. or indirectly through organizations that are participants in such systems. DTC or such nominee. the Trustee will be responsible for. the Trustee or any Paying Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the global notes or for maintaining. investors may also hold their interests in a Regulation S Global Note directly through DTC if they are DTC Participants. no beneficial owner of an interest in a global note will be able to transfer that interest except in accordance with DTC’s or its participant’s applicable procedures. or reviewing any records relating to such beneficial ownership interests. (ii) ensuring that payments of principal (including cash in the case of a cash redemption by the Issuer) and interest in respect of the notes received by the Trustee from the Issuer are duly paid to DTC or its nominee and (iii) transmitting to the Issuer any notices from Noteholders. Investors that are qualified institutional buyers may hold their interests in Restricted Global Notes directly through DTC if they are DTC Participants. which in turn will hold such interests in Regulation S Global Notes in customers’ securities accounts in the depositaries’ names on the books of DTC. or indirectly through organizations that are DTC Participants. will be considered the sole owner or Holder of the notes represented by such global note for all purposes under the Indenture and the notes. is the registered owner or Holder of such global note. the respective principal amount of the individual beneficial interests represented by such global note to the accounts of persons who have accounts with DTC. but the Issuer or Trustee or other agent may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. or an Event of Default (as defined above) has occurred and is continuing with respect to such note. Payments of the principal and interest on individual notes represented by a global note registered in the name of DTC or its nominee will be made to DTC or its nominee. will not receive or be entitled to receive physical delivery of notes in certificated form and will not be considered to be the owners or Holders of any notes under the Indenture or the notes. including transfers and pledges. Belgium time). and directly or indirectly through Euroclear or Clearstream participants. Cash received in Euroclear or Clearstream as a result of sales of interests in a global note by or through a Euroclear or Clearstream participant to a DTC Participant will be received with value on the DTC settlement date but will be available in the relevant Euroclear or Clearstream cash account only as of the Business Day following settlement in DTC. deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in Regulation S Global Notes in DTC. may be affected by the lack of a physical certificate for such interest. the securities account of a Euroclear or Clearstream participant purchasing an interest in a global note from a DTC Participant will be credited during the securities settlement processing day (which must be a business day for Euroclear or Clearstream. which is DTC’s nominee. The notes will be issued as fully registered senior notes registered in the name of Cede & Co. will be legended as set forth under “Transfer Restsrictions. a member of the Federal Reserve System. Transfers between participants in Euroclear and Clearstream will be effected in accordance with their respective rules and procedures. Such payments will be the responsibility of such DTC Participants. and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. Accordingly.” cross-market transfers between DTC. as the case may be. and the credit of any transactions in interests in a global note settled during such processing will be reported to the relevant Euroclear or Clearstream participant on such day. on the other.” DTC has advised the Issuer as follows: DTC will act as the depositary for the notes. as the case may be. by the counterparty in such system in accordance with its rules and procedures and within its established deadlines (Brussels. such cross-market transactions will require delivery of instructions to Euroclear or Clearstream. the ability to transfer beneficial interests in a global note to such persons may be limited because DTC can only act on behalf of DTC Participants. or otherwise take actions in respect of each interest. Euroclear or Clearstream. Because of time zone differences. the presentation of notes for transfer or exchange as described below) only at the direction of one or more DTC Participants to whose account with DTC interests in the global notes are credited and only in respect of such portion of the aggregate principal amount of the notes as to which such Participant or Participants has or have given such direction. However. in the limited circumstances described herein. and will be deposited with DTC.” See “—Certificated Notes. Transfers between DTC Participants will be effected in accordance with DTC rules and procedures and will be settled in same-day funds. will be effected in DTC in accordance with DTC rules and procedures on behalf of Euroclear or Clearstream. who in turn act on behalf of indirect participants and certain banks. however. Consequently. DTC is a limited-purpose trust company organized under the New York Banking Law. without limitation. if representing interests in the Restricted Global Notes. as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Subject to compliance with the transfer restrictions applicable to the notes described above and under “Transfer Restrictions. a “banking organization” within the meaning of the New York Banking Law. by its respective depositary. and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. in the aggregate principal amount of the issue. as the case may be. a “clearing corporation” within the meaning of the New York Uniform Commercial Code. if the transaction meets its settlement requirements. on the one hand.Participants to owners of beneficial interests in such global note held through such DTC Participants will be governed by standing instructions and customary practices. will.. The laws of some states require that certain persons take physical delivery of securities in definitive form. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositaries for Euroclear or Clearstream. which it will distribute to DTC Participants and which. Fully registered global notes will be issued for the notes. in deposited securities through electronic 36 . DTC holds securities that its participants deposit with DTC. as the case may be) immediately following the DTC settlement date. DTC will exchange the global notes for certificated notes in definitive form. DTC also facilitates the settlement among participants of securities transactions. the ability of a person having a beneficial interest in a global note to pledge such interest to persons or entities that do not participate in the DTC system. DTC has advised the Issuer that it will take any action permitted to be taken by a Holder of notes (including. ” The Issuer may decide to discontinue use of the system of book-entry transfers through DTC or a successor securities depositary. Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. Under such circumstances. Access to DTC’s system is also available to indirect participants. subject to any statutory or regulatory requirements as may be in effect from time to time. certificated notes will be printed and delivered. DTC is owned by a number of its direct participants and by the New York Stock Exchange. as the case may be. having the same maturity date and the same terms and conditions and of differing authorized denominations which will have the same aggregate principal amount. by direct participants to indirect participants.S. 37 . all global notes representing the notes which are deposited with.computerized book-entry changes to participants’ accounts. banks. the Registrar. such notes will bear. Neither DTC nor Cede & Co. will consent or vote with respect to the global notes representing the notes.. trust companies. Euroclear and Clearstream. Upon any exchange for certificated notes. Certificated Notes If DTC is at any time unwilling or unable to continue as a depositary for the reasons set forth under “— Global Notes” above and a successor depositary is not appointed by the Issuer within 90 days. To facilitate subsequent transfers. which may or may not be the beneficial owners. effect no change in beneficial ownership. banks and trust companies that clear through or maintain a custodial relationship with a direct participant. in the event that a successor securities depositary is not obtained. and these procedures may be discontinued at any time. that interests in Regulation S Global Notes will not be exchangeable for certificated notes until expiration of the 40-day distribution compliance period and receipt of certification of non-U. Inc. DTC may discontinue providing its services as securities depositary with respect to the notes at any time by giving reasonable notice to the Issuer or the Trustee. Cede & Co. the legend referred to under “Transfer Restrictions”.” Although DTC. Direct participants of DTC include securities brokers and dealers. The rules applicable to DTC and its participants are on file with the SEC. DTC are registered in the name of DTC’s nominee. they are under no obligation to perform or continue to perform these procedures.. The participants will remain responsible for keeping account of their holdings on behalf of their customers.’s consenting or voting rights to those direct participants to whose accounts the notes are credited on the applicable record date (identified in a listing attached to the omnibus proxy). beneficial ownership as described above. which names shall be provided by DTC’s relevant participants (as identified by DTC) to the Trustee. See “—Certificated Notes. or on behalf of. Euroclear and Clearstream have agreed to the procedures described above in order to facilitate transfers of interests in the global notes among participants of DTC. In the case of definitive notes issued in exchange for Restricted Global Notes. Under its usual procedure. thereby eliminating the need for physical movement of notes certificates. or an Event of Default has occurred and is continuing with respect to the notes. DTC has no knowledge of the actual beneficial owners of the global notes representing the notes. None of the Trustee. See “—Certificated Notes. DTC mails an omnibus proxy to the Issuer as soon as possible after the applicable record date. the Issuer elects to discontinue use of the system of book-entry transfers through DTC or a successor securities depository. The omnibus proxy assigns Cede & Co. the American Stock Exchange. and by direct and indirect participants to beneficial owners will be governed by arrangements among them. Inc. which includes securities brokers and dealers. any Paying Agent or the Issuer will have any liability or responsibility for the performance by DTC. the certificated notes shall be registered in the names of the beneficial owners of the global notes representing the notes. certificated notes are required to be printed and delivered. DTC’s records reflect only the identity of the direct participants to whose accounts the notes are credited. clearing corporations and certain other organizations. or on behalf of. and the National Association of Securities Dealers. The deposit of global notes with. either directly or indirectly. including the initial purchasers of the notes. Inc. however. and be subject to. In that event. in registered form in exchange for Regulation S Global Notes and Restricted Global Notes. Conveyance of notices and other communications by DTC to direct participants. DTC and their registration in the name of Cede & Co. provided. the Issuer will issue individual definitive notes. whether or not such note is overdue. The Trustee’s function is to exercise its rights and powers granted to it under the Indenture to protect the interests of the Holders. Trustee The Bank of New York Mellon is the Trustee. the Trustee will authenticate and deliver. loss or theft of such note. the Issuer will execute and. The Issuer may have normal banking relationships with The Bank of New York Mellon and its Affiliates in the ordinary course of business. If the Trustee resigns or is otherwise removed. Registrar. or will refuse to remove such legend. as may reasonably be required by the Issuer. the Issuer will deliver only definitive notes that bear such legend. in every case of destruction.The Holder of a definitive note may transfer such note by surrendering it at the office or agency maintained by the Issuer for such purpose in the Borough of Manhattan. The obligations of the Trustee to any Holder of notes are subject to such immunities and rights as are set forth in the Indenture. upon the Issuer’s request. that neither the legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act. The Trustee may resign at any time with notice. New York. lost or stolen. The address of the Trustee is 101 Barclay Street. NY 10286. loss or theft of such note and of the ownership thereof. and none of the Issuer. The City of New York. and. which initially will be the office of the Trustee or at the office of any Transfer Agent or the Registrar. in exchange and substitution for such note (upon surrender and cancellation thereof) or in lieu of and substitution for such note. Replacement of Notes In the event that any note shall become mutilated. defaced. and if they do not do so in a timely manner. The Trustee’s office is located at 101 Barclay Street. exchange or replacement of definitive notes bearing the legend referred to under “Transfer Restrictions. and bearing interest from the date to which interest has been paid on such note. as the case may be. destroyed. the Trustee and any agent of the Issuer or the Trustee may treat the person in whose name such note is registered as the owner or Holder of such note for the purpose of receiving payment of principal or interest on such note and for all other purposes whatsoever.” or upon specific request for removal of the legend on a definitive note. Neither the Trustee nor any Registrar or Transfer Agent shall be required to register the transfer of or exchange definitive notes for a period from the record date to the due date for any payment of principal of. 4E. The Trustee and any of its Affiliates may hold notes in their own respective names. the Company shall appoint a new trustee. Paying Agent and Transfer Agent under the Indenture. the applicant for a substitute note shall furnish to the Issuer and the Trustee security or indemnity satisfactory to them to hold each of them harmless. Upon the transfer. or interest on. registered in the same manner. United States. the Holders may appoint a new trustee. 4 East. The Indenture contains provisions for the indemnification of the Trustee and for its relief from responsibility. which may include an opinion of counsel. In the event that such note is destroyed. Prior to presentment of a note for registration of transfer (including a global note). New York 10286. the applicant shall also furnish to the Issuer and the Trustee satisfactory evidence of the destruction. the holders of a majority of the outstanding principal amount of notes may remove the Trustee at any time and the Company is required to remove the Trustee for certain causes. the Issuer. a new note of like tenor (including the same date of issuance) and equal principal amount. the notes or register the transfer of or exchange any notes for 15 days prior to selection for redemption through the date of redemption. Upon the issuance of any substituted note. lost or stolen. the Trustee or any agent of the Issuer or the Trustee shall be affected by notice to the contrary. the Issuer may require the payment by the registered holder thereof of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other fees and expenses (including the fees and expenses of the Trustee) connected therewith. unless there is delivered to the Issuer such satisfactory evidence. New York. 38 . 39 . registration under the Securities Act. the new notes are being offered and issued only: in the United States to qualified institutional buyers (as defined in Rule 144A) pursuant to Rule 144A under the Securities Act. other than U. except upon presentation of evidence satisfactory to the Issuer that the restrictions set forth herein have been complied with.TRANSFER RESTRICTIONS The new notes have not been registered. and the new notes may not be offered or sold except pursuant to an effective registration statement or pursuant to transactions exempt from. U. (3) it understands and agrees that new notes initially offered in the United States to qualified institutional buyers will be represented by a global note and that new notes offered outside the United States pursuant to Regulation S will also be represented by a global note. persons except as set forth below. the dealer manager and the solicitation agent and other persons will rely upon the truth and accuracy of the foregoing acknowledgements. (4) it will not resell or otherwise transfer any of such new notes prior to (i) the date which is one year (or such other period of time as permitted by Rule 144(d) under the Securities Act or any successor provision thereunder) after the later of the date of original issuance of the new notes and (ii) such later date. (c) outside the United States in compliance with Rule 903 or 904 under the Securities Act. Purchasers’ Representations and Restrictions on Resale and Transfer By exchanging its old notes for new notes. or for the account or benefit of. and outside of the United States. each recipient of new notes will be deemed to have represented and agreed as follows: (1) it is obtaining the new notes for its own account or an account with respect to which it exercises sole investment discretion and it and any such account is either (a) a qualified institutional buyer and is aware that the new notes are being issued to it pursuant to Rule 144A or (b) a non-U. (8) it acknowledges that we. in offshore transactions meeting the requirements of Rule 903 of Regulation S under the Securities Act. Accordingly. as may be required by applicable laws.S. (5) it agrees that it will give to each person to whom it transfers the new notes notice of any restrictions on transfer of such new notes. (d) pursuant to an exemption from registration under the Securities Act (if available) or (e) pursuant to an effective registration statement under the Securities Act.S. or not subject to.S. (6) it acknowledges that prior to any proposed transfer of new notes (other than pursuant to an effective registration statement or in respect of new notes sold or transferred either pursuant to (a) Rule 144A or (b) Regulation S) the holder of such new notes may be required to provide certifications relating to the manner of such transfer as provided in the indenture. except (a) to us or any of our subsidiaries (b) within the United States to a qualified institutional buyer in a transaction complying with Rule 144A under the Securities Act. under the Securities Act or any state securities laws. to certain persons. (7) it acknowledges that the trustee. (2) it acknowledges that the new notes have not been registered under the Securities Act or with any securities regulatory authority of any state and may not be offered or sold within the United States or to. persons. registrar or transfer agent for the new notes may not be required to accept for registration or transfer of any new notes acquired by it. person that is outside the United States. if any. representations and agreements and 40 . and will not be registered. THE TERMS “OFFSHORE TRANSACTION. SELL. and any offers to exchange will not be accepted from. OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE FOLLOWING SENTENCE. PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES (AS DEFINED IN REGULATION S) OR TO. (9) if it is acquiring the new notes as a fiduciary or agent for one or more investor accounts. (II) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BECOME EFFECTIVE UNDER THE SECURITIES ACT. EXCEPT TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF THE INDENTURE REFERRED TO HEREIN. EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO SUCH ACCOUNT. and (10)the exchange offer is not being made to. PLEDGE OR OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST HEREIN. it will promptly notify us and the dealer manager and solicitation agent. 41 . eligible holders of the old notes in any jurisdiction in which the making of such offer would not be in compliance with the laws and regulations of such jurisdiction. representations and agreements on behalf of each account. EXCEPT (A) (I) TO THE COMPANY OR ANY SUBSIDIARY THEREOF. AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN. (III) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT. PERSON” HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN “OFFSHORE TRANSACTION” PURSUANT TO RULE 903 OR 904 OF REGULATION S AND.agrees that if any of the acknowledgements. THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. PLEDGED. SOLD. representations and agreements deemed to have been made by its exchange of the new notes are no longer accurate. SOLD. AS USED HEREIN. A U. AS AMENDED (THE “SECURITIES ACT”)). PERSON (AS DEFINED IN REGULATION S). THIS SECURITY MAY NOT BE REOFFERED. it will be deemed to be removed. OR FOR THE ACCOUNT OR BENEFIT OF. (IV) IN AN OFFSHORE TRANSACTION COMPLYING WITH THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT.” “UNITED STATES” AND “U. If we so consent. This legend will only be removed with our consent. (2) AGREES FOR THE BENEFIT OF THE COMPANY THAT IT WILL NOT OFFER. The following is the form of restrictive legend which will appear on the face of the Regulation S Global Notes and which will be used to notify transferees of the foregoing restrictions on transfer: PRIOR TO EXPIRATION OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD (AS DEFINED IN REGULATION S (“REGULATION S”) UNDER THE SECURITIES ACT OF 1933.S. OR (V) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE). or on behalf of. AND ANY ACCOUNT FOR WHICH IT IS ACTING. WITH RESPECT TO (A) AND (B). (A) IS A “QUALIFIED INSTITUTIONAL BUYER” (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) OR (B) IS NOT A U. Legends The following is the form of restrictive legend which will appear on the face of the Restricted Global Notes and which will be used to notify transferees of the foregoing restrictions on transfer.S. AS AMENDED (THE “SECURITIES ACT”). THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT. OR ANY STATE OR OTHER SECURITIES LAWS. AND MAY NOT BE OFFERED. it represents that it has sole investment discretion with respect to each such account and it has full power to make the foregoing acknowledgements. and is only directed at. provided that no such offer of notes shall require us or any representative to publish a prospectus pursuant to Article 3 of the Prospectus Directive. as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State. Notice to Prospective Investors in the United Kingdom This listing prospectus is only being distributed to. to the extent implemented in the Relevant Member State) and includes any relevant implementing measure in the Relevant Member State. other than: (a) to any legal entity which is a qualified investor as defined in the Prospectus Directive. subject to obtaining the prior consent of the representative or representatives nominated by us for any such offer. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents. 150. or other evidence as may reasonably be required in order to determine that the proposed transfer is being made in compliance with the Securities Act and applicable state securities laws. published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. No representation is made as to the availability of any exemption from the registration requirements of the Securities Act. an offer to the public of any notes that are the subject of the offering contemplated by this listing prospectus may not be made in that Relevant Member State.” Notice to Prospective Investors in the European Economic Area In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each. certifications. the Company reserves the right to require the delivery of such legal opinions. For the purposes of this provision. persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive that are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (ii) high net worth entities. The applicable Resale Restriction Period may be extended in our discretion. (b) to fewer than 100 or. Notice to Prospective Investors in Mexico The notes have not been registered in Mexico in the Registro Nacional de Valores (National Securities Registry) maintained by the Comisión Nacional Bancaria y de Valores (National Banking and Securities Commission). or (c) in any other circumstances falling within Article 3(2) of the Prospectus Directive. and other persons to whom it may lawfully be communicated. in the event of one or more issuances of additional notes.Prior to the registration of any transfer in accordance with clause 2(A)(V) of the Restricted Global Note legend. falling within Article 49(2)(a) to (d) of the Order (each such person being referred to as a “relevant person”). “Prospectus Directive” means European Council Directive 2003/71/EC (and amendments thereto. and “2010 PD Amending Directive” means Directive 2010/73/EU. a “Relevant Member State”). and no action has been or will be taken that would permit the offer or sale of the notes in Mexico absent an available exemption under the Ley del Mercado de Valores (Mexican Securities Law). as described under “Description of the New Notes—General. including the 2010 PD Amending Directive. if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive. the expression an “offer of notes to the public” in relation to any notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offered so as to enable an investor to decide to purchase or subscribe for the notes. This listing prospectus and its contents should not be distributed. natural or legal persons (other than qualified investors as defined in the Prospectus Directive). 42 . with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”). transferred or delivered in or from the Netherlands. insurance companies. pension funds. the public in Hong Kong SAR (except if permitted to do so under the securities laws of Hong Kong SAR) other than with respect to notes which are or are intended to be disposed of to persons outside Hong Kong SAR or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor. Accordingly. invitation or document relating to the notes may be issued. investment institutions. or any person pursuant to Section 275(1) or Section 275(1A) of the Securities and Futures Act. (2) where no consideration is given for the transfer. central governments. any other applicable provision of the Securities and Futures Act. Individuals or legal entities who or which do not trade or invest in securities in the course of 43 . Chapter 289 of Singapore (“Securities and Futures Act”). sold. whether directly or indirectly. or any person pursuant to Section 275(1A).Notice to Prospective Investors in Hong Kong The new notes will not be offered or sold in Hong Kong SAR by means of any document other than to persons whose ordinary business is to buy or sell shares or debentures. Notice to Prospective Investors in Netherlands The new notes may not be offered. Where the new notes are subscribed or purchased under Section 275 of the Securities and Futures Act by a relevant person which is: (a) a corporation (which is not an accredited investor (as defined in Section 4A of the Securities and Futures Act)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals. of the new notes will not be circulated or distributed. or in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. treasuries and finance companies of large enterprises. whether as principal or agent. among others. nor will the new notes be offered or sold. or (3) by operation of law. each of whom is an accredited investor. and in accordance with the conditions of. 66 Notice to Prospective Investors in Singapore This listing prospectus has not been and will not be registered as a prospectus with the Monetary Authority of Singapore and the new notes are offered by us pursuant to exemptions invoked under Section 274 and Section 275 of the Securities and Futures Act. respectively. including. shares. securities firms. whether in Hong Kong SAR or elsewhere. this listing prospectus and any other document or material in connection with the offer or sale. to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act. or invitation for subscription or purchase. (ii) to a relevant person pursuant to Section 275(1). large international and supranational institutions and other comparable entities. or the contents of which are likely to be accessed or read by. 571) of Hong Kong SAR and any rules made thereunder. which is directed at. other than to banks. and in accordance with the conditions. and no advertisement. debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the new notes under Section 275 of the Securities and Futures Act except: (1) to an institutional investor under Section 274 of the Securities and Futures Act or to a relevant person. or be made the subject of an invitation for subscription or purchase. which trade or invest in securities in the course of their profession or trade. and in accordance with the conditions. specified in Section 275 of the Securities and Futures Act or (iii) otherwise pursuant to. specified in Section 275 of the Securities and Futures Act. 32) of Hong Kong SAR. directly or indirectly. and this listing prospectus or any other offering material relating to the new notes may not be considered an offer or the prospect of an offer to sell or exchange the new notes. 44 .their profession or trade may not participate in the offering of the new notes. The following is a general summary of the principal consequences. including the particular tax consequences to them in light of their particular investment circumstances.TAXATION The following is a general summary of certain Mexican federal and U. which could affect the continued validity of this summary. rulings and decisions of the United States available on or before this date and now in effect. Mexican Federal Taxation The summary below does not address all Mexican tax considerations that may be relevant to particular investors. municipality or taxing jurisdiction other than the federal income tax laws of the United States and the Mexican Federal Income Tax Law (Ley del Impuesto Sobre la Renta.S. possibly with retroactive effect. 45 . Circular 230 Disclosure. as currently in effect on the date of this listing prospectus and all of which are subject to change or to new or different interpretations. to which the holding of the new notes is attributable for tax purposes. FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON TAXPAYERS UNDER THE UNITED STATES INTERNAL REVENUE CODE. Holders of old notes should consult their own tax advisors as to the Mexican. TO ENSURE COMPLIANCE WITH INTERNAL REVENUE SERVICE CIRCULAR 230. as well as rules and regulations of Mexico and regulations. but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to exchange old notes for new notes in the exchange offer. (B) SUCH DISCUSSION IS WRITTEN IN CONNECTION WITH THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN. a “foreign holder” means a beneficial owner of the new notes that: is not a resident of Mexico for tax purposes. As used in this listing prospectus. Generally: an individual is a resident of Mexico if the individual has established his or her home in Mexico. under the provisions of the Mexican Income Tax Law. AND (C) TAXPAYERS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR. of the ownership and disposition of the new notes and the exchange of the old notes for new notes by a foreign holder. This summary is for general information only and is based on the federal tax laws of Mexico and federal income tax laws of the United States as in effect on the date of this listing prospectus. or other tax consequences (including tax consequences under any state or municipal law of Mexico or the United States or under any applicable double taxation treaty which is in effect) of participation in the exchange offer and of the ownership of the new notes. AND CANNOT BE RELIED UPON BY TAXPAYERS. For purposes of Mexican taxation. nor does it address the special tax rules applicable to certain categories of investors or any tax consequences under the tax laws of any state or municipality of Mexico. This summary does not describe any tax consequences arising under the laws of any state. and does not hold the new notes or a beneficial interest in the new notes through a permanent establishment in Mexico for tax purposes. All of the foregoing are subject to change. U. or the “Mexican Income Tax Law”). federal income tax consequences related to participation in the exchange offer as well as the ownership and disposition of new notes.S. TAXPAYERS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF UNITED STATES FEDERAL TAX ISSUES IN THIS LISTING PROSPECTUS IS NOT INTENDED OR WRITTEN BY US TO BE RELIED UPON. locality. tax residency is a highly technical definition that involves the application of a number of factors. is deemed a non-resident of Mexico for tax purposes. by persons related to us. if. including. directly or indirectly. an individual or corporation that does not satisfy the requirements to be considered a resident of Mexico for tax purposes. Capital Gains Resulting from the Exchange. In the event that the specified information or documentation concerning the holder or beneficial owner. Interest and Principal. may withhold Mexican tax from the interest payment on the new notes to that holder or beneficial owner at the maximum applicable rate.” 46 . or the subsidiary guarantors. receiving more than 5% of the aggregate amount of each interest payment under the new notes are (i) shareholders holding more than 10% of our voting stock. directly or indirectly. whether directly or indirectly. In the event that any of the foregoing requirements is not met. the following requirements are met: the new notes are placed outside of Mexico through banks or brokerage houses. or (ii) corporations or other entities having more than 20% of their stock owned. if the effective beneficiaries. a notice is filed before the CNBV describing the main characteristics of the new notes offering pursuant to Article 7 of the Mexican Securities Market Law (Ley del Mercado de Valores). after completion of the offering of the new notes.9%. severally or jointly with related parties. will be subject to Mexican withholding tax assessed at a rate of 10% or higher. and the information requirements specified from time to time by the Mexican Tax Management Service (Servicio de Administración Tributaria) under its general rules. For purposes of Mexican taxation. as expected. to a foreign holder. as described above. The application of Mexican tax law provisions to capital gains realized by a foreign holder as a result of the exchange is unclear. to provide certain information or documentation necessary to enable us to apply the appropriate Mexican withholding tax rate applicable to such holders or beneficial owners. Holders or beneficial owners of the new notes may be requested. payments of interest on the new notes (which interest would be deemed to include payments of principal in excess of the issue price of the new notes. but our obligation to pay Additional Amounts relating to those withholding taxes will be limited as described under “Description of the New Notes—Additional Amounts. and that permanent establishment will be required to pay taxes in Mexico in accordance with applicable Mexican tax laws. a permanent establishment in Mexico of a foreign person will be treated as a resident of Mexico for tax purposes. that under the Mexican Income Tax Law would be deemed interest) made by us or a subsidiary guarantor that is resident in Mexico for tax purposes. will generally be subject to a Mexican withholding tax assessed at a rate of 4. and a foreign person without a permanent establishment in Mexico will be required to pay taxes in Mexico in respect of certain income from a Mexican source. jointly or severally. in respect of all income attributable to such permanent establishment. if requested. is not timely provided or not provided completely or at all prior to the payment of any interest to that holder or beneficial owner. under the Mexican Income Tax Law. a legal entity is considered a Mexican tax resident if it maintains the main administration of its business or the effective location of its management in Mexico. we. the Mexican withholding tax will be applied at a higher rate. In addition. the filing of certain information related to the new notes offering and this listing prospectus are duly and timely complied with. in a country with which Mexico has entered into a treaty for the avoidance of double taxation which is in effect. we expect that there will be no tax consequences in Mexico to foreign holders as a result of their exchange of old notes for new notes. Under the Mexican Income Tax Law. subject to specified exceptions and limitations. However. payments of interest on the new notes made by us or by any subsidiary guarantor that is resident in Mexico for tax purposes to a foreign holder. Any determination of residency should take into account the particular situation of each person or legal entity. severally or jointly with related parties. As used in this listing prospectus. for U. or any subsidiary guarantor that is resident in Mexico for tax purposes. We have agreed. provided that: such fund is duly organized under the laws of its country of residence and is the effective beneficiary of the interest payment. subject to specified exceptions and limitations.” Under the Mexican Income Tax Law. or any subsidiary guarantor that is resident in Mexico for tax purposes with respect to the new notes to non-Mexican pension or retirement funds. that is. to pay Additional Amounts relating to the Mexican withholding taxes to foreign holders of the new notes. Dispositions. a corporation (or entity treated as a corporation for such purposes) created or organized in or under the laws of the United States. such income is exempt from income tax in such country. Gains resulting from the sale of the new notes by a foreign holder to a purchaser who is a Mexican resident for tax purposes or to a foreign holder deemed to have a permanent establishment in Mexico for tax purposes. See “Description of the New Notes—Additional Amounts. a “U. payments of principal on the new notes made by us.S. succession or gift taxes generally applicable to the purchase. are U. federal income tax consequences of the exchange offer and consent solicitation and the ownership and disposition of the new notes. federal income tax purposes: a citizen or individual resident of the United States. and such fund is registered with the Mexican Tax Management Service for that purpose. Other Taxes. as applicable. This summary is limited to beneficial owners of the old notes or the new notes. issuer registration or similar taxes or duties payable by foreign holders of the new notes with respect to the new notes.S. or any State thereof or the District of Columbia. The acquisition of the new notes at a discount by a foreign holder will be deemed interest income (in respect of such discount). as applicable. Under the Mexican Income Tax Law. 47 . will be exempt from Mexican withholding taxes. holder” means a beneficial owner of an old note or a new note. holders (as defined below). Gratuitous transfers of the new notes in certain circumstances may result in the imposition of Mexican income taxes upon the recipient. gains resulting from the sale or other disposition of the new notes by a foreign holder to another foreign holder are not taxable in Mexico.S. There are no Mexican stamp. that. and subject to Mexican withholding taxes. except as explicitly indicated below: acquire new notes pursuant to the exchange offer. payments of interest made by us. inheritance. if the seller is a Mexican resident for tax purposes or a foreign resident deemed to have a permanent establishment in Mexico. and hold the old notes and will hold the new notes as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986. as amended (the “Code”). there are no estate.S. to a foreign holder will not be subject to any Mexican withholding taxes. ownership or disposition of the new notes by a foreign holder.Under the Mexican Income Tax Law. Under current Mexican tax laws. Certain United States Federal Income Taxation Consequences The following is a summary of certain U. will be subject to Mexican federal income or other taxes pursuant to the rules described above in respect of interest payments. S.S. In the event that the early participation consideration is not treated as additional consideration received by a U. hedge or synthetic security.S. if either (x) it is subject to the primary supervision of a court within the United States and one or more “United States persons” has the authority to control all substantial decisions of the trust or (y) it has a valid election in effect under applicable U. holder’s early tender of old notes.S.S. federal income tax purposes without regard to its source. holder as part of the exchange. If a partnership (or an entity or arrangement classified as a partnership for U.S. We intend to treat any early participation consideration received by a U.S. Each beneficial owner of old notes or new notes should consult a tax advisor as to the particular tax consequences to it of participation in the exchange offer and of owning and disposing of such notes. and persons that hold the old notes or that will hold the new notes as part of a constructive sale. and a U. such as: entities that are tax-exempt for U. This discussion assumes that each beneficial owner of old notes and new notes will comply with the certification procedures described in “Description of New Notes— Additional Amounts” as may be necessary to obtain a reduced rate of withholding tax under Mexican law. the U.S. The U. 48 . Consequences of Tendering Old Notes for New Notes Early Participation Consideration Received in Connection with the Exchange. federal law on a beneficial owner of old notes or new notes. local or foreign tax laws. this summary does not address the effect of any U. wash sale. federal income tax treatment of the receipt of any early participation consideration received upon the exchange of old notes for new notes is uncertain.S. and dealers or traders in securities or currencies. Treasury regulations to be treated as a “United States person.S. federal income tax consequences of participation in the exchange offer and of owning and disposing of new notes. the remainder of this discussion assumes that the early participation consideration is so treated.S. federal income tax law. holder likely would recognize ordinary income in the amount of such early participation consideration. federal income tax purposes) holds old notes or new notes. persons having a “functional currency” other than the U. financial institutions. holder in connection with the exchange of old notes for new notes as additional consideration received by such holder as part of the exchange.S. federal income tax purposes) and beneficial owners of pass-through entities. such payments would likely be treated as a separate payment in the nature of a fee paid for such U. federal income tax purposes and retirement plans. and partnerships holding old notes should consult their own tax advisors regarding the U.S. federal income tax treatment of a partner in the partnership generally will depend on the status of the partner and the activities of the partnership. conversion transaction or other integrated transaction or a straddle. pass-through entities (including partnerships and entities and arrangements classified as partnerships for U. state or local tax law or any non-income tax U.S.S.S. an estate the income of which is includible in its gross income for U. or a trust. including the applicability and effect of any state.S. individual retirement accounts and tax-deferred accounts. expatriates. certain U. Finally. Unless otherwise stated.” This summary does not discuss considerations or consequences relevant to persons subject to special provisions of U. insurance companies. persons that are subject to the alternative minimum tax. dollar. holder. holder validly tenders old notes for new notes (and any cash received in lieu of a fractional portion of new notes) pursuant to the exchange offer. The determination of whether a debt instrument constitutes a security for such purposes is not defined in the Code or the U. which will be treated as ordinary income).General Consequences.S.S. a U.S. Treasury regulations to be issued but would be treated as accrued market discount with respect to the new notes received in the recapitalization. This exchange by a U.S.S. increased by any market discount previously taken into account as income by the U.S.S. corporate debt instruments with maturities when issued of five years or more are considered securities for such purposes.S. Each U.S. holder will be a fully taxable exchange unless the exchange qualifies as a recapitalization for U. holder on the exchange. then the Code provides that any accrued market discount in respect of the old notes (not previously included in income by such holder) in excess of the gain recognized in the recapitalization should not be currently includible in income under U. if any.S. holder is urged to consult its own tax advisor with respect to the U. holder as a “recapitalization” for U. holders are discussed below. a U. holder will be considered to have purchased its old notes at a market discount for U. which will generally be treated and taxed separately as such. There is only little authority that exists on the scope of the definition of “securities. holder will recognize gain or loss in an amount equal to the difference between (i) the issue price of the new notes (as discussed below under “—Issue Price and Qualified Reopening”) plus any cash received in lieu of fractional portions of new notes (excluding for this purpose. If the exchange does not qualify as a recapitalization. The U. The qualification of the exchange by a U. holder.S.S. including corporate recapitalizations. most authorities have held that the length of the term of a debt instrument is an important factor in determining whether the instrument is a security for such purposes. holder’s adjusted tax basis in the old notes tendered in exchange therefor. holder who elects to exchange old notes for new notes and other applicable consideration will generally (i) recognize gain realized (determined as described below under “—Non-Recapitalization Treatment”) on the exchange. holder’s adjusted tax basis in its old notes will generally equal the amount paid therefor. federal income tax consequences of participation in the exchange offer.S. we believe that the old notes and the new notes should constitute securities. A U. federal income tax consequences of recapitalization and non-recapitalization treatment to U. federal income tax purposes. any amounts received in respect of accrued interest on the old notes. the exchange will result in a sufficient change in yield with respect to the old notes such that the exchange will be treated as a significant modification to the old notes for U. Generally.S. holder upon a subsequent disposition (or repayment) of any such new notes would be treated as ordinary income to the extent of any accrued market discount in respect of the new notes (including amounts treated as such) not previously included in income. Although not free from doubt. Recapitalization Treatment.S.S. Non-Recapitalization Treatment.S.S. federal income tax purposes depends upon whether both the old notes and the new notes constitute “securities” for purposes of the Code’s provisions dealing with corporate reorganizations.S.S.S. If the exchange qualifies as a recapitalization. but will not recognize loss realized. on the exchange. but only to the extent of any cash received in lieu of a fractional portion of new notes.” and existing interpretations have not been entirely consistent. the old notes and the new notes should both be treated as issued with maturities of five years or more. federal income tax purposes. If a U. Any such gain will be capital gain (except to the extent of any accrued market discount on the old notes not previously included in income by the U. federal income tax purposes if such holder’s initial tax basis in its old notes was less than the stated principal amount of such old notes by more than a specified de minimis amount. holder purchased old notes at a market discount.S. (ii) have a holding period in the new notes received that includes the holding period of the old notes exchanged therefor. as discussed below under “—Accrued Interest”) and (ii) such U. While the determination depends upon an evaluation of the nature of the debt instrument. If a U. decreased by the amount of any cash received in lieu of fractional portions of new notes and increased by the amount of any gain recognized by the U. Treasury regulations. and (iii) have an initial tax basis in the new notes equal to the adjusted tax basis in the old notes tendered in exchange therefor.S. In this regard. and will be long-term capital gain if the old notes have been held for more than one year at the time of the exchange. Any such gain or loss recognized on the exchange will be capital gain (except to the extent of any 49 .S. holder and reduced by any amortizable bond premium previously amortized by the U. federal income tax purposes. Any gain recognized by a U.S. if any. A U. and the exchange of old notes for new notes plus any cash received in lieu of a fractional portion of new notes should qualify as a recapitalization for U. holder) will constitute income from sources outside the United States and generally will constitute “passive category income” for U. holder’s usual method of accounting for U. holder will include the amount of all Mexican taxes that we withhold (as described above under “—Mexican Federal Taxation”) from these payments made on the new notes. Interest and Additional Amounts paid on the new notes will constitute income from sources without the United States for U. holder that elects to deduct foreign taxes. paid in respect of Mexican withholding taxes imposed on interest payments on the new notes (as described in “Description of New Notes—Additional Amounts”) will be taxable to a U. foreign tax credit purposes. federal income tax purposes and (ii) the new notes are issued with no more than a statutorily defined de minimis amount of original issue discount for U. holders’ adjusted tax basis and holding period in the old notes not tendered should remain unchanged.S.S. federal income tax consequences of not participating in the exchange offer or consent solicitation. federal income tax consequences than those described herein. be eligible to claim the Mexican taxes withheld as a credit or deduction for purposes of computing its U.S. The new notes should form part of a “qualified reopening” of the existing notes for U. which was $1.S. holder may.S. U. federal income tax purposes. the availability 50 . U. The rules relating to the calculation and timing of foreign tax credits and. federal income tax purposes. holder of old notes exchanging such old notes for new notes are attributable to accrued interest on the old notes. Ownership and Disposition of the New Notes Interest and Additional Amounts. Additional Considerations.S. holder’s gross income for U. that the new notes will form part of such a qualified reopening. even though the payment of these taxes will be remitted by us. federal income tax purposes if (i) the existing notes are publicly traded for U. federal income tax purposes. holder (regardless of whether the exchange qualifies as a recapitalization) generally should be treated as U.S. federal income tax purposes. and will be long-term capital gain or loss if the old notes have been held for more than one year at the time of the exchange.S. if any. if the adoption of the proposed amendments is deemed to result in a significant modification of the old notes for U. Holders that Do Not Participate in the Exchange Offer or Consent Solicitation. holder. This foreign source income generally will constitute “passive category income” for U. U.S.S.S.S.S. and such holder’s initial tax basis in the new notes generally will equal the issue price of the new notes.S. Accrued interest income with respect to the old notes that is treated as paid as a result of the exchange (including accrued market discount not previously included in income by the U. In addition. in the case of a U. holders of the old notes that do not participate in the exchange offer or consent solicitation may be deemed to have exchanged their old notes for notes bearing the modified note terms. and you are urged to consult your tax advisor regarding the application of the rules to your particular circumstances. federal income tax purposes.S. and the remainder of this discussion so assumes.S. a U.000 principal amount. holders should consult their own tax advisors regarding the U. Interest on the new notes and Additional Amounts. foreign tax credit purposes. which will be treated as ordinary income) or loss. The amount of income taxable to a U. the deduction of capital losses may be subject to limitations. holder will have to report income in an amount that is greater than the amount of cash it receives from these payments on its new note. holder’s holding period for the new notes will begin on the day after the exchange. holders that do not participate in the exchange offer or consent solicitation should not recognize gain or loss in respect of old notes not tendered pursuant to the exchange offer.S.S.S. foreign tax credit purposes. holder as interest income if such accrued interest has not been included previously in the U. Such a characterization could result in significantly different U.S.S.S. federal income tax liability.S.S. holder as ordinary interest income at the time they are paid or accrued in accordance with the U. and such U. Issue Price and Qualified Reopening. However. foreign tax credits are complex. Accrued Interest.S. a U.S. foreign tax credit purposes (as discussed below under Ownership and Disposition of the New Notes – Sale. We expect.S. The U.000 per $1. Exchange. However.-source income or loss for U. To the extent that amounts received by a U. Any gain or loss recognized by a U. or Other Taxable Disposition).S. The rules governing U.S. Accordingly.S. Based on our position that the adoption of the proposed amendments should not result in a significant modification of the old notes for U.accrued market discount on the old notes not previously included in income by the U. Thus. such amounts will be includible in gross income by the U. U. subject to certain limitations.S.S. the issue price of the new notes should be the issue price of the existing notes.S.S. U. holder can apply the credit against U. holder would be considered to have amortizable bond premium equal to such excess. holder on the sale.S.S. then. therefore. exchange or other taxable disposition of a new note that is subject to foreign income tax. There are limitations on the deductibility of capital losses.S. foreign tax credits generally will not be allowed for Mexican taxes withheld from interest on certain short-term or hedged positions in the new notes. in general. exchange or other taxable disposition of a new note will generally be capital gain or loss and will be long-term capital gain or loss if at the time of the sale. Amortizable Bond Premium. holder who elects to amortize bond premium may offset each interest payment on such new notes by the portion of the bond premium allocable to the payment and must reduce its tax basis in the new notes by the amount of the premium so amortized. If a U. holder’s initial tax basis in the new notes calculated as described above.S. holder. increased by any market discount includible in income by the U. If any foreign income tax is withheld on the sale. you will recognize a capital loss equal to the amount of such premium when the new notes mature. exchange or other taxable disposition of a new note generally will be treated as U. In addition. source gain or loss for U.S. holder elects to deduct (rather than credit) all foreign income taxes paid or accrued during the taxable year.S. holder’s particular circumstances. Except to the extent of any accrued market discount on the new notes not previously included in income by the U. the amount realized by a U. The rules governing foreign tax credits are complex and. foreign tax credit purposes (except that accrued interest income with respect to the new notes that is treated as paid as a result of the disposition (including accrued market discount not previously included in income by the U. federal income tax payable on other income from foreign sources.S.S. the U.S. in an amount equal to such pre-issuance interest. involves the application of complex rules that depend upon a U. a U.S. as well as any debt instruments that you subsequently acquire. New notes received in the exchange offer will have an embedded entitlement to interest (“pre-issuance interest”) for the period from April 28.S. holder will generally recognize taxable gain or loss equal to the difference between the amount realized on the disposition (except amounts attributable to accrued but unpaid interest on new notes.S.S. exchange or other taxable disposition of its new notes. A portion of the interest received on the first interest payment date of a new note. Certain non-corporate U. Consequently. If you do not elect to amortize any bond premium and you hold the new notes to maturity. exchange or other taxable disposition of a new note. holder) will constitute income from sources outside the United States and generally will constitute “passive category income” for U. foreign tax credit purposes).S. Capital gain or loss.S.S. A U. which amounts will be treated as ordinary interest income to the extent not previously included in the U. if any. holder may take a deduction for the foreign income tax if the U. A U. 2012 (the most recent interest payment date on the existing notes) up to but excluding the settlement date.S. it generally will apply to all debt instruments that you hold at the time of the election. holders should consult their tax advisors regarding the availability of foreign tax credits in their particular circumstances.S. and reduced by any premium amortized by such holder with respect to the new notes. the U. the U. If you make the election. holder’s adjusted tax basis in the new notes immediately before the disposition. holder’s income) and the U. Unless a non-recognition provision applies and subject to the discussion below with respect to market discount. The adjusted tax basis of the new notes generally will equal the U.S. holder will include the gross amount of the proceeds of that sale. Sale. the application of the foreign tax credit rules to their particular situations. holder has an adjusted tax basis in its new notes immediately after the exchange which exceeds the stated principal amount of its new notes. holders (including individuals) are eligible for reduced rates of taxation on long-term capital gains under current law. exchange or other taxable disposition before deduction of such tax. with respect to which any gain will be treated as ordinary income.S. should be treated as a non-taxable return of such pre-issuance interest and not as a payment of interest on the new note. holder with respect to the new notes. holder may not be able to benefit from the foreign tax credit for the tax unless the U. holder may elect to amortize this premium using a constant yield method over the term of the new notes.S. you may not revoke the election without the consent of the U. holders should consult with their own tax advisors with regard to the availability of a credit or deduction in respect of foreign taxes and. in the case of a gain from the sale.of deductions. Internal Revenue Service (the “IRS”).S. In addition.S. U. 51 . gain or loss realized on the sale. upon the sale. in particular.S.S. exchange or other taxable disposition the new note has been held by the holder for more than one year.S. realized by a U. Alternatively. Exchange or Other Taxable Disposition. S. holder” means a beneficial owner of the new notes that is not. signed under penalty of perjury.8% tax on the lesser of (1) the U. furnishes an incorrect TIN.S. is attributable to a permanent establishment maintained by the non-U. federal income tax liability.S. unless those payments are effectively connected with the conduct by the non-U. or gain realized on the sale. unless that gain is effectively connected with the conduct by the non-U. U. holder.S. holder is not subject to backup withholding. a U. Holders For purposes of the following discussion a “non-U.S. Backup withholding applies only if the U.S. holder’s U. unless such interest income or net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). holder is an exempt recipient (such as a corporation). Backup withholding is not an additional tax.S. federal income or withholding tax on: interest and Additional Amounts received in respect of the new notes. holder that is an individual or estate.S. or a trust that does not fall into a special class of trusts that is exempt from such tax.S.S. In general. holder in the United States). For taxable years beginning after December 31.S. holders of new notes should consult their tax advisors as to their qualification for exemption from backup withholding and the procedure for obtaining such exemption. and may entitle such holder to a refund.S. if required by an applicable tax treaty. holder under the backup withholding rules is allowable as a credit against such U. holder’s “modified adjusted gross income” (in the case of individuals) or “adjusted gross income” (in the case of estates and trusts) for the taxable year over a certain threshold (which in the case of individuals will be between $125. holder’s “net investment income” (in the case of individuals) or “undistributed net investment income” (in the case of estates and trusts) for the relevant taxable year and (2) the excess of the U. Non-U.S. estates or trusts should consult their own tax advisors regarding the applicability of the Medicare tax to their income and gains in respect of the new notes. holder or a partnership (or entity or arrangement classified as a partnership for such purposes). a U. that the TIN provided is its correct number and that the U. for U. unless the U. the non-U.S. U.S.S.Information Reporting and Backup Withholding. depending on the individual’s circumstances).000.S. holders that are individuals. to provide a certified statement. if required by an applicable tax treaty.S. holder in the United States) or. holder of a trade or business in the United States (and. holder is present in the United States for 183 days or more in the taxable year of the disposition and certain other conditions are met. redemption or retirement of the new notes. Medicare Tax. A non-U. under certain circumstances. holder generally will not be subject to U.S. fails to report interest or dividends properly. holder’s net investment income generally will include its interest income on the new notes and its net gains from the disposition of the new notes. or fails. information reporting requirements will apply to payments of interest on the new notes and payments of the proceeds of the sale or other disposition of the new notes (including a redemption or retirement). are attributable to a permanent establishment maintained by the non-U. federal income tax purposes.S.S. provided that the required information is timely furnished to the IRS. A U.S.000 and $250. 52 . Any amount withheld from a payment to a U. will be subject to a 3. holder: fails to furnish its social security or other taxpayer identification number (“TIN”) within a reasonable time after a request for such information.S. holder of a trade or business in the United States (and. 2012.S. in the case of gain realized by an individual non-U. . With respect to certain matters governed by Mexican law.C. counsel. and for the dealer manager and solicitation agent by Simpson Thacher & Bartlett LLP.C. Simpson Thacher & Bartlett LLP may have relied on the opinion of Ritch Mueller.S. and for the dealer manager and solicitation agent by Ritch Mueller. 53 . Certain legal matters in connection with the exchange offer and consent solicitation were passed upon for us by Paul Hastings LLP. counsel to the dealer manager and solicitation agent.LEGAL MATTERS Certain matters relating to the validity of the new notes were passed upon by Díaz Estrada y Facha García. S. special Mexican counsel to the dealer manager and solicitation agent. our special U. S. special U. our special Mexican counsel.S. Authorization We have obtained all necessary consents. the CUSIP number is 21240B AA9. In addition. 2009 in reliance on Rule 144A under the Securities Act and will not be fungible for trading purposes with such existing notes. For the Rule 144A notes. paying agent and transfer agent. the CUSIP number is P3100S AA2. For the Regulation S notes. 54 . The new notes have not been registered with the Securities Section (Sección de Valores) of the National Securities Registry (Registro Nacional de Valores) and therefore. the ISIN number is US21240BAB71. We do not publish unconsolidated financial statements. the CUSIP number is 21240B AB7 and the common code is 079547468. Litigation We are not involved in any legal or arbitration proceedings (including any such proceedings which are pending or threatened) relating to claims or amounts which may have or have had during the 12 months prior to the date of this listing prospectus a material adverse effect on the financial position of Mabe and its subsidiaries taken as a whole. the new notes have been accepted for trading in book-entry form by DTC. as well as at the offices of the trustee. approvals and authorizations in connection with the issuance and performance of the new notes. there has been no material adverse change in the financial position or prospects of Mabe and its subsidiaries taken as a whole since December 31. the ISIN number is USP3100SAB09. the new notes may not be publicly offered or sold in Mexico. the new notes issued in reliance on Regulation S under the Securities Act will have different CUSIP and ISIN numbers than those of the existing notes issued on October 28. our published annual audited consolidated financial statements and any published quarterly unaudited consolidated financial statements will be available at our expense at our principal executive offices. registrar. 2011. Until the first anniversary of the settlement date. No Material Adverse Change Except as disclosed in this listing prospectus. We will maintain a paying and transfer agent in Luxembourg for so long as any of the new notes are listed on the Luxembourg Stock Exchange. We believe the auditor’s reports included herein have been accurately reproduced. and until 40 days after settlement date. the first supplemental indenture. the CUSIP number is P3100S AB0 and the common code is 079547506. the ISIN number is USP3100SAA26 and the common code is 023592258. the indenture. 2009 pursuant to Regulation S under the Securities Act and will not be fungible for trading purposes with such existing notes. the ISIN number is US21240BAA98 and the common code is 023592223. the new notes issued pursuant to Rule 144A under the Securities Act will have different CUSIP and ISIN numbers than those of the existing notes issued on October 28. Copies of our bylaws. For the Regulation S existing notes. as may be amended or supplemented from time to time. Listing Application has been made to list the new notes on the Official List of the Luxembourg Stock Exchange and to trading on the Euro MTF Market. as such addresses are set forth in this listing prospectus. and at the offices of the Luxembourg listing agent.GENERAL INFORMATION Clearing Systems The new notes have been accepted for clearance through Euroclear and Clearstream. paying agent and transfer agent. For the Rule 144A existing notes. ............................................................................................................................. A-53 Management ................................................................................ A-2 Service of Process and Enforcement of Civil Liabilities ...............................................................................................ANNEX A INFORMATION ABOUT THE COMPANY TABLE OF CONTENTS Page Available Information..................................... A-24 Management’s Discussion and Analysis of Financial Condition and Results of Operations ................... A-80 Index to Financial Statements ...................................................................................................................................... A-6 Summary............................................................ A-79 Independent Accountants ................................................................... A-3 Cautionary Statement Regarding Forward-Looking Statements .......................................................page numbering A-1 ............................................................................... F-1 o Not Delete this Hidden Paragraph – it is needed for A..................................................................................................... A-23 Selected Consolidated Financial Information ................................................................................................................................................................................................................................................. A-4 Presentation of Financial and Other Information.......................................................................................................................... A-9 Capitalization ............................................................................................... A-31 Business ................................................................. A-74 Principal Shareholders and Related Party Transactions .................................................................................................................................................................................... with information meeting the requirements of Rule 144A(d)(4) if at the time of the request we are neither a reporting company under Section 13 or Section 15(d) of the Exchange Act. This listing prospectus forms. copies of the new notes indenture as well as this listing prospectus and annual audited consolidated financial statements prepared in conformity with MFRS (as defined herein).S.” following completion of the exchange offer and the consent solicitation. Mexico and our telephone number is +52(55) 9178-8267. Application has been made to list the new notes on the Official List of the Luxembourg Stock Exchange and to trade on the Euro MTF Market. at the corporate trust office of the Trustee at our expense. Except as otherwise set forth under “Description of the New Notes — Covenants—Reporting Requirements. we are not otherwise obligated to furnish holders or others with any supplemental information. such information will be available at our specified offices and (for so long as the new notes are listed on the Luxembourg Stock Exchange) that of the Luxembourg Paying Agent. We will be required to comply with any undertakings given by us from time to time to the Luxembourg Stock Exchange in connection with the new notes. 11000 Mexico D. 3rd Floor. discussion or analysis of our business or financial reports. Lomas de Chapultepec. We will make available to the holders of the notes. as amended (the “Exchange Act”). Palmas 100. and to furnish to it all such information as the rules of the Luxembourg Stock Exchange may require in connection with the listing of the new notes. Information is also available at the office of the Luxembourg Listing Agent. we have agreed that we will promptly provide any holder or any prospective purchaser of the new notes who is designated by that holder and is a “qualified institutional buyer. in all material respects. We will also make available at the office of the Trustee our unaudited quarterly consolidated financial statements prepared in accordance with MFRS. To preserve the exemption for resales and transfers under Rule 144A under the Securities Act. upon the request of such holder or prospective purchaser. For so long as the new notes are outstanding. the listing prospectus for admission to the Luxembourg Stock Exchange.” as defined under Rule 144A.F.AVAILABLE INFORMATION We are not subject to the reporting requirements of the U. A-2 . Securities Exchange Act of 1934. Our principal executive offices are located at Av.. nor exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act. that there is doubt as to the enforceability. A-3 . See “Risk Factors—Risks Related to Mexico and the Countries Where We Operate—It may be difficult to enforce civil liabilities against us or our directors and executive officers” in this listing prospectus. a significant portion of the assets of our directors. executive officers and major shareholders reside outside of the United States.SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES We are a sociedad anónima de capital variable (a limited liability variable capital corporation) organized under the laws of Mexico. We have been advised by our Mexican counsel. of liabilities predicated solely on United States federal securities laws and as to the enforceability in Mexican courts of judgments of United States courts obtained in actions predicated upon the civil liability provisions of United States federal securities laws. Díaz Estrada y Facha García. executive officers and controlling persons and substantially all of our assets are located outside of the United States. in original actions in Mexican courts. As a result. it may not be possible for you to effect service of process within the United States upon these persons or to enforce against any of them or us in United States courts judgments predicated upon the civil liability provisions of the federal securities laws of the United States. Many of our directors. ” “anticipates. and we assume no obligation to update any forward-looking statement or risk factor. Many of the factors that will determine these results and values are beyond our ability to control or predict. risks inherent in international operations. In this context.” “believes. the economic trends in the countries or the markets in which we operate.” “estimate.” “will. and other factors described under “Risk Factors” and elsewhere in this listing prospectus. business and financial performance.” “may. not past. and often contain words such as “expects. events. forward-looking statements often address our expected future prospects. changes to the North American Free-Trade Agreement or other trade agreements between the countries in which we operate. any adverse development in our relationship with General Electric Company.” “forecast. objectives or goals. based on information available to us as of such date.” “predict.CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This listing prospectus contains forward-looking statements. the economy and other future conditions.” “guideline. Forward-looking statements are based on our current expectations and assumptions regarding our business. statements about our future economic performance or that of Mexico or other countries in which we operate.” Examples of forward-looking statements include: statements of our plans. including those relating to anticipated trends. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements.” “intends.” “project. Forward-looking statements are based on our current expectations and assumptions regarding our business. the economy and other future conditions. the competitive environment in which we operate.” “target. and statements of assumptions underlying these statements. the terms of laws and government regulations that affect us and interpretations of those laws and regulations.” “could” or “would.” “should. including any loss of business from them. Forward-looking statements are statements related to future. Factors or events may emerge that could cause our actual results to differ from the forward-looking statements in this listing prospectus and it is not possible for us A-4 . availability and price volatility in the cost of raw materials and energy. All forward-looking statements and risk factors included in this listing prospectus are made as of the date on the front cover of this listing prospectus. developments.” “seeks. whether as a result of new information or future developments. regulation and government policy and rates. Important factors that could cause our results to differ materially from those in our forward-looking statements include the following: cyclicality in demand for our products.” “plans. competition. A-5 . For all of the reasons above. you are cautioned against placing undue reliance on forward-looking statements.to predict all of them. 2010 and 2011 (the “Audited Financial Statements”) and our unaudited interim condensed consolidated financial statements as of March 31. the Financial Statements and other financial information for the period ended December 31. As a result of the adoption of IFRS. For the period ended December 31. however. An analysis of the principal differences between IFRS and MFRS and an estimate of the effect of IFRS on our consolidated opening balance sheet as of January 1. We prepare the Financial Statements in accordance with Mexican Financial Reporting Standards (“MFRS”). our consolidated transitional balance sheet as of December 31. 2009 included in this listing prospectus are presented in U. GAAP.S. 2011 and our unaudited interim balance sheet as of March 31. We are not providing any reconciliation to U. dollars. For comparison and presentation purposes.PRESENTATION OF FINANCIAL AND OTHER INFORMATION Financial Information This listing prospectus contains our audited consolidated financial statements as of and for the years ended December 31.S. GAAP of the Financial Statements or other financial information in this listing prospectus. A-6 . however. 2012. 2012 and for the three months ended March 31.S. given that the functional currency of our operations is the U.S.S. dollar (which we began using as of January 1. Since we are currently in the process of converting our financial statements to IFRS. 2010). 2012 is set forth in Note 3 to the Annual Financial Statements and to the unaudited Interim Financial Statements included elsewhere in this listing prospectus. 2012. 2012. dollar. which we believe will result in an increase in the value of our property. We cannot assure you that a reconciliation would identify material quantitative differences between the Financial Statements or other financial information as prepared on the basis of MFRS if such information were to be prepared on the basis of U. We will be reporting under International Financial Reporting Standards (“IFRS”) for the year ended December 31. IFRS differs in certain significant respects from MFRS and U. we believe that the primary impact of this accounting change on our financial statements will be (i) the revaluation of our fixed assets. GAAP”). 2011. it is not yet possible to determine in a definitive manner the possible effects that IFRS will have on our financial information. may differ from those applied in preparing the IFRS financial information included herein. 2009) to the U. Moreover. GAAP. our consolidated financial information presented under IFRS for fiscal year 2012 may not be comparable to our financial information for previous periods prepared under MFRS. the “Financial Statements”).S. 2010. MFRS differs in certain significant respects from accounting principles generally accepted in the United States (“U. the date for reporting our first set of financial statements under IFRS. machinery and equipment and our total assets and an increase in our depreciation and amortization expense. the International Accounting Standards Board (“IASB”) standards and International Financial Reporting Standards Interpretation Committee (“IFRIC”) interpretations used to prepare the IFRS financial information included in the Financial Statements were those issued and effective as of March 31. 2009. we changed the reporting currency used in preparing our financial statements from the Mexican peso (which we used through December 31. 2012. as promulgated by the Mexican Financial Reporting Standards Board (Consejo Mexicano para la Investigación y Desarrollo de Normas de Información Financiera). 2011 and 2012 (the “Interim Financial Statements” and.S. together with the Audited Financial Statements. the IFRS standards and IFRIC interpretations that will be applicable at December 31. (ii) an increase in our liabilities associated with employee benefits and (iii) an increase in our deferred income tax liabilities resulting principally from the adjustments described in (i) and (ii). including those that will be applicable on an optional basis. with an official IFRS adoption date of January 1. References to “export sales” are references to sales of products manufactured in one country and sold to a customer located in a different country. (“Mabe Brazil”). we have included certain adjusted financial information in this listing prospectus that excludes the non-controlling interest in Mabe Brasil Eletrodomésticos. In managing our business we rely on EBITDA as a means of assessing our operating performance. We believe that EBITDA enhances the understanding of our financial performance and our ability to satisfy principal and interest obligations with respect to our indebtedness as well as to fund capital expenditures and working capital requirements because it excludes the effect of (i) income tax.In this listing prospectus and in the Financial Statements. determined in accordance with MFRS. (iii) certain financing costs.37% non-controlling ownership interests of Mabe Brazil. References to “Ps. when trying to understand our operating performance. which are significantly affected by external factors. such as MFRS. or to cash flow from operating activities. net (which primarily consists of non-recurring items). financial position or cash flows but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measure. including interest rates. which are finished products that we import from suppliers. a group of Mexican shareholders and a group of Brazilian shareholders hold the remaining 41. references to “US$” and “U. which represents a non-cash charge to earnings and (v) participation in the results of joint venture. it does not represent cash generated from operating activities in accordance with MFRS and should not be considered as an alternative to net income (loss). We also disclose in this listing prospectus “EBITDA. however. Where indicated. investing activities and financing activities.63% ownership interest in Mabe Brazil and. as a measure of our liquidity. foreign currency exchange rates and inflation rates. which is a non-GAAP financial measure. (ii) other expenses.” and “pesos” are to the lawful currency of Mexico. in which we currently hold a 58.” A non-GAAP financial measure is generally defined as one that purports to measure historical or future financial performance. references to “domestic sales” are references to sales of products produced and sold in the same country and sales of sourced products. is commonly referred to as “GAAP. While EBITDA is a relevant and widely used measure of operating performance. EBITDA. determined in accordance with MFRS. (iv) depreciation and amortization. General Electric Company. along with net income and cash flow from operating activities. nor is it indicative of funds available A-7 .” which is not a financial measure recognized under GAAP. You should review EBITDA.S. is not a measure of financial performance under MFRS and should not be considered as an alternative to net income or operating income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. as an indication of our financial performance. Totals in some tables in this listing prospectus may differ from the sum of individual amounts in those tables due to rounding.63% ownership interest. This adjusted financial information reflects our proportionate 58. We disclose in this listing prospectus certain adjusted financial information that excludes the non-controlling interest in Mabe Brazil. which we believe have little or no bearing on our operating performance. Ltda. dollars” are to the lawful currency of the United States. we believe it more accurately reflects our economic participation in Mabe Brazil’s financial results and is consistent with similar adjusted financial information we have provided to our bondholders in the past. Note Regarding Non-GAAP Financial Measures A body of generally accepted accounting principles. Currency Information Unless otherwise specified. therefore. The words “estimated. income taxes. “Combined market share” means unit sales of particular white line products we have sold in a market over total unit sales of those particular white line products in that market. For a reconciliation of EBITDA to consolidated net income (loss) under MFRS for the years ended December 31. which we used to prepare the Financial Statements. 2011 and 2012. “Average weighted combined market share” means the weighted average of our market shares for various products in the relevant markets. 2009. The components of EBITDA presented herein relate to MFRS. Our calculation of EBITDA may not be comparable to other companies’ calculation of similarly titled measures. Our estimates for Central America and South America are based exclusively on our beliefs and on information we have obtained ourselves and not from independent sources. depreciation.” Industry and Market Data A substantial portion of the data and other statistical information used throughout this listing prospectus is based on our estimates. as well as independent sources.to fund our cash needs. EBITDA has material limitations that impair its value as a measure of our overall profitability since it does not address certain ongoing costs of our business that could significantly affect profitability such as financial expenses. 2010 and 2011 and the three months ended March 31. The non-GAAP financial measures described in this listing prospectus are not a substitute for GAAP measures of financial performance. amortization and the impact of financial derivatives (except for derivatives classified as hedging). which are derived from our review of internal surveys. see “Summary––Summary Consolidated Financial Data” and “Selected Consolidated Financial Information.” “believe” and “approximate” when used in this listing prospectus with respect to market share should be interpreted in light of the foregoing. All market share information presented in this listing prospectus is based on unit sales. A-8 . Although we believe our sources and estimates are reliable. we have not independently verified the information or data from third parties and cannot guarantee the accuracy or completeness of such information from third parties or the information and data we have obtained ourselves. 2012. GE is also our principal customer based on aggregate product sales. Since 1987. and GE licenses to us trademarks and patents for our products and provides us access to relevant technology used in the manufacture of our products. We also distribute built-in ovens and hoods. Our Business We are a holding company with subsidiaries involved in the manufacture. North American Operations Mexico We are the leading distributor and manufacturer of white line products in Mexico with an approximate 43% average weighted combined market share in 2011. Io Mabe. 37% market share for refrigerators and 35% market share for washing machines.” We have operations throughout North. Hotpoint. Our products are sold primarily in Mexico. Canada. water coolers. For the three months ended March 31. operating income of US$25 million and EBITDA of US$60 million. Pursuant to our joint venture agreement. We have eight manufacturing facilities in Mexico and nine other manufacturing facilities. 2012. where we operate through our 58. unless the context otherwise requires.V. GE Café. Atlas. Continental and various local brand names.63% interest in Mabe Brazil). dishwashers.” “the Company” and “Mabe” refer to Controladora Mabe. including the Financial Statements and related notes and other financial data appearing elsewhere herein.” “us.A. compared to US$176 million for the comparable period in 2011. Central and South America (including Brazil. compared to US$854 million. refrigerators. the United States. We market our products in Mexico under the GE.SUMMARY This summary may not contain all of the information that is important to you. Central America and South America under the following brand names: GE.41% equity interest in our company. commonly referred to as “white line products. A-9 . In 2011. Additionally. the terms “we. before making a decision whether to participate in the exchange offer and the consent solicitation. S.” “our. Moffat. in part through our partnership with GE. our consolidated domestic net sales for our Mexican operations were US$715 million. our consolidated domestic net sales for our Mexican operations were US$159 million. distribution. respectively. for the comparable period in 2011. Throughout this listing prospectus. Io Mabe. we had consolidated net sales of US$3. We believe we have leading market shares in most of the countries where we operate. we have improved our manufacturing processes and operating performance by applying GE’s continuous improvement techniques. Net sales to GE accounted for 21% of our consolidated net sales in 2011 and 23% of our consolidated net sales for the three months ended March 31. In 2011. and its subsidiaries. Mabe. which holds a 48. microwave ovens and related parts and components under various brand names. 2012. sale and servicing of ranges. we have operated as a joint venture with General Electric Company (“GE”). GE Monogram. Mabe and other well-known local brand names. de C. For the three months ended March 31. Dako. we had consolidated net sales of US$931 million. operating income of US$49 million and EBITDA of US$211 million. You should read carefully the entire listing prospectus. GE Profile.660 million. clothes dryers and washing machines. US$9 million and US$45 million. consisting of approximately 64% market share for ranges. 2012.4 million units to the U. market. we plan to gradually close this plant between now and the end of 2014. represented exports to GE for sale in the United States. compared with 352.. In addition to exports to the United States from Mexico.S.772 units to the U. 2012. compared to 3% for the comparable period in 2011. we are the primary supplier of clothes dryers to GE in the United States sold under the GE. For the three months ended March 31. our consolidated net export sales on a global basis were US$934 million. Canada and Mabe Canada Inc. accordingly. we exported approximately 193. our manufacturing business unit located in Montreal. We believe we had an approximate 3% market share for white line products when operations started in Chile and that our market share in Chile climbed to approximately 12% by the end of 2011. or 83%. Argentina and Mexico under the Mabe and GE brand names. Andean Region Operations We are also a leading manufacturer and distributor of white line products in Colombia. represented exports to GE for sale in the United States. or 85%. GE mainly markets our products under various GE brand names and the Hotpoint brand name. (“Mabe Canada”). In 2011.Exports We exported approximately 1. Peru. or 83%. represented exports to GE for sale in the United States. we initiated distribution operations in Chile. market from our facilities in Mexico under our joint venture agreement with GE in 2011. 2012. of which US$216 million. Through our Canadian operations.. compared to US$212 million for the comparable period in 2011. Production of dryers from the Montreal plant will be consolidated into our existing facilities in Mexico. introducing white line products manufactured in Colombia. In the United States. Mexico. In August 2008. we also exported approximately 778. we exported approximately 418.001 units to other countries.702 units for the comparable period in 2011. which is currently operating at half of its capacity. of which US$776 million. We currently do not have manufacturing facilities in Venezuela. Net sales to Venezuela represented 4% of our total sales in the three months ended March 31. Brazil. For the three months ended March 31. of which US$178 million. A-10 . Ecuador. compared with approximately 153. nor will it have an impact on the supply of products to customers. is no longer financially viable and. GE Profile and GE Monogram brand names. We have recently determined that our Montreal plant. our commercial business unit located in Burlington.236 additional units to other countries in 2011. our consolidated net export sales on a global basis were US$254 million. distribution and support division in Canada under our commercial business unit operated by MC Commercial Inc.552 units for the comparable period in 2011. We have manufacturing facilities in Colombia and Ecuador which serve as the primary source of products for the Andean Region markets. Canada. This decision will not impact our sales. Canada We conduct our Canadian operations through MC Commercial Inc. Chile and Venezuela (the “Andean Region”).S. In the Canadian market. For the three months ended March 31. We recently entered into a new Dryer Manufacturing Agreement with GE which involves the relocation of our dryer production from Montreal to Saltillo. in addition to these brand names. where we believe our combined market share for white line products was approximately 29% in 2011. we also sell dryers under the Hotpoint and Moffat brand names. 2012. A. we had become Mexico’s leading exporter of white line products. create. built-in kitchenettes and breakfast units.63% ownership interest. we manufacture ranges. By 1968. S. (“Atlas”). a Brazilian subsidiary of the German company BSH Bosch und Siemens Hausgeräte GmbH. S. Mexico in 1982 with two plants that produce plastics and steel die-stamping components used in ranges and refrigerators. Today. refrigerators and washing machines for the Brazilian and Argentinian markets and for export to other countries. Controladora Mabe. which were quickly followed by the production of our first ovens. which conducted Bosch’s trademark white-line appliance operations in Brazil. was incorporated on November 18. At the end of 2010. de C. We produced our first single-door refrigerators in 1964 and during the 1960s began to increase our share of the Mexican domestic market as well as expand into the export market. Guatemala. we began to establish branches and distribution centers throughout Mexico. We also own two manufacturing plants in Argentina that produce ranges and refrigerators. Costa Rica. Atlas manufactures and sells its products under popular regional brand names. and more A-11 . establish and operate plants. which manufactures ranges and refrigerators at its Heredia manufacturing facility in Costa Rica. Through Mabe Brazil’s three manufacturing facilities. We believe Mabe Brazil had an approximate 22% market share in Brazil in 2011. Our operations in Brazil were strengthened in 2010 when we integrated BSH Continental Eletrodomésticos LTDA. we were producing our first gas ranges. We began operations in Querétaro. we acquired Atlas Electrica. In 1997. we manufacture gas ranges. Our corporate purpose is to participate in the capital of all types of companies. we expanded our Central American operations into El Salvador. Ltda. and had successfully penetrated the Venezuelan and certain Central American markets. and various other legal activities related to the production and distribution of our products. 2012.A. grills. We believe it is the primary supplier of ranges and refrigerators in Central America. such as Atlas and Cetron.660 million in 2011 and US$931 million for the three months ended March 31. in 1946 and began production of kitchen fittings in Mexico in the 1940s. History and Development Our predecessor was incorporated in Mexico as Industrias Mabe. refrigerators and washing machines for the Brazilian domestic market under various GE and local brand names. buy and sell white line products. During the 1950s and the 1960s. de C. By 1953. S. to produce and sell front load washing machines in Argentina under local Mabe brand names. a leading manufacturer of white line products in Central America. (formerly BSH Continental Eletrodomésticos LTDA) in which we have a 58. 1981 for a period of 99 years.Brazil and Argentina Operations In Brazil and Argentina. we consolidated our three Brazilian operations into Mabe Brasil Eletrodomésticos.V.V. We believe that our combined market share in 2011 in each of the markets in which we operate in Central America was approximately 50% based on our own estimates. we are a multinational company with operations throughout the Americas with total sales of US$3. Central American Operations We have operated in the domestic markets in Central America and exported white line products to Central America and the Caribbean from Mexico since 1960. In February of 2008.A. Honduras and Panama. We believe that our market share in 2011 was approximately 18% in Argentina. We recently entered into a strategic alliance with Midea Group. prototyping and product development projects. We are the leading distributor and manufacturer of white line products in Mexico with an approximate 43% average weighted combined market share in 2011. In Canada. Exceptional Sourcing Network We have developed a close relationship with suppliers by integrating procedures and improving communication channels to ensure the consistency of our operations. Our Technology and Project Center also operates in partnership with GE’s Research and Development Center located in Louisville. In addition. where we believe we have the second largest market share position. we have a preferred raw material sourcing arrangement with GE’s suppliers that gives us access to raw materials at the same costs and under the same conditions as GE.400 employees throughout the Americas. consisting of approximately 64% market share for ranges. We believe that our brand name portfolio helps us to maintain our market share position and creates significant barriers to entry for potential competitors. this R&D center has achieved numerous product innovations that have translated into value creation for our company. We believe our strong relationships with leading distributors through the region support our position as a market leader. Dako and Continental (Brazil) and Patrick (Argentina). and middle. we sell dryers under the GE. Centrales (Colombia). Competitive Strengths Strong Brand Awareness and Presence Throughout the Americas We have a strong brand portfolio with leading brand names such as GE. México to carry out our research and development (“R&D”) activities. World Class R&D Facilities Our competitive position is enhanced by our access to world-class research and development facilities. Inresa (Peru). our products are sold under various GE brand names. our widely-recognized brand names have leading market shares in all countries in which we operate other than Canada. allowing us access to world-class design and technology data. Because most of our products are manufactured in Latin America where labor costs are generally lower.than 22. Regina (Venezuela). Kentucky. Durex (Ecuador). In the United States. we established the Technology and Project Center in Querétaro.and lower-end white-line products under local brand names such as IEM (Mexico). this R&D center hosts laboratories and design shops where more than 400 engineers work on engineering. Approximately two-thirds of our employees are members of labor unions.000 square feet and equipped with the latest technology. we are able to employ a high-skilled labor force with a relatively low cost compared with A-12 . In addition. Atlas and Cetron (Central America). we sell high-end white line products under the GE and IoMabe brand names. Brazil and Argentina. In Mexico and other countries in Latin America. With an area of more than 60. In 1994. due to our relationship with GE. Over the past few years. Our purchasing activities are centralized. which results in large part from the strategic positioning and operation of our 17 manufacturing facilities to achieve greater operating efficiencies. Strategically Located Manufacturing Facilities and Dynamic Manufacturing Process We believe we have a very competitive cost structure. 37% market share for refrigerators and 35% market share for washing machines. middle-market white line products under the Mabe and Easy brand names. Hotpoint and Moffat brand names. GE Monogram and Mabe that have high levels of awareness with consumers. which provides us with a stronger negotiating position with respect to raw material sourcing. .. Washing machines ............................ Total.. We believe this diversification puts us in a good position to drive growth and competitiveness to capture market opportunities and effectively mitigate any adverse consequences that could result from economic downturns......... Ranges .. compared with EBITDA of US$45 million for the comparable period in 2011.. 2012. Our consolidated net sales were US$3. 2011 (adjusted for noncontrolling interest in Mabe Brazil) Total Mabe 43% 43% 32% 32% 11% 11% 6% 6% 8% 8% 100% 100% Our EBITDA by region of operation and the percentage contribution of each region to our consolidated EBITDA is set forth in the table below for the periods indicated: EBITDA by region Three months ended Year ended December 31.. 2012.... Other ............................................................ We use a portion of our capital expenditures to invest in the development of procedures that shorten product manufacturing and development times........ compared with consolidated net sales of US$854 million for the comparable period in 2011........................ our manufacturing facilities are strategically located to minimize transportation costs and strengthen the link between distributors and our customers....................................... March 31........... 137 43 17 65 21 8 34 22 2 56 37 3 A-13 ...... Product and Geographic Diversity Our sales are diversified both by product type and by geographic market....660 million in 2011 and US$931 million for the three months ended March 31......... which allows us to respond faster and to be more closely in touch with the needs of our distributors and our customers....... Our consolidated net sales by product are set forth in the table below for the periods indicated: % of net sales Three months ended March 31.... We believe that these procedures have also led to better inventory management that.............. At our manufacturing facilities.. Canada ..... has had a positive effect in our cash conversion cycle.................. 2012 2011 (US$ in millions) % (US$ in millions) % Mexico(1) ........ 2011 2012 (adjusted (adjusted for nonfor noncontrolling controlling interest in interest in Mabe Mabe Total Total Brazil) Brazil) Mabe Mabe 44% 43% 41% 42% 33% 32% 34% 34% 11% 11% 11% 11% 5% 6% 6% 7% 7% 7% 8% 6% 100% 100% 100% 100% Product Refrigerators ..... we have incorporated a dynamic manufacturing process that allows us to adapt and incorporate new market trends and technologies in an efficient and timely manner... In addition.. which has enabled us to make adjustments to our products while minimizing production times and waste....... in turn.....some of our competitors.... South America(2) ................ Dryers ................................... Our consolidated EBITDA was US$211 million in 2011 and US$60 million for the three months ended March 31... Year ended December 31.................... ...S.............................. Recognized Manufacturing Excellence and Product Quality We have achieved recognition for quality at our manufacturing facilities.................................. (2) South America includes the Andean Region.......... most of our facilities have been ISO certified............... We also received Innovation Awards from the Applied Research and Technology Directors Association in Mexico in 2008........S.. 138 61 17 14 230 60 27 7 6 100 34 21 2 2 59 58 36 3 3 100 ___________ (1) Includes sales to GE for sale in the United States and elsewhere............................ Three months ended 2011 March 31. 2009 and 2011 for the new “aqua saver” program in our washing machines......... The gas ranges produced at our Leiser Facility have been consistently ranked in the top five for their product category by Consumer Reports Magazine in recent years...... which became effective on January 1..... We have entered into a new Dryer Manufacturing Agreement with GE. Canadian and Mexican markets..... 2012 (US$ in millions) % (US$ in millions) % Mexico(1) ............... Total......... 2012 (US$ in millions) % (US$ in millions) % Central America.. 2012....... with which we have had a business alliance since 1987.... Three months ended 2011 March 31......... and is the principal distributor for our products in the U...... Central America............... We expect to invest approximately US$80 million to expand our dryer production capacity and develop new products with higher standards as a result of this agreement.......... We believe that our relationship with GE gives us the ability to leverage our capabilities to produce high-quality products.. Business Alliance with GE Our competitive position is strengthened by our relationship with GE............... A-14 ............ Canada ............... market..... Since 1987.EBITDA by region Year ended December 31..000 dryers for sale to GE over a period of 10 years... Brazil and Argentina.. Total..... South America(2) ........000........ Our Leiser Facility was the first appliance manufacturer in the Americas to receive certain industry awards relating to quality and efficiency......................... GE provides us access to certain of its trademarks and designs............... 14 211 6 100 2 60 4 100 EBITDA by region (adjusted for non-controlling interest in Mabe Brazil) Year ended December 31. We believe these quality certifications and awards are a recognition of the extraordinary efforts we have made to improve our manufacturing processes and the quality of the products we produce......... pursuant to which we will manufacture approximately 10.. we have expanded our relationship with GE to develop new products for the U........................... We export products to the United States under GE’s technical standards.. technical support and patents........... Since October 1994. Accordingly. fund future growth. Market Development and Services. the Andean Region and Central America. With respect to our operations. In particular. which is critical to the continued success of our business. We have implemented this organizational model in Mexico. we believe this corporate reorganization will provide us with a more robust legal structure to leverage acquisitions. We utilize local brand names for products designed for specific markets and tailor the look and operation of our products to conform to the requirements and standards of each market. we intend to leverage our manufacturing capacity by taking advantage of reduced labor costs and trade arrangements pursuant to which we may manufacture products in certain countries and export them to others without import tariffs or with significantly reduced import tariffs. Introduce Technologically Advanced Products We seek to be at the forefront of development of product technology. increase transparency in our operations and provide better accountability-tracking capabilities. Customize Products to Meet Local Demands and Preferences We believe that providing product designs focused on the needs and habits of each country and region to which we export is critical to our continued success. Key elements of our strategy are: Realign Our Organizational Structure into Three Global Business Units In 2010.S. improve the speed of new products to market. increase our position in other markets in the Americas by increasing sales of existing and new products and leveraging our brand names. enhance cost efficiency initiatives. We believe that our success in penetrating new markets is in large part a result of our ability to provide customers with product designs that are familiar to them. which we believe will enable better strategy implementation. In 1994. reduce costs and increase productivity while maintaining our high levels of product quality and customer satisfaction. distribution as a means to improve our market share in the United States and increase our profitability. Expand Investments in Latin America We intend to continue the integration of our operations in Latin America and to continue leveraging our established platform in this region. divestitures and new joint-ventures. our strategy is to continue to improve manufacturing efficiency. Expand and Consolidate our Business Relationship with GE in the United States We intend to maintain our position as GE’s most competitive and preferred supplier of white line products for U. that make them feel comfortable and that address their needs and style preferences. Under this new organizational model. Canada. Additionally. each business unit will be responsible for its own strategy formulation and profit creation. we strive to adapt our products to the needs of local customers. receive future investors and manage our debt.Business Strategy We intend to continue strengthening our position in countries where we currently have leading market positions and to. We intend to seek to increase the volume and variety of products we export to GE for the United States market. we commenced streamlining our organizational structure from a complex geographically-based business into three global business units: Supply Chain. we established the Technology and Development Center in A-15 . Mexico. We intend to continue to leverage our leading market positions and strong brand recognition in our markets to: target first-time customers for white line products. Leverage Our Leading Market Position and Brand Recognition We believe there are still growth opportunities in all of the markets in which we operate. We have adopted a standardized purchase and sale accounting control mechanism to maintain low inventory levels and adopted a flexible work schedule that allows for fluctuations in the number of employees or hours worked based on market demand. technologically advanced and differentiated products for both the Mexican and export markets. A-16 .S. We are also committed to use state-of-the-art technology in our manufacturing processes to produce higher quality products on a more efficient basis. We have integrated Six Sigma. In addition. capture the market for customers upgrading to higher-end white line products that generally generate greater profit margins. maintain our leadership position in the Mexican. We also intend to further enhance our product offerings by applying technology made available by GE pursuant to our joint venture agreement. We expect this demographic trend will drive demand for white line products.” implements streamlining technology to allow our products to more efficiently reach our customers. at every level of our operations throughout our manufacturing facilities. Brazil and Argentina. which employs approximately 400 engineers and is designed to develop new. We are committed to the use of state-of-the-art technology in our manufacturing processes to create better and more efficiently produced products. Central American. We also believe we will benefit from the favorable demographic trends in these markets where a significant percentage of the population is below 30 years of age. and increase our presence in countries like Chile and other countries outside the Americas where we currently have limited or no operations. We expect to continue to invest in and improve our manufacturing technology and to introduce technologically advanced products. reflecting greater consumer purchasing power and more sophisticated consumer preferences. We strive to increase operating efficiencies and reduce manufacturing costs. we seek to continually improve our product service operation to provide after-sales support service to customers in the markets where our products are sold. markets. Our strategic organization program. Improve Product Quality. a quality control program designed to eliminate defects in the manufacturing process and deliver near-perfect products. “Mabe Way. particularly in the refrigerator and washing machine segments.Querétaro. Customer Service and Manufacturing Efficiency We continually strive to improve the quality of our products and provide superior customer service. increase our market share in Canada. Andean Region and U. Our consolidated financial statements are prepared in accordance with MFRS.S.63% ownership interest. 2009. GAAP. Information as of December 31. 2010 and 2011 has been derived from the Audited Financial Statements and notes thereto included elsewhere in this listing prospectus. which are finished products that we import from suppliers. These tables should be read in conjunction with the Financial Statements and notes thereto included elsewhere in this listing prospectus and are qualified in their entirety by the information contained therein. see “Presentation of Financial and Other Information. Financial information as of December 31. references to “domestic sales” are references to sales of products produced and sold in the same country and sales of sourced products.SUMMARY CONSOLIDATED FINANCIAL DATA The following tables present summary consolidated financial information and other data as of and for each of the periods indicated. 2009 is derived from our audited financial statement not included in this listing prospectus. 2011 and 2012 has been derived from the Interim Financial Statements include elsewhere in this listing prospectus. in which we currently hold a 58. Where indicated. we have included certain adjusted financial information in the following tables that excludes the non-controlling interest in Mabe Brazil. In this listing prospectus and in the Financial Statements. References to “export sales” are references to sales of products manufactured in one country and sold to a customer located in a different country. which differs in certain respects from U. For additional information regarding financial information presented in this listing prospectus.” A-17 . The financial information as of and for the three months ended March 31. 2010 and 2011 and for the years ended December 31. .............. Total variable costs .... Net sales............................................................................. Other expenses......... Net interest expense ............................” see Note 18 to the Audited Financial Statements and Note 14 to the Interim Financial Statements............................... net........................................... Contribution margin ......... 2011 2012 642 212 854 629 84 713 140 36 95 132 9 (8) 12 (32) – (20) (20) (4) – (24) 677 254 931 682 93 775 156 35 96 132 25 (7) (1) (36) – (37) (20) 4 – (15) (1) For additional information regarding the components of “comprehensive financing cost....................... Participation in the results of joint venture ..........................175 2.......................356 2........................................673 3............ Income (loss) before income tax benefit (expense) and participation in the results of joint venture ............................ _____________________________________________________________________________ Year ended December 31........................................ Loss on monetary position ................................. net ....080 2.............117 2.. Export sales ..... 2009 2010 2011 (US$ in millions) 2................ Variable selling and administration expenses .............. Total fixed expenses .............. Net foreign exchange (loss) gain .............................197 2..................... 2009 2010 2011 (US$ in millions) 1............. Variable selling and administration expenses ............. Export sales .......................719 277 317 361 2.128 3...............................................296 2.......................... Consolidated net loss ................................ Variable production costs ... Operating income .............................. _____________________________________________________________________________ Year ended December 31.............................................................................. Fixed production costs ..............740 2.............. Income Statement Data(1) Domestic sales ................................956 2............049 2. Fixed selling and administration expenses ..... Other expenses.......553 575 536 580 133 143 162 277 298 370 441 532 410 165 95 49 (21) (66) (72) (38) (28) (7) (87) (98) (111) – (1) (1) (125) (127) (119) 19 (23) – (4) (98) 53 (2) (47) (142) 2 (1) (140) Three months ended March 31.362 953 963 934 2................................... 2011 2012 548 212 760 486 144 630 131 32 84 116 14 (6) 11 (28) – (16) (8) (4) – (12) 574 254 828 605 78 683 145 31 86 117 28 (6) (1) (29) – (31) (9) 4 – (5) (1) Adjusted to reflect our 58................660 2............... net(1) ........ Income tax benefit (expense) .......... Fixed production costs .........Income Statement Data Domestic sales .......... Net sales......012 3................................480 2......63% ownership interest in Mabe Brazil...........366 543 532 556 122 132 148 279 327 253 411 475 375 168 122 80 (42) (52) (10) (19) (28) (6) (80) (86) (94) – (1) (1) (100) (115) (101) 58 (32) – 25 (35) 51 – 16 (73) – (1) (74) Three months ended March 31. Fixed selling and administration expenses .............................................................................................246 2..428 249 284 312 2...... Total variable costs ..... net(2) .............. Net foreign exchange (loss) gain ............ Participation in the results of joint venture ......................................................................... Net interest expense .................... Total fixed expenses ....726 953 963 934 3.................................. Income tax (expense) benefit ...... Comprehensive financing cost.. Consolidated net income (loss) ............... net ........................................ Loss on monetary position .............275 2............................................................... Operating income ................. Income (loss) before income tax benefit (expense) and participation in the results of joint venture ..... Variable production costs .......... Comprehensive financing cost..........209 3. A-18 ..................909 3........................................................ Contribution margin .................... ............ Long-term debt .................... Property............... Total current assets ......105 317 2....................... Employee benefits ...............390 21 805 337 1.................................................................421 _____________________ (1) For additional information regarding the components of “other accounts payable and accrued expenses....................................... Deferred income tax ...................” see Note 18 to the Audited Financial Statements and Note 14 to the Interim Financial Statements..........390 As of March 31....................................524 178 726 317 1......221 603 111 90 36 2.219 657 92 65 72 2..197 666 246 208 2............................ 2011 2012 157 606 7 420 7 1................................ A-19 .” see the consolidated balance sheets in the Audited Financial Statements and the Interim Financial Statements............220 603 — 81 167 2............................................................................. 2009 As of December 31........ Accounts receivable.......... net ....................061 491 2..............071 453 2.................(2) For additional information regarding the components of “comprehensive financing cost.................. Notes and accounts payable to suppliers ............................ General Electric Company (Shareholder) ............163 679 94 65 67 2.... Other assets..................524 78 524 16 426 35 1......... net ................................... 2010 2011 (US$ in millions) 113 571 11 477 12 1........317 82 621 19 459 26 1..................... net ....020 618 — 86 81 1... Total assets ......................... Total current liabilities .............551 195 660 366 1......... Balance Sheet Data Current assets: Cash and cash equivalents ................................207 775 250 292 2........ net..........................067 323 2............................079 620 250 472 2..... machinery and equipment............ Other accounts payable and accrued expenses and other(1) .... Inventories............. Total liabilities and stockholders’ equity .. Goodwill........................806 511 2........ Prepaid expenses .... Total stockholders’ equity.021 634 250 485 2....184 773 250 344 2.317 161 580 280 1..... Total liabilities . Other long-term liabilities .421 47 806 366 1.... Current liabilities: Current portion of long-term debt .. net ........551 80 476 32 408 26 1...................... net ............. 63% ownership interest in Mabe Brazil. net ............................................. net .................. (2) For additional information regarding the components of “other accounts payable and accrued expenses. Total current liabilities ............................................. 2011 2012 1..............207 2........................ Other accounts payable and accrued expenses and other(2) ...................... Other assets.............. Total assets .....153 1........ Inventories.....840 520 505 402 2............ 2009 2010 2011 (US$ in millions) – – 76 86 90 65 51 54 40 1.......... Prepaid expenses .................360 14.... 2011 2012 154 556 7 391 6 1...... Other ........................................590 1..........242 246 223 1................................ General Electric Company (Shareholder) .......216 47 691 199 214 261 888 956 981 616 603 679 As of December 31...................Balance Sheet Data(1) Current assets: Cash and cash equivalents .................................................................... Balance Sheet Data(1) Deferred income tax .......161 153 536 80 574 19 437 5 1............ Current liabilities: Current portion of long-term debt ............................641 1. Total stockholders’ equity..............862 3...........364 4........... 2009 As of December 31...191 Three months ended March 31........ Dryers ............ Property.....383 12.............333 76 65 72 1.....” see the consolidated balance sheets in the Audited Financial Statements and the Interim Financial Statements..... Year ended December 31.....333 164 627 78 487 16 395 34 1.316 1....161 2...........................116 721 250 246 2...................832 383 2.......................................690 1...................040 1.................. net .................................. Notes and accounts payable to suppliers ................249 4.....207 165 578 79 465 32 375 25 975 570 250 447 2................ net .....................062 698 250 196 2...... machinery and equipment....833 500 2........................................................... Total current assets ...370 1........ Washing machines ..569 989 404 248 303 3...............010 523 250 432 2....216 _____________________ (1) Adjusted to reflect our 58.......................................900 5........... Accounts receivable......750 1...036 962 602 657 As of March 31................................. Other long-term liabilities ............... Total liabilities ......................153 1...................................................... Unit Sales Ranges ................ 2010 2011 (US$ in millions) 97 505 11 437 12 1................... Employee benefits ..503 A-20 .............................................242 21 698 As of March 31.......................329 1....................703 1..... 2011 2012 – 81 114 1. Goodwill.................. 2009 2010 2011 (in thousands) 5..................................016 405 219 296 3................... Total liabilities and stockholders’ equity ....814 14...........337 5................ Refrigerators . Total ..... net ......215 1......114 631 246 169 2.. Long-term debt ........393 1............. ...553 372 366 1............................. Year ended December 31........192 1.153 1. 2010 2011 2011 2012 2009 (US$ in millions) 25 — 32 10 100 122 290 16 — (51) 42 115 132 253 (74) 1 — 52 101 148 230 (12) — 4 6 16 32 46 (5) — (4) 6 31 31 59 Consolidated net loss .............. EBITDA ........................... Participation in the results of joint venture .................362 3....................... Reconciliation of EBITDA to net income (loss) Three months ended March 31....... EBITDA ........866 12..........301 274 285 12................................. Total ..Unit Sales(1) Ranges ........... Depreciation and amortization ...................... 2010 2011 2011 2012 2009 (in thousands) 5............026 1..153 1................................... Other expenses......................... Year ended December 31................... Other expenses............060 _____________________ (1) Adjusted to reflect our 58.............................704 886 840 1...................370 1........... 2010 2011 2011 2012 2009 (US$ in millions) (4) — 23 21 125 133 298 (47) 2 (53) 66 127 143 238 (140) 1 (2) 72 119 162 211 (24) — 4 8 20 36 45 (15) — (4) 7 37 35 60 Consolidated net loss ................................321 3........................................040 219 248 1..............589 1... Dryers .. Reconciliation of EBITDA to net income (loss)(1) Three months ended March 31... Three months ended March 31..................................... net . Comprehensive financing cost....................630 1....... Income tax (benefit) expense ......... Depreciation and amortization ......................................................................063 5......... Participation in the results of joint venture ...............806 12............... net ................ net .......................253 1.624 2...................... Year ended December 31........943 3...................... Income tax (benefit) expense .......333 5..63% ownership interest in Mabe Brazil..... Washing machines ..................................... Refrigerators ........... Comprehensive financing cost....... Other ......63% ownership interest in Mabe Brazil.........767 3.............................................................................. A-21 ........... net ................................................................................ _____________________ (1) Adjusted to reflect our 58. ...... As of and for the Three months ended As of and for the year ended March 31....7 3............... We define EBITDA as consolidated net income (loss) before participation in the results of joint venture..... Ratio of total debt to EBITDA(2)... EBITDA margin(1) ........... net.......... EBITDA margin is EBITDA as a percentage of net sales. 2012...42% 5.........3 0. comprehensive financing cost................... except for % and ratios) 290 253 230 46 59 9................ 2010 2011 2011 2012 2009 (US$ in millions..63% ownership interest in Mabe Brazil (2) (3) A-22 ............ other expenses..... Ratio of earnings to fixed charges .........6 3..” The subsidiary guarantors of the new notes (in addition to Controladora Mabe on a standalone basis) directly accounted in aggregate for 51% of our consolidated EBITDA for the year ended December 31........... December 31...........3 1..................9 1...........0 2.. December 31..3 3......... net and depreciation and amortization........ Ratio of total debt to EBITDA(2).....9 1... The ratio of total debt to EBITDA for a fiscal year or period is computed by dividing total debt as of the end of the fiscal year or period by EBITDA for the fiscal year or period..........7 1............ 2010 2011 2011 2012 2009 (US$ in millions...53% 7.......1 Other Financial Data and Ratios(3) EBITDA(1) .Other Financial Data and Ratios EBITDA(1) ...10% 7.. Ratio of earnings to fixed charges ....... EBITDA margin(1) .97% 8........98% 6....1 1....41% 2........... 2011 and 49% of our consolidated EBITDA for the three months ended March 31............. Adjusted to reflect our 58..............76% 5.... See “Presentation of Financial and Other Information—Note Regarding Non-GAAP Financial Measures.......................4 3...0 3.1 2....9 2............... plus income tax...09% 2. As of and for the Three months ended As of and for the year ended March 31...3 ______________ (1) EBITDA is not a financial measure computed under MFRS...........41% 6..0 3............. except for % and ratios) 298 238 211 45 60 9.26% 6....3 3...................2 1...................5 1.. ............................................. 2012 As adjusted for the exchange offer Actual (US$ in millions) 78 78 4 43 107 200 350 704 317 1.. The table also sets forth such information as adjusted to reflect the consummation of the exchange offer and the consent solicitation..... Debt: Short-term debt ........... 2012........................................ Total capitalization(1) ..................... short-term and long-term indebtedness and total capitalization..............................021 4 43 107 — 550 704 317 1..................................................... There has been no material change in our capitalization since March 31. 2012. As of March 31....................................... Long-term loans (excluding current portion).....875% Senior Guaranteed Notes due 2019 offered hereby (including the new notes issued pursuant to the exchange offer)............ 6............................................................................................................................................................... including our cash and cash equivalents................................ Total stockholders’ equity ................... assuming that all old notes were tendered prior to or on the early participation date and we did not round down the amount to be issued to any tendering holder.......................500% Senior Guaranteed Notes due 2015 ............. ______________ (1) Total capitalization equals total debt plus total stockholders’ equity............................ Total debt .......................... 7.................... This table should be read together with the Financial Statements and notes thereto included elsewhere in this listing prospectus...... A-23 .......CAPITALIZATION The following table sets forth certain consolidated financial information for us under MFRS as of March 31....... Current portion of long-term debt..............................021 Cash and cash equivalents ............................... 2009. 2011 and 2012 has been derived from the Interim Financial Statements include elsewhere in this listing prospectus. In this listing prospectus and in the Financial Statements. Our consolidated financial statements are prepared in accordance with MFRS. which are finished products that we import from suppliers. see “Presentation of Financial and Other Information. which differs in certain respects from U.63% ownership interest. references to “domestic sales” are references to sales of products produced and sold in the same country and sales of sourced products.” A-24 . GAAP. References to “export sales” are references to sales of products manufactured in one country and sold to a customer located in a different country. For additional information regarding financial information presented in this listing prospectus. 2009 is derived from our audited financial statement not included in this listing prospectus.S. Where indicated. Financial information as of December 31. The financial information as of and for the three months ended March 31.SELECTED CONSOLIDATED FINANCIAL INFORMATION These tables should be read in conjunction with the Financial Statements and notes thereto included elsewhere in this listing prospectus and are qualified in their entirety by the information contained therein. in which we currently hold a 58. Information as of December 31. we have included certain adjusted financial information in the following tables that excludes the non-controlling interest in Mabe Brazil. 2010 and 2011 has been derived from the Audited Financial Statements and notes thereto included elsewhere in this listing prospectus. 2010 and 2011 and for the years ended December 31. ..480 2.................197 2........................................... Total variable costs ................................................................................... Operating income ............................ Income tax benefit (expense) ......... Income Statement Data(1) Domestic sales .............................................................................................. Comprehensive financing cost.....909 3......... net(1) ....... net...... 2011 2012 642 212 854 629 84 713 140 36 95 132 9 (8) 12 (32) – (20) (20) (4) – (24) 677 254 931 682 93 775 156 35 96 132 25 (7) (1) (36) – (37) (20) 4 – (15) (1) For additional information regarding the components of “comprehensive financing cost.............128 3... Net interest expense ..Income Statement Data Domestic sales .........296 2.175 2..........................956 2..................................... Total fixed expenses .............................................................................. Fixed selling and administration expenses ...................... Variable production costs ........................................................................................................................................ Participation in the results of joint venture ... Other expenses................ Consolidated net income (loss) .....366 543 532 556 122 132 148 279 327 253 411 475 375 168 122 80 (42) (52) (10) (19) (28) (6) (80) (86) (94) – (1) (1) (100) (115) (101) 58 (32) — 25 (35) 51 — 16 (73) — (1) (74) Three months ended March 31........................... Export sales ................................................... Other expenses..................... Loss on monetary position ...... 2009 2010 2011 (US$ in millions) 1................ Net interest expense ............................... Total variable costs .. Contribution margin .660 2........................ Net foreign exchange (loss) gain ............049 2..................... Participation in the results of joint venture ..........362 953 963 934 2....... Operating income ............................ net ............209 3.............................................726 953 963 934 3..... Loss on monetary position ... Fixed production costs ......117 2.673 3.... _____________________________________________________________________________ Year ended December 31......275 2....................... Fixed selling and administration expenses ........................................................................ Contribution margin ...... Variable production costs ............ Net foreign exchange (loss) gain .....................................080 2............................................... Income (loss) before income tax benefit (expense) and participation in the results of joint venture ........................ Variable selling and administration expenses ..” see Note 18 to the Audited Financial Statements and Note 14 to the Interim Financial Statements........... net(2) ...... Consolidated net loss .. Comprehensive financing cost.............................553 575 536 580 133 143 162 277 298 370 441 532 410 165 95 49 (21) (66) (72) (38) (28) (7) (87) (98) (111) – (1) (1) (125) (127) (119) 19 (23) – (4) (98) 53 (2) (47) (142) 2 (1) (140) Three months ended March 31........................... 2009 2010 2011 (US$ in millions) 2.428 249 284 312 2...................................................63% ownership interest in Mabe Brazil....012 3........ Total fixed expenses .... Net sales...... Income (loss) before income tax benefit (expense) and participation in the results of joint venture ............... Variable selling and administration expenses .. 2011 2012 548 212 760 486 144 630 131 32 84 116 14 (6) 11 (28) – (16) (8) (4) — (12) 574 254 828 605 78 683 145 31 86 117 28 (6) (1) (29) – (31) (9) 4 — (5) (1) Adjusted to reflect our 58.............................356 2...................................... Net sales............ _____________________________________________________________________________ Year ended December 31... A-25 ..719 277 317 361 2.............. Export sales ................................................................................................ Fixed production costs . net .......246 2......... Income tax benefit (expense) ........740 2....... .......................................................................551 80 476 32 408 26 1........ machinery and equipment.................................184 773 250 344 2... A-26 ..... Goodwill......806 511 2........................ Deferred income tax ................. Total current liabilities .” see the consolidated balance sheets in the Audited Financial Statements and the Interim Financial Statements......524 178 726 317 1.............421 47 806 366 1........................................067 323 2..... Other accounts payable and accrued expenses and other(1) . As of December 31............................................. Prepaid expenses ...........(2) For additional information regarding the components of “comprehensive financing cost.... net . Total liabilities .................................................020 618 — 86 81 1.... net ........421 _____________________ (1) For additional information regarding the components of “other accounts payable and accrued expenses............................... Long-term debt ... Current liabilities: Current portion of long-term debt .........163 679 94 65 67 2....................219 657 92 65 72 2.......021 634 250 485 2.......................... Total stockholders’ equity..197 666 246 208 2..... net.......................................................317 113 571 11 477 12 1...............524 78 524 16 426 35 1..........551 195 660 366 1................207 775 250 292 2.......... Total assets ...........................221 603 111 90 36 2..................... Notes and accounts payable to suppliers . net .................... net ..................317 161 580 280 1.............. Employee benefits ..105 317 2.” see Note 18 to the Audited Financial Statements and Note 14 to the Interim Financial Statements.........220 603 — 81 167 2........................... Balance Sheet Data Current assets: Cash and cash equivalents . net ..... Accounts receivable.071 453 2.................. Property.............. Other assets..................061 491 2............. Total current assets ... General Electric Company (Shareholder) ..... 2009 2010 2011 (US$ in millions) 157 606 7 420 7 1...390 As of March 31.......... Total liabilities and stockholders’ equity .......390 21 805 337 1..............079 620 250 472 2......................................... Inventories...................................... Other long-term liabilities .......................... 2011 2012 82 621 19 459 26 1.. ................590 1............ Total current assets ...... Notes and accounts payable to suppliers .. (2) For additional information regarding the components of “other accounts payable and accrued expenses..... Accounts receivable...........153 1... 2009 2010 2011 (US$ in millions) 86 90 65 51 54 40 1............. 2011 2012 1..............690 1........................... Property......750 1.......... Dryers ................................040 1...............................116 721 250 246 2............................503 A-27 ..249 4..............................................062 698 250 196 2............ Other accounts payable and accrued expenses and other(2) ......................333 164 627 78 487 16 395 34 1....................................036 962 602 657 – 76 As of March 31...........840 520 505 402 2..... net ... Total liabilities ..................... Other ....... Balance Sheet Data(1) Employee benefits ......161 2.....337 5...............393 1........ Total stockholders’ equity...215 1.......................................63% ownership interest in Mabe Brazil.............. Total ..................703 1...............114 631 246 169 2.....................................Balance Sheet Data(1) Current assets: Cash and cash equivalents .... Unit Sales Ranges ....207 165 578 79 465 32 375 25 975 570 250 447 2.....900 5.......364 4........... 2009 As of December 31....832 383 2....862 3...... Other long-term liabilities .. Current liabilities: Current portion of long-term debt ................... machinery and equipment......................................333 65 72 1................ net ......... Long-term debt .....641 1...................191 12................ Washing machines ... 2010 2011 (US$ in millions) 97 505 11 437 12 1............................... Total liabilities and stockholders’ equity .... Goodwill............................569 989 404 248 303 3................. net .......................... Year ended December 31........................................ 2011 2012 81 114 1....................316 1...............242 21 698 As of March 31...................161 153 536 80 574 19 437 5 1......153 1........216 47 691 199 214 261 888 956 981 616 603 679 – – 76 As of December 31.........................383 14........................... General Electric Company (Shareholder) .........................370 1.................... Deferred income tax ........ 2009 2010 2011 (in thousands) 5...........................242 246 223 1................... Prepaid expenses ... Inventories.010 523 250 432 2.....360 14......................... Refrigerators .................814 Three months ended March 31..016 405 219 296 3........ Total current liabilities ............................... Total assets ...... 2011 2012 154 556 7 391 6 1.....” see the consolidated balance sheets in the Audited Financial Statements and the Interim Financial Statements........207 2................................... Other assets.................. net ..........................329 1......216 _____________________ (1) Adjusted to reflect our 58..........833 500 2.......................... net .................................. ........704 886 840 1.. Depreciation and amortization ....... net ..301 274 285 12.....060 _____________________ (1) Adjusted to reflect our 58.. Washing machines ..589 1...... EBITDA ........... Other expenses..................................866 12......624 2......... Year ended December 31.................................................192 1......321 3................... Three months ended March 31...63% ownership interest in Mabe Brazil...........................................63% ownership interest in Mabe Brazil.......................................... Other ....................................153 1.........040 219 248 1.............................................943 3.... Income tax (benefit) expense ..........153 1........................... net . Comprehensive financing cost.................253 1..........................063 5... 2010 2011 2011 2012 2009 (US$ in millions) (4) — 23 21 125 133 298 (47) 2 (53) 66 127 143 238 (140) 1 (2) 72 119 162 211 (24) — 4 8 20 36 45 (15) — (4) 7 37 35 60 Consolidated net loss ................. Reconciliation of EBITDA to net income (loss) Three months ended March 31... 2010 2011 2011 2012 2009 (in thousands) 5......... net ..... Reconciliation of EBITDA to net income (loss)(1) Three months ended Year ended December 31............. Participation in the results of joint venture ..................................... Comprehensive financing cost........... Other expenses. Participation in the results of joint venture .. A-28 .................................... Dryers ............................................. Year ended December 31.......... Total ................................................ _____________________ (1) Adjusted to reflect our 58............Unit Sales(1) Ranges ........................................ 2010 2011 2011 2012 2009 (US$ in millions) 25 — 32 10 100 122 290 16 — (51) 42 115 132 253 (74) 1 — 52 101 148 230 (12) — 4 6 16 32 46 (5) — (4) 6 31 31 59 Consolidated net loss ..... March 31.................................333 5.............553 372 366 1....630 1..767 3......... net ...............................................................806 12.............................370 1...........................026 1.................... EBITDA ....... Depreciation and amortization ....................................... Income tax (benefit) expense ................362 3........... Refrigerators . .41% 6............7 1..... 2011 and 49% of our consolidated EBITDA for the three months ended March 31. net and depreciation and amortization........3 1. comprehensive financing cost....9 1........ 2010 2011 2011 2012 2009 (US$ in millions.......................... December 31.............3 ______________ (1) EBITDA is not a financial measure computed under MFRS..1 Other Financial Data and Ratios(3) EBITDA(1) .3 3. December 31........10% 7.9 2....09% 2. other expenses..97% 8............ 2010 2011 2011 2012 2009 (US$ in millions..5 1... (2) (3) A-29 ......42% 5.63% ownership interest in Mabe Brazil.......... except for % and ratios) 290 253 230 46 59 9. Ratio of earnings to fixed charges .0 2.............3 0......53% 7..............0 3............” The subsidiary guarantors of the new notes (in addition to Controladora Mabe on a standalone basis) directly accounted in aggregate for 51% of our consolidated EBITDA for the year ended December 31........ Ratio of total debt to EBITDA(2).......... EBITDA margin(1) .......... except for % and ratios) 298 238 211 45 60 9.......76% 5. EBITDA margin is EBITDA as a percentage of net sales.... EBITDA margin(1) ... See “Presentation of Financial and Other Information—Note Regarding Non-GAAP Financial Measures.......0 3................... Ratio of earnings to fixed charges ......1 2...Other Financial Data and Ratios EBITDA(1) .............. As of and for the Three months ended As of and for the year ended March 31.......3 3.................... The ratio of total debt to EBITDA for a fiscal year or period is computed by dividing total debt as of the end of the fiscal year or period by EBITDA for the fiscal year or period...........1 1....................6 3.......98% 6..... As of and for the Three months ended As of and for the year ended March 31.........4 3..................26% 6............... Ratio of total debt to EBITDA(2).......... Adjusted to reflect our 58..2 1. We define EBITDA as consolidated net income (loss) before participation in the results of joint venture..9 1.7 3.. net........ 2012......................41% 2.. plus income tax........ ........................................ Brazil . Brazil ......................................................................................................................................................726 642 677 135 175 158 34 38 194 181 145 31 38 315 303 300 70 90 297 279 274 66 68 12 25 58 10 22 953 963 934 212 254 3............................. Chile ....... USA (Leiser) .................. 2009 2010 2011 2011 2012 (US$ in Millions) 565 726 715 176 159 331 359 364 75 83 144 165 170 37 33 318 118 101 23 36 133 167 181 38 44 64 76 78 16 17 54 65 67 15 15 17 30 37 10 10 88 118 156 38 42 461 421 857 214 240 2............ Central America.. Three months ended Year ended December 31.............................................. Chile ........................................ USA (Saltillo) ................... USA (Montreal) .......63% ownership interest in Mabe Brazil...909 3........... USA (Quantum) ............................ 2009 2010 2011 2011 2012 (US$ in Millions) 565 726 715 176 159 331 359 364 75 83 144 165 170 37 33 318 118 101 23 36 133 167 181 38 44 64 76 79 16 17 54 65 67 15 15 17 30 10 37 10 88 118 156 38 42 242 225 492 121 137 1.......................................... Total sales . A-30 .......................................................................................................... Colombia ............... USA (Leiser) .................................................................................................................................................................... Exports (rest of the world) ............................ Central America........................................ March 31........................................................ Argentina .............. Argentina ...................... Colombia ........................................................................................................................................................................ Peru ................012 3......... USA (Quantum) .............................................................................................................. Total export sales ............................................... Total domestic sales ...............................175 2..............................................296 760 828 ______________ (1) Adjusted to reflect our 58.......................... Total export sales ..............................................................956 2........ USA (Montreal) ......................................... Canada .. Canada ... Total domestic sales ..... Three months ended Year ended December 31.................................................................................................................... Total sales ....................660 854 931 Sales by Country/Region(1) Mexico .....................049 2.... USA (Saltillo) ..................................................................... Peru ....................................... March 31...............128 3...... Ecuador ............................................................................... Exports (rest of the world) ............................................................................................................. Venezuela ....................... Ecuador ........................362 548 574 135 175 158 34 38 194 181 145 31 38 315 303 300 70 90 297 279 274 66 68 12 25 58 10 22 953 963 934 212 254 2.......................246 2....................................................................................................................................................................209 3.........................................Sales by Country/Region Mexico ............ Venezuela ............. the United States. 2012. South America under the following brand names: GE. Our actual results could differ materially from those discussed in the forward-looking statements. those discussed below and elsewhere in this listing prospectus. as of and for the year ended December 31. Continental and various local brand names. GE Monogram. in part through our partnership with GE. GE is our principal customer based on aggregate product sales. Moffat. The discussion and analysis in this section contains forward-looking statements that reflect our plans.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Financial Statements and the notes thereto included elsewhere in this listing prospectus which have been prepared in accordance with MFRS. We derive our net sales from five geographic markets and from exports as follows: A-31 .” Where indicated. water coolers. Central America. but are not limited to. we have improved our manufacturing processes and operating performance by applying GE’s continuous improvement techniques. particularly in “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors. 2011. Factors that could cause or contribute to these differences include. microwave ovens and related parts and components under various brand names. We also distribute built-in ovens and hoods. Hotpoint. we have included certain adjusted financial information below that excludes the non-controlling interest in Mabe Brazil. We are a leading manufacturer and distributor of ranges.63% interest in Mabe Brazil).41% equity interest in our company. we have operated as a joint venture with GE. Mabe. Net sales to GE accounted for 21% of our consolidated net sales in 2011 and 23% of our consolidated net sales for the three months ended March 31. Overview Since 1987. Atlas. 2012.” with operations throughout North. dishwashers. GE Café. Io Mabe. which holds a 48. where we operate through our 58. Our Subsidiary Guarantors on a stand-alone basis accounted in aggregate for 45% of our consolidated net assets and 40% of our consolidated net sales. Dako. Additionally. commonly referred to as “white line products. We have eight manufacturing facilities in Mexico and nine other manufacturing facilities throughout our principal markets.63% ownership interest. See Note 2 to our Audited Financial Statements included elsewhere in this listing prospectus. washing machines and dryers manufactured in Mexico and sales of dryers manufactured in Canada. and GE licenses to us trademarks and patents for our products and provides us access to relevant technology used in the manufacture of our products. Our products are sold primarily in Mexico. Net sales to GE are comprised of sales of ranges. in which we currently hold a 58. refrigerators. estimates and beliefs. clothes dryers and washing machines. and 42% of our consolidated net assets and 39% of our consolidated net sales as of and for the three months ended March 31. Canada. We believe we have leading market shares in most of the countries where we operate. Central and South America (including Brazil. GE Profile. ........909 100% 3........... Mexico.049 68% 2.. 2012.. This market includes Brazil and Argentina and represented 27% of our consolidated net sales in 2011 and 31% of our consolidated net sales in the three months ended March 31......... .. except percentages) 565 19% 726 23% 715 20% 176 21% 159 17% 331 11% 359 10% 364 10% 75 9% 83 9% 144 5% 165 5% 170 5% 37 4% 33 4% 586 19% 456 14% 465 13% 101 12% 120 13% 88 3% 118 4% 156 4% 38 4% 42 5% 461 15% 421 13% 857 23% 215 25% 240 26% 70% 2...............128 100% 3.... Central America. Andean Region...... Andean Region ............. GE Profile.362 72% 548 72% 574 70% 1....... Total sales . Canada ..... CEAM . Argentina .246 70% 2. Argentina ....... South America.... 2012. Domestic sales in Mexico represented 20% of our consolidated net sales in 2011 and 17% of our consolidated net sales in the three months ended March 31........... three months ended March 31.......... sales from Mexico represented 37% of our consolidated net sales in 2011 and 36% of our consolidated net sales in the three months ended March 31........... Consolidated net sales for the year ended Consolidated net sales for the December 31........209 100% 3...... Canada ........... Total sales...... Total Domestic ... Andean Region ...... In Argentina. Total export sales ......... Total domestic sales ............ In Brazil we had a market share of approximately 22% in white line products in 2011.......012 100% 3..956 953 33% 963 32% 934 28% 212 28% 254 30% 760 100% 828 100% 2. This market includes Colombia......... Including exports from our Mexican manufacturing facilities to the United States.... % of % of % of % of % of 2010 2011 2012 Total Total Total 2011 Total Total 2009 (US$ in millions.Sales by Country/Region Mexico ... A-32 .. 2012.. ______________ (1) Adjusted to reflect our 58....660 100% Consolidated net sales for the Consolidated net sales for the year ended three months ended March 31. Our Mexican manufacturing facilities supplied approximately 1... Brazil ..726 74% 642 75% 677 73% 2.. Ecuador....175 953 30% 963 30% 934 26% 212 25% 254 27% 854 100% 931 100% 3.... GE and Hotpoint....63% ownership interest in Mabe Brazil..... Chile and Venezuela and represented 13% of our consolidated net sales in 2011 and 13% of our consolidated net sales in the three months ended March 30....... Brazil .... % of % of % of % of % of 2009 Total Total Total Total Total 2010 2011 2011 2012 (US$ in millions..4 million units to GE to be sold in the United States in 2011 under various GE trademarks such as GE Monogram.. Peru........ Total export sales ... December 31......296 100% Sales by Country/Region(1) Mexico ......... except percentages) 565 19% 726 24% 715 22% 176 23% 159 19% 331 11% 359 11% 364 11% 75 10% 83 10% 144 5% 165 5% 170 5% 37 5% 33 4% 586 20% 456 14% 465 14% 101 13% 120 15% 88 3% 118 4% 156 5% 38 5% 42 5% 242 8% 225 7% 492 15% 121 16% 137 17% 67% 2.... We had an average weighted combined market share of approximately 43% of the Mexican market for white line products in 2011...... 2012..... we had an estimated market share of approximately 18% in white line products in 2011.. We had an estimated combined average market share of approximately 29% of the Andean Region market white line products in 2011...... Brazil. packaging costs. We are the exclusive distributor in Canada of popular brand names such as GE Monogram. including steel and plastics. The prices for our products are primarily affected by changes in raw material prices and regional market conditions. Central America. Income from operations is the difference between contribution margin and fixed expenses. calculated before adjustment for inflation (if any). Export sales are made from Mexico. GE. labor costs and costs of finished products for resale. Our consolidated net sales consist primarily of sales of ranges. technical assistance.” which represents 10% of our taxable profit. Ecuador. Our variable production costs consist of raw material costs. Our fixed selling and administration expenses include employee salaries.376 units to GE to be sold in the United States in 2011. In addition. which are finished products that we import from suppliers. 2012. capacity utilization rates. Our variable selling and administration expenses consist of expenditures incurred in connection with transportation. Panama and the Dominican Republic) represented 5% of our consolidated net sales in 2011 and 4% of our consolidated net sales in the three months ended March 31. 2012. El Salvador. The principal factors affecting our sales include available production capacity. Contribution margin is the difference between net sales and variable costs. Our Canadian manufacturing facilities supplied approximately 818. we believe our combined market share of white line products in the region was approximately 50%. Colombia. marketing. References to “domestic sales” are references to sales of products produced and sold in the same country and sales of sourced products. operating disruptions and demand for our products in the markets where we operate. Net sales in Canada represented 10% of our consolidated net sales in 2011 and 9% of our net sales in the three months ended March 31. GE Profile. Hotpoint and Moffat. net consists principally of restructuring expenses. in accordance with Mexican law. Other expenses. We and our subsidiaries record provisions for income taxes and employee profit sharing. refrigerators. Canada. employees’ statutory profit sharing and loss (gain) on the sale of property. References to “export sales” are sales of products manufactured in one country and sold to customers (including GE) located in countries where we do not have commercial operations. Nicaragua. such as utility and energy costs. Based on our own estimates in 2011. Canada and Costa Rica. Canada to Saltillo. fees payable to third parties and rent. The Montreal manufacturing facility is the primary supplier of clothes dryers to GE in the United States. we pay our employees “Employee Profit Sharing. 2011 and 2012. in A-33 . dryers and washing machines in each region in which we operate. Net sales in Central America (Guatemala. machinery and equipment. Mexico. We had an estimated combined market share of approximately 14% for white line products in Canada in 2011. payments to GE and sales commissions. Results Of Operations Overview General. We recently entered into a new Dryer Manufacturing Agreement with GE which involves the relocation of our dryer production facilities from Montreal. Our fixed production costs consist primarily of depreciation. variable factory costs. Costa Rica. Honduras. management and other personnel costs at our corporate headquarters. The corporate income tax rate in Mexico was 30% in 2010. A substantial decrease in prices of these commodities may lead to the creation of mark-to-market losses and a potential liability in connection with these instruments... Results of Operations Three Months Ended March 31..... 2011 The following table sets forth our results of operations for the three months ended March 31. 2012 and 2011: For the three months ended March 31...... Our business is seasonal. Our comprehensive financing result includes.... a significant portion of our customers’ purchasing occurs in the second and fourth quarters of our fiscal year.0% 83.... We monitor country-specific economic factors and market trends such as seasonality......... brand... interest expense on bonds and loans. 4........ and can be significantly impacted by..... net... factoring discounts... Variable costs: Production costs .... Accordingly.. product and key retailers in shaping pricing policies.. with an average of approximately 26% of our sales in the last two fiscal years generated in our second quarter and an average of approximately 27% of our sales in the last two fiscal years generated in our fourth quarter.......... with most of our sales occurring during the periods of March to May in Latin America and September to November in Latin America.. Compr ehensive Financing Cost........ % of net sales 2012 % of net sales (US$ in millions.....2% 16....8% 2011 Net sales.....2% 35 (US$ in millions..........6% 16.................... but the fair value of the liability is required to be recognized immediately....... Selling and administration expenses ..... the United States and Canada due to the fact that white line products are often purchased as gifts for Mother’s Day and during the Christmas season. Effects of Derivative Financial Instruments on Comprehensive Financing Results...........8% 3............. except for %) A-34 .........7% 9. Net.... We refer to interest income.... including natural gas and other commodities-related derivatives.2% 10....addition to wages and agreed-upon fringe benefits...... inflation. market share.....8% 83................. 2012 Compared to the Three Months Ended March 31.4% 682 93 775 156 73. loss on monetary position..... except for %) 854 — 931 — 629 84 713 140 36 73. Total variable costs .... The components of our net comprehensive financing cost are interest income.............. interest expense on bonds and loans..... factoring discounts and bank fees collectively as “net interest expense” in this listing prospectus.... See Note 18 to the Audited Financial Statements and Note 14 to the Interim Financial Statements for additional information regarding these items. bank fees and net foreign exchange loss (gains)..... Season ality and Pricing.... Contribution margin ................. Fixed expenses: Production costs ........ This amount is reflected in other expenses................. While we would expect over time to experience a related decrease in our cost of goods sold due to decreases in raw material and energy prices (if they were to remain constant)....... the full savings are not immediately recognized in our financial statements.. mark-to-market gains or losses in connection with derivative financial instruments held for trading purposes.. ...2% 11..............4% (0.........6%) (9) (4) — (5) (1.... Total fixed costs and expenses ....................2011 Selling and administration expenses ..................... Income tax (expense) benefit .............................................................. Total variable costs and expenses .......4% 14........0%) (20) (4) — (24) (2........3%) 96 132 25 (7) (37) 10.................4% 1....................... Our domestic net sales increased 5.................. or US$26 million....... Loss before income tax benefit (expense) and participation in the results of joint venture .......... A-35 ......... Operating income ............0%) (2...1%.......1% (1...... Selling and administration expenses .. net .... Contribution margin ............................. 2012 from US$642 million for the three months ended March 31.... 2012 from US$854 million in the three months ended March 31.................. Variable costs and expenses: Production costs ..............4%) — (0...3% 1.... Net sales increased 9.....................................4%..................... to US$931 million in the three months ended March 31.......... Selling and administration expenses ...5% — (3.. Other expenses........8%) (2..................... For the three months ended March 31............1%) 0..............2%) (20) 4 — (15) (2..1%) 605 78 683 145 31 86 117 28 (6) (31) 73........... net .......9% 18..............................2% 4. or US$35 million....2% 15.... Income tax benefit (expense) ..... or US$77 million............. Consolidated net loss ........5%) — (1. Operating income ..... net ..... in domestic net sales in Brazil primarily due to higher demand for our products. Consolidated net loss ...............0% 9.......... Loss before income tax benefit (expense) and participation in the results of joint venture ............5% 82. 2011 reflecting: an increase of 12...3%) 0.....4% 14..............7% 10.. For the three months ended March 31(1)..................................8%) (4......8% 17........... except for %) 760 — 828 — 486 144 630 131 32 84 116 14 (6) (16) 63..63% ownership interest in Mabe Brazil......................... Participation in the results of joint venture ........ Fixed costs and expenses: Production costs ....... Other expenses......................... Total fixed expenses ..................6% — (1......................1% 2.....8%) (3.... Comprehensive financing cost............ Participation in the results of joint venture ..............1% 3....5% 17.. % of net sales 2012 % of net sales 95 132 9 (8) (20) 11................1% 15.........9% (0.......... 2011....7%) (8) 4 — (12) (1............ to US$677 million for the three months ended March 31.............9% 82........5% 3..............6%) Net sales.......... % of net sales 2012 % of net sales 2011 (US$ in millions...1%) (0.................... net ....... Net Sales... Comprehensive financing cost.1%.......6%) ______________ (1) Adjusted to reflect our 58.1%) (0.6% (0................ in domestic net sales in Mexico primarily due to decreased domestic demand for our products as a result of a general economic contraction and a decrease in consumer spending.4%. in domestic net sales in the Andean Region.9%. Contribution Margin. 2012 compared to US$84 million in the three months ended March 31. Other Expenses. 2011. also as a result of higher net sales. Operating Income. or US$17 million. or US$19 million.3%. Other expenses. to US$93 million in the three months ended March 31. 2011 decreased 104. to US$25 million in the three months ended March 31. 2012 compared to US$713 million in the three months ended March 31. Variable selling and administration expenses increased 11. 2012 compared to US$9 million in the three months ended March 31. 2011. 2011.2% in the three months ended March 31. This increase in domestic net sales was partially offset by: a decrease of 10. to US$775 million in the three months ended March 31. or US$9 million. 2011.6% in the three months ended March 31. 2012 compared to 16. Net sales in the three months ended March 31. in net export sales primarily due to an increase in exports to GE in the United States. Fixed expenses were substantially constant in the three months ended March 31. 2012 and 2011. principally reflecting higher net sales. Net decreased 15. Net. 2012 compared to US$140 million in the three months ended March 31. or US$16 million.5%. in domestic net sales in Central America primarily due to certain existing clients having excess inventory of our products. Comprehensive financing cost. to US$36 million in the three months ended March 31. 2011. or US$4 million. or US$62 million.8%. Variable Costs and Expenses.3%.7%. or US$42 million. Contribution margin increased 11. 2011. or US$1 million. Net interest expense increased 16.3%. an increase of 10. in domestic net sales in Canada which represented 9% of our consolidated net sales for the three months ended March 31. to US$37 million in the three months ended March 31. to US$7 million in the three months ended March 31. Contribution margin as a percentage of net sales increased to 16. Fixed Costs and Expenses. 2012 and 2011 at US$132 million. 2011 as a result of higher net sales. net increased 85%.4% in the three months ended March 31. to US$156 million in the three months ended March 31. or US$16 million. or US$17 million. primarily as a result of the factors as described above. Operating income increased 185. Comprehensive Financing Cost.2%.6%. and a decrease of 9%. 2012 from US$32 million in the three months ended March 31. 2012 compared to US$8 million in the three months ended March 31. primarily as a result of the factors described above. and an increase of 17. or US$5 million. 2011 due to longer-term refinancing arrangements with suppliers. primarily due to higher demand for our products in Venezuela and Colombia. or US$12 million. 2012 also reflect an increase of 20. 2012 from US$20 million in the three months ended March 31. Variable costs as a percentage of sales was 83. Net. 2011.4%. Variable production costs increased 8.7% in the three months ended March 31. This decrease was primarily due to restructuring expenses associated with the consolidation of our operations in Brazil. 2012 compared to 83. to US$1 million of foreign A-36 . or US$8 million. Foreign exchange gain in the three months ended March 31. 660 73.................4% 9....719 361 3.. Results of Operations for the Year Ended December 31..... Operating income .....5%) (142) 2 (1) (140) (3..9% 84................... 2010 % of net sales 2011 (US$ in millions. 2011.....0%) (4.....exchange loss in the three months ended March 31.... 2010: For the year ended December 31...........2%) (98) 53 (2) (47) (3..................... 3.5% 1...........................7%) — (1.......... Contribution margin .....9% 83...8% 3...8%) For the year ended December 31(1). except for %) % of net sales A-37 ......3% (2..................... Variable costs: Production costs ..080 580 162 370 532 49 (72) (119) % of net sales — 74.....0% (2............................1%) — (3...............3% 9.........9% 4.....9%) (0... Selling and administration expenses ................... Selling and administration expenses ...........4% 10...... 2012 primarily due to the appreciation of the Mexican peso relative to the U.7% 4...... net ........3% 16..209 2...... 2012 compared to an income tax expense of US$4 million in the three months ended March 31.. net ............ Income Tax Benefit (Expense)..... Comprehensive financing cost.....0%) (3...........1% 14................... primarily as a result of the application of a lower effective tax rate related to projected income tax for fiscal year 2012.........S...........3% 13... 2011....... 2011 due to the factors described above. 2012 compared to a consolidated net loss of US$24 million in the three months ended March 31.. Income before income tax benefit (expense) and participation in the results of joint venture .... 2011 and December 31........... We recorded a consolidated net loss of US$15 million in the three months ended March 31... Fixed expenses: Production costs ........... except for %) — 3............................... 2010 Net sales.......673 536 143 298 441 95 (66) (127) % of net sales 2011 (US$ in millions..... We recorded an income tax benefit of US$4 million in the three months ended March 31.......... 2011 Compared to the Year Ended December 31...........5% 9...........0%) 2..... Total fixed expenses ...........1% 15... Consolidated net loss ... Consolidated Net Loss......... Participation in the results of joint venture ........ Income tax benefit (expense) ........ Total variable costs .......................... Other expenses............1%) (1.......356 317 2... 2010 The following table sets forth our results of operations for the years ended December 31............................... dollar in the three months ended March 31....................... ......... or US$38 million...... Net sales..5% 83.... Selling and administration expenses ............1%............. to US$361 million in 2011 from US$317 million in 2010 as result of the increase in net sales.....3% 17.......................660 million in 2011 from US$3.. Operating income ...............................209 million in 2010 primarily due to the following factors: an increase of 32... 2010 3.................. to US$3................9% 9..........2%) 0..........1% in 2011 A-38 ......................... Consolidated net income (loss) .3% 13.......................... Total fixed costs ....9% 4..7% 4..............63% ownership interest in Mabe Brazil. net ......080 million in 2011 from US$2...........012 2.............4% 9...... Variable costs as a percentage of sales was 84......... Income before income tax benefit (expense) and participation in the results of joint venture ....... or US$29 million. or US$436 million........ an increase of 103...4%............ Contribution margin .5%... Variable selling and administration expenses increased 13......... Variable production costs increased 15. net ..673 million in 2010........2%..... Net Sales........... Fixed costs and expenses: Production costs .................4% 82..8%..... Income tax benefit (expense) ... or US$451 million..6%) (3...4%) (3...... in domestic net sales in Argentina primarily due to import controls in that country that benefitted our local facilities.... or US$14 million.6% 4...2%) 1.. Selling and administration expenses .... an increase of 8..480 532 132 279 411 122 (42) (115) % of net sales — 72....... to US$3........ and an increase of 2.......4% (1............. Variable Costs and Expenses..... Other expenses.. or US$5 million................197 284 2. The increase in net sales was partially offset by a decrease of 3%..0% — (2...For the year ended December 31(1)......5% (73) — (1) (74) (2................ Participation in the results of joint venture . Variable costs and expenses: Production costs .... in export sales to US$934 million in 2011 from US$963 million in 2010 due to lower demand for our products resulting from the effects of the economic recession in the United States.....4% 2........ Comprehensive financing cost...1%) (35) 51 — 16 (1........ Net sales increased 14.....740 556 148 327 475 80 (52) (101) % of net sales — 73...9%...7% 9.... or US$44 million..... in domestic net sales in Colombia primarily due to growth in retail stores and specialized distribution channels.....7% — 0..... in domestic net sales in Brazil primarily due to the acquisition of BSH Continental Eletrodomésticos LTDA and the subsequent operations of Mabe Brazil... or US$407 million............296 2.....3%......428 312 2......5% 9........ reflecting higher unit sales as well as increased commodity prices in 2011....9% 14.. in domestic net sales in Central America primarily due to higher demand for our products in Central America.... Total variable costs .....1% 16.............0% (1.....8%) 2011 3....................2%) ______________ (1) Adjusted to reflect our 58......... .......... Contribution margin as a percentage of net sales decreased to 15....7% 2009 Net sales. except for %) 3........ Total variable costs ..... Net.... the increase in net comprehensive financing cost and the decrease in income tax benefit described above.. Net. or US$46 million........... Contribution Margin....... Comprehensive Financing Cost.6% 2..3% in 2010.. or US$44 million.. or US$13 million. or US$91 million...... or US$6 million.... to US$72 million in 2011 from US$66 million in 2010 primarily due to the incurrence of restructuring expenses associated with the consolidation of our operations in Brazil........ primarily as a result of the factors described above.compared to 83.... We recorded a consolidated net loss of US$140 million in 2011 compared to a consolidated net loss of US$47 million in 2010 primarily as a result of the factors described above and... Contribution margin . net increased 9....4% 9...... 2010 and December 31... % of net sales 2010 % of net sales (US$ in millions......4% 536 (US$ in millions.. This decrease was primarily due to the recognition in 2010 of tax loss carry-forwards and the recognition of tax losses associated with our sale of certain subsidiaries to another existing subsidiary in connection with our strategic corporate restructuring in 2010 that were not applicable in 2011......... Operating Income decreased 48. Comprehensive financing cost... except for %) A-39 .5%..2%.........1%........... in particular.. Income Tax Benefit (Expense).3% 16.. primarily due to higher levels of factoring arrangements..... Variable costs: Production costs . or US$8 million..... Other Expenses.673 18....... Fixed Costs and Expenses..... to US$49 million in 2011 compared to US$95 million in 2010..7%.7%. Fixed production costs increased 20.......... primarily due to foreign exchange fluctuations and a decrease in our loss on monetary position.. partially offset by an increase in net sales.. Consolidated Net Loss......9% 2......... Contribution margin increased 8. Operating Income..553 575 72.... Other expenses.. to US$111 million in 2011 from US$98 million in 2010...........9% in 2011 compared to 16...7% 8... to US$532 million in 2011 from US$441 million in 2010 primarily due to an increase in depreciation expenses associated with higher levels of capital expenditures and the acquisition of BSH Continental Eletrodomésticos LTDA in Brazil.209 — 2..9% 83.............7% in 2010 principally reflecting an increase in the cost of raw materials and labor costs in 2011 compared to 2010.. to US$580 million in 2011 from US$536 million in 2010.. 2009: For the year ended December 31. Selling and administration expenses .128 — 3.. We recorded an income tax benefit of US$2 million in 2011 compared to an income tax benefit of US$53 million in 2010..... 2009 The following table sets forth our results of operations for the years ended December 31...356 317 73.. net decreased 6.. 81. Results of Operations for the Year Ended December 31.275 277 2. 2010 Compared to the Year Ended December 31................. Net interest expense increased 13. to US$119 million in 2011 from US$127 million in 2010.. mainly in Brazil..5%... .............................................209 million in 2010 from US$3.......6% (0.................5%) For the year ended December 31(1)..... Income before income tax benefit (expense) and participation in the results of joint venture ........ Selling and administration expenses ..... % of net sales 2010 % of net sales 4.3%) (3....................3% 8.......... Fixed costs and expenses: Production costs ..6%......7% 12...0% (1.............117 249 2..175 million in 2009.............4% 82..1%) (98) 53 (2) (47) (3....5% 9.... which was attributable to the following: an increase of 34% or US$30 million in domestic net sales in Argentina......................... Comprehensive financing expense (benefit) cost..3% (0......... net ........9% 13...7% — 0....... Total fixed costs and expenses ............................................. net ...............4%) (3......6% 81...........3% 13........ Comprehensive financing cost.........................3% 13.............. except for %) 2...........7% — (1.197 284 2...........3% 17..0% (2...9% 5.............2% 8. Net sales increased 2....................3% 18...........................909 — 3........................... Total fixed expenses .. Consolidated net income (loss) ...0%) (4... % of net % of net 2010 sales sales (US$ in millions. Income tax expense (benefit) .246 million in 2010 from US$2.... Selling and administration expenses ......... Consolidated net loss ......480 532 132 279 411 122 (42) (115) 72....... Other expenses... Operating income ....366 543 122 253 375 168 (10) (100) 72.. Selling and administration expenses .....................4% 9... 2009 Net sales........................ A-40 ....................9% 9............2%) 1....................................7%) (4... Participation in the results of joint venture .......... Other expenses...........9% (35) 51 — 16 (1..........0%) 19 (23) — (4) 0.........2% increase in domestic net sales to US$2...................8% 3.............012 — 2........63% ownership interest in Mabe Brazil............. Operating income ............... Income tax expense (benefit) ............8% 8...................6% 4. Income before income tax benefit (expense) and participation in the results of joint venture ............. Net Sales.................8% (0....... Total variable costs and expenses ................. net .....1%) — 0................ Participation in the results of joint venture .....7%) — (0.........0%) 143 298 441 95 (66) (127) 4.1% 5...5%) 2......... or US$81 million.........1%) 1.................... net ................... 133 277 410 165 (21) (125) For the year ended December 31..5% ______________ (1) Adjusted to reflect our 58......7% 4........................0% (1........ to US$3......................................... Variable costs and expenses: Production costs .....................7% 4...........8%) 58 (32) — 25 2........ Contribution margin ............128 million in 2009 primarily due to a 3...2009 Fixed expenses: Production costs ....... in domestic net sales in Mexico primarily due to higher demand for our products. or US$161 million. Net.6%.553 million in 2009. These increases in net sales were partially offset by the following: a decrease of 22.5%. or US$70 million. primarily due to the increase in net sales. and a decrease of 8. Variable production costs increased 4. or US$40 million.3%.7% in 2010 compared to 18. Variable Costs and Expenses. to US$95 million in 2010 compared to US$165 million in 2009 mainly due to the increase in variable selling and administration expenses and the increase in fixed selling and administration expenses. and an increase of 28. in domestic net sales in Brazil. Contribution margin decreased 6. rental and maintenance expenses and legal and professional fees.2%. in domestic net sales in Canada. to US$441 million in 2010 from US$410 million in 2009 primarily due to the capitalization of costs associated with certain projects and an increase in the purchase of assets in 2010 compared to 2009.5%.7%.8%.6%. to US$66 million in 2010 compared to US$21 million in 2009 primarily due to restructuring expenses associated with the consolidation of our operations in Brazil. mainly due to the successful expansion of our product offerings to include Mabe products manufactured outside of Canada. in domestic net sales in the Andean Region primarily due to a decrease in sales in Venezuela. in domestic sales in Central America primarily due to increased sales of washing machines and refrigerators as well as the introduction of dishwashers into the region. primarily due to increases in labor expenses.6% in 2009. Other expenses increased 219%. Operating Income. or US$21 million. Contribution Margin.5%. Variable costs as a percentage of sales was substantially unchanged at 83. to US$2. to US$298 million in 2010 from US$277 million in 2009. A-41 . to US$317 million in 2010 from US$277 million in 2009 reflecting increased logistics costs due to higher unit volume sales as well as higher labor expenses due to merit pay increases and an increase in advertising expenses. Contribution margin as a percentage of net sales decreased to 16. Fixed selling and administration expenses increased 7. partially offset by the increase in variable production costs and variable selling and administration expenses. to US$536 million in 2010 from US$575 million in 2009. or US$28 million. an increase of 14. or US$21 million. or US$45 million. Other Expenses. Export sales were substantially constant in 2009 and 2010.3% in 2010 compared to 81.3% in 2009.2%. or US$130 million. Fixed Expenses and Costs. or US$40 million. particularly in Mexico.4%. an increase of 8. Fixed production costs increased 7. or US$31 million. or US$39 million. or US$120 million. Operating income decreased 42. primarily due to higher unit sales volume as well as increased commodity prices (particularly for steel).673 million in 2010 from US$2. Variable selling and administration expenses increased 14. ... Net cash flows used in financing activities .. other investments or working capital needs..S..... Cash and cash equivalents at period end ..... A-42 . Net cash flows used in investing activities ... we finance the operations of our subsidiaries through our normal internal cash management and treasury functions.......... dollar in 2010 as compared to a 5....S.....3% appreciation of the Mexican peso against the U.. March 31.... for example for acquisitions. Our ability to meet our debt and other obligations is primarily dependent on the earnings and cash flows of our subsidiaries and the ability of those subsidiaries to pay us interest or principal payments on intercompany loans... dividends or other amounts which may be limited by debt agreements. to US$98 million in 2010 from US$87 million in 2009. Net interest expense increased 12... Statement of Cash Flows For the three For the year ended months ended December 31.. 2010 2011 2011 2012 2009 (US$ in millions) 33 531 130 357 88 (41) (175) (133) (55) (13) (396) 157 (135) 113 (229) 80 (47) 82 (29) 78 Net cash flows from operating activities ......... This increase was primarily due to the recognition of tax loss carry-forwards and the recognition of tax losses associated with our sale of certain subsidiaries to another existing subsidiary in connection with our strategic corporate restructuring in 2010..................... We recorded a consolidated net loss of US$47 million in 2010 compared to a consolidated net loss of US$4 million in 2009 as a result of the factors described above.....1% appreciation of the Mexican peso against the U.. Net comprehensive financing cost increased 1. dollar in 2009.... The following table shows the generation and use of cash in 2011 and the three months ended March 31....... We recorded an income tax benefit of US$53 million in 2010 compared to an income tax benefit (expense) of US$23 million in 2009.1%.......... 2011 and 2012.... to US$127 million in 2010 from US$125 million in 2009 primarily due to a decrease in foreign exchange loss reflecting a 5.. Income Tax Benefit (Expense)...................... Liquidity and Capital Resources We are a holding company and therefore derive substantially all of our cash flows from our subsidiaries......... Net.Comprehensive Financing Cost. Consolidated Net Loss. As a holding company........ we provide centralized financing through intercompany loans or through debt facilities...... or US$11 million.. To the extent our subsidiaries are not able to satisfy their financing needs through internal cash generation.......4%... or US$2 million... ..... Leiser.... S. we had US$78 million of cash and cash equivalents and US$704 million of outstanding indebtedness compared to US$79 million of cash and cash equivalents and US$700 million of outstanding indebtedness at December 31. In addition. (“Controladora Mabe”).V. 2010 2011 2011 2012 2009 (US$ in millions) 582 126 250 61 63 (147) (156) (75) (60) (7) (383) 154 (132) 97 (173) 79 (27) 80 (30) 78 ______________ (1) Adjusted to reflect our 58... As of March 31... de C....A.. waiver and accession agreement in September 2011. S... substantial liquidity and capital resource requirements.. 2012 and of 2.. 2011... 2011. de R.....L.. if necessary.... and expect to continue to experience.V. a consolidated net interest coverage ratio (calculated as the ratio of EBITDA to consolidated net interest charges. MC Commercial Inc. 2012 and the years ended December 31... Statement of Cash Flows(1) For the three months For the year ended ended March 31......V. We are subject to various restrictive covenants under this agreement......25 to 1 through June 30.............A.5 to 1. Export Prepayment Credit Agreement In June 2011. Net cash flows used in investing activities ............. principally to operate our facilities and to finance our research and development activities... de R.... we were in compliance with these covenants. (“Mabe Mexico”). each as defined therein) of 2. The loans bear interest at a rate of LIBOR plus an applicable margin. each as defined therein) of 3.... (“MCM Americas”).. cash flow from operations and.. de C... (“Leiser”).. de C. Such ratios are calculated using values that have been adjusted to exclude the non-controlling interest in Mabe Brazil. December 31. We have experienced.... Net cash flows used in financing activities .. S..Net cash flows from operating activities .. it is an event of default under the agreement if a change of control A-43 . through a combination of cash flow from operations.V..L........ and a consolidated leverage ratio (calculated as the ratio of total net debt to EBITDA.V... dispositions of property and on our subsidiaries making restricted payments including dividend payments if a default or event of default under the agreement exists... Sources of Cash We funded our cash needs for the three months ended March 31. S.... As of December 31..50 to 1 thereafter. and a requirement that we maintain a minimum net worth of Ps. We expect that cash on hand. Mabe México. cash on hand...... de C..... Cash and cash equivalents at period end . S...... additional debt financing will be sufficient to fund our currently foreseeable liquidity requirements.. New York Branch (“Deutsche Bank”) for term loans in the amount of US$150 million.. (“MC Commercial”) and MCM Americas. 2012. sales and leases. which was amended pursuant to an amendment..63% ownership interest in Mabe Brazil. 2012.... Principal on the loans is scheduled to be repaid in seven equal quarterly installments starting in December 2012. 2011 and March 31. The loan is guaranteed on a joint and several basis by Controladora Mabe. The borrower under this agreement is Mabe..... 2010 and 2009. consolidations. we entered into an export prepayment credit agreement with Deutsche Bank AG...2.... de R....600 million at the end of each fiscal quarter.. bank financings and short-term uncommitted credit lines from financial institutions.. mergers... including limitations on liens. de C.L... and Leiser. A-44 . 2012. plus accrued interest and any additional amounts. accrued interest and any additional amounts. we issued the old notes.875% per year and maturing on October 28. we were in compliance with these covenants.. plus accrued interest and any additional amounts. As of March 31. de C. including limitations on liens and consolidation. de C.A. de R. including limitations on liens. We are subject to certain covenants under the indenture governing the existing notes.V.L. 2019. consisting of US$350 million aggregate principal amount of senior. accrued interest and any additional amounts. sales and leaseback transactions and consolidation. upon the occurrence of a change of control. As of December 31.L. As of December 31. The old notes are guaranteed by our subsidiaries Mabe. 2012. 2015.. S. unsecured notes bearing interest at a rate of 6.500% per year and maturing on December 15. merger. 2012. The existing notes are guaranteed by our subsidiaries Mabe. de R. we may redeem all (but not less than all) of the existing notes at 100% of their principal amount. we may redeem all (but not less than all) of the old notes at 100% of their principal amount. Mabe México. plus accrued interest.V. As of March 31. upon the occurrence of a change of control. S. S. we issued the existing notes.V. plus accrued interest. de C. in the event of certain changes in the Mexican withholding tax treatment relating to payments on the old notes. consisting of US$200 million aggregate principal amount of senior.L. sale or conveyance. 2011 and March 31. de R. de C. Also.A. 2005 Bond Issuance In November 2005. We may redeem the existing notes. sale or conveyance. de C. in the event of certain changes in the Mexican withholding tax treatment relating to payments on the existing notes. US$200 million aggregate principal amount of the old notes were outstanding. S. US$40 million of indebtedness owed to Banco Nacional de México. merger. including the repayment of certain shortterm indebtedness.V.L. each holder of the existing notes would have the right to require us to repurchase the existing notes at a purchase price of 101% of the principal amount thereof.A. we were in compliance with these covenants.occurs and is continuing. 2009 Bond Issuance In October 2009. in whole or in part. at any time by paying the principal amount of the existing notes plus the applicable “make-whole” premium. Mabe México. de R. 2011 and March 31. In addition. In addition. We are subject to certain covenants under the indenture governing the old notes. US$350 million aggregate principal amount of the existing notes were outstanding. and Leiser.. among others.V. We used the proceeds from the loans to refinance certain short-term credit facilities we had with local banks and to refinance a previous agreement with Deutsche Bank under the same terms and conditions in the principal amount of US$75 million. among others. at any time by paying the principal amount of the old notes plus the applicable “make-whole” premium. approximately US$145 million of certain short-term debt and US$59 million of other long-term debt. The proceeds of the old notes were used to repay US$60 million of short-term debt incurred in connection with the acquisition of Mabe Canada and for general corporate purposes. We may redeem the old notes. unsecured notes bearing interest at a rate of 7. The proceeds of the existing notes were used to repay US$100 million of indebtedness pursuant to a loan facility. S. in whole or in part. each holder of the old notes would have the right to require us to repurchase the old notes at a purchase price of 101% of the principal amount thereof. Also. S. de C. S. 2012.V. ............. and we had US$4 million outstanding under such credit lines..” The following is a summary of our contractual obligations as of March 31. Our only recourse related to these arrangements is legal or administrative collection efforts directed against the customer........ 2012: Total Contractual Obligations: Long-term debt obligations..... 2011 and 2010.... Short-term debt obligations ... Short-term debt obligations ................Other Sources of Cash As of March 31.... Operating lease obligations... Operating lease obligations.......... In the ordinary course of business..... we also enter into long-term supply arrangements for raw materials which are not reflected in the above table.................... our Brazilian subsidiaries would be required to satisfy the obligation with the bank................. We have also entered into factoring agreements that are designed to extend the maturities of our supplier agreements.. In addition..... of which 66% are denominated in local currencies........ We hedge a substantial portion of our debt to reduce our exposure to fluctuations in interest rates and exchange rates........... we had US$236 million in uncommitted credit lines available to us...... A-45 ... 2012..... Total ...... Total ........ respectively.... Payments Due By Period Less than 1 year 1-3 years 3-5 years (US$ in millions) — 28 47 75 307 44 — 351 — 40 — 40 More than 5 years 657 147 47 851 350 35 — 385 Total Contractual Obligations: Long-term debt obligations................ our Brazilian subsidiaries guarantee customer lines of credit with commercial banks..... Off-Balance Sheet Financing Arrangements Following standard business practices in Brazil......63% ownership interest in Mabe Brazil..... the outstanding balance under these agreements amounted to US$392 million and US$297 million............... If a customer were to default on its line of credit with the bank............... supporting finished product purchases from us..................... See “—Market Risk Disclosures........ At December 31... Payments Due By Period(1) Less than 1 year 1-3 years 3-5 years (US$ in millions) — 22 47 69 307 36 — 343 — 34 — 34 More than 5 years 657 126 47 830 350 34 — 384 ______________ (1) Adjusted to reflect our 58................... our obligations under derivative financial instruments are not reflected above.. At March 31. the LEBAC rate in Argentina and LIBOR for loans in U.1 million for cost reduction initiatives in the production of wall ovens and ranges to be sold in Latin American markets. primarily consisting of US$14. Interest rate risk exists principally with respect to our indebtedness that bears interest at floating rates. US$37 million for maintenance expenditures at all of our production facilities. Additionally. we invested in manufacturing facilities in Central America and the Andean Region to comply with international environmental standards relating to refrigeration. We do not engage in transactions involving derivative financial instruments for speculative purposes. Brazil and Argentina.4 million for moving the production of our ranges from our factory in Mexico City to our factory in San Luis Potosi as part of a cost reduction initiative.9 million for the development of a new washing machine to be sold in the Southern Cone market. 99% of which was denominated in U. interest rate swaps and cross currency swaps. US$8. 2012. Our risk-management program considers the unpredictability of financial markets and seeks to minimize the potential negative effects on our financial performance. Of this amount. we made US$25 million in capital expenditures. Latin American and international markets.S. as well as expansion of our production capacity. we had outstanding indebtedness of US$704 million. In 2011. 2012. Increases in the Tasa Activa. The interest rate on our variable rate debt is determined primarily by reference to the Tasa Activa rate in Venezuela. dollars. 29% of our net sales were generated and denominated in U. 2012 was 99% U. We manage our exposure to changes in interest rates by engaging in forward-rate agreements.S. dollar-denominated except for working capital lines in Canada. we made US$122.Capital Expenditures Our capital expenditures include new investments in. Central America. Mexico. Mexican pesos. We use derivative financial instruments to reduce our exposure to adverse fluctuations in interest rates.S. Exchange Rate Risk Our net sales are generated and denominated in U. primarily consisting of the initiation of an ongoing cost reduction program involving the relocation of a dryer production line from Montreal.S. and maintenance of our manufacturing facilities.9 million for our strategic organization program “Mabe Way” in connection with the ongoing implementation of a new SAP system. exchange rates and commodity prices. “Mabe Way. US$4.S. In the three months ended March 31. 22% bore interest at variable interest rates and 78% bore interest at fixed interest rates. dollars. 2012. Our interest rate risk is partially mitigated by the multi-currency nature of our variable interest debt.6 million for an upgrade to our middle-end refrigerator production facility in Brazil. Interest Rate Risk In connection with our business activities. which are denominated in local currencies.0 million for renovations and upgrades to the design of our high-end refrigerators to be sold in the United States. LEBAC and LIBOR rates would increase our interest payments. Canadian dollars and other currencies. dollars.5 million in capital expenditures. US$1.1 million for the development of a new line of refrigerators to be sold in Latin American markets. A-46 . At March 31. we have issued and hold financial instruments that currently expose us to market risks related to changes in interest rates. dollars. Market Risk Disclosures Our operations expose us to a number of market risks. and US$12. Colombia. US$2. Canada to Saltillo. We also invested in maintenance for all our production facilities and for our strategic organization program. technological upgrades to. US$5.” including the implementation of streamlining technology. Our debt at March 31. aluminum and nickel prices. In the past.940 Commodity Price Risk Commodity price risk in our businesses exists primarily with respect to raw materials prices including natural gas. we have not always been able to increase the prices of our products to reflect increases in prices of raw materials in a timely manner. For a full description of all of A-47 .062 12. dollar 13. warranties. 2012 June 25. fair value of derivative financial instruments. We enter into forward exchange contracts that are effective economic hedges and are not designated as hedging instruments under MFRS. Critical Accounting Policies We have identified certain key accounting estimates on which our consolidated financial condition and results of operations are dependent. In the near term. 2012 Pesos per U. 2009 December 31.Fluctuations in exchange rates relative to the Mexican peso expose us to foreign-currency exchange rate risk. deferred taxes and for obsolete inventory. the foreign-currency exchange rate exposure associated with our debt repayment obligations is primarily limited to our short-term debt which totaled US$47 million at March 31. Actual results may differ from our estimates under different assumptions or conditions. These key accounting estimates most often involve complex matters or are based on subjective judgments or decisions that require management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.S. estimates routinely require adjustments based on changing circumstances and the receipt of new or better information. We base our estimates on historical experience. and other assumptions that we believe are reasonable under the circumstances. Any ineffective portion of a financial instrument’s change in fair value is immediately recognized in earnings. valuation of long-lived assets. 2010 December 31. dollar for certain dates since the issuance of the existing notes: Date December 31. 2012.991 14. We have entered into arrangements with certain financial institutions to hedge our exposure to increases in natural gas. In the opinion of our management.305 13. The table below contains the exchange rate of Mexican pesos per U.S. where applicable. We periodically assess the effectiveness of hedging and derivative financial arrangements. our most critical accounting estimates under MFRS are those that require management to make estimates and assumptions that affect the reported amounts related to the accounting for the allowance for doubtful accounts receivable. a situation that may continue in the future. In addition. We do not enter into hedging arrangements in connection with purchases of steel although we do enter into some fixed price contracts with our steel suppliers. copper. steel.948 12.343 13. copper. aluminum and nickel. 2011 April 30. 2012 May 31. our accounting policies, see the Financial Statements and the notes thereto included in this listing prospectus. There are certain critical estimates that we believe require significant judgment in the preparation of our consolidated financial statements. We consider an accounting estimate to be critical if: it requires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making the estimate; and changes in the estimate or different estimates that could have a material impact on our financial condition or results of operations. Allowance for Doubtful Accounts The allowance for doubtful accounts represents our estimate of losses resulting from the failure or inability of our customers to make required payments. Determining our allowance for doubtful accounts receivable requires significant estimates. We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer’s current creditworthiness, as determined by our review of their current credit information. In addition, we consider a number of factors in determining the proper size and timing for the recognition of and the amount of the allowance, including historical collection experience, customer base, current economic trends and the aging of the accounts receivable portfolio. While we believe that our estimates are reasonable, changes in customer trends or any of the factors mentioned above could materially affect our allowance for doubtful accounts. As of March 31, 2012, our allowance for doubtful accounts was US$95 million compared to US$54 million as of March 31, 2011. We consider this provision sufficient to cover the potential risk of uncollectible accounts, however, we can provide no assurance that we will not be required to increase the amount of this provision in the future. Warranties We provide product warranties against manufacturing defects for periods ranging from one to three years, depending on the product. We recognize a warranty provision in the same period that revenue from the sale of the related products is recognized. That provision is based on warranty terms and our best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. In addition, we recognize the warranty provision considering a displacement factor (for the period between sales to wholesalers and sales to final users) and a factor for costs incurred for parts and repair services provided. The factors used in determining the relevant provision are based on the experience of the most recent years. Local distributors assume responsibility for warranties on exported products, except in those countries in which we operate where our operating subsidiaries retain responsibility for the warranties. Long-lived Assets We review fixed, definite lived intangible and other long-lived assets at least annually, under MFRS C-15, “Impairment of the Value of Long Lived Assets and their Disposal.” A-48 Impairment reviews require a comparison of the discounted cash flows to the carrying value of the asset for MFRS reporting purposes. If the total of the discounted cash flows is less than the carrying value under MFRS, an impairment charge is recorded for the difference between the estimated fair value and the carrying value of the asset. In making such evaluations, we estimated the fair value of the long-lived assets as well as the discounted cash flows. In determining our discounted cash flows, we make significant assumptions and estimates in this process regarding matters that are inherently uncertain, such as estimating remaining useful lives and the possible impact that inflation may have on our ability to generate cash flow, as well as customer growth and the appropriate discount rate. Although we believe that our estimates are reasonable, different assumptions regarding such remaining useful lives or future cash flows could materially affect the valuation of our long-lived assets. We also evaluate the useful lives used to depreciate our long-lived assets periodically considering their operating and usage conditions. As of December 31, 2011 and March 31, 2012, no indicators of impairment existed. Deferred Income Taxes As part of the process of preparing our consolidated financial statements, we are required to estimate our income tax liability. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from the different treatment for tax and accounting purposes of several items, such as depreciation, amortization and allowance for doubtful accounts. These differences result in deferred income tax assets and liabilities that are included in our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely to occur, we must include an expense in income tax expense in the consolidated statement of income. Significant management judgment is required in determining our provision for income taxes, our deferred income tax assets and deferred income tax liabilities and any valuation allowance recorded against our net deferred income tax. The valuation allowance is based on management projections of future financial results. If actual results differ from these estimates or we adjust the projections in future periods, we may need to materially adjust the valuation allowance, which may materially impact our results of operations in future periods. Financial Instruments Measured at Fair Value All derivative financial instruments classified as for trading or to hedge against market risk, are recognized in the balance sheet as assets and/or liabilities at their fair value. The fair value of financial instruments is determined based upon liquid market prices evidenced by exchange traded prices, broker-dealer quotations or prices of other transactions with similarly rated counterparties. If available, quoted market prices provide the best indication of value. If quoted market prices are not available for fixed maturity securities and derivatives, we discount expected cash flows using market interest rates commensurate with the credit quality and maturity of the investment. Alternatively, we may use matrix or model pricing to determine an appropriate fair value. In determining fair values, we consider various factors, including time value, volatility factors and underlying options, warrants and derivatives. A-49 The degree of management’s judgment involved in determining the fair value of a financial instrument is dependent upon the availability of quoted market prices. When observable market prices and parameters do not exist, management’s judgment is necessary to estimate fair value, in terms of estimating the future cash flows, based on variable terms of the instruments and the credit risk and in defining the applicable interest rate to discount those cash flows. Reporting Currency For the period ended December 31, 2010, we changed the reporting currency used in preparing our financial statements from the Mexican peso (which we used through December 31, 2009) to the U.S. dollar (which we began using as of January 1, 2010) in accordance with MFRS B-15 “Translation of Foreign Currency,” given that the functional currency of our operations is the U.S. dollar. For comparison and presentation purposes, the Financial Statements and other financial information for the period ended December 31, 2009 included herein are presented in U.S. dollars. See Note 4(u) to our Audited Financial Statements included elsewhere in this listing prospectus. Adoption of IFRS We will be reporting under IFRS for the year ended December 31, 2012, with an official IFRS adoption date of January 1, 2012. IFRS differs in certain significant respects from MFRS and U.S. GAAP. Since we are currently in the process of converting our financial statements to IFRS, it is not yet possible to determine in a definitive manner the possible effects that IFRS will have on our financial information; however, we believe that the primary impact of this accounting change on our financial statements will be (i) the revaluation of our fixed assets, which we believe will result in an increase in the value of our property, machinery and equipment and our total assets and an increase in our depreciation and amortization expense, (ii) an increase in our liabilities associated with employee benefits and (iii) an increase in our deferred income tax liabilities resulting principally from the adjustments described in (i) and (ii). An analysis of the principal differences between IFRS and MFRS and an estimate of the effect of IFRS on our estimated consolidated opening balance sheet as of January 1, 2011, our estimated consolidated opening balance sheet as of December 31, 2011 and our estimated unaudited opening balance sheet as of March 31, 2012 is set forth in Note 3 to the Annual Financial Statements and to the Interim Financial Statements included elsewhere in this listing prospectus. As a result of the adoption of IFRS, our consolidated financial information presented under IFRS for fiscal year 2012 may not be comparable to our financial information for previous periods prepared under MFRS. Moreover, the IASB standards and IFRIC interpretations used to prepare the IFRS financial information included in the Financial Statements were those issued and effective as of March 31, 2012; however, the IFRS standards and IFRIC interpretations that will be applicable at December 31, 2012, the date for reporting our first set of financial statements under IFRS, including those that will be applicable on an optional basis, may differ from those applied in preparing the IFRS financial information included herein. Summary of Significant Differences Between MFRS and IFRS The following is a summary of significant differences between MFRS and IFRS that could significantly affect our financial statements. We have not attempted to identify future differences between MFRS and IFRS that might affect our financial statements as a result of transactions or events that may occur in the future, including the issuance of new accounting standards under either MFRS or IFRS. A-50 Potential investors should seek advice from their own advisors for their understanding of the differences between MFRS and IFRS and how these differences could impact the financial information included in this listing prospectus. Asset Revaluation IFRS. As a general matter, IFRS allows the revaluation of long lived assets to their fair value. In particular, IFRS 1, “First Time Adoption of International Financial Reporting Standards” gives the alternative of revaluating an item of property, plant and equipment to its fair value at the transition date to IFRS. MFRS. MFRS does not allow asset revaluation. Depreciation of Asset Components IFRS. International Accounting Standard (“IAS”) 16, “Property, Plant and Equipment” requires depreciating each part or component of an item of property, plant and equipment separately that has a significant cost in relation to the total cost of the item and that has a different useful life from the rest of the components that comprise an item. MFRS. Beginning January 1, 2012, MFRS C-6, “Property, Plant and Equipment” requires depreciating by component under the same basis as IAS 16. Prior to such date, there was no requirement to identify the components of the items of property, plant and equipment. Recognition of Inflation Effects IFRS. Under IAS 29, “Financial Reporting under Hyperinflationary Economies,” the effects of inflation on financial information should be recognized in the financial statements of an entity whose functional currency is one of a hyperinflationary economy, that is, when the accumulated inflation over the last three years was close to or exceeded 100%. MFRS. Until December 31, 2007, MFRS B-10, “Recognition of Inflation Effects in the Financial Information,” required inflation effects to be recorded in the basic financial statements, independent of any inflationary environment. Beginning January 1, 2008, the new standards under MFRS B-10 established criteria for the identification of inflationary and non-inflationary environments and now require recognition of the inflation effects in the financial information only when the accumulated inflation of the past three annual periods is equal to or greater than 26%. Termination Benefits IFRS. According to IAS 19, “Employee Benefits,” the recognition of the expense and liability for termination benefits is effective only until the entity can demonstrate its commitment to end the labor relationship or providing the termination benefits, as a result of making an offer to motivate the voluntary retirement. To demonstrate the entity’s commitment to terminate a labor relationship, the entity must have a formal detailed plan that describes the terms and conditions of such termination, without a reasonable probability of cancellation. MFRS. In the event that a labor relationship is terminated for causes other than a restructuring (for example, statutory compensation, bonuses, special compensations offered in exchange for a voluntary resignation, seniority premiums, etc.), MFRS D-3, “Employee Benefits” requires the recognition of a provision for these benefits during the period in which the labor is rendered. A-51 “Employee Benefits.” Debt Issuance Expenses IFRS.” they should be presented either in accordance with the nature of the expense in the employees’ profit sharing line or in accordance with the expense based on its function as part of the cost of sales. Presentation of Impairment Losses IFRS. MFRS D-3. cost of goods sold. In practice. and in conformity with IAS 1. although there is a requirement to disclose the line item(s) in the income statement under which these losses are included. Mexican practice is to disclose any difference in its determination. less discount or plus premium for the placement of the securities. In conformity with IAS 39. Under MFRS. contingent assets and liabilities and commitments. 2013. which are similar under both standards. Under MFRS C-9. The determination of the effective interest rate is based on the estimated cash flows during the expected life of the liability. “Impairment of long lived assets and its disposal” establishes that impairment losses should be presented in the income statement under “other income and expenses. Presentation of Employees’ Profit Sharing IFRS. According to IAS 19. A-52 . this expense is to be presented under the same line item as costs and expenses under which the entity recognizes the rest of its employee benefits. The requirements of IAS 36. “Impairment of assets” do not specify the line item under which impairment losses should be included. Nevertheless.” debt issuance related liabilities represent the amount to be paid for the issued obligations.” employees profit sharing plans are presented in the income statement as an expense. both standards refer to voluntary disclosure. “Income Statement” do not require the disclosure of operating income in the income statement. as described below. and general expenses.” financial liabilities are initially recognized at fair value less transaction costs that are directly attributable to the issuance of these liabilities and are amortized using the effective interest rate method. Even though a definition is not provided by the standards. MFRS. MFRS. “Liabilities. “Financial instruments: Recognition and measurement. distribution expenses or administrative expenses. “Presentation of financial statements” and MFRS B-3.Other Income and Expenses Effect on the Operating Income IFRS. Beginning January 1. in accordance with the par value of the securities. other income and expenses are not included. “Employee Benefits” recommends that employees profit sharing plans be presented under the line item other income and expenses. consequently. IAS 1. issuance costs are presented as other assets and are amortized on a straight line basis throughout the life of the loan. MFRS. Under IFRS. operating income is determined including the following items: sales. MFRS. “Presentation of financial statements. MFRS C-15. there are certain aspects that must be taken into consideration in its determination. other income and expenses are considered as part of operating income. provisions. respectively. GE is also our principal customer based on aggregate product sales. compared with 352. Io Mabe. Continental and various local brand names. our consolidated domestic net sales for our Mexican operations were US$715 million. In the United States. In 2011. Exports We exported approximately 1. Additionally. consisting of approximately 64% market share for ranges. compared to US$854 million. 2012. 2012. we had consolidated net sales of US$3. we had consolidated net sales of US$931 million. operating income of US$25 million and EBITDA of US$60 million. refrigerators. 2012.63% interest in Mabe Brazil). GE Profile. For the three months ended March 31. clothes dryers and washing machines. Central and South America (including Brazil. Canada. Dako. our consolidated domestic net sales for our Mexican operations were US$159 million. GE Café.772 units to the U. in part through our partnership with GE. operating income of US$49 million and EBITDA of US$211 million. We market our products in Mexico under the GE. Mabe.BUSINESS Our Company We are a leading manufacturer and distributor of ranges. We have eight manufacturing facilities in Mexico and nine other manufacturing facilities. GE mainly markets our products under various GE brand names and the Hotpoint brand name.660 million. Hotpoint.S. Atlas.702 units for the comparable period in 2011. commonly referred to as “white line products. for the comparable period in 2011. In 2011. US$9 million and US$45 million.S. we have operated as a joint venture with GE. GE Monogram. we exported approximately 418. We also distribute built-in ovens and hoods. market from our facilities in Mexico under our joint venture agreement with GE in 2011. 2012. where we operate through our 58. Since 1987. Central America and South America under the following brand names: GE. North American Operations Mexico We are the leading distributor and manufacturer of white line products in Mexico with an approximate 43% average weighted combined market share in 2011. which holds a 48. We believe we have leading market shares in most of the countries where we operate. Pursuant to our joint venture agreement. dishwashers. microwave ovens and related parts and components under various brand names. A-53 . and GE licenses to us trademarks and patents for our products and provides us access to relevant technology used in the manufacture of our products. water coolers. Io Mabe. we have improved our manufacturing processes and operating performance by applying GE’s continuous improvement techniques.4 million units to the U. For the three months ended March 31. For the three months ended March 31. Moffat. Mabe and other well-known local brand names. the United States. compared to US$176 million for the comparable period in 2011. Our products are sold primarily in Mexico. Net sales to GE accounted for 21% of our consolidated net sales in 2011 and 23% of our consolidated net sales for the three months ended March 31.41% equity interest in our company.” with operations throughout North. market. 37% market share for refrigerators and 35% market share for washing machines. 2012. our consolidated net export sales on a global basis were US$254 million. 2012. we initiated distribution operations in Chile. We have recently determined that our Montreal plant. GE Profile and GE Monogram brand names. compared to 3% for the comparable period in 2011.63% ownership interest.552 units for the comparable period in 2011. Through Mabe Brazil’s three A-54 . a Brazilian subsidiary of the German company BSH Bosch und Siemens Hausgeräte GmbH. Andean Region Operations We are also a leading manufacturer and distributor of white line products in the Andean Region. For the three months ended March 31. In 2011. we consolidated our three Brazilian operations into Mabe Brasil Eletrodomésticos. which is currently operating at half of its capacity. We currently do not have manufacturing facilities in Venezuela. refrigerators and washing machines for the Brazilian and Argentinian markets and for export to other countries. we are the primary supplier of clothes dryers to GE in the United States sold under the GE. compared with approximately 153. Production of dryers from the Montreal plant will be consolidated into our existing facilities in Mexico. Brazil and Argentina Operations In Brazil and Argentina. in addition to these brand names. our consolidated net export sales on a global basis were US$934 million. introducing white line products manufactured in Colombia. or 85%. is no longer financially viable and. This decision will not impact our sales. distribution and support division in Canada under our commercial business unit operated by MC Commercial Inc. our commercial business unit located in Burlington. Ltda. Our operations in Brazil were strengthened in 2010 when we integrated BSH Continental Eletrodomésticos LTDA. Canada and Mabe Canada. We believe we had an approximate 3% market share for white line products when operations started in Chile and that our market share in Chile climbed to approximately 12% by the end of 2011. we also exported approximately 778. of which US$178 million. Canada We conduct our Canadian operations through MC Commercial Inc. compared to US$212 million for the comparable period in 2011. Mexico. Argentina and Mexico under the Mabe and GE brand names.236 additional units to other countries in 2011..In addition to exports to the United States from Mexico. We recently entered into a new Dryer Manufacturing Agreement with GE which involves the relocation of our dryer production from Montreal to Saltillo. 2012. Net sales to Venezuela represented 4% of our total sales in the three months ended March 31. Canada. we manufacture ranges. In the Canadian market. At the end of 2010.001 units to other countries. or 83%. we exported approximately 193. represented exports to GE for sale in the United States. accordingly. or 83%. In August 2008.. we plan to gradually close this plant between now and the end of 2014. our manufacturing business unit located in Montreal. of which US$776 million. represented exports to GE for sale in the United States. represented exports to GE for sale in the United States. (formerly BSH Continental Eletrodomésticos LTDA) in which we have a 58. Through our Canadian operations. we also sell dryers under the Hotpoint and Moffat brand names. Brazil. We have manufacturing facilities in Colombia and Ecuador which serve as the primary source of products for the Andean Region markets. of which US$216 million. For the three months ended March 31. nor will it have an impact on the supply of products to customers. which conducted Bosch’s trademark white-line appliance operations in Brazil. where we believe our combined market share for white line products was approximately 29% in 2011. We believe it is the primary supplier of ranges and refrigerators in Central America. Central American Operations We have operated in the domestic markets in Central America and exported white line products to Central America and the Caribbean from Mexico since 1960. in part through our partnership with GE. a leading manufacturer of white line products in Central America. Atlas manufactures and sells its products under popular regional brand names. Mexico in 1982 with two plants that produce plastics and steel die-stamping components used in ranges and refrigerators. Approximately two-thirds of our employees are members of labor unions. Costa Rica. refrigerators and washing machines for the Brazilian domestic market under various GE and local brand names. Pursuant to our joint venture agreement. and GE licenses to us trademarks and patents for our products and provides us access to relevant technology used in the manufacture of our products. we were producing our first gas ranges. such as Atlas and Cetron. We began operations in Querétaro. we acquired Atlas.400 employees throughout the Americas. GE is also our principal customer based on aggregate product sales. In 1997. we had become Mexico’s leading exporter of white line products. Additionally. In February of 2008. By 1953. grills. This arrangement has allowed us to leverage the relative strengths and experience and other advantages of each partner to create a cohesive and efficient business relationship. History and Development Our predecessor was incorporated in Mexico as Industrias Mabe. to produce and sell front load washing machines in Argentina under local Mabe brand names. de C. Guatemala. 2012. We recently entered into a strategic alliance with Midea Group. By 1968. in 1946 and began production of kitchen fittings in Mexico in the 1940s. and had successfully penetrated the Venezuelan and certain Central American markets.V. we manufacture gas ranges. We believe that our market share in 2011 was approximately 18% in Argentina. which were quickly followed by the production of our first ovens.660 million in 2011 and US$931 million for the three months ended March 31.manufacturing facilities. Net sales to GE accounted for 21% of our consolidated net sales in 2011 and 23% of our consolidated net sales for the three months ended March 31. we began to establish branches and distribution centers throughout Mexico. The General Electric Joint Venture Since 1987. and more than 22. S. We believe that our combined market share in 2011 in each of the markets in which we operate in Central America was approximately 50% based on our own estimates. We also own two manufacturing plants in Argentina that produce ranges and refrigerators. we have been able to improve our manufacturing processes and operating performance by applying GE’s continuous improvement techniques. which manufactures ranges and refrigerators at its Heredia manufacturing facility in Costa Rica. Honduras and Panama. During the 1950s and the 1960s. We believe Mabe Brazil had an approximate 22% market share in Brazil in 2011. Today. we are a multinational company with operations throughout the Americas with total sales of US$3.41% interest in our company. which currently holds a 48. built-in kitchenettes and breakfast units. We produced our first single-door refrigerators in 1964 and during the 1960s began to increase our share of the Mexican domestic market as well as expand into the export market. 2012. we have operated as a joint venture with GE. A-55 .A. we expanded our Central American operations into El Salvador. See “Principal Shareholders and Related Party Transactions. The terms of our termination of these products are currently under review among us and GE. net sales of ranges (gas and electric) to GE under the 1998 Contract Manufacturing Agreement were US$300 million. the “non-bankrupt party” is given a preferential right to acquire the shares of Mabe which are owned by the “bankrupt party. the other party may terminate the agreement on 30 days’ written notice unless the material breach is cured within 90 days after the breaching party receives notice of the other party’s intent to terminate. which accounted for approximately 8% of our consolidated net sales. We expect to stop production of these products by 2014. long-term supply agreements and introducing or discontinuing product lines. upon 30 days’ written notice to the other party.Our joint venture with GE was created pursuant to a Joint Venture Agreement. 23 Bis. The Joint Venture Agreement and our by-laws require that certain significant decisions be approved by either a supermajority of our shareholders or by a majority of our directors as well as at least one director appointed by our Series B shareholders. A “material breach” is defined in the Joint Venture Agreement as any breach which has the effect of substantially frustrating the performance of the Joint Venture Agreement and the business relationship between the parties. If either party to the Joint Venture Agreement is in material breach of the Joint Venture Agreement. self and standard clean. A-56 .” Matters requiring such approval include increases or decreases in share capital. GE provided us with notices of termination of “Antarctica” bottom freezer refrigerators and “Side by Side” refrigerators under these agreements. Under the same agreement. if either party transfers its interest in us. we have agreed to manufacture in Mexico and sell finished 20 and 22 cubic feet “Antarctica” bottom freezer refrigerators to GE for sale in the United States and certain international markets subject to customary restrictions. 2006. 27 and 29 cubic feet “Side by Side” refrigerators as well as 22 and 25 cubic feet “Large Top Mount” refrigerators to GE at the unique mark-up cost specified in the agreement. In December 2010. a group of Mexican shareholders holds all of our Series A shares and GE is our only Series B shareholder.” Ranges and Refrigerators Manufacturing Agreements Pursuant to a Contract Manufacturing Agreement with GE dated July 1. 25. the Joint Venture Agreement will be terminated as to that party. The Joint Venture Agreement may also be terminated upon the occurrence of certain bankruptcy or insolvency events. significant acquisitions. we have agreed to manufacture and sell finished free standing 30 inch platform gas ranges as well as free standing. Pursuant to a Contract Manufacturing Agreement with GE dated February 16. 30 inch platform electric ranges to GE for sale in the United States and Canada. These manufacturing and purchase obligations are automatically renewed for terms of four years unless either party gives notice of non-renewal to the other party two years prior to the scheduled termination date. 1998. Currently. The Joint Venture Agreement may be terminated at any time upon the mutual written agreement of the parties or if a force majeure event occurs and is continuing for more than 12 months. pursuant to which we and GE have agreed to common corporate policies applicable to certain matters and to certain restrictions on the ability of each party to enter into arrangements with third parties as well as to certain restrictions on transfer of the shares issued by us and to non-compete provisions. In addition. After the occurrence of such an event. we have agreed to manufacture and sell finished 21 Bis. subject to GE’s obligation to compensate us. In 2011. or by GE. this agreement may be terminated upon a breach by us. In addition. New Dryer Manufacturing Agreement We entered into a new Dryer Manufacturing Agreement with GE on January 1. non-transferable right and license. net sales of refrigerators to GE were US$274 million. which enables us to enhance the efficiency of our manufacturing process. we paid GE an annual fee of US$2 million in connection with this agreement. Central America and South America (other than the Caribbean and Brazil). problem solving and consultation rights under patents. A-57 . assistance. inventions. 2010 and 2009. In addition. 2018. this agreement is automatically renewed for two-year terms unless either party gives notice of non-renewal to the other party at least 18 months prior to the scheduled termination date. Although the production will take place in our dryer production facilities in Montreal. we recently entered into an agreement with GE to gradually move all dryer production to the Saltillo plant. know-how and other rights from GE pursuant to a nonexclusive. In addition. Central America. This agreement is automatically renewed for one-year terms unless either party gives notice of non-renewal to the other party. the annual fee we paid to GE was US$360.In 2011. designs. this agreement may be terminated upon a breach by either party. the Andean Region and South American countries outside the Andean Region. under which (i) GE is the exclusive and authorized distributor for all products bearing our owned and licensed brand names (other than licensed GE brand names) for major appliances within the United States and (ii) we are the exclusive and authorized distributor for all products bearing GE’s owned and licensed brand names for major appliances within Canada. Mexico. GE has the right to unilaterally terminate this agreement under certain circumstances including a change in control of Mabe or disclosure of confidential information to third parties. 2012 for the production of 10 million dryers over a 10 year period. Mexico.000. GE supports our sourcing strategy by (i) providing us with access to its supplier base at the same cost and under the same conditions as those provided to GE. developments. Canada and Saltillo. we pay an annual fee to GE. which accounted for 6% of our consolidated net sales during that year. (ii) combining purchases to increase volume and thereby obtain lower prices. components and materials for white line products. (iii) providing access to GE material supply agreements and (iv) establishing joint strategies for sourcing of specific materials. Patent License Agreement for Major Appliances We are party to a Technical Support and Patent License Agreement for major appliances whereby GE furnishes us with certain technical information. After the initial 10-year period. Technical Support. GE makes available to us a broad scope of purchasing services relating to parts. Distribution Agreements We are party to two Distribution Agreements with GE.3 million dryers in 2011. subject to GE’s obligation to compensate us. Our production facilities in Mexico and Canada manufactured an aggregate of 1. or by GE. We may also manufacture. In 2011. This agreement expires on January 1. sell and export products covered by GE patents in Canada. In 2011. Mexico. Purchasing and Services Agreement Pursuant to a Purchasing and Services Agreement with GE that became effective in 1994. In consideration for these services. which accounted for 7% of our consolidated net sales. we have a preferred raw material sourcing arrangement with GE’s suppliers that gives us access to raw materials at the same costs and under the same conditions as GE. we sell high-end white line products under the GE and IoMabe brand names. GE has the right to unilaterally terminate this agreement under certain circumstances. The licenses for the use of the GE brand names granted to us under this agreement also provide a right of use to our subsidiary companies throughout Latin America. we sell dryers under the GE. Hotpoint and Moffat brand names. Canada. Competitive Strengths Strong Brand Awareness and Presence Throughout the Americas We have a strong brand portfolio with leading brand names such as GE.Trademark License Agreement Under a Trademark License Agreement. Central America and the South American countries outside the Andean Region (other than the Caribbean) for an annual fee of 1% of the price of the product sold. Brazil and Argentina. Exceptional Sourcing Network We have developed a close relationship with suppliers by integrating procedures and improving communication channels to ensure the consistency of our operations. Agreement for Major Appliance Designs We have an exclusive agreement with GE under which GE provides specific detailed product designs and supporting technology that enable us to design and manufacture white line products for GE. the Andean Region. due to our relationship with GE. We believe our strong relationships with leading distributors through the region support our position as a market leader. sell and service certain of our products in Mexico. our widely-recognized brand names have leading market shares in all countries in which we operate other than Canada. Centrales (Colombia). non-exclusive license with respect to all designs and patents used in the manufacture of these products. Durex (Ecuador). and middle. In Canada. Dako and Continental (Brazil) and Patrick (Argentina). In addition. A-58 . Our purchasing activities are centralized. GE Monogram and Mabe that have high levels of awareness with consumers. Regina (Venezuela). and we have a perpetual. we have the right to use certain of GE’s licensed trademarks to market. In the United States. middle-market white line products under the Mabe and Easy brand names. our products are sold under various GE brand names. consisting of approximately 64% market share for ranges. This agreement terminates in the event that GE ceases to own at least 34% of Mabe or if the joint venture with GE is terminated. In Mexico and other countries in Latin America. Atlas and Cetron (Central America). This agreement expires on January 1. where we believe we have the second largest market share position. including a change in control of Mabe or disclosure of information to third parties. 37% market share for refrigerators and 35% market share for washing machines. In addition. We believe that our brand name portfolio helps us to maintain our market share position and creates significant barriers to entry for potential competitors. 2018. Inresa (Peru). All interests in such designs are assigned to GE.and lower-end white-line products under local brand names such as IEM (Mexico). which provides us with a stronger negotiating position with respect to raw material sourcing. We are the leading distributor and manufacturer of white line products in Mexico with an approximate 43% average weighted combined market share in 2011. Strategically Located Manufacturing Facilities and Dynamic Manufacturing Process We believe we have a very competitive cost structure.World Class R&D Facilities Our competitive position is enhanced by our access to world-class research and development facilities. which results in large part from the strategic positioning and operation of our 17 manufacturing facilities to achieve greater operating efficiencies. Our consolidated net sales by product are set forth in the table below for the periods indicated: A-59 . At our manufacturing facilities. Kentucky. which has enabled us to make adjustments to our products while minimizing production times and waste. México to carry out our R&D activities. 2012. we are able to employ a high-skilled labor force with a relatively low cost compared with some of our competitors. we established the Technology and Project Center in Querétaro. In addition. prototyping and product development projects. Our consolidated EBITDA was US$211 million in 2011 and US$60 million for the three months ended March 31. our manufacturing facilities are strategically located to minimize transportation costs and strengthen the link between distributors and our customers. We believe this diversification puts us in a good position to drive growth and competitiveness to capture market opportunities and effectively mitigate any adverse consequences that could result from economic downturns. We believe that these procedures have also led to better inventory management that. compared with consolidated net sales of US$854 million for the comparable period in 2011. which allows us to respond faster and to be more closely in touch with the needs of our distributors and our customers. Product and Geographic Diversity Our sales are diversified both by product type and by geographic market. this R&D center has achieved numerous product innovations that have translated into value creation for our company. has had a positive effect in our cash conversion cycle. allowing us access to world-class design and technology data. Our Technology and Project Center also operates in partnership with GE’s Research and Development Center located in Louisville. 2012. We use a portion of our capital expenditures to invest in the development of procedures that shorten product manufacturing and development times.660 million in 2011 and US$931 million for the three months ended March 31. in turn. we have incorporated a dynamic manufacturing process that allows us to adapt and incorporate new market trends and technologies in an efficient and timely manner. Because most of our products are manufactured in Latin America where labor costs are generally lower. compared with EBITDA of US$45 million for the comparable period in 2011.000 square feet and equipped with the latest technology. Over the past few years. With an area of more than 60. Our consolidated net sales were US$3. In 1994. this R&D center hosts laboratories and design shops where more than 400 engineers work on engineering. .. South America(2) ................... Total.. Central America........ Three months ended 2011 March 31................................... Canada ................................ 2011 (adjusted for noncontrolling interest in Mabe Brazil) Total Mabe 43% 43% 32% 32% 11% 11% 6% 6% 8% 8% 100% 100% % of net sales Three months ended March 31................................... technical support and patents................ 2011 2012 (adjusted (adjusted for nonfor noncontrolling controlling interest in interest in Mabe Mabe Total Total Brazil) Brazil) Mabe Mabe 44% 43% 41% 42% 33% 32% 34% 34% 11% 11% 11% 11% 5% 6% 6% 7% 7% 7% 8% 6% 100% 100% 100% 100% Our EBITDA by region of operation and the percentage contribution of each region to our consolidated EBITDA is set forth in the table below for the periods indicated: EBITDA by region Three months ended Year ended December 31........ March 31......................................... with which we have had a business alliance since 1987................... Total................ GE provides us access to certain of its trademarks and designs......... Business Alliance with GE Our competitive position is strengthened by our relationship with GE............... Washing machines .............. 138 61 17 14 230 60 27 7 6 100 34 21 2 2 59 58 36 3 3 100 ___________ (1) Includes sales to GE for sale in the United States and elsewhere.............................................. (2) South America includes the Andean Region..................... Central America..................................... South America(2) ......... and is the A-60 .............................................. 2012 2011 (US$ in millions) % (US$ in millions) % Mexico(1) ................................................................... We export products to the United States under GE’s technical standards...................................................... Other ......... Total.......... Dryers ... Brazil and Argentina.................................................. Ranges ................... 137 43 17 14 211 65 21 8 6 100 34 22 2 2 60 56 37 3 4 100 EBITDA by region (adjusted for non-controlling interest in Mabe Brazil) Year ended December 31..................... Year ended December 31....Product Refrigerators .... 2012 (US$ in millions) % (US$ in millions) % Mexico(1) ............................................ Canada ............... .S.principal distributor for our products in the U. divestitures and new joint-ventures. We have entered into a new Dryer Manufacturing Agreement with GE. which became effective on January 1. We expect to invest approximately US$80 million to expand our dryer production capacity and develop new products with higher standards as a result of this agreement.000 dryers for sale to GE over a period of 10 years. The gas ranges produced at our Leiser Facility have been consistently ranked in the top five for their product category by Consumer Reports Magazine in recent years. Under this new organizational model. Since October 1994. we intend to leverage our manufacturing capacity by taking advantage of reduced labor costs and trade arrangements pursuant to which we may manufacture products in certain countries and export them to others without import tariffs or with significantly reduced import tariffs. We believe that our relationship with GE gives us the ability to leverage our capabilities to produce high-quality products. Our Leiser Facility was the first appliance manufacturer in the Americas to receive certain industry awards relating to quality and efficiency. our strategy is to continue to improve manufacturing efficiency. We also received Innovation Awards from the Applied Research and Technology Directors Association in Mexico in 2008. receive future investors and manage our debt. A-61 . Since 1987. Key elements of our strategy are: Realign Our Organizational Structure into Three Global Business Units In 2010. In particular. Recognized Manufacturing Excellence and Product Quality We have achieved recognition for quality at our manufacturing facilities. Additionally. 2009 and 2011 for the new “aqua saver” program in our washing machines. increase transparency in our operations and provide better accountability-tracking capabilities. With respect to our operations. enhance cost efficiency initiatives. Market Development and Services. most of our facilities have been ISO certified. increase our position in other markets in the Americas by increasing sales of existing and new products and leveraging our brand names. we commenced streamlining our organizational structure from a complex geographically-based business into three global business units: Supply Chain. we believe this corporate reorganization will provide us with a more robust legal structure to leverage acquisitions. Canada. reduce costs and increase productivity while maintaining our high levels of product quality and customer satisfaction. fund future growth. improve the speed of new products to market. 2012. each business unit will be responsible for its own strategy formulation and profit creation. Business Strategy We intend to continue strengthening our position in countries where we currently have leading market positions and to. We believe these quality certifications and awards are a recognition of the extraordinary efforts we have made to improve our manufacturing processes and the quality of the products we produce. which we believe will enable better strategy implementation. We have implemented this organizational model in Mexico. market. Expand Investments in Latin America We intend to continue the integration of our operations in Latin America and to continue leveraging our established platform in this region. the Andean Region and Central America.S. we have expanded our relationship with GE to develop new products for the U. Canadian and Mexican markets. pursuant to which we will manufacture approximately 10.000. In 1994. “Mabe Way. We strive to increase operating efficiencies and reduce manufacturing costs. at every level of our operations throughout our manufacturing facilities. that make them feel comfortable and that address their needs and style preferences. Introduce Technologically Advanced Products We seek to be at the forefront of development of product technology. We believe that our success in penetrating new markets is in large part a result of our ability to provide customers with product designs that are familiar to them. we strive to adapt our products to the needs of local customers. Customize Products to Meet Local Demands and Preferences We believe that providing product designs focused on the needs and habits of each country and region to which we export is critical to our continued success. Our strategic organization program. We also believe we will benefit from the favorable demographic trends in these markets where a significant percentage of the population is below 30 years of A-62 . we seek to continually improve our product service operation to provide after-sales support service to customers in the markets where our products are sold. reflecting greater consumer purchasing power and more sophisticated consumer preferences. We have integrated Six Sigma. We are committed to the use of state-of-the-art technology in our manufacturing processes to create better and more efficiently produced products. Leverage Our Leading Market Position and Brand Recognition We believe there are still growth opportunities in all of the markets in which we operate. Accordingly. Improve Product Quality. distribution as a means to improve our market share in the United States and increase our profitability. Customer Service and Manufacturing Efficiency We continually strive to improve the quality of our products and provide superior customer service. We intend to seek to increase the volume and variety of products we export to GE for the United States market. which employs approximately 400 engineers and is designed to develop new. a quality control program designed to eliminate defects in the manufacturing process and deliver near-perfect products. Mexico. technologically advanced and differentiated products for both the Mexican and export markets. We utilize local brand names for products designed for specific markets and tailor the look and operation of our products to conform to the requirements and standards of each market. In addition. We also intend to further enhance our product offerings by applying technology made available by GE pursuant to our joint venture agreement. we established the Technology and Development Center in Querétaro. We have adopted a standardized purchase and sale accounting control mechanism to maintain low inventory levels and adopted a flexible work schedule that allows for fluctuations in the number of employees or hours worked based on market demand.S. We expect to continue to invest in and improve our manufacturing technology and to introduce technologically advanced products. particularly in the refrigerator and washing machine segments.Expand and Consolidate our Business Relationship with GE in the United States We intend to maintain our position as GE’s most competitive and preferred supplier of white line products for U. which is critical to the continued success of our business. We are also committed to use state-of-the-art technology in our manufacturing processes to produce higher quality products on a more efficient basis.” implements streamlining technology to allow our products to more efficiently reach our customers. Argentina. A brand name associated with GE. We believe the Leiser Facility is one of the largest gas range plants in the world.and 30-inch floor standing and built-in models. Ecuador. We intend to continue to leverage our leading market positions and strong brand recognition in our markets to: target first-time customers for white line products. A-63 . We manufacture gas and electric ranges at six plants in San Luis Potosí. The brand name “IEM” is used for 20. distribution.and 30-inch floor standing and built-in models. maintain our leadership position in the Mexican.8 million gas and electric ranges throughout Latin America. washing machines. Mexico City. markets. 24.age. In the United States. including gas and electric ranges. Costa Rica. we use the General Electric brand name in all the markets in which we operate serving the high-end consumer segment with a line of 20. In 2011. we sold 4. dryers and other products under a variety of recognized brand names. Central American. Our Products We are a holding company with subsidiaries involved in the manufacture. capture the market for customers upgrading to higher-end white line products that generally generate greater profit margins. Mexico (the “Leiser Facility”). Brazil. We expect this demographic trend will drive demand for white line products.183 million in 2011 and US$319 million for the three months ended March 31. Campinas. 2012. Manufacture of Ranges We manufacture 30-inch wall ovens. “Hotpoint. Guayaquil. In Mexico we believe that we are the leading manufacturer of gas and electric ranges with a market share of approximately 64% in 2011. sale and servicing of white line products. 2012. refrigerators.S. we operate a plastic components and die-casting molds plant in Querétaro. Mexico.and 30-inch floor standing and built-in models along with a line of hoods. Brazil and Argentina. we estimate that four out of every 10 gas ranges are manufactured by Mabe and sold by GE. Andean Region and U. In Mexico. In addition.” is also used to market a line of 20. Our net sales derived from ranges were US$1.and 30-inch floor standing and built-in models along with a line of ovens. Both the Leiser Facility and the Querétaro manufacturing plant are ISO-9002 certified. increase our market share in Canada. Sales of ranges represented 33% of our consolidated net sales for 2011 and 34% of our consolidated net sales for the three months ended March 31. We estimate that our market share for ranges was approximately 57% in Central America. and Heredia. 34% in Brazil and 17% in Argentina. and a line of built-in models. Buenos Aires. Mexico whose output is used in the production of ranges at our other plants.and 30-inch free standing gas and electric ranges. and increase our presence in countries like Chile and other countries outside the Americas where we currently have limited or no operations. 38% in the Andean Region. In Mexico. We market a line of 20-inch free-standing ovenless ranges along with hoods for the lower-end market segment. 20-. ranges are marketed under the brand name “Mabe” for 20. The Mexican refrigerator market is one of the most competitive segments within white line products. Mexico and Brazil washing machine manufacturing plants are ISO9002 certified and our Saltillo Manufacturing plant has ISO-9001 certification. 22% in Central America. We currently have limited our exports of washing machines to Canada and the United States. 37% in Mexico. Our refrigerators are manufactured at six plants in Querétaro. in a variety of colors and sizes ranging from the 3. semi-luxury and luxury models with one or two doors. A-64 . Our Monterrey. stacked washer and dryer units and compact and two basket models. 13 and 14 kilogram capacities. Colombia. the market for washing machines has become more competitive due to an increased presence from Asian competitors such as Samsung and LG Electronics.Manufacture of Refrigerators We manufacture different models of refrigerators including standard. Mexico.3 million refrigerators. Manizales. a key component in the production of refrigerators. eight. 19% in the Andean Region and 9% in Brazil. Heredia. we manufacture efficient and technologically advanced compressors. The GE brand name is used in all of the markets in which we operate to market to the high-end consumer segment. Our net sales from washing machines were US$398 million in 2011 and US$99 million in the three months ended March 31. semi-automatic. Over the past several years. Celaya. 10. 11. Our plastic component plant in Querétaro supplies parts for range production and supplies plastic parts for the manufacture of refrigerators including liners and lamination materials. We also manufacture a line of freezers. 2012. These washing machines are manufactured at four plants located in Mexico. automatic.7 cubic foot Frigobar Minibar model targeted at the office market to the 29 cubic foot Luxury No-Frost model. top mount and frost or no-frost.575 million in 2011 and US$383 million for the three months ended March 31. we believe that this particular market has the lowest penetration and. to GE and other international customers. 32% in the Andean Region. Sales of washing machines represented 11% of our consolidated net sales for 2011 and 11% of our consolidated net sales for the three months ended March 31. economy.” The “Easy” brand name is used for a line of automatic. 2012. 32% in Argentina and 18% in Brazil. bottom mount. We believe that in 2011 we had a market share of approximately 35% in Mexico. therefore. In 2011. Costa Rica. Manufacture of Washing Machines We manufacture compact and automatic washing machines with six. presents the largest growth potential. The compressors are used both for the production of refrigerators in Mexico and are also exported to our South American refrigerator plants. 2012. washing machines are marketed under the brand name “Mabe. Ecuador and Brazil. We estimate that our market share in 2011 was approximately 54% in Central America. 2012. semi-automatic and two basket models. including side-by-side and stacked doors. We have achieved ISO-9002 certification in all our refrigerator manufacturing plants. and Itú. Brazil. The high level of competition is affected by an aggressive pricing strategy from local producers such as Whirlpool Corporation and the market entry of Samsung and LG Electronics. However. we sold approximately 3. Mexico. In Latin America. San Luis. Argentina. The “IEM” brand name is used for automatic. Sales of refrigerators represented 43% of our consolidated net sales for 2011 and 41% of our consolidated net sales for the three months ended March 31. Through our subsidiary MCM Americas. Our net sales derived from refrigerators were US$1. Hotpoint and Moffat brand names. such as Elektra. which accounted for 6% of our consolidated net sales during that year. which became effective January 1. special sales accounts and finished kitchen maker accounts. Canada and Saltillo. Other Products We also sell products manufactured by third parties such as water dispensers and kitchen hoods. twenty-four hours a day throughout Mexico and South America as well as Central America. Since 2009. Our net sales from dryers were US$214 million in 2011 and US$53 million in the three months ended March 31. without any additional cost to the final consumer. approximately 70% of our service calls are covered by warranties (for which we do not receive separate fees). GE Monogram. We entered into a new Dryer Manufacturing Agreement with GE. Serviplus divides its operations into four centers: north. kitchen hoods from Italy and twin tub washers and freezers from China. Mexico. central and south. we recently entered into an agreement with GE to gradually move all dryer production to our Saltillo plant. In Mexico. In Canada. west. Serviplus. among others. Customer Service We extend warranties for the operation and all parts of our products for a period ranging from one to three years. These include national accounts.Manufacture of Dryers We are the primary supplier of clothes dryers to GE in the United States sold under the GE. 2012. our after – sale service division provides customer service 365 days a year. As a result of intense competition in Mexico. In addition. Our production facilities in Mexico and Canada manufactured an aggregate of 1.3 million dryers in 2011. we estimate that our market share was approximately 14% in 2011. We categorize our clients into four classes: national accounts. 12. we import and distribute other products from different countries. 2012. Walmart (including Sam’s Club) and Coppel. The sales of our dryers in other countries are not significant. We were the first company in Mexico to increase warranty terms. we sell directly to wholesalers from our various plants. In addition. depending on the product and brand. Liverpool. Serviplus is present in more than 40 cities in Latin America. approximately 657 employees and 210 authorized specialized and higher A-65 . 2012. our active client base decreased by approximately 7.2% during 2011 from 777 to 721 clients. 13 and 14 kilograms. GE Profile. Customers and Sales We typically market and distribute our products directly to department or specialty stores. such as microwave ovens and room air conditioners from Asia. Exports to customers other than GE account for a small percentage of our total exports. Dryer sales to GE for sale in the United States represent 77% of our total dryer sales. Sales of dryers represented 6% of our consolidated net sales for 2011 and 6% of our consolidated net sales for the three months ended March 31. In Mexico. Substantially all of our exports to the United States and Canada are to GE. Although the production will take place in our dryer production facilities in Montreal. With over 26 service centers. independent and regional accounts. Sales from the distribution of these other products accounted for 8% of our consolidated net sales in 2011. We manufacture dryers with capacities of 11. stackable washer-dryer combinations from the United States. an average of 51% of our total sales in Mexico have consistently come from 10 clients. which together comprised approximately 53% of our total sales in Mexico during 2011. for the production of 10 million dryers over a 10 year period. We have implemented a streamlining strategy designed to allow our products to reach more clients while increasing logistical efficiency. and we. To obtain a higher level of quality and customer satisfaction for products. in conjunction with GE. liability and risk of loss are transferred to GE. implement Six Sigma throughout our operations. our branch offices and distribution centers provided services to approximately 2.tech service clients. In addition. after-sales product repair services are offered to customers through Serviplus. analysis. Argentina. thereby avoiding or minimizing the costs of storing inventory at. From the Leiser Facility in San Luis Potosí. therefore. As of 2011. and certain programs which enable us to determine the optimum inventory levels for each such center based on projected market demand. and from the Mabe Canada production facility to the applicable border-crossing point. We generate jointly with GE annual production estimates that are revised and adapted throughout the year. We have been improving our efficiency through the expansion of our distribution network and the linking of our computer systems via satellite. we seek to reduce the cost of operations and marketing in order to improve the quality of processes and to reduce the maximum failure rate to three failures per million units sold or repair services rendered. The export process to the United States is driven by our “on-screen” computer access to the inventories of GE’s distribution centers. Guatemala. El Salvador. GE’s authorization is required in order to make each product shipment. We maintain a monetary reserve in lieu of insurance to cover the potential risk of loss which we believe results in significant insurance-related cost savings. In addition. We ship products to GE primarily by rail and alternatively by truck. warehouses have been established at our five manufacturing plants for finished products in Mexico as part of our effort to achieve just-in-time delivery of products. Chile. We constantly monitor inventory levels and adjust production to conform to the requirements of the distribution centers. A-66 . and thereupon the products are covered by GE’s own insurance policies. Nicaragua. Within Mexico. and transporting inventory to. Shipments by Leiser in Mexico are made to our distribution centers by truck or rail. Peru. liability and risk of the products are borne by us. Monterrey and Guadalajara. Costa Rica. from where they are directed to GE’s distribution centers. Shipments to North America are always sent though the Laredo border. Serviplus technicians are present in all of our regions.450 locations in Mexico with 721 clients. Venezuela. we periodically send suggested shipment statements to GE. Panama and the Dominican Republic through rail and maritime transport. Nevertheless. to eliminate communication barriers and to encourage association among individuals of different levels. management seeks to promote teamwork while implementing a formal strategic planning process. and a shipment is only made upon GE’s acceptance of each such statement. Colombia. Under the Six Sigma program. Brazil. We distribute our products elsewhere in the Americas through our distribution facilities in Canada. improvement and control of our processes. Management also uses Six Sigma to help to reinforce our commitment to quality through the continuous measurement. Serviplus processes and responds to service calls within 24 hours 55% of the time. warehouses far from the manufacturing locations. legal title. Mexico. Distribution We currently distribute our products domestically through three distribution centers located in the Mexico City area. Managers at these distribution centers calculate inventory objectives and monitor inventory levels in their region to assure that there is adequate inventory on hand to meet the demand in such region. Ecuador. Once the products have crossed the border into the United States. we believe that Serviplus’s presence in Mexico is well established. as demand fluctuates. among other things. See “—The General Electric Joint Venture–Purchasing and Services Agreement. We also benefit from the support we receive in our raw materials purchasing from GE through our Purchasing and Services Agreement whereby GE supports our sourcing strategy by. natural gas. The agreement expires each year but is automatically renewed for one-year terms unless either party gives notice of non-renewal to the other party. the United States and Canada due to the fact that white line products are often purchased as gifts for Mother’s Day in Latin America and during the Christmas season in Latin America. and assistance from GE’s international purchasing offices in making travel arrangements. Mexico. As a result. A significant portion of our raw material requirements are purchased pursuant to this agreement. enamel and glass. compressors. (ii) combining purchases to increase volume and thereby obtain lower prices. Korea. consist principally of: identification of potential sourcing cost savings programs. Seasonality Most of our sales occur during the periods of March to May in Latin America and September to November in Latin America. with respect to parts and products. our principal suppliers are U. and any other location in the world where GE purchasing offices exist. Steel and Ternium for steel.S. with an average of approximately 27% of our sales generated in the fourth quarter historically. gas valves. At the regional level. Kentucky. data pertaining to sourcing. advice from the international purchasing office of the Material Resource Operation of GE located in Louisville. electricity and plastics. packaging. At the local level. With respect to steel. motors. Pemex for gas. Prices are also raised to offset the effects of inflation with consideration given to maintaining adequate A-67 . (iii) providing access to GE material supply agreements and (iv) establishing joint strategies for sourcing of specific materials.Materials and Parts Our main manufacturing inputs include steel. quality and reliability profiles of selected vendors. the Comisión Federal de Electricidad for electricity and SABIC for plastics. Hong Kong. transmissions. we seek to develop a variety of sources and to develop strong quality and pricing benchmarks to guarantee competitiveness. Our policy is to maintain relationships with at least one primary supplier and one alternate supplier for each of our raw materials. Japan. the United States and Canada. plastics. Taiwan. negotiation of purchase orders and contracts on behalf of Mabe with selected vendors. Our general pricing strategy is to increase prices a month before the high seasons begin. (i) providing us with access to GE’s supplier base at the same cost and under the same conditions as GE. our most important raw materials. auto igniters. identification of potential vendors known to GE worldwide. gas. paint. we seek to combine our material needs for various locales and benefit from pricing advantages offered by regional trade agreements.” The type of purchasing services furnished to us by GE. We centralize our purchasing activities through a central purchasing office in order to create greater efficiencies and a stronger negotiating position with respect to our key raw materials. we experience significant quarterly variability in our results of operations. market share and sales floor presence. We consider domestic market trends at the retailer level in shaping our pricing policies. Manufacturing Facilities We own or lease eight plants throughout Mexico for the production of white line products and related parts through our subsidiaries, with our principal plants located in Mexico City, Querétaro, Saltillo, Monterrey and San Luis Potosí. Since 1987, we have increased our operating efficiencies and reduced manufacturing costs by consolidating our older plants when feasible. We also maintain manufacturing facilities in Canada, Costa Rica, Ecuador, Colombia, Brazil and Argentina for the production of white line products and related spare parts. The following table lists the location of each of our manufacturing facilities, their capacity utilization for the year ended December 31, 2011 and the products manufactured at each facility: Manufacturing Facility Location Montreal, Canada Celaya, Mexico Querétaro, Mexico Querétaro, Mexico Saltillo, Mexico Saltillo, Mexico Monterrey, Mexico San Luis Potosí, Mexico San Luis Potosí, Mexico Heredia, Costa Rica Guayaquil, Ecuador Manizales, Colombia Itú, Brazil Campinas, Brazil Hortolandia, Brazil(1) Hortolandia, Brazil(1) San Luis, Argentina Buenos Aires, Argentina Operating Subsidiary Mabe Canada Leiser (Quantum) Mabe Mexico Mabe Mexico Mabe Mexico Mabe Mexico Mabe Mexico Leiser MCM Americas Atlas Eléctrica Mabe Ecuador, S.A. Mabe Colombia, S.A.S. Mabe Brazil Mabe Brazil Mabe Brazil Mabe Brazil Kronen Internacional, S.A. Kronen Internacional, S.A. Principal Products Dryers Refrigerators Refrigerators Components Washing machines Components Washing machines Gas and electric ranges Compressors Gas and electric ranges and refrigerators Gas ranges and washing machines Refrigerators Refrigerators and washing machines Gas ranges Refrigerators Components Refrigerators Gas ranges and washing machines Capacity Utilization 51% 61% 69% 79% 65% 80% 37% 71% 73% 84% 75% 73% 73% 78% 87% 35% 77% 91% ___________ (1) We refer to these two plants as one facility. Ranges Ranges are currently manufactured at five plants. In Mexico, ranges are produced at the Leiser Facility. Mabe Mexico operates a plastic components and die-casting molds plant in Querétaro, Mexico whose output is used to produce ranges at our other plants. Both plants are ISO-9002 certified. We also have range manufacturing plants in Guayaquil, Ecuador; Campinas, Brazil; Buenos Aires, Argentina; and Heredia, Costa Rica. A-68 Refrigerators Refrigerators are manufactured at seven plants in Mexico, Central America and South America. In Mexico, we have plants in Querétaro and Celaya. In Central America, we have a plant in Heredia, Costa Rica, in South America, we have a plant in Manizales, Colombia, one in San Luis, Argentina and one in each of Itú and Hortolandia Brazil. We integrated the Hortolandia Plant in 2010 into our operations in Brazil as a consequence of the acquisition of BSH Continental Eletrodomésticos LTDA. The Celaya plant manufactures the top-of-the-line side-by-side, bottom freezer and top mount refrigerators. The Querétaro plant has been recognized for its innovative manufacturing approach including a flexible work week to adjust for fluctuations in market demand and its three line assembly process that permits the manufacture of small lots for specific orders and the daily production of more than 3,500 refrigerators in more than 120 different models. The same Querétaro plant that supplies parts for range production also supplies plastic parts for the manufacture of refrigerators including liners and lamination materials. We have achieved ISO-9002 certification in all of our refrigerator plants. In 2011, Mabe produced more than 3.3 million refrigerators at its plants in Mexico, Central America and South America. MCM Americas manufactures compressors in San Luis Potosí, Mexico with an annual production capacity of 2.7 million compressors. It also manufactures transmissions and motors for washing machines with an annual production capacity of 1.2 million. Washing Machines Washing machines are manufactured in two of our plants in Mexico, one in Monterrey and one in Saltillo, at our Itú plant in Brazil and at the Guayaquil plant in Ecuador. At the end of 2011, we began producing washing machines at our plant in San Luis, Argentina through a strategic alliance with Midea. In 2011, our plants in Mexico and South America manufactured an aggregate of 1.7 million washing machines. Consistent with our vertically integrated manufacturing philosophy, a plant for the production of transmissions used in washing machines operates in Saltillo. This plant also stamps aluminum parts for the washing machines and supports the machining and fabrication of components. The plant in Monterrey manufactures, sells and distributes one-phase and three-phase electric motors which are used in washing machines, air conditioners, centrifugal pumps and fans. Our washing machine plants are ISO9001 or ISO-9002 certified. Dryers Dryers are manufactured in two plants, one in Montreal, Canada and one in Saltillo, Mexico. We entered into a new Dryer Manufacturing Agreement with GE, which became effective on January 1, 2012, for the production of 10 million dryers over a 10 year period. Although the production will take place in both of our dryer production facilities, we recently entered into an agreement with GE to gradually move all dryer production to the Saltillo plant. Our plants in Mexico and Canada manufactured an aggregate of 1.3 million dryers in 2011. Our dryer plants in Montreal are CSA certified and the Saltillo plant is ISO certified. We have recently determined that our Montreal plant is currently operating at half of its capacity, is no longer financially viable and, accordingly, we plan to gradually close this plant between now and the end of 2014. This decision will not impact our sales, distribution and support division in Canada (MC Commercial Inc.), nor will it have an impact on the supply of products to customers. Production of dryers from the Montreal plant will be consolidated into our existing facilities in Mexico. A-69 Processes and Projects We are continuously implementing new technologies in our manufacturing processes in all of our facilities to efficiently produce high-quality white line products. New technologies provide the plants with a high degree of production flexibility and tight inventory controls. Leiser Facility We believe that the Leiser Facility in San Luis Potosí, Mexico is one of the largest gas range production facilities in the world based on installed production capacity. Strategically located approximately 500 miles south of the United States border, the Leiser Facility has access to skilled labor at competitive cost, transportation (rail lines and highways) and services. Most of the production at the Leiser Facility is exported to the United States for sale by GE. Leiser estimates that it can deliver finished gas ranges maintained in inventory into the United States within approximately three days after GE orders them. Under our export agreement with GE, products produced at the Leiser Facility are subject to periodic quality control inspections by GE personnel. Construction was completed in 1990 with an initial investment of US$100 million and initially had an annual production capacity of 1,000,000 gas ranges. Expansions completed at a cost of US$80 million, including the Thermo project completed in late 1999, have increased the annual production to its current capacity of 2.7 million gas and electric ranges. In 1994, the Leiser Facility became the first appliance manufacturer in all of the Americas to receive ISO-9002 certification and also has been ISO-9001 certified since 1998. It also received, in 1997, Sears’ North American Quality (S.N.A.Q.) qualification. Gas ranges produced at the Leiser Facility have been consistently ranked as first or second for their product category by Consumer Reports Magazine since 1994. Quantum Facility In 2000, we constructed the Quantum plant in Celaya, Mexico with an investment of US$300 million. The Quantum plant is designed to manufacture a new generation of refrigerators, developed in conjunction with GE. In 2011, we manufactured approximately 482,114 side by side, bottom freezer and top mount refrigerators at the Quantum facility. Saltillo Facility We entered into a new Dryer Manufacturing Agreement with GE, which became effective on January 1, 2012, for the production of 10 million dryers over a 10 year period. To support this production, our Saltillo Facility requires an investment of approximately US$80 million. We have already begun the upgrade and expansion which we expect will be completed at the end of 2014. This investment will mainly support our export business to the United States. Competition Mexico Since our inception in 1946, we have consistently increased our share of the market for our three principal white line products (ranges, refrigerators and washing machines). In Mexico, we had an estimated combined market share of approximately 44% in 2011 with net sales of US$715 million. Our principal competitor in Mexico, Whirlpool Corporation, in 2011 had an approximate one-third combined A-70 domestic market share for white line products. We also face competition from Asian manufacturers of white line products, including Daewoo, Samsung and LG Electronics which export products from Asia to Mexico and other Latin American markets. In recent years, Asian white line manufacturers have invested in plants in Mexico thereby increasing their market presence and resulting in increased competition. We are the leading domestic manufacturer in Mexico of gas and electric ranges with a market share of approximately 64% in 2011, refrigerators with a market share of approximately 37% and washing machines with a market share of approximately 35%. The refrigerator market is the most competitive segment of the white line product market in Mexico due to aggressive pricing strategies from local producers, such as Whirlpool Corporation and the market entrance of Asian manufacturers, such as Samsung and LG Electronics. We believe that the washing machine segment of the white line industry presents the lowest market penetration and the greatest potential for our market growth in Mexico. Despite intense competition in the domestic Mexican market, we have successfully maintained our market share due in large part to our continuous product innovation and extensive distribution network, a key competitive advantage, which cannot be easily replicated. We believe that the white line product market in Mexico presents significant growth opportunities, particularly as Mexican consumers continue to shift their preferences to products with more features. United States In 2011, we manufactured approximately 603,304 gas ranges and 297,216 electric ranges in Mexico for export to the United States. In the United States, GE experiences heavy competition in the market for white line products from Frigidaire and Whirlpool. In the United States, we estimate that our share of the gas range market in 2011 was approximately 30% and our share of the electric range market in 2011 was approximately 33%. Andean Region, Central America, South America and the Caribbean We are the leading white line products manufacturers in the Andean Region. We believe our competition in the Andean Region is extremely fragmented and, as a result, we believe we are well positioned to continue to be the leading manufacturer and competitor in this market. We estimate that our white line product market share in 2011 was 27% in Venezuela, 40% in Colombia, 38% in Ecuador, 28% in Peru and 12% in Chile. Through our Heredia, Costa Rica facility and related distribution subsidiaries, we produce and distribute ranges, refrigerators and washing machines in Central America and the Caribbean. We estimate that our combined market share for white line products in Central America, South America and the Caribbean was approximately 50% in 2011. Our principal competitors in Central America and the Caribbean are from the United States. Whirlpool is the leading white line product manufacturer in the Brazilian market, the largest market in Latin America. With the integration of BSH’s Brazil’s operations, we strengthened our market share in that country and we believe that Mabe Brazil had an approximate 22% market share in Brazil in 2011. Our operation in Argentina has also increased its market share. In addition, European market entrants are attempting to develop market positions in Brazil and, from there, to branch out into South, Central and North America. A-71 Research and Development We believe that technology research and development is essential to remain successful in a highly competitive global environment and an essential growth factor. In 1994, we inaugurated the Technology and Project Center (“T&P”), in Querétaro, Mexico with over 60,000 square feet of offices, labs and new product design shops and more than 300 employees. Since 2009, we have invested US$85 million in engineering, prototyping, evaluation and research for product development, raw materials and components. Every new project is handled individually with allocated resources and management. The T&P is equipped with the latest technology, including the most advanced computerized engineering software and hardware. Technicians at the T&P regularly interact with our manufacturing facilities and marketing, service and sales personnel to ensure that any product defects are quickly identified and a solution is implemented. The T&P also operates in partnership with GE’s Research and Development Center located in Louisville, Kentucky, allowing us access to world-class design and technology data. In its 17 years of operation, the T&P has engaged in activities ranging from the design of experimental product prototypes to advanced product computer simulations. Since 2009, we have generated and registered more than 65 patents in order to protect our technological developments. The T&P won the Innovation Award from the Applied Research and Technology Director’s Association in Mexico in 2004, 2006, 2007, 2008, 2009 and 2011 for the new “aqua saver” program in our washing machines. The T&P has been awarded the Styling Award by Quorum, Mexican Designers Association in 2003, 2004 and 2006 and the Vinculation Award by the Mexican Government and Academy in 2008. The T&P facilities and staff play a significant role in the development of new materials, components and suppliers used in our production processes. To achieve this, we employ a number of professionals to negotiate raw material and commodity purchases and to identify and implement cost reduction measures. Delivering manufacturing processes to the plants implies that T&P personnel need to be present for start-up and continuous improvement. The communications services generated by our technological information area play an important role for connecting people, information flow and knowledge management. Environmental Matters We are subject to federal, state and municipal laws and regulations relating to the protection of the environment, including with respect to the control and abatement of air, water and soil pollutants and storage, handling and disposal of hazardous substances and waste, in Mexico and other countries in which we conduct operations. From 2008 to 2011, we invested US$950,000 in environmental compliance. We expect to spend an additional US$1.1 million over the next two years in connection with environmental compliance activity throughout our operations. However, actual compliance costs may vary from those estimates, and future events, such as new information concerning past releases of hazardous substances, future expansions or manufacturing changes, changes in existing environmental law or their interpretation and more rigorous enforcement by regulatory authorities. We take a proactive approach with respect to compliance with all environmental laws and regulations as they relate to our manufacturing operations. We believe that we are in material compliance with all currently applicable laws and regulations and have timely submitted all applications pending for licenses for our operating plants from governmental entities. A-72 As a result.” “possible” or “probable”. management intends to reduce the amount of overtime wages which a production facility has to pay during periods of peak output. Although no assurance can be given with respect to the ultimate outcome of these matters. which seek remedies or damages. lawsuits and tax. The Company classifies the risk of adverse sentences in the legal suits as “remote. At December 31. including our unionized employees. Provisions for losses have been recognized by the Company in its consolidated financial statements in connection with proceedings where potential losses have been deemed probable as determined by the Company’s management and based on legal advice and for which the amount of probable losses is known or can be reasonably estimated. The majority of our manufacturing sites in México have been certified as clean industry by Mexican governmental agencies (Procuraduria Federal del Medio Ambiente) or are in the process of completing clean industry certification. we can alter the output of our manufacturing facilities to meet seasonal fluctuations in product demand without hiring or laying-off a large number of temporary or seasonal workers. Product Liability We have not historically incurred material expenditures in respect of product liability claims other than costs of insurance premiums. A-73 . This flexibility is achieved through an agreement with our factory workers which provides that during peak times they will work six days per week and during slower periods they will work four days per week. the Company believes that any liability that may finally be determined should not have a material effect on its consolidated financial position. which typically are more stringent than regulatory criteria. these collective bargaining agreements are required to be renegotiated on a yearly basis with respect to wages and every two years with respect to benefits. Under the flexible work schedule. Employees and Labor Relations At March 31. Under Mexican and Canadian law. which we believe have been in line with industry standards. we have implemented a flexible work schedule for our union and non-union employees at several of our plants. 2011 the Company had reflected a provision of US$51 million (US$47 million in 2010) to cover these probable losses. we had more than 22.400 employees throughout the Americas. 2012. results of operations or cash flow. labor and administrative proceedings against the Company or its subsidiaries. Approximately two-thirds of our employees are represented by labor unions.Mabe is audited annually in accordance with the GE environmental framework standard to verify compliance with their environmental requirements. Legal Proceedings There are various pending or threatened claims. arising from the ordinary course of business. Our employees are affiliated with several labor unions and labor relations with each of these labor unions are governed by collective bargaining agreements which are required to be negotiated separately for each union. We believe we have good labor relations with all of our employees. Since April 1993. Since our foundation. we have not experienced any strikes or other labor disputes that have materially affected our overall operations. Mr. Paseo de las Palmas 100. including: Corporate (Business. Postal Code 11000. Krakowiak Stephen Sedita Francisco Berrondo Lagos Enrique Saiz Fernández Eduardo Berrondo Ávalos Oscar Martín del Campo Brett L. Financial Operations Worldwide). He received a degree in Finance and Accounting from the University of Bridgeport. the members of our Board of Directors and their ages are as follows: Name Luis Berrondo Ávalos Mark J. Mr. Distrito Federal. Ciudad de Mexico. Sedita is also Vice-President of Finance of GE Appliances and previously served as Controller and Manager of Finance of GE Appliances. S.MANAGEMENT Directors and Executive Officers Directors Our Board of Directors currently consists of nine members and is responsible for managing our business. CFO and CEO Analyst). de C. As of the date of this listing prospectus. Francisco Berrondo Lagos has been the Secretary of the Board of Directors and Financial Advisor to the management of Mabe since November 1981. He received a degree in Economics from the Instituto Tecnológico Autónomo de Mexico. A-74 . Begole Ronald M. NBC and Plastics (Manager. Krakowiak has been the Vice – Chairman of the Board of Directors of Mabe since January 2012. Colonia Lomas de Chapultepec. He joined GE in 1983 and has served in key roles in various departments. Mexico. and a Masters in Economics from the University of Chicago.V.Chairman Independent Advisor Secretary Member Member Member Member Member Luis Berrondo Ávalos has been Chairman of the Board of Directors and President and Chief Executive Officer of Mabe since April 2001. Mark J. Mr. Mr. The business address of each director is the company’s address: Controladora Mabe. Griffith Age 62 47 61 59 65 54 63 46 44 Position Chairman Vice . Aircraft Engines (Manager. and a Masters in Business Administration from Bellarmine University.. Each director is elected for a term of one year or until a successor has been appointed. Krakowiak received a Bachelor's degree in Business Administration from the University of Cincinnati. GE Plastics Americas).A. Berrondo Ávalos received a degree in Industrial Engineering from the Universidad Iberoamericana and a Masters in Business Administration from the Instituto Panamericano de Alta Dirección de Empresas. he became an independent advisor to the Board of Directors. Krakowiak assumed the role of Chief Risk Officer in 2009. He joined Mabe in 1981 and served as Executive and Operations Vice President of Mabe. and as of January 1 2012. Finance. Stephen Sedita has been a Member of the Board of Directors of Mabe since December 2008. Enrique Saiz Fernández and Ronald Griffith. Some members of the Board of Directors are members of this Committee and the Chief A-75 .Enrique Saiz Fernández has been a Member of the Board of Directors since April 1991. He has 22 years of experience in product management. one of which is appointed from a list of GE’s proposed candidates. Audit Committee The Board of Directors has delegated compliance with our policies and other auditing responsibilities to an Audit Committee. José Berrondo Mir. Rafael Díaz Granados and Fidel Castro. business development and sourcing at GE. Ángel Romanos. Mr. He has also studied engineering at Rhineland-Westphalian Technical University in Aachen. Begole has been a Member of the Board of Directors since January 2012. Begole is a graduate of GE’s Operations Management Leadership Program and received a Bachelor’s of Mechanical Engineering from Michigan State University and a Masters in Business Administration from Ohio State University. Griffith has been with GE for 18 years and has worked in the appliance industry for 23 years. of which one is appointed from a list of GE’s proposed candidates. Vice-President of Sales for GE Energy’s Reuter Stokes. Ronald M. Mr. He received a degree in business from the University of Louisville and a Masters in Business Administration from Vanderbilt University. José Esteve Recolons. Eduardo Berrondo Ávalos has been a Member of the Board of Directors of Mabe since April 1991. Germany. which meets monthly and has four principal members. Oscar Martín del Campo has been a Member of the Board of Directors since April 1991. sales. Francisco Berrondo Lagos. He also serves as a general advisor to Mabe and joined the Company in 1984 where he has worked in different capacities. marketing. Martín del Campo received a degree in Business Administration from the Instituto Tecnológico de Estudios Superiores de Monterrey. Saiz Fernández received a degree in Chemical Engineering from the Universidad Iberoamericana and a degree in Business Administration from the Universidad Nacional Autónoma de Mexico. Committees of the Board of Directors Executive Committee The Board of Directors has delegated certain operational and financial responsibilities to an Executive Committee. His background includes extensive experience in banking. Berrondo Ávalos received a degree in Industrial Engineering from Universidad Iberoamericana in Mexico City and a Masters of Business Administration from Claremont Graduate University. Brett L. He is also General Manager of Appliances for Latin America at GE’s Consumer and Industrial division. but holds working meetings every month and has five principal members. The following persons are currently serving as alternate directors of Mabe: Eduardo Saiz Fernández. and Team Leader for GE’s Corporate Initiatives Group. Mr. Griffith has been a Member of the Board of Directors since October 2003. which has quarterly official meetings. and their respective alternates. Some of his other positions include General Manager of Business Development for GE Aviation. Mr. finance and manufacturing. Current members of this committee are Luis Berrondo Ávalos. Mr. Current members of this committee are Luis Berrondo Ávalos. Leiser Program Manager and Manager of the Leiser Facility. A-76 . which has monthly official meetings. Javier Burkle Elizondo and Rodolfo Muller Patiño. Urbano Pérez Vázquez is our Vice President of Operations for Mexico and Central America. He received a degree in Electrical and Mechanical Engineering from the Universidad Anahuac and a Masters in Business Administration from the Instituto Panamericano de Alta Dirección de Empresas. and has three principal members. three members of the Board of Directors with broad experience in risk management techniques. Francisco Berrondo Lagos. Mr. Burkle Elizondo received a degree in Industrial and Systems Engineering from the Instituto Teconológico y de Estudios Superiores de Monterrey and a Masters in Business Administration from the same institution in addition to several diplomas from Harvard and Northwestern universities. the positions they hold with Mabe and their years with Mabe are as follows: Name Luis Berrondo Ávalos Javier Burkle Elizondo Urbano Pérez Vázquez Luis Enrique Guillén Smer Jorge Bages Marco del Bosque García Pablo Francis Gómez Agustin Soto Albarrán Federico Montane Samano Rodolfo Muller Patiño Francisco Quintana Rivera Mauricio Gil Rocha Title President and Chief Executive Officer VP of Finance—Chief Financial Officer VP of Operations VP of Operations for South America VP of Operations for Andean Region VP of Operations for Mexico Human Resources Director Corporate Product Engineering Director Corporate Marketing Director Corporate Treasurer and Financial Planner Corporate Controller Corporate Tax and Auditing Director Years with Mabe 31 4 35 21 16 17 1 21 3 24 3 8 Javier Burkle Elizondo is our Vice President of Finance—Chief Financial Officer. Peréz Vázquez has also served as Manager of the Comasa Plant. Director of Compressor Operations. Our President and Chief Executive Officer presides over this Committee. Mr. Current members of this committee are Eduardo Saiz Fernández. Risk Committee The Board of Directors has delegated risk management to the Risk Committee. He joined Mabe in 1991 and served as Gas Ranges Manager of Mabe from 1991 to 1997. Before joining Mabe. a position he has held since 2008.Financial Officer is a permanent member. He joined Mabe in 1972 and has served as an officer for the past 10 years. the Chief Financial Officer and the Corporate Treasurer are also permanent members. he served as Chief Financial Officer of the Bottling Group of Cadbury Schweppes and as Chief Financial Officer of Grupo Lala. our principal executive officers. Guillén Smer received a degree in Industrial Relations from the Instituto Tecnológico de San Luis Potosí and a postgraduate degree in Collective Bargaining from the Universidad de Guanajuato. Eduardo Saiz Fernández. Francisco Berrondo Lagos. Executive Officers As of the date of this listing prospectus. Mr. Luis Enrique Guillén Smer is our Vice President of Operations for South America. Fidel Castro and Enrique Saiz Fernández. Stephen Sedita. An external member presides over the Committee. V. first at Kellog de México and now at Mabe. Francis also has a post-graduate degree from the D1 program at the Instituto Panamericano de Alta Dirección de Empresa and has more than 25 years serving as Human Resources Director. He has a Degree in Business Administration from the Universidad del Valle de México and completed a postgraduate exchange program at Thunderbird University. Rodolfo Muller Patiño is our Corporate Treasurer and Financial Planner. Board of Directors As a Mexican company. He joined Mabe in 1988 and has served as FP&A Manager for the Washers division of Mabe. Gil Rocha received a Public Accounting degree from Universidad Anáhuac and a Masters in Business from Instituto Panamericano para la Alta Dirección de Empresas. Francisco Quintana Rivera is our Corporate Controller. He joined Mabe in March 2011. Montané joined Mabe three years ago and has also served as Mabe’s Brand Manager. Federico Montané Sámano is our Corporate Marketing Director. He joined Mabe in 2004. Soto has served as Mabe’s Quality Manager in our Leiser and Quantum facilities. Pablo Francis Gómez is our Human Resources Director. Currently. He received a degree in Mechanical Engineering from Universidad de América in Colombia. Mr. Mr. He has a degree in Industrial and Systems Engineering from the Instituto Teconológico y de Estudios Superiores de Monterrey. Bages previously served as General Manager and Chief Operations Officer at Induacero (producer of “Centrales” white line products). Muller received a degree in public accounting from the Universidad Autónoma del Noreste and a Masters in Business Administration from the Instituto Tecnológico y de Estudios Superiores de Monterrey. Mr. Del Bosque García received a degree in Industrial Engineering and a Masters in Business Administration from Instituto Tecnológico y de Estudios Superiores de Monterrey. See “Principal Shareholders and Related Party Transactions. the group of Mexican shareholders holds all of our Series A shares and GE is our only Series B shareholder and effectively any decision by directors will also require the vote of at least one director appointed by the group of Mexican shareholders.Jorge Bages is our Vice President of Operations for the Andean Region and General Manager of our operations in Colombia. Mr. we are managed by a Board of Directors that sets policies and reports to our shareholders annually in respect of our results. Quintana received a degree in Public Accounting from the Universidad Nacional Autonoma de Mexico and a Masters in Finance from the Universidad Panamericana. Mauricio Gil Rocha is our Corporate Tax and Auditing Director. He joined Mabe in 1995 and has been in charge of different commercial areas in different countries where we have operations. S. a Mexican auto parts company. The Joint Venture Agreement and our by-laws require that certain significant decisions be approved by a majority of our directors as well as at least one director appointed by the Series B shareholders. He joined Mabe in 1996. Mr. He joined Mabe in 2009 and served as our Internal Audit General Manager before becoming Corporate Controller. Mr.. Agustin Soto Albarrán is our Corporate Product Engineering Director. before which he was Tax Corporate Manager at SANLUIS Corporación. He has a degree in Mechanical Engineering from the Universidad Panamericana and a Masters Degree in Business Administration from Instituto Panamericano de Alta Dirección de Empresa. Mr.A. Marco del Bosque García is our Vice President for Mexico.” A-77 . de C. Mr. Statutory Auditor Our by-laws require that a statutory auditor be elected at a General Ordinary Shareholders’ Meeting for a term of one year or until replaced at a General Ordinary Shareholders’ Meeting. The duties of the statutory auditor include. among other things. books. A-78 . records and any other documents of the Company and the presentation at the General Ordinary Shareholders’ Meeting of a report of such examination. the examination of the operations. GE Mexico.370.764.100 Series B shares.” We believe that the transactions in which we have engaged with GE and its affiliates have been made on terms that are no less favorable to us than those that could be obtained from unrelated third parties. in certain cases. In addition.59% 48. super majority vote.764.370. holds 185. we had 16. among other things.486.V.00% — 213.148 Members of the Saiz and Berrondo families and certain other individuals (the “Principal Shareholders”).370.000. Owner Group of Mexican Shareholders (GMS)(1) GE and GE subsidiaries (2) Total Outstanding Shares (1) Series A Shares 213.000 16.000.852 Sub-Series LP Shares 8.764. own 51. In particular. and in the future may engage. contains restrictions on transfer of shares and provides for the vote of the shares of Controladora Mabe held by the Principal Shareholders as a block.000 Percentage of Voting Shares 51. in transactions with our shareholders and companies affiliated with our shareholders.659.A. Except in the case of the Sub-Series LP shares.852 199.200 Series B shares.852 429.V.764. General Electric International (Benelux) B. These individuals are party to a shareholders’ agreement that.148 Series A shares of common stock and 199. holds 11. S.135.619.552 Series B shares and General Electric Company. Our capital is fully paid up.000.000 non-voting Sub-Series LP shares of common stock outstanding.59% of our outstanding common stock. (2) Related Party Transactions We have engaged. we had 213. The shareholders’ agreement also provides that the vote of the shares subject to that agreement be determined by majority vote and. A-79 . our shareholders do not have different or preferential voting rights with respect to the shares they own.148 Series B Shares — 199. we have and intend to continue to engage in significant transactions with GE. See “Business—The General Electric Joint Venture.000 Aggregate Shares 221.41% 100.370.000 8. as a group. 2012. de C.000. holds 2.852 Series B shares of common stock outstanding. The table below sets forth information concerning the percentage of our voting capital stock owned by any person known to us to be the owner of 5% or more of any class of our voting securities.PRINCIPAL SHAREHOLDERS AND RELATED PARTY TRANSACTIONS Principal Shareholders As of March 31.148 207. Colonia Rincón del Bosque. S. 11580.C. including the Audited Financial Statements included in this listing prospectus. The address of PricewaterhouseCoopers. Distrito Federal. México. S. A-80 . is Mariano Escobedo 573.INDEPENDENT ACCOUNTANTS Our financial statements for the past three years have been audited by PricewaterhouseCoopers. independent accountants..C. .. F-60 F-1 ................................................................ 2010 and 2009 ....... and its Subsidiaries Audited Consolidated Financial Statements Independent Auditors’ Report. 2012 and 2011 ....... 2010 and 2009F-7 Notes to the consolidated financial statements .............................................A...............................................INDEX TO FINANCIAL STATEMENTS Controladora Mabe......................................................... 2011..... 2012 and 2011 ..... 2012 and 2011 ....... 2010 and 2009 ..................... F-2 Consolidated balance sheets at December 31.............................................. 2011...... 2011........................... F-5 Consolidated statements of changes in stockholders’ equity for the years ended December 31......................... 2011............. F-8 Interim Unaudited Financial Statements Condensed consolidated balance sheets at March 31.. F-56 Condensed consolidated income statements for the three months ended March 31........................ F-59 Notes to the condensed consolidated financial statements .................. 2012 and December 31.................................................... de C.......................................... 2011 and 2010 ..................................................................... F-57 Condensed consolidated statements of changes in stockholders’ equity for the three months ended March 31......... F-4 Consolidated income statements for the years ended December 31............................................... S........... F-6 Consolidated statements of cash flows for the years ended December 31..... F-58 Condensed consolidated statements of cash flows for the three months ended March 31..V.................................. As mentioned in Note 4u. Those standards require that we plan and perform the audit in order to obtain reasonable assurance about whether the financial statements are free of material misstatement and that they were prepared in accordance with Mexican Financial Reporting Standards (“MFRS”). These financial statements are the responsibility of the Company’s Management. evidence supporting the figures and disclosures of the financial statements. 2010. and the currency most representative of the environment in which the entity operates is the US dollar. We conducted our audits in accordance with auditing standards generally accepted in Mexico. consolidated statements of changes in stockholders’ equity and of cash flows for each of the three years in the period ended December 31. 3.A. The reason for the change is that information presented in US dollars is more useful to financial statement users in decision-making. de C. Our responsibility is to express an opinion on these financial statements based on our audits. and the related consolidated income statements. We consider that our audits provide a reasonable basis for our opinion. to the financial statements.A. F-2 . 2009) to the US dollar (used from January 1. 2011.V.V. and subsidiaries (the “Company”) at December 31. 2010 onwards). de C. the Company changed the reporting currency used in preparing its financial statements from the Mexican peso (used through December 31. We have examined the consolidated balance sheets of Controladora Mabe. 2011 and 2010. 2. 2012 To the Stockholders of Controladora Mabe. S. in the period ended December 31. significant estimates made by Management. on a test basis. and the presentation of the overall financial statements. An audit consists of examining. April 23. S. and subsidiaries 1. it also includes the assessment of the financial reporting standards used.Independent Auditors’ Report Mexico City. 7. considering January 1. “Change arising from the adoption of the International Financial Reporting Standards” and f) Improvements to MFRS 2011. the Company acquired Mabe Brasil Electrodomésticos. As described in Note 3 to the financial statements. c) MFRS C-6. plant and equipment”. the consolidated financial position of Controladora Mabe. (a related party previously known as Mabe Hortolândia Electrodomésticos. therefore. Ltda. S. V. This footnote was prepared based on the provisions established in MFRS Interpretation 19. “Property. Note 3 to the financial statements sets forth the estimated effects in the initial consolidated balance sheet under IFRS. with the effects described in such Note. PricewaterhouseCoopers. 5. the aforementioned consolidated financial statements present fairly. de C. As mentioned in Note 2 to the financial statements. 6. “Change arising from the adoption of International Financial Reporting Standards”. e) MFRS Interpretation 19. and the consolidated income statements. At the date of issuance of these financial statements. on December 21. “Inventory”. A. 2010. Company Management and GEA are in the process of reviewing those contracts and evaluating the effects of possible changes to the agreed terms. MFRS vary in certain significant respects from IFRS. plant and equipment”. as of January 1. in accordance with MFRS. and from that date the Company prepares consolidated financial statements that include Mabe Brasil Electrodomésticos.4. in all material respects. the adoption of IFRS may have a significant effect on the Company’s financial position and results of operations. d) MFRS C-18. C. As explained in Note 1 to the financial statements. changes in its stockholders’ equity and of cash flows for the three years in the period ended December 31. /s/Luis Antonio Martínez Gómez F-3 . 2011 and 2010. In our opinion. 2011 the Company prospectively adopted the following MFRS and their Interpretations: a) MFRS C-4. “Obligations associated to the disposal of property. Ltda. 2010 as the expected transition date at which IFRS would replace MFRS as the accounting framework of the Company. S. b) MFRS C-5. and subsidiaries as of December 31. “Prepaid expenses”. 2011. 8. Ltda. The Company has signed manufacturing contracts with GE Appliance Products (“GEA”) for the manufacturing of two refrigerator models at its Celaya plant and for the manufacture and supply of parts and spares.). Mabe is currently developing a transition plan to adapt its systems and procedures to International Financial reporting Standards (“IFRS”). 242 1.636 $ 2.999 327.927 2.399 215.104 $ 112.308 2.650 101.228 633.224 10.475) (31.060.390.429 412.858 90.786 2.530 2. F-4 .344) (1.669 118.188 35.646 in 2011 and $54.295 $ 2.497 10.675 402.457) 402.339 1.233 477.184.163.557 47.062 $ 79.497 330. 2011 and 2010 Thousands of US dollars At December 31.551.021.916 37.575 41.020 (79.365 $ 2.842 (12.803 25.Net (Note 11) Derivative financial instruments (Note 5) Total assets Liabilities and Stockholders’ Equity Short-term liabilities: Current portion of long-term debt (Note 12) Notes and accounts payable to suppliers Factoring (Note 13) Other accounts payable and accrued expenses Taxes payable Derivative financial instruments (Note 5) Total short-term liabilities Long-term liabilities: Long-term debt (Note 12) Deferred income tax (Note 17) Employee benefits (Note 14) Warranties and other long-term liabilities Derivative financial instruments (Note 5) Total liabilities Stockholders’ equity (Note 15): Capital stock Inflation adjustment to capital stock Additonal paid-in capital Retained earnings Consolidated effect of deferred income tax Cumulative translation effects of foreign entities Valuation of derivative financial instruments Controlling interest Non-controlling interest Total stockholders’ equity Commitments and contingencies (Note 20) Subsequent event (Note 22) Total liabilities and stockholders’ equity $ 21.188 12.593 296.132 772.000 250.124 678. 2012.067.511 603.394 502.685 32.219 407. 2 and 4) At December 31.Net (Note 8) Deferred income tax (Note 17) Investment in securities (Note 9) Goodwill (Note 10) Other assets .755 26.917 122. A.820 1.618 392.468 47.966 (30.013 1.571 93. S.470 110.219 18.390.220.384) 322.136 (30.221 20.113 23. net of allowance for doubftul accounts of $93.399 371.583 64. 2011 Assets Current assets: Cash and cash equivalents Accounts receivable: Clients.337) 490. machinery and equipment .451 31.917 48. and subsidiaries Consolidated Balance Sheets (Notes 1.237 362.970 in 2010 General Electric Company (Shareholder) (Note 6) Sundry receivables Tax receivables Inventories .104 $ 195.543) 1.Controladora Mabe. V.165 311.000 250.497 330.Net (Note 7) Prepaid expenses Total current assets Property.916 37.333 17.505 $ 2.551. which were authorized for issuance on April 23. de C.475) (6.590 464.930 49.163 80.864 10.062 2010 The accompanying twenty four notes are an integral part of these financial statements. 070 441.275.Controladora Mabe.264 952.688 3.719.829) ($ 48.552.584) (141.011 410.160 369.932) 53.080.666 Operating income Other expenses . 2011.195 277. which were authorized for issuance on April 23.855 3.952 2.660.364) 46.736 (118.877) -_ _ 3.018 Contribution margin Fixed expenses: Production costs Selling and administration expenses 580.672. V.629 3. 2 and 4) For the years ended December 31. de C.739 575. 2012.530) ___ ($ 2009 $ 2.605 (125.213 133.064 (1.125 3.977 2.163 360. 2010 and 2009 Thousands of US dollars For the year ended December 31.354) 19.364 162.451 2.023 143.288 277.217) ($ 2010 $ 2.662) 46. and subsidiaries Consolidated Income Statements (Notes 1. A.555 2.506 531.175.622) 2.926 962.726. F-5 .530) ($ 4.245.054) (97.047) 140.007 20.048 (22.845 65.834 (63.800) 3.382 2.206 165.208.178 94.355. S.698 71.127.723 (127.330 (925) 140.829) The accompanying twenty four notes are an integral part of these financial statements.257 934.Net (Note 18) (Loss) income before income tax benefit (expense) and participation in the results of joint venture Income tax benefit (expense) (Note 17) Participation in the results of joint venture Consolidated net loss Distribution of consolidated net income (loss): (Loss) income from controlling interest Loss from non-controlling interest Consolidated net loss for year ($ ($ 73.Net (Note 19) Comprehensive financing cost .532 536.217) ($ $ 16.971 (8.108 298.170) (67. 2011 Net sales: Domestic Export Variable costs: Production costs Selling and administration expenses $ 2.555 316. 928 (3.753 - Valuation of derivative financial instruments ($ 8.822) $ 402. de C. S.916 - Additional paid-in capital $ 37.917 - 4.800) (10.216 (3.497 $ 330.183) - (96.183) (37.355) 510.300) 25.983) - (129.842 (2.851) ($ 1.917 16.000) 47.497 - 330.708 (30.966 ($30.394 2.020 (67.475) (31.058) - (138. 2012.475) (24.861 (21.971 126.457) (100.869) $ 322. V.505 $ 47.801) ($31. which were authorized for issuance on April 23.043) (9.834 122.136 6.543) 11.916 - 37. 2 and 4) For the years ended December 31. 2010 Comprehensive loss for the year (Notes 4n.279) (12.000) 47.497 330. and 16) Balances at December 31.000) ($37.377 1.000) Non-controlling interest ($ 1.453 - (1. and 16) Balances at December 31.919 (21. and 16) Balances at Decembrer 31.923 502.170) $ 48.331 (3.384) (167. 2011.497 $ 330.258) - Total $ 652.344) (2.996) (6.Controladora Mabe.000) (8. F-6 .302 (21.000) Consolidated effect of deferred income tax - Cumulative translation effects of foreign entities $ 121. and subsidiaries Consolidated Statements of Changes in Stockholders’ Equity (Notes 1.636 The accompanying twenty four notes are an integral part of these financial statements.916 37.555) 520.337) 644 490. 2009 Dividends paid (Note 15) Comprehensive loss for the year (Notes 4n.940) - Controlling interest $ 634. A.917 - Retained earnings $ 124.916 $ 37. 2009 Dividends paid (Note 15) Comprehensive income for the year (Notes 4n.917 (73. 2011 $ 47.047) ($ 79. 2010 and 2009 Thousands of US dollars Capital stock Inflation Historical adjustment Balances at January 1. Operating activities (Loss) income before income tax benefit (expense) and participation in the results of joint venture Items related to investing activities: Depreciation and amortization (Loss) gain on property.891 129.993 3.242) (395.103) (20.450 7.599 30.384 (13.631) (3.Controladora Mabe.941) (21.195 4. 2 and 4) For the years ended December 31.915) 112.590 $ 79.118 58. 2010 and 2009 Thousands of US dollars For the year ended December 31.138 281. 2011.693) (142.100 (15. 2012.000 (248.537) 164.235 (23.780) 28.922 2009 $ 19.620 The accompanying twenty four notes are an integral part of these financial statements.180 (494.159 (897) (20.675 668. and subsidiaries Consolidated Statements of Cash Flows (Notes 1.928) (28.267) (8.650) (175.155 2010 ($ 97. machinery and equipment 27.582) 7.048 133.979) (107. A.272 7.690 125.312 95. which were authorized for issuance on April 23.314 (8.614 113.229) (5. F-7 .236) (59.221) (228.121 (44.525) (135.263) 156.163) (32.930) 115. de C.387 172. other accounts payable and accrued expenses Income tax Employee benefits Net cash flows from operating activities Investing activities Disposal (acquisition) of property. machinery and equipment Interest income Net foreign exchange loss Items related to financing activities: Interest expense 2011 ($141.157 131.585 (24.211 8.941 530.932) 143.817 186.099 6.289) 357.707) (130.313 (669.108 1.853 (132.853 $ 112.103) -__ (41.062) 37. net of cash (Acquisition) disposal of other assets (160.000) (112.055) (48.044) Net cash flows used in investing activities Financing activities Loans obtained Loan payments Dividends paid Interest paid Net cash flows used in financing activities Adjustments to cash flow from variations in foreign exchange rates and in inflation levels Decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 150.153) (41. V.191 (54.540) (12.231) 205.525 (Increase) decrease in: General Electric Company (Shareholder) Accounts receivable Inventories Prepaid expenses Notes and accounts payable to suppliers Other assets.622) 162.955) (113.597 69.482) 145.095) (51.590 196.001 (3.034 430 65. S.199) 3.000) (94.076) 1.065 Acquisition of business.084 $ 156.153) 136.368 137. Since 1987. S. the International Accounting Standards (“IAC”) and IFRS Interpretations Committee (“IFRIC”) interpretations are supplemental to MFRS and should be applied in the absence of an applicable MFRS requirement. the figures in these financial statements are stated in historical Mexican pesos modified by the cumulative inflation effects on the financial information recognized up to December 31. S. which holds a 48. which has as its main characteristic the separation of the cost of sales from the other costs and expenses. and subsidiaries Notes to the Consolidated Financial Statements At December 31. and subsidiaries (the “Company” or “Mabe”) are engaged mainly in the manufacturing of ranges. since there has been a cumulative inflation below 26% (threshold for defining if an economy should be considered as inflationary) in the most recent three year period (with the exception of Venezuela and Argentina). see Note 4) Note 1 . de C. refrigerators. the recognition of the effects of inflation in the financial information is required to be discontinued (disconnection from inflationary accounting). as of January 1. for better analysis of its financial position. V. operations and basis of preparation: Controladora Mabe. 2008. the Company has operated as an economic joint venture with General Electric Company (“GE”).Controladora Mabe. dryers and washing machines.A. expenses and additional line items in the statement of income: The Company presents costs and expenses in the consolidated income statements under the classification criterion based on the function of the items. 2011 and 2010 and for the three years then ended (Amounts expressed in thousands of US dollars. dryers. Therefore. the Company has deemed it necessary to separately present the amount of operating income in the income statements since such information is a common disclosure practice of the sector to which the company belongs.Company history. F-8 . which is Mabe’s reporting currency. GE is also the main customer of the Company. the Mexican economy is not in an inflationary environment. These consolidated financial statements are presented in US dollars. water coolers. “Inflation effects” (“MFRS B-10”). Consequently. Pursuant to the joint venture agreement. de C. based on aggregate product sales. Presentation of costs. Effects of inflation on financial information: According to the provisions of MFRS B-10. Additionally. A. MFRS provides that International Financial Reporting Standards (“IFRS”). 2011 and 2010 and for the three years then ended fully meet the requirements of MFRS to show a fair presentation of the Company’s financial position. and distribution of built-in ovens and hoods. Mexican Financial Reporting Standards (“MFRS”): These consolidated financial statements at December 31. denoted by the symbol “$”. microwave ovens and related parts and components in domestic and foreign markets.V.41% equity interest in the Company. 2007. licenses to the Company trademarks and patents for products offered and provides Mabe access to relevant technology used in the manufacturing of different products. dishwashers. MFRS C-18. in the balance sheet and statement of changes in stockholders’ equity. "Cash flow statement" allows the optional presentation of the line item excess cash to be applied to (obtained from) financing activities. and subsidiaries Notes to the Consolidated Financial Statements At December 31. The main changes are. the invalidation of the cost allocation method of last in first out. "Accounts Receivable" establishes the rules for the recognition of interest derived from bad debt accounts receivable. of the effects of adjustments recognized retrospectively. 2010. MFRS C-5. which will become effective as of January 1. 2011. S. 2011.19% Inflation for the year Cumulative inflation in the last three years Prospective application of MFRS due to accounting changes and MFRS effective as of January 1. plant and equipment” effective up to December 31. 2011 Amendments to MFRS MFRS B-1. 2010. plant and equipment for depreciation effects. “Changes arising from the adoption of International Financial Reporting Standards” requires the disclosure of the company’s reasons for adopting IFRS. the expected date of adoption and the estimated amount of any significant effect the adoption would have on the company’s financial statements. MFRS C-6.82% 12. the separate presentation from current and non-current assets of the amounts disbursed under this concept. “Obligations associated with the disposal of property. “Accounting changes and correction of errors” establishes the rules for the presentation. plant and equipment for assets used to develop or maintain biological assets and assets used in extractive industries as well as the categorization of property. “Inventory” effective up to December 31.Controladora Mabe. Bulletin C-3. 2012.20% 4. “Property. leaving the following methods available: identified costs. This standard leaves Bulletin C-6. plant and equipment” establishes the valuation. “Prepaid expenses” establishes the presentation and disclosure rules for prepaid expenses which require. A. MFRS C-4.40% 15. effective as of January 1. presentation and disclosure rules. A main characteristic of a prepayment is that future economic benefits are expected to flow to the company and the benefits and risks have not been transferred to the company. 2011 2010 3. among other things. plant and equipment components. the following MFRS have been prospectively adopted by the Company. This standard leaves Bulletin C-4. plant and equipment” establishes the particular rules for initial and subsequent recognition of provisions related to obligations associated with the disposal of property. “Inventory” and establishes the inventory valuation. average cost and first in first out. presentation and disclosure rules for property. MFRS Interpretation 19. V. 2011: Beginning on January 1. “Inventory” replaces Bulletin C-4. MFRS B-2. “Property. as well as the invalidation of direct cost as a valuation system. de C. F-9 . 2011 and 2010 and for the three years then ended The inflation rates are as follows: December 31. V. de C. Controladora Mabe. S. de C. María Cooling and María Solutions (all S.A.V. the hedging relationship is permissible only if the parties’ functional currency is different. and c) Mabe México. MFRS C-13. The Marías companies were acquired during 2010. (c) When the hedging item is the portion of a financial asset or liability portfolio.V.. S. and financial guaranties and deposits received that will not become the entity’s property must be reflected at fair value and will not be controlled by the entity. and subsidiaries Notes to the Consolidated Financial Statements At December 31.A. the stockholders of the Company approved: a. (the seller) sold Mabe.L.L. 2012 by Mr. de C. F-10 . S. "Leasing" establishes.) into Controladora Mabe.. 2010. S. 2011 and 2010 and for the three years then ended Bulletin C-10. S. among other things: (a) an extension and clarification of certain concepts to consider in the determination of the discount rate to be used by the lessor and lessee in a finance lease. the effect of the hedged risk attributable to movements in interest rates of the hedged portion must be presented in a separate line as complementary account of the hedging item. and (c) criteria for the determination of a gain or loss from a sale leaseback. (d) Contribution or margin accounts associated with derivative financial instruments must be accounted for separately as an asset or liability. b) MCM Américas. b. S. and (e) A portion of the hedging instrument. de C. because those components can be generally measured separately.Chief Financial Officer) and Mr. Francisco Quintana (Corporate Controller). (b) additional disclosures with respect to finance leases for the lessor and lessee.V. "Related parties" expands the definition of close relative to be considered as a related party to the company.Controladora Mabe.V. (b) If a forecasted transaction is between related parties. 2010. may be designated as a hedging instrument. de C.A.A.L. the merger gave rise to no capital increase. Bulletin D-5. and Centro de Diseño y Fabricación de Herramentales de Mabe and General de Comercio San Miguel (both S. Authorization of the financial statements: These consolidated financial statements and notes were authorized for issuance on April 23. (the purchaser) the shares of the following companies: a) Industrias Confad. Javier Burkle Elizondo (Vice-President of Finance . Company Management considered that the adoption of the foregoing MFRS will not have a significant impact in the financial statements of the Company. de C. The excecution of a private purchase agreement with the following features: On December 23. but a hedging relationship may not be designated for only a portion of the time period during which the hedging instrument remains outstanding. Note 2 .) (“Marías companies”). 2010.V. Mabesa. the separation of some components is permitted for options (intrinsic and extrinsic value) and FX forwards (interest element and spot element). In view of the fact that the merged companies were subsidiaries of the merging company. The merger of the following companies: Mabe Andina. de R. “Derivative Financial Instruments and Hedging Transactions” specifies the following amendments: (a) For the purpose of measuring hedge effectiveness. de C. María Holding. de C. A. de R. S. de R. de R. such as a percentage of its notional amount.L.Group re-organization: México In an Extraordinary General Stockholders’ meeting held on November 3. both of whom hold the legal power to authorize these financial statements and notes. effective on November 30. de C. V.V.V. amounting to $102 thousand Brazilian Reales as well as the capital stock amounting to $223.208.934 $67.A. During the September 17. Set forth below are differences in the consolidated income statement and the consolidated statements of cash flows: Acquisition from begining of the year Consolidated Income Statement Net sales Contribution margin Operating income Consolidated net loss for the year $3. establishing the necessary agreements to achieve greater synergies among the companies operating in Brazil.i.Controladora Mabe.4 million Brazilian Reales through the transfer of property. S. the stockholders approved a capital reduction of $16. Ltda. Ltda. b. (formerly Mabe Hortolândia Electrodomésticos. On December 21. A. Mabe Hortolândia Electrodomésticos. therefore the net assets merged were accounted for by Mabe at their historical values according to the merged companies’ financial statements.A. capital and the spunoff net assets from Mabe Campinas Electrodoméstics.571. 2010.. V. S. respectively. acquired from Exinmex. amounting to $8 million Brazilian Reales and with the incorporation of the spun-off net assets from Mabe Campinas Electrodomésticos. the stockholders of Mabe Brasil Electrodomésticos. machinery and equipment to Mabe Participações e Empreendimentos.530) $362.555 $536. S. correspond to initial balances shown in the blance sheet as of December 1. The capital stock and spun-off net assets were reflected in the financial statements at December 31.529 $82.506 ($12. On December 21. 58. agreed to a capital increase of $223.) had occurred on January 1. S. b. de C.530) $3.63% of the shares of Mabe Hortolândia Electrodomésticos. As part of those agreements.845 ($46. 2010. a Mabe Brasil Electrodomésticos.A. 2010. b.A. 2010. Ltda.489 $ 603. de C. 2010.A. Controladora Mabe. S. reorganization-terms contract was signed. 2010. The figures considered when valuing the Mabe Itu Electrodomésticos. Ltda. and subsidiaries Notes to the Consolidated Financial Statements At December 31. MFRS requires the inclusion of the following information as if the acquisition of Mabe Brasil Electrodomesticos. Ltda.V. Ltda. The capital reduction was conducted by amending a contract signed on December 21.V. de C.’s name was changed to Mabe Brasil Electrodomésticos.A. Ltda.222) From acquisition date Differences F-11 . Ltda.9 million Brazilian Reales and $1 Brazilian Reales.9 million Brazilian Reales through the incorporation of the equity of Mabe Itu Electrodomésticos. S. Brazil a. 2010.623 ($46.023 $94. Ltda. 2011 and 2010 and for the three years then ended These mergers were accounted for as a reorganization of companies under common control.ii During an extraordinary stockholders’ meeting held on December 31. S. 2010 stockholders’ meeting of Mabe Hortolândia Electrodomésticos. V.321) $2.590 From acquisition date ($97. and b) Such policies should be applied at the date of transition to IFRS (i. December 31.932) $129. including those that will be applicable on an optional basis.153) $112.Controladora Mabe.590 Differences ($5.376 ($10.153) ($135.. at the transition date.299 ($185.. may differ from those applied in preparing these estimated consolidated opening balance sheets under IFRS.153) $112. de C. Note 3 . 2011.e. as follows: a) An entity will develop accounting policies based on standards and related interpretations effective at the reporting date of its first annual IFRS financial statements (i.278) ($135. 2012).922 ($175.253) $135. 2011) and throughout all periods presented in the first IFRS financial statements. considering the following optional exceptions permitted by IFRS 1: F-12 . 2011 as the expected transition date at which IFRS would replace MFRS as the accounting framework for Mabe. A.. “Firsttime Adoption of International Financial Reporting Standards” (“IFRS 1”). Based on the result of the transition plan to date. Mabe followed the requirements contained in MFRS 19. “Changes arising from the adoption of International Financial Reporting Standards” and applied the requirements of IFRS 1. 2011 considering January 1.e. 2011 and 2010 and for the three years then ended Consolidated Statement of Cash Flows Acquisition from begining of the year Loss income before income tax Net cash flows from operating activities Net cash flows investing activities Net cash flows financing activities Cash and cash equivalents at end of year ($103. January 1. The International Accounting Standards Board (“IASB”) standards and IFRIC interpretations used to prepare these estimated consolidated opening balance sheets were issued and effective at December 31. December 31. S. Mabe adjusted amounts previously reported in its financial statements prepared under MFRS.Conversion process and adoption of IFRS: The adoption of IFRS may have effects on the financial position and results of operations of Mabe since the Company is currently finalizing the conversion of its financial statements pursuant to IFRS. In order to determine the estimated consolidated opening balance sheets under IFRS.125) $ $ - No changes are reflected in the consolidated balance sheet and consolidated statement of changes in stockholders’ equity because they were prepared after the acquisition.e. 2012). The IASB standards and IFRIC interpretations that will be applicable at the date of the reporting of the first set of financial statement under IFRS for Mabe (i. and subsidiaries Notes to the Consolidated Financial Statements At December 31. Mabe has prepared estimated consolidated balance sheets at December 31. To prepare these estimated consolidated opening balance sheets. plant and equipment at fair value at the transition date to IFRS and use that fair value as the deemed cost. etc. in which periods the respective economies qualified as hyperinflationary under IAS 29. and subsidiaries Notes to the Consolidated Financial Statements At December 31. 3) immediate recognition in the income statement. In accordance with IAS 16. less any impairment losses. It must be determined. “Property. “Employee benefits” (“IAS 19”) must be applied retroactively. The measurement must be applied consistently to each class of fixed asset. Exemption for fair value as deemed cost IFRS 1 allows measurement of a component of property. Mabe has opted to carry all property. or use the restated book value determined under MFRS if that restated book value is comparable to: a) fair value. machinery and equipment at cost less accumulated depreciation and accumulated impairment losses in accordance with IAS 16.) for initial recognition. IFRS 1 allows recognition of all unamortized accumulated actuarial gains and losses at the transition date to IFRS in retained earnings. V. “Financial Reporting in Hyper-Inflationary Economies” (where the threeyear inflation rate approaches or exceeds 100%). subsequent measurements are made under one of the following options: 1) corridor approach. machinery and equipment) and to allow minor assets to remain at book value under MFRS (computer equipment. For subsequent measurement. A. If that option is not elected. or b) cost or depreciated cost in accordance with IFRS. For subsequent measurement. Mabe has opted to recognize the translation effect in stockholders’ equity in retained earnings at the transition date. IAS 19. According to IAS 19. or 2) fair value. F-13 . 2) immediate recognition in Other Comprehensive Income (“OCI”) in stockholders’ equity. Mabe has preliminarily elected to use appraisal values for its most significant assets (property. If this option is elected. by country.Controladora Mabe. “The effects of changes in foreign exchange rates” from the date on which the subsidiary or the investment accounted for by the equity method was established or acquired. office furniture and equipment. The most significant change in the amendments to IAS 19 is that actuarial gains and losses (remeasurements) will be recognized immediately in OCI and will no longer be deferred using the corridor approach or recognized in income. adjusted to recognize changes in an inflation index. This exception makes it possible not to calculate the cumulative translation difference under IAS 21. subsequent measurement is made at either: cost less accumulated depreciation. and 4) early adoption of the amendments to IAS 19 issued in June 2011. S. it must be applied to all plans. Mabe has opted to recognize unamortized accumulated actuarial gains and losses at the transition date to IFRS in retained earnings. Exemption for employee benefits In relation to defined benefit plans. Mabe has preliminarily opted to adopt the amendments to IAS 19 issued in June 2011. 2011 and 2010 and for the three years then ended OPTIONAL EXCEPTIONS UNDER IFRS 1 Exemption for determining the cumulative translation differences IFRS 1 allows cancellation of all cumulative losses and gains in the translation of the financial statements of subsidiaries located abroad and of investments accounted for by the equity method generated under MFRS. de C. plant and equipment” (“IAS 16”). “Consolidated and separate financial statements” (“IAS 27”). “Business combinations” (“IFRS 3”) as at transition date or a specific date prior to the transition date. Mabe has opted to recognize investments in affiliates in its separate financial statements at the book value used under MFRS. jointly controlled entities and associates When an entity opts for the cost method rather than fair value for recognition of its investments in subsidiaries. associates and joint venture IFRS 1 makes it possible for the consolidated financial statements of a holding company adopting IFRS for the first time after the date on which they have been adopted by a subsidiary. F-14 . 2011 and 2010 and for the three years then ended Exemption for investments in subsidiaries. or b) deemed cost. V. to quantify the assets and liabilities of the subsidiary (or associate or joint venture) at the transition date. and subsidiaries Notes to the Consolidated Financial Statements At December 31. de C. In cases in which IFRS are not allowed for certain foreign subsidiaries at the transition date. or ii) book value at that date used under MFRS. 2011 are consistent with the estimates at the same date made in conformity with MFRS. All of the Company’s hedge contracts satisfy the hedge accounting criteria as of January 1. S. Exemption for business combinations IFRS 1 allows prospective application of IFRS 3. Mabe has opted not to reformulate business combinations recognized prior to the transition date. IFRS mandatory exceptions Set out below are the applicable mandatory exceptions in IFRS 1. these transactions are reflected as hedges in the Company’s balance sheet. At the transition date. Hedge accountingHedge accounting can only be applied prospectively from the transition date to transactions that satisfy the hedge accounting criteria under IFRS. Mabe has opted for subsidiaries subsequently adopting IFRS to use the balances included in Mabe’s consolidated financial statements. after consolidation and equity method adjustments and the effects of business combinations in cases where the holding company acquired the subsidiary. joint venture and associates in its separate financial statements.Controladora Mabe. Deemed cost of these investments may be either i) fair value at the transition date in the separate financial statements of the entity. consequently. at the same book values of those items in the financial statements under IFRS of that subsidiary (or associate or joint venture). A. IFRS 1 allows valuation of those investments by any of the following methods at the transition date: a) costs as per IAS 27. EstimatesIFRS estimates at January 1. a. and therefore to prospectively apply IFRS 3. This option makes it possible to avoid retroactive application involving the reestablishment of all business combinations occurred prior to the transition date. 2011 and. Any entity deciding to reestablish its acquisitions at a specific date prior to the transition date must include all acquisitions made during that period. b. at that date. Exemption for assets and liabilities of subsidiaries. This had no effect in the consolidated balance sheet at the transition date. 104 Balance sheet Cash and cash equivalents Accounts receivable -Net Other accounts receivable and prepaid expenses Inventories .451 133.858 35. machinery and equipment .451 133.183 (a) (b) $ 397.389 148.948.260 2. (e) $ $ $ (1) The adjustments set forth above represent the Company’s Management’s best estimate at the date of issuance of these financial statements.Net Total assets Current portion of long-term debt Other short-term accounts payable Long-term debt Employee benefits Deferred income tax Other long-term liabilities Total liabilities Total stockholders’ equity Total liabilities and stockholders’ equity Notes Adjustments (1) $ Balances IFRS 79.390.067.141.767 21.Net Property.136 2.Net Deferred income tax Investments in securities Goodwill and other assets .803 1.060.172 227.000 465.497 10.707 2.470 90. the Company applied prospectively the following mandatory exceptions starting January 1. S. V.707 2.675 402.468 322.169. F-15 .047 733.274 603.551.188 1.Net Property.930 93.025.765.948.121 (d).864 129. A.972 67.000 465.713 197. 2011: Balances MFRS $ 79.803 633. (e) $ $ $ Set forth below is the estimated consolidated opening balance sheet of Mabe at December 31.971 221.313 101.390.215.188 772.695 678.260 2.707 154.490 477. 2011: Balance sheet Cash and cash equivalents Accounts receivable -Net Other accounts receivable and prepaid expenses Inventories . 2011 and 2010 and for the three years then ended Additionally.215.274 603.650 101.571 64.551. machinery and equipment .675 402.583 67.062 195.009.470 133.530 2.237 1.663 $ $ (c) (b) 43.790 118.565 35.121 $ $ $ 397.864 129. and subsidiaries Notes to the Consolidated Financial Statements At December 31.590 464.669 118.237 1.490 242.188 110.141.783 104. since the requirements under MFRS are the same.224 10.505 2.490 477.765.631 397.590 464.Controladora Mabe.636 2.025.224 10. 2011: derecognition of financial assets and liabilities and non-controlling interest.783 110.497 10.594 407.Net Deferred income tax Investments in securities Goodwill and other assets .764 2. de C.429 1.530 2.594 407. Therefore.Net Total assets Current portion of long-term debt Other short-term accounts payable Long-term debt Employee benefits Deferred income tax Other long-term liabilities Total liabilities Total stockholders’ equity Total liabilities and stockholders’ equity Notes $ Balances MFRS 112.640 550.104 21.764 2.121 $ $ (c) (b) 43.663 $ $ $ 375.603 (d).491 375.429 1.695 678.062 Adjustments (1) $ Balances IFRS 112. the information shown is preliminary and subject to changes that might arise from changes to certain options established under current IFRS or from the issuance of new IFRS.183 195. with no significant effect.767 (a) (b) $ 375.000 621. Set forth below is the estimated consolidated opening balance sheet of Mabe at January 1.571 108.557 490.000 621.127 2. at January 1. A. de C. liabilities for employee benefits would be amortized on a straight line basis over a five year period. Under IFRS. the three-year accumulated inflation must be 26% or more. taking into consideration the following: a. Mabe had the most significant land. the Company’s Management is in the process of studying and adapting the main changes in Mabe’s accounting policies under IFRS. For subsequent measurements. plant and equipment. determined by applying the National Consumer Price Index (“NCPI”) factors to acquisition cost from the date of acquisition to December 31. the c. machinery and equipment .As mentioned in Note 2. Therefore. 2008. Mabe will recognize that liability only when it has proposed the formal and detailed termination plan to the affected personnel. accumulated inflation over the most recent three-year period must be equal or greater than 100%. therefore. S. b. there is a remaining transition liability to be amortized in the future for such amendments. buildings and machinery appraised in monetary terms by an independent appraiser. 2011 and 2010 and for the three years then ended Notes At the date of issuance of these financial statements. Additionally. These inflationary effects did not exist in Mexico at January 1. At the transition date to IFRS. The changes include elimination of the corridor approach and differences in the presentation of pension expenses in different accounts. 2013. d. which. Mabe elected the other IFRS 1 option. in order for an economy to qualify as hyperinflationary in Mexico.Changes in deferred income tax represent the impact of deferred taxes on the adjustments necessary for the transition to IFRS. For all other property. Therefore. plant and equipment to be valued at fair value at the time of initial valuation (fair value or value recognized under MFRS at the transition date). 1998 and therefore Mabe will cancel the effects of inflation against retained earnings. machinery and equipment) and allow minor assets to remain at book value under MFRS (computer equipment. under MFRS B-10.). such as the portion of financing cost of the liability being recorded under financial costs and the actuarial gains and losses being recognized directly in OCI rather than in income. For the same reason. 2007. The liability for termination benefits recognized under MFRS is not allowed under IFRS unless a demonstrable commitment has been made i) to terminate an employee or group of employees prior to the regular retirement date. allows early adoption. The amount recognized up to January 1. 2011 directly in stockholders’ equity at the transition date under IFRS 1 so as to be in line with the requirements of new IAS 19. office furniture and equipment. Employee benefits . which allows valuation under MFRS at the transition date.Controladora Mabe. plan modifications were also recognized in stockholders’ equity. Mabe opted to recognize unamortized actuarial profits or losses at January 1. The principal effect corresponds to an increase in the deferred tax liability of revaluation of fixed assets. V. Deferred income taxes . or ii) to pay a severance as a result of an offer made in order to persuade employees to resign. in order to recognize those effects. these amendments do not apply. F-16 . Effects of inflation . represented by historical cost plus restated values for all acquisitions until December 31. although effective from January 1.Under amendments to MFRS. Under IFRS.Mabe elected the IFRS 1 option which allows property. 2007. etc. the reversal of the related effects is recognized in retained earnings. and subsidiaries Notes to the Consolidated Financial Statements At December 31. In that regard. 2011 will therefore be eliminated. Mabe ceased recognizing the effects of inflation in its financial information. Property. Mabe has preliminarily opted to use appraisal values for its most significant assets (property. Mabe has opted for cost less accumulated depreciation less any impairment losses. Actual results could differ from those estimates.A. such estimates and assumptions are subject to a number of risks and uncertainties that may cause actual results to differ materially from such estimates. and subsidiaries Notes to the Consolidated Financial Statements At December 31. S. a. Consolidation - These financial statements include those of Controladora Mabe.V. Servej. S.V. de C. At December 31. and all entities in which it is the owner of 50% or more of the shares or exercises control. L. Leiser. to govern the operation. de C. Use of estimates The preparation of financial statements in conformity with MFRS requires Management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements. which have been applied consistently in the reporting years. 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% % of ownership 2011 2010 F-17 .V. L. V. A. Mabe opted to recognize the effect of translation on stockholders’ equity in retained earnings at the transition date in its opening balance under IFRS at January 1. de C. The consolidation was carried out on the basis of the audited financial statements of the subsidiaries.V. S. when an entity has the power. Mabesud.V. (2) the valuation of derivative financial instruments and employee benefits liabilities. MFRS requires the use of critical accounting estimates in the preparation of financial statements. directly or indirectly.V. de C. Control exists.Summary of significant accounting policies: Mabe’s most significant accounting policies. 2011 and 2010 and for the three years then ended company cancelled the effects of inflation in the other countries in which it has operations and the accumulated inflation over the most recent three-year period was not equal to or greater than 100%. administrative and financial policies of an entity to obtain benefits from its activities. Mabe Argentina. de C. While Management believes that its estimates and assumptions are reasonable. S. e.A. Accordingly. unless otherwise specified. are set forth below. 2011. Significant estimates underlying these financial statements include: (1) allowances for doubtful accounts and for obsolete inventory. S. Mabe Integra. Note 4 .A. de R. S. the subsidiaries were: MÉXICO Mabe. Cumulative translation differences . S. b. Investments in subsidiaries and all significant balances and transactions carried out among consolidated companies have been eliminated for effects of consolidation. and (3) the present value of estimated future net cash flows. de C.Controladora Mabe.A. Management’s judgment is required to define the Company’s accounting policies. S. and the reported amounts of revenues and expenses during the reporting years.A.In accordance with the option established in IFRS 1. de R. de C. Atlas Distribuidora de El Salvador. CENTRAL AMERICA Mabe Guatemala. S. ANDEAN COUNTRIES Mabe Colombia.A. Ltda. Atlas Distribuidora de Honduras. S. Comercial Mabe Chile. 2011 and 2010 and for the three years then ended % of ownership CANADA MC Commercial Inc.V. de C. Ltda. Ltda. (formerly Mabe Hortolândia Electrodomésticos.A. Ltda. S.A.A. Mc Lean.Controladora Mabe.A. Atlas Industrial Group. (1) (1) On June 30. S. S. Mabe Panamá. Mabe Comercial e Participações. Atlas Industrial. Atlas del Caribe. Mabe Perú.A.V. BRAZIL Mabe Mercosur Participações. Mabe Brasil Electrodomésticos. A. Mabe Ecuador. S. S. S. Atlas Eléctrica.97% 58. S.V. 100% 100% 100% 100% 75.A. Atlas Distribuidora de Productos. Mabe de El Salvador. S. S. S.A.L.A. S. de C.A.A. S. de C. A. V. S.A.A.V. Atlas Distribuidora de Nicaragua. S. A. de R. S. C.V. de C. Mabe Canada Inc.63% 100% 75. and subsidiaries Notes to the Consolidated Financial Statements At December 31. S. Ltda.A.97% 58. de C. S.A. Atlas Distribuidora de Guatemala.A. Mabe Honduras. 2011.A. S. S.) ARGENTINA Kronen Internacional. Central American Marketing.A. S. S. Mabe Venezuela.A. Electrodomésticos Mabeca. Cetrón de El Salvador.A. this company was merged into Kronen Internacional. Atlas Commercial & Investment. S.A.63% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% F-18 . de C. d. When a forecast transaction is no longer expected to occur. any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in the income statement. The Company obtains financing under different conditions and when these are at a variable rate. characteristics. both the derivative and the hedged item are valued at fair value and the valuation fluctuations are recorded in the income statement in the same line item as the position they hedge. When derivative financial instruments are contracted to hedge against risks and meet all hedging requirements. or when the Company decides to cancel the hedge designation. Derivative financial instruments are only entered into with recognized institutions and limits have been established for each institution. the Company contracts derivative financial instruments in the form of interest rate swaps that convert interest payments from a variable to a fixed rate. the effective portion is temporarily recorded in comprehensive income. ii) for cash flow hedges. fair value is determined based on valuation techniques accepted in the financial domain. F-19 . 2011 and 2010 and for the three years then ended c. and subsidiaries Notes to the Consolidated Financial Statements At December 31. (See Note 5). bank deposits and other highly liquid investments with original maturities of less than three months and insignificant risk to changes in value. Cash and cash equivalents - Cash and cash equivalents include cash balances. Non-controlling interest - Not controlling interest reflects the participation of third parties in the equity and the results of consolidated subsidiaries. as applicable to that operation. their designation is documented at the outset of the hedging operation.Controladora Mabe. within stockholders’ equity. e. 2011 and 2010.384) and ($12. V. is cancelled or used. in order to reduce its exposure to the risks of interest rate volatility. A. when the derivative fails to reach a high effectivity to offset the changes in fair value or cash flows of the item hedged. Fair value is determined based on recognized market prices and. describing the purpose. S. When a hedging instrument expires or is sold. or when a hedge no longer meets the criteria for hedge accounting. and the ineffective portion is immediately recognized in the income statement. At December 31. Derivative financial instruments - All derivative financial instruments classified as for trading or to hedge against market risk. are recognized in the balance sheet as assets and/or liabilities at their fair value. when not quoted in the stock market. the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. was sold. The Company recognizes all assets and liabilities arising from operations with derivative financial instruments in the balance sheet at fair value. The Company suspends hedge accounting when the derivative has expired. independently of the purpose for holding those instruments. and is reclassified to income when the position it covers affects the income statement. de C. Hedging derivatives are valued as follows: i) for fair value hedges. non-controlling interest in capital totaled approximately ($79.337). respectively. accounting recognition and the manner by which effectiveness thereof is to be measured. The Company’s policy is not to engage in transactions for speculative purposes with derivative financial instruments. Property. machinery and equipment acquisition costs reduced from their residual values are systematically depreciated using the straight line method based on the assets. ii. respectively. The allowance for obsolete and/or slow-moving inventories is determined based on an analysis performed by the Company’s Management and is sufficient to absorb any related loss. (See Note 7). At December 31. Acquisitions made at or after January 1. as appropriate. h. machinery and equipment. less accumulated depreciation and. the incremental interest rate under the provisions of Bulletin D-5 should be used. machinery and equipment - Property. The financing costs derived from the financing granted by the lessee for the acquisition of such assets are recognized in income as they accrue. Prepaid expenses Prepaid expenses represent expenditures made by the Company where the risks and benefits inherent to the goods to be acquired or services to be received have not been transferred. The financial leases of equipment are capitalized since they substantially transfer all the inherent risks and benefits of the property. 2011 and 2010 and for the three years then ended f. - Property. de C. for new financial leases. 2011 and 2010. These values do not exceed market value. restated by applying inflationary rates from the NCPI in México up to December 31. Prepaid expenses are registered at cost and are presented in the balance sheet as current or non-current assets. F-20 . including those acquired under financial leases. Inventories - At December 31. determined at the exchange rate of the relevant entity’s functional currency. 2007 exchange rate and converted from this recording currency to the functional and reporting currency. 2008. 2011. at their historical cost. determined by the first-in-first-out method. restated by applying rates that reflect the inflation of the country of origin at the valuation date converted to Mexican pesos at the December 31. such items are stated at their modified historical cost. useful lives applied to property. as per the procedure described in Note 4u. 2007: Of Mexican origin at their acquisition cost in Mexican pesos (recording currency). machinery and equipment values. S. inventories and cost of sales are stated at historical cost. stated in the original currency. the embedded interest rate should be used for the calculation of the present value of the minimum payments and if it is not obtainable. are stated as follows: i. A. including acquisitions from financial leases. 2007 and converted from the recording currency to the functional and reporting currency in accordance with the procedure described in Note 4u. they are recognized as an asset or expense in the income statement. Once these good or services are received. impairment losses. machinery and equipment are subject to impairment testing only when signs of impairment are identified. The property.Controladora Mabe. and subsidiaries Notes to the Consolidated Financial Statements At December 31. V. Of foreign origin at their historical cost. Acquisitions made in México until December 31. The capitalized value corresponds to the lower of the leased asset value and the present value of the minimum payments. Consequently. if applicable. g. 2011 and 2010 and for the three years then ended i. k. Finite life intangible assets are those whose expectation to generate future economic benefits is limited by legal or economic conditions and are amortized by the straight-line method based on their estimated useful life. at the rates established in the tax provisions in effect at the date of the financial statements. at their updated values. 2007. less impairment losses. at its historical cost. Intangible assets acquired or developed are reflected as follows: i) as of January 1. Indefinite life intangible assets (i. Provisions Provisions represent current obligations for past events whose settlement is expected to require the use of economic resources. and subject to annual impairment testing. if any. Consequently. less the corresponding accumulated amortization and impairment losses. (See Note 17). l. Goodwill - Based on MFRS B-7. Goodwill is reflected as follows: i) as of January 1. determined by applying inflationary rates from the NCPI at that date to their acquisition or development cost.Controladora Mabe. j. 2007. Intangible assets - Intangible assets are recognized when they meet the following characteristics: they are identifiable and provide future economic benefits. and its value is subject to annual impairment testing. ii. the Company applies the following accounting provisions to business acquisitions: i) the purchase method is used as the only valuation rule. ii) acquired intangible assets are identified. The Company recognized deferred income tax. as it’s financial and tax projections indicate that the Company will essentially pay income tax in the future. F-21 .. and there is control over those benefits. 2008. at their historical cost. and subsidiaries Notes to the Consolidated Financial Statements At December 31. intangible assets are stated at their modified historical cost. Deferred income tax - Deferred income tax is recognized by the comprehensive asset-and-liability method. which consists of calculating deferred taxes for all temporary differences between the book and tax values of assets and liabilities expected to materialize in the future. Provisions have been recorded on the basis of Management’s best estimates. Intangible assets are classified as follows: i. at its net restated value determined by applying rates from the NCPI to its acquisition cost. S. Research costs are recognized as expenses in the year in which they are incurred. de C. goodwill is stated at its modified historical cost.e. (See Note 10). which requires the purchase price to be assigned to acquired assets and assumed liabilities based on their fair values at the acquisition date. valued and recognized. if any. goodwill) are not amortized and are subject to annual impairment testing. V. 2008. A. and ii) until December 31. Consequently. and ii) until December 31. “Business Acquisitions”. Goodwill is considered to have an indefinite lifetime and represents the cost of the shares of subsidiaries in excess of the fair value of the net assets acquired. and iii) the nonassigned portion of the purchase price represents goodwill. minimum wage increase rate and inflation rate. S.). are recognized through an accrual to employee benefits liability determined at discounted value. de C.) are recognized in income or expense as they accrue and their corresponding liabilities are expressed at their nominal value since they are short-term. aging bonus. Have served the Company for at least a two-year period at the valuation date. participants must: i. (See Note 19). the eligible group was considered to be all union plant personnel and all full-time personnel in the Company’s service. according to contractual provisions. Employee benefits The benefits granted by the Company to its employees. Deferred employees’ statutory profit-sharing (“ESPS”) Deferred ESPS is recognized based on the comprehensive method of assets and liabilities. In order for plan membership to be effective. ii. 2011 and 2010 and for the three years then ended m. ESPS currently payable is shown in the income statement under other income and expenses. An accrual for benefits for termination from restructurings has been established. special compensations or voluntary separation. the amortization of the labor cost of past services and actuarial gains (losses) from previous periods. Paid long-term absences related to sabbaticals. The net cost of each employee benefit plan is recognized as operating expenses in the period in which it accrues including. Compensated absence payments based on legal or contractual provisions are not cumulative. Actuarial studies of employee benefits include the following assumptions: interest rate. etc. 2011 and 2010. discount rate.Controladora Mabe. F-22 . are recognized based on actuarial studies carried out by independent actuaries through the projected unitary credit method. To cover these benefits. are described as follows: The direct benefits (salary.. which covers employee benefits to which the employees have the right in the case of restructuring and to which payments are expected to be made in the short-term. aging bonus. V. etc. the Company makes periodic contributions to funds established in irrevocable trusts. At December 31. rate of salary increases. vacation. Termination benefits for reasons other than restructurings (firing compensation or indemnities. and subsidiaries Notes to the Consolidated Financial Statements At December 31. etc. overtime. in which payment or recovery is likely. (See Note 14). among other things. including pursuant to defined benefit plans. the breakdown of employee benefit plans was as follows: Pension plan For purposes of the actuarial valuation of the obligations of the pension plan.). n. etc. (See Note 19). A. holidays. and other retirement benefits. as well as retirement benefits (pension. Be part of the eligible group. which consists of recognizing deferred ESPS for all temporary differences between the book and tax values of assets and liabilities. compensated absence payments. retirement and dismissal. the cumulative translation effects of foreign entities and the effect of valuation of derivative financial instruments are stated as follows: i) movements made as of January 1. de C. 2007 at their restated values determined by applying rates from the NCPI to their historical values up to December 31. Severance This benefit consists of the payment of ninety days of the salary earned by the worker at the time of dismissal or retirement. F-23 . plus translation effects of foreign entities and the effects of valuation of derivative financial instruments. (See Note 16). disability. b) income. o. the additional paid-in capital.4% of the pensionable salary must exceed the equivalent amount of 10 times the monthly minimum wage for Mexico City for pensionable services. 2008 at their historical cost. Consequently. Stockholders’ equity Capital stock. Be at least 30 years old. V. p. and ii) movements made prior until December 31. Seniority premiums The benefits and obligations arising from the seniority premiums are determined in accordance with article 162 of the Federal Labor Law. Income from services is recognized when the services are rendered and: a) income and costs incurred in service rendering are determined reliably.7% of the pensionable salary must not exceed the equivalent amount of 10 times the monthly minimum wage for Mexico City for pensionable services. 2007. the legal reserve. the following rules are applied: - 0. 2011 and 2010 and for the three years then ended iii. The additional pain-in capital represents the excess of the payment on the subscription of shares over the par value thereof.Controladora Mabe. Other comprehensive (loss) income Comprehensive (loss) income is comprised of the net (loss). the different stockholders’ equity items are stated at their modified historical cost. q. retained earnings. and subsidiaries Notes to the Consolidated Financial Statements At December 31. and c) the Company is likely to receive economic benefits from the sale. Revenue recognition Income from product sales is recognized when all of the following requirements are met: a) the risks and benefits of the goods have been transferred to the buyer and no significant control is retained. as per the provisions of articles 48 and 50 of the Federal Labor Law. which are reflected in stockholders’ equity and do not constitute capital contributions. and consists of twelve days salary for every year of service. S. In order to calculate the benefit to be paid to each participant at retirement. and b) the Company is likely to receive economic benefits from the sale. A. plus twenty days salary per year of service. costs incurred or to be incurred are determined on a reliable basis. Seniority premiums are payable upon death. (See Note 15). reductions and distributions. 1. Inc. S. depending on the type of product. Advances from customers are classified as short-term liabilities and are recognized in income when the products are sold. s. de C. S. u.A. Servej. Mabe Guatemala. applying the exchange rate prevailing on the transaction date.) Mabe Canada. de C. A warranty reserve is recognized. are absorbed by local dealers. or valued at year end. r.V. Mabe Panamá. S.A. Exchange rate differences - Foreign currency transactions are initially recorded in the recording currency.V. de C. Warranties - The Company grants warranties against defects on its manufacturing product. Mabe Argentina. S.A.A. Mabe de El Salvador. for periods of one to three years. A. Such factors are obtained from statistics based on the Company’s experience over the most recent two-year period. S. The Company has identified the following recording and functional currencies for each subsidiary. and subsidiaries (except Mabe Canada. Foreign currency transactions The Company operates in a global market with differents currencies. de C. Mabesud.and services-granted factor. and subsidiaries Notes to the Consolidated Financial Statements At December 31. de C. Recording currency Mexican pesos Canadian dollars Mexican pesos Mexican pesos Mexican pesos Argentine pesos Quetzales US dollar US dollar Functional currency US dollar Canadian dollars Mexican pesos Mexican pesos Mexican pesos US dollar US dollar US dollar US dollar F-24 .A. V. The functional currency for each subsidiary was designated based on the currency of the primary economic environment in which it operates in accordance with the provisions of MFRS B-15. de C.V. t.A. S. Allowance for doubtful accounts - Allowance for doubtful accounts is recognized based on studies conducted by the Company’s Management and is considered sufficient to absorb losses. Assets and liabilities denominated in the recording currency are converted to the functional currency at the exchange rate in effect on the balance sheet date.V. Company Mabe. Inc.L. S. considering an inventory selling rate (between the time the sale is made to the wholesaler customer and to the final user) and a parts. are applied to income as a component of the Comprehensive Financing Income.V. de R. except where certain Company affiliates operate. Differences arising from fluctuations in the exchange rates between the dates in which transactions are entered into and those in which they are settled. Warranties on sales abroad. S. S. 2011 and 2010 and for the three years then ended Income from trademark use and from providing technical assistance is recognized during the period in which the trademark is used and the assistance is provided. Mabe Integra.Controladora Mabe.A. C. Ltda. S. S. The exchange differences arising from the convertion from the recording currency to the functional currency were recognized as income or expenses in the income statement in the period in which they arose. 2009. which averaged Ps12. which averaged Ps12. S.51. Electrodomésticos Mabeca. Mabe Mercosur Participações. Mabe Ecuador. S. respectively (for Mexican companies). S. 2010 and 2009 stated in the recording currency. Ps12.51. respectively (for Mexican companies). I. respectively. A. The above mentioned change did not have significant effects on the Company’s financial statements.A. Ltda.04. “Accounting changes and correction of errors”. in which case the historical exchange rates of non-monetary items were used.64 and Ps13. de C. Mabe Perú. and subsidiaries Notes to the Consolidated Financial Statements At December 31. As of January 1. (formerly Mabe Hortolândia Electrodomésticos. and the currency most representative of the environment in which the Company operates is the US dollar.) Kronen Internacional. unless they originated from non-monetary items. S.42. S.A. 2010 and 2009 stated in the recording currency were converted at the closing exchange rates of Ps13. that maintain a recording currency other than the functional currency. Ps12.64 and Ps13.A.Controladora Mabe. ii. Comercial Mabe Chile.A. as follows: i. Mabe Comercial e Participações. Ltda.A. 2010. costs and expenses related to 2011. the Company’s Management used the Mexican peso as the reporting currency for presenting its financial statements.V. were converted at the historical exchange rates on the date on which they arose and were recognized in the income statement.A. Conversion of financial statements The financial statements of the subsidiaries conducting operations in foreign currencies. 2011. and retroactively recognized the effects of that change accordance with MFRS B-1. Non-monetary asset and liability and stockholders’ equity balances at December 31. Mabe Brasil Electrodomésticos. the Company’s Management decided to change the reporting currency to the US dollar. 2011 and 2010 and for the three years then ended Mabe Honduras.38 and Ps13. iv. de C. Lempiras Colones Colones Colombian pesos US dollar Nuevos soles Bolívares fuertes Chilean pesos Brazilian reals Brazilian reals Brazilian reals Argentine pesos US dollar US dollar Colones Colombian pesos US dollar US dollar US dollar US dollar US dollar US dollar Brazilian reals US dollar Until December 31.42. Ps12.A. Ltda. S.A. iii. Atlas Eléctrica. V. were converted to the functional currency. F-25 . 2010 and 2009 were converted using historical exchange rates. Income.97. Mabe Venezuela. 2011. Monetary asset and liability balances at December 31. The reason for the change is that information presented in US dollars is more useful to users in decision-making. and subsidiaries Mabe Colombia. Ltda. 543) Investments in joint-ventures are recognized when there are contractual agreements with other entities where there is shared control over the entity. 2011 and 2010 and for the three years then ended II. A. x. de C. Goodwill is tested at least annually or more regularly if events indicate that this is necessary. income and/or expenses in the financial statements. an impairment loss is recognized to the extent that the net book value exceeds the estimated recoverable value of the assets. 2011 Beginning balance Plus (less): Effect of translation Ending balance v. w. The net sales price is determined using market value or the price of transaction involving similar assets. less selling costs. Financial information by segment Although not within the scope of Bulletin B-5. Reclassification and grouping For presentation purposes. y.543) (24.453 (31. “Financial information by segment”.344) 2010 $ 25. to the extent that the estimated recoverable value of the assets exceeds the net book value. Investment in joint-ventures ($ 6. Participation in income of the joint-ventures are recognized in the financial statements as of the date when the share control begins and up to the date it ends. 2011. The recoverable value is determined using the higher of the estimated discounted net cash flows expected to be generated by the assets or the net sales price. machinery and equipment when certain events or circumstances suggest that the carrying value of these assets might not be recovered.Controladora Mabe. When appropriate. liabilities. S. and subsidiaries Notes to the Consolidated Financial Statements At December 31. South America. Impairment of non-financial assets Management performs impairment tests for its property. With respect to the years presented. (See Note 21). stock. F-26 . Such investments are recorded using the equity method. Breakdown of the cumulative translation effects: The following is an analysis of the movements of the cumulative translation effects from functional to reporting currencies: At December 31. the Company has operated the following business segments: México. 2010 were regrouped and reclassified to be comparable to the corresponding figures at December 31. V. certain figures at December 31.801) ($31. Canada and Central America. under certain circumstances.996) ($ 6. in order to identify segments. which consists of recognizing the proportional portion of the jointly controlled entity's assets. Subsequently. Those segments have been determined by taking into account geographic areas. the Company analyzed its organizational structure and system for presenting information. such impairment may be reduced or reversed. Derivative financial instruments: Financial risk factors The Company’s operations expose it to a number of financial risks: market risk (which includes exchange rate risk. credit risk and liquidity risk. The Board of Directors has approved general written policies with respect to financial risk management. the risk of interest rates of cash flows and fair value. subscribed by the subsidiaries. mainly the US dollar. Note 5 . such as exchange rate risks. as well as policies addressing specific risks. de C. At December 31. i. credit risks. The Company also periodically enters into financial instrument contracts to economically hedge its exposure to changes in interest rates. when appropriate. evaluates and hedges the financial risk in close cooperation with its subsidiaries. The exchange rate risk arises from future commercial operations. A. V. in accordance with the policies approved by the Board of Directors. The Company’s general risk-management program considers the unpredictability of financial markets and seeks to minimize the potential negative effects on the Company’s financial performance. and subsidiaries Notes to the Consolidated Financial Statements At December 31. S. from recognized assets and liabilities and from net investments in foreign operations. whose net assets are exposed to the risk of currency conversion. interest rate risks. The Company has a number of investments in foreign operations. Risk management is handled through the Treasury Department. 2011 and 2010 and for the three years then ended These assets are subject to recognition of impairment. Exposure to foreign currencies is mainly managed through loans denominated in corresponding currencies. as well as the reversal of such impairment. Exchange rate risk The Company conducts international operations and is exposed to exchange rate risks arising from exposure to different foreign currencies. there were no indications of impairment. 2011 and 2010 are summarized as shown in the next page: F-27 . The positions of derivative financial instruments in foreign currencies held at December 31.Controladora Mabe. 2011 and 2010. interest rate risk and price risk). The Company identifies. the use of trading and/or hedge derivative financial instruments in terms of accounting and of non-derivative financial instruments and investment of treasury surpluses. they do not reflect the amounts at risk concerning future flows. 2011 Total short-term at December 31. $50 and $25. 2011 Comprehensive Comprehensive Financial instrument Short-term: For trading: Natural gas swap Aluminum and copper commodity For hedging: Interest rate cross swap Total short-term at December 31.295 2. the Company’s loans and debt instruments at fixed and variable rate were denominated both in pesos and US dollars. A.208) ($ 114) (825) Interest rate 2012 ($ (641) 2. with different maturitiy dates as shown in the table. also expose its cash flows to interest rate risk. 2010 Long-term: Interest rate cross swap Total Interest rate cross swap Total long-term at December 31. Amounts at risk are generally limited to the unrealized profit or loss from valuation to market of those instruments. independently of its contractual rate profile. Loans and debt instruments contracted at fixed rates expose the Company to the risk of decreases in the reference rates. 2011 and 2010. which can vary depending on changes in the market value of the underlying item. the Company’s Management has evaluated the effectiveness of its hedges for accounting purposes and considers them to be highly effective. At December 31. F-28 . its volatility and the credit rating of the counterparties. Loans and debt instruments issued at variable rates expose the Company to the risk of variability in interest rates and consequently.927) ($ 518) ($ 18. related to long-term loans and issuance of debt instruments. however.295 (17.121 December 2012 December 2012 ($ 164) (1.Controladora Mabe.242) ($ 16. During 2011 and 2010. and subsidiaries Notes to the Consolidated Financial Statements At December 31. 2011 and 2010 and for the three years then ended Valuation at December 31.739) Interest rate (1) 2019 ($ 17. ii.927) ($ 518) (18. The notional amounts related to derivative financial instruments reflect the contracted reference volume.739) (1) Notional amounts amounted in million to $100.532) Interest rate (1) 2012 and 2014 $ $ 2. de C.013) ($ 939) $ 1. V. S.000 3. Risk of interest rates of cash flows and of fair value The risk of the Company’s interest rates arises from its contractual profile.394 ($ ($ 280) 280) ($ 18. possibly representing a greater financial cost of the liability. $70. 2011 Type of underlying asset Notional amount Maturity date Assets (liabilities) (loss) income financing cost MMBTU Metric Tons 300. Company policy consists of covering approximately 50% of its loans and debt instruments with a fixed-rate profile. resulting in a net realized loss of $1. S. the Company has long-term variable-rate loans. natural gas and copper. Generally. Scenarios are only run for the main interest-bearing liabilities. alternative financing and hedging. The Company also contracts variable to fixed interest rate swaps to hedge against the risk of fair value interest rates arising in contracting loans at variable rates. that consider refinancing. In these interest-rate swaps. the Company manages the interest rate risks of cash flows through the use of interest rate swaps from variable to fixed. A number of different scenarios are simulated. renewal of existing positions. and subsidiaries Notes to the Consolidated Financial Statements At December 31. the Company agrees with other parties to deliver or receive. which are exchanged for fixed-rate loans to mitigate the effects of volatility that affect their financial cost. The financial effect of these interest rate swaps is of converting variable-rate loans to fixed-rate loans. the Company entered into forward purchase contracts for aluminum. the Company calculates the impact of a change in defined interest rates on profits or losses. at specific intervals (quarterly for the most part). F-29 . For each of the simulations. Based on those scenarios. 2011 and 2010 and for the three years then ended The Company analyzes its exposure to interest rates on an ongoing basis.Controladora Mabe. copper and natural gas with monthly expirations for the period from December 2010 to December 2011.162 reflected in variable production costs for 2011. Future (commodities) Due to the variations in the aluminum. the same change in interest rates is used for all currencies. the existing difference between the interest amount of contractual fixed rates and the interest amount of variable rates calculated on the basis of the theoretical agreed-upon amounts. V. A. de C. Based on the different scenarios. S.540 10.026 $ 772.601 633.699 41.981 19.873 $477.407) 387.885 41.899 34.650 2010 $ 288.000 2010 $809. and subsidiaries Notes to the Consolidated Financial Statements At December 31.953 12.75% F-30 .245 $ 145.677 69.688 7.363.35% 7.393 1.057) 660.Inventories: $795. 2011.14% 9.722 2.822 $407.Controladora Mabe.A. machinery and equipment: At December 31. which owns 51.412 $ 138.V.914.560.370 2.000 2009 $ 810. S.166 1. The Company is controlled by a group of Mexican shareholders.430 128. S.137 9.350 Construction in process Land $ 40. V. 2011 Buildings and facilities Machinery and equipment Computer equipment Transportation equipment Office furniture and equipment Accumulated depreciation $ 288.966 42.959 10. the Company conducted the following operations with related parties (principally with GE): 2011 Sales income Expenses: Purchases Royalties paid Freight Technical assistance Note 7 .431 3.910.65% 26.Property. During the years ended December 31. is the owner.621 1.886 29.171 3. of the companies listed in such note.78% 23.Transactions with related parties: As mentioned in Note 4.250.821 (22. de C.000 At December 31. Controladora Mabe. 2011 and 2010 and for the three years then ended Note 6 .59% of the shares of Controladora Mabe.636 1. de C.042) 551.080 19. 2011 2010 $246.315 12.555.805 15.188 Finished products Production in process Raw materials Allowance for obsolete inventory Merchandise in transit Note 8 . 2010 and 2009.392 (1.V.416 134. de C.406 28.734 (1. either directly or indirectly.877 $170.544 2.A.936 3.822) 464.566 (21.669 Annual average depreciation rate 4. A.803 $328. 000 preferred shares of Consolidada de Ferrys. S.151 1.681 12. Mabe Venezuela. A. entered into an agreement with Naviera TMLV Trading Corp. Inc. Mc Lean.616 2.464 35. respectively. Mabe Ecuador. Mabe Colombia.. a Venezuelan subsidiary of Controladora Mabe.143 189.581 22.150. C. S. Following is an analysis of the principal amounts. The acquisition of these preferred shares was by means of subscription and payment of a capital increase of CONFERRY through an issuance of preferred shares. The Company is entitled to receive a fixed annual return of 8% of the nominal value and has the option to sell the preferred shares between December 17.688 6.A.151 1. and subsidiaries $ 1. Note 10 . Canada Mabe Canada.581 22. de R.507 4. A. L. Mabe Mercosur Participações. A.675 and $104. (“CONFERRY”) corresponding to 17. 2012.. V. A. Costa Rica Atlas Eléctrica. 2008. de C. Mabe Venezuela.Goodwill: Goodwill arises from a number of acquisitions conducted by the Company from incorporation. and subsidiaries Notes to the Consolidated Financial Statements At December 31. de C. 2010 and 2009 income statements totaled $112.V.A.399 $ 2010 1. S. 2011 and 2010 and for the three years then ended Depreciation recorded in the 2011.681 12. S. which is recognized in fixed production costs. A. S.399 F-31 .A.Controladora Mabe. C. Andean Region Mabe Venezuela.688 6. Ltda. 2009 and September 30. A.968 16. Note 9 .500. C. 2012.Investments in securities: On December 17.333 $250. net of accumulated amortization: At December 31.333 $250.616 2.883 4. S.507 4.800 4. with a nominal amount of 21. V.883 4. A.2% of CONFERRY’s capital stock. de C.200. Mercosur Mabe Brasil Electrodomésticos.800 4. C.143 189.464 35. S. Ltda.968 16. $102. A. S.852.000 Bolivares fuertes. TMLV has an option to purchase the preferred shares at any time within 10 working days’ notice following September 30. 2011 México Mabesa. (“TMLV”) for the acquisition of 2. 488) (30. S.433) (340.013) (24.031) (49.338) $371.Other assets: At December 31. 2010 $ 271. 2011 and 2010.248) Total $471.133 555.248) (119.248 (119.598) (40. 2011 Accumulated amortization: Balances as of January 1.488) $ 154.890 (1) $ Development costs $ 119. F-32 .536) $ 254.878) (48. de C. in escrow accounts in respect of litigations in Brazil.263 84. 2011 Net as of December 31.050 (1) $ Development costs $ 119.248 119. 2010 Amortization for the period Balances as of December 31.100 and $47. A.475) (172.295) $ 60.094 55. 2010 Net as of December 31.794 (172.963 (148.869 326.646 (340.419 184.248) Total $555.604 (48. 2010 Additions arising from internal developments Balances as of December 31.185 75.248 119.365 (1) At December 31.921 28.308 At December 31.475 Other $ 80.048) (202.000 respectively.963 129.307) (389.Controladora Mabe.248 (119. 2010 Unamortized expenses Balances as of January 1.258 Other $109.264 109.168) (80) (119.831 456.185 (32.396 205.295) (19.259) (67. V.417) (15. the Company had deposited $53. 2011 $ 326. 2011 and 2010 and for the three years then ended Note 11 .031) $215.554) $ 117.250 760. 2011 Additions arising from internal developments Balances as of December 31.396 (299. 2011 Unamortized expenses Balance as of Janaury 1. 2010 Accumulated amortization: Balances as of January 1. 2011 Amortization for the period Balances as of December 31. and subsidiaries Notes to the Consolidated Financial Statements At December 31. 571 2010 Maturity Syndicated loan (3) Bond issuance (1) Other loans (4) 2010-2011 2015-2019 US dollars $ 63. long-term debt was comprised as follows: Maturity Bond issuance (1) Other loans (2) 2015-2019 2014 2011 US dollars $ 550. S.000 185.Controladora Mabe.470 (1) At December 31.857 200.714 42. 2019. 2011 and 2010 and for the three years then ended Note 12 . (2) On June 23. A.000 150.50% maturing on November 17. Interest payable semiannually starting on June 15.636 550. 2011 and 2010. 2015.707 Less .071 798. and subsidiaries Notes to the Consolidated Financial Statements At December 31.current portion 195. payable quarterly and maturing on June 16.Short and long-term debt: At December 31. F-33 .429 $ 678. 2011 were as follows: 2013 2014 2015 2019 $ 85.875% maturing on October 28.000 350. V.571 Long-term debt maturities at December 31. the bonds issued by the Company were comprised as follows: $350 million of guaranteed senior notes at a fixed rate of 7. the Company obtained from Deutsche Bank AG a loan denominated in US dollars bearing interest at the LIBOR rate. de C.current portion 21.237 $603. 2006. 2014.000 Less .000 700. Interest payable semiannually starting on April 28.000 $ 678. 2010. 2011. $200 million of guaranteed senior notes at a fixed rate of 6. plus a 2% margin. L. 2011 and 2010. b. and MC Commercial Inc. S.227.165 and $296.20% and 5. the most important of which consist of a level of liquidity. de C. the most significant of which were: a. to obtain credit lines for supporting finished product purchases by clients and payments of accounts payable to suppliers. asset acquisitions from third parties. Leiser. S. the Company has guaranteed payment to the lenders in the event that the borrowers are unable to cover their repayment obligations. the Company was in compliance with the covenants under the credit agreements. obligations and covenants. S. b. (4) At December 31.L. applicable to monthly balances. other loans bear interest at market rates of between 3. At December 31. or incur debt that could have a material effect on the borrower’s assets. de C. S. F-34 .335 and $286. plus a margin. the loans contain very similar restrictions. the outstanding balances under these agreements amounted to $392. A. The value of benefit obligations at December 31. de C. To comply with certain financial ratios.A. de R. The loan is guaranteed on a joint and several basis by Controladora Mabe.V.A. The syndicated loan bears interest at the annual three-month LIBOR rate.25% and 6.. To restrict the entering into of material agreements or contracts over certain fixed assets. The fixed interest rate under each of these agreements is LIBOR plus a margin. V.V. respectively. varying according to the economic situation at the date of such loans and the economic variables prevailing in the country in which the loan was entered into.20%. respectively. de C. clients and financial institutions. 2011 and 2010 and for the three years then ended The borrower under this agreement is Mabe. de R. Note 14 . as well as to maintain insurance coverage over such assets. Note 13 . At December 31. and subsidiaries Notes to the Consolidated Financial Statements At December 31. 2011 and 2010 is $281. leveraging and interest hedging.L.Controladora Mabe. S. MCM Americas. de C. Reconciliation of Defined Benefit Obligations (“OBD”). the Company and some of its subsidiaries renegotiated a syndicated loan agreement for $350 million (originally entered into on November 2004).V.V.Employee benefits: a. Mabe México. In general. (3) During 2006. c. To not conduct mergers. S.. 2011 and 2010. with the debt maturing on 2011. According to the terms of these agreements. without the creditor’s consent.999.Factoring: Subsidiaries of the Company have entered into factoring agreements with various suppliers.. Plan Assets (“AP”) and the Net Projected Asset/Liability (“A/PNP”). de R. 2011 and 2010.V. de C.25% and 6. respectively. 00% 4.846) $ 11. Net Cost for the Period (“CNP”).036 2010 $ 7. as well as discount rates.623 $ 64.50% 4. V.Controladora Mabe. are as follows: 2011 Interest rates Discount rate Rate of salary increases Minimum wage increase rate Inflation rate 8.930 2010 $ 304. salary increases and changes in indexes and other variables. Main actuarial hypothesis.04% 4.70% 4. The main actuarial hypotheses used. Labor liabilities: OBD AP Financing position Less unamortized items: Actuarial losses Transition asset Past service cost PNP c.Net Labor cost of past service Effect of any reduction or early settlement / other than a restructuring or discontinuation of an operation Total d. 2011 and 2010.035 (63.480 $ 14. de C. 2011 and 2010 and for the three years then ended The following is a reconciliation of the present value of the OBD against the fair value of AP and the A/PNP recognized in the balance sheet: At December 31.143) 106.657) (71) 14. stated in absolute terms. and subsidiaries Notes to the Consolidated Financial Statements At December 31.507 (185.560) 105 873 126 (2. at December 31.526) 93 773 85 4.00% $ 6.710 2011 $ 299.970 14. A. At December 31.019 (197.220 $ 90.876 (38.20% 9. AP yields. 2011 Labor cost of current service Financial cost Expected return of AP Initial transition liability Actuarial loss (gain) .443 18.569 (12.00% 2010 9.00% 4.20% 5.472) 114.188 The following is an analysis of the CNP per type of plan: F-35 .70% 8.161 (12.723) (185) 22. S. Dividends exceeding the CUFIN and Reinvested CUFIN (“CUFINRE”) are subject to 42. “A-1” and “Lp” represent 51% of the capital stock and acquisition thereof is restricted to Mexican nationals only. Variable capital is unlimited. whose consolidated balance at December 31.048 199. Dividends paid are free of income tax if paid out from the Net Tax Profit Account (“CUFIN”). respectively. in accordance with the procedures established in the Income Tax Law. against flat tax for the period.86% tax if paid in 2011. The profit for the year is subject to the legal provision requiring at least 5% of the profit for each period to be set aside to increase the legal reserve until it reaches 20% of paid-in capital stock. A.000. 2011 was comprised as follows: Shares 100 Description Series “A” Represents fixed capital stock without withdrawal rights Series “A-1”: represents variable capital stock with withdrawal rights Series “B-1”: represents variable capital stock with withdrawal rights Series “Lp”: represents variable capital stock with withdrawal rights Total 213.000 The capital stock is comprised of nominal common shares. de C. S.370.Stockholders’ equity: The capital stock at December 31. Series “B1” represents 49% of the capital stock and subscription thereof is unrestricted. V.077 and $714. Tax incurred is payable by the Company and may be credited against income tax for the period and for the following two periods or. In the event of a capital reduction.Controladora Mabe. and subsidiaries Notes to the Consolidated Financial Statements At December 31.764.000 429. 2011. with no par value. 2011 and 2010 and for the three years then ended Note 15 .135.852 16. Dividends paid out from previously taxed earnings are subject to no tax withholding or additional tax. F-36 . 2010 and 2009 totalled $690. $758.858. Series “A”. if applicable. the excess of stockholders’ equity over capital contributions is accorded the same tax treatment as dividends.979. 834 (31. 2011. due to recognition of the effects of inflation for tax purposes. respectively). A.996) 11.138 and $150.708 644 2009 $ 4. and therefore deferred income tax was recorded.161. adding to and removing provisions of the 2011 Income Tax Law.790 (tax loss of $161. and subsidiaries Notes to the Consolidated Financial Statements At December 31. as well as due to items only affecting either book or tax results. described above. the Company determined a tax loss of approximately $69.971 (96.717) ($ 2.851) (67. For recording and presentation of the income tax expense or benefit in the consolidated income statement. 2011 and 2010 and for the three years then ended Note 16 . 2010 and 2009 was comprised as follows: December 31.330) At December 31. The provision for income tax in 2011 and 2010 is analyzed as follows: 2011 Income tax currently payable Deferred income tax Total $ 12. On December 7. ii.801) (2.279) 6. it was determined that the tax to be paid by the Company in the future will be income tax. Income tax ($ 73.355) The Company is authorized to determine its tax result for income tax on a consolidated basis along with that of its Mexican subsidiaries. 2011 (Loss) income from controlling interest for the year Cumulative translation effect of foreign entities Valuation of derivative financial instruments. S. iv.300) (1.Controladora Mabe.183) ($ 138.Comprehensive (loss) income: The comprehensive (loss) income for the years ended on December 31. de C.877 F-37 . On the basis of financial and tax projections.869) $ 2010 $ 16. 2009. iii. V. the Company considers its consolidated tax result. net of taxes Non-controlling interest Consolidated effect of deferred income tax (Note 17) Comprehensive (loss) income for the year Note 17 . Book and tax results differ mainly due to items that accumulate over time and are deductly differently for book and tax purposes. plus the tax effects of its foreign subsidiaries and recognizes the corresponding tax. i.149 (64. 29% for 2013 and 28% starting on 2014.486 (5.043) (8.609) $22. 2010 $ 11.064) 2009 $28.387 (14. In 2011. that the income tax rate applicable from 2010 to 2012 is 30%. among other things.Income Tax and Flat Tax: a.377 (2. in accordance with the provisions of the Mexican Income Tax Law (see point c.213) ($53. which establishes.047) ($167. the government published a decree amending. in 2010 and 2009.800) (37.170) (24. below). 639 2011 $ 68.618) 7. 2011 (Loss) income before the following provisions Income tax rate used Income tax at the legal rate Plus (less) effect on income tax of the following permanent items: Nondeductible expenses Annual adjustment for inflation Derivative financial instruments Effect of consolidation Tax loss carry forwards Change in tax rates of other countries against legal rate in Mexico Other permanent items Income tax recognized in income Effective income tax rate 18.583) $ ($ 110.876(1) $ 101. The principal temporary differences at December 2011 and 2010.693) (78.330) (2%) 5.932) 30% (29.368 (8.773 9.641 ($ 3.206 7. Assets: Accumulated liabilities Tax loss carry-forwards Deferred income tax asset Liabilities: Inventories Property.534 ($53.082 $ 118.518) (216) 31.084 ($ 2.038 5. 2011 and 2010 and for the three years then ended v. de C.547) (28.905) 7.444 4. machinery and equipment Other assets Deferred income tax liability Deferred income tax asset .486) 2010 ($ 97.622) 30% (42.180) 39.231) (72.333 vi.279) 7.639 ($ 2.641 $ $ 544 7. and subsidiaries Notes to the Consolidated Financial Statements At December 31. V.374) (5. S. are as follows: At December 31.877 120% ($141.095 7.454) 4.917 (3.858) $ F-38 .410) (44. The reconciliation between the rate incurred and the effective income tax rate is as follows: For the year ended December 31.Net $ $ 14.380) 2009 $ 19.048 28% 5.497 ($ 93.415 59. A.546 (6.535 498 (19.064) (54%) 698 8. for which deferred flat tax was recorded.894) (46.355 7.348 32.539 $ 22.Net Deferred income taxes: Mexican companies Foreign companies Deferred income tax asset .224 $ 2010 59.Controladora Mabe. At December 31.221. 2011 2010 2009 Argentina Brazil Canada Chile Colombia Costa Rica Ecuador El Salvador Guatemala Honduras Panama Perú Venezuela 35% 34% 34% 17% 33% 30% 25% 25% 31% 25% 30% 30% 34% 35% 34% 34% 17% 33% 30% 25% 25% 31% 25% 30% 30% 34% 35% 34% 34% 17% 33% 30% 25% 25% 31% 25% 30% 30% 34% Year of expiration 2015 2016 2029 2032 Restated amount $ 8. Central American and Canadian countries in which the Company’s subsidiaries operate are as follows: For the years ended December 31. 2011 amounted to $119.108 555 24.491 12.869 4. V. de C. A. the Company had accrued tax losses with the right to be amortized against future income which expire as follows: Mexico Year of loss 2005 2006 2007 2008 2009 2010 2011 Canada Year of loss 2005 2006 2008 2011 Restated amount $ 4.605 $332.Controladora Mabe.708 16.557 viii. determined according to the effective tax consolidation regime which at December 31.025 $ 33.054 Year of expiration 2015 2016 2017 2018 2019 2020 2021 F-39 .345 109.921 74.750 17. The income tax rates of South American.234 92. and subsidiaries Notes to the Consolidated Financial Statements At December 31. vii. S. 2011. 2011 and 2010 and for the three years then ended (1) The amount considered as cumulative tax loss carry-forwards corresponds to the amount to be amortized in the future. Such profit is determined by subtracting authorized deductions from total income arising from taxable operations.509. 2011 and 2010 and for the three years then ended Argentine companies are subject to Asset Tax (“AT”). payable only on the amount by which AT exceeds income tax for the year. Labor laws in Colombia. as well as to items only affecting either book or tax results. Consolidated book and tax results differ mainly due to items taxed or deducted over time. 29% for 2013 and 28% starting on 2014. due to recognition of the effects of inflation for tax purposes. V. c. b. respectively) on the profit determined on a cash flow basis. A. the Company determined a consolidated tax loss of approximately $27. Flat tax i. less certain liabilities. S. even though they can be credited against the flat tax base. has the authorization. Flat tax for 2011 was calculated at the rate of 17. Venezuela and Central America do not assess any type of AT. The possibility of using credits arising from an excess of deductions on income taxable for flat tax purposes (flat tax loss credit) to decrease income tax payable is eliminated. The aforementioned tax consolidation benefits stem from: Tax losses used in tax consolidation that were not authorized on an individual basis by the controlled company that generated them.V. S. F-40 . amending. and subsidiaries Notes to the Consolidated Financial Statements At December 31. Ecuador. and a consolidated tax profit of $67.Controladora Mabe. in accordance with the provisions of the Mexican Income Tax Law. adding to and repealing a number of provisions of the Mexican Income Tax Law for 2011. iii. In 2011. Argentina and Central America do not impose an obligation to pay employees’ profit sharing. 2009. Under current tax legislation. respectively. Tax laws in Colombia. the most significant of which are as follows: i. The income tax rate for the years from 2011 to 2012 will be 30%. to determine its income tax under the tax consolidation regime. ii. On December 7. 1988. Venezuela.5% (17% for 2010 and 2009. the Company must pay the higher of annual income tax and annual flat tax. 2010 and 2009. de C. a consolidated tax profit of approximately $145. as established by current legislation.019. ii. differently for book and tax purposes. de C. on the net average of most assets (at restated values). Such payment is recoverable on a restated basis. together with its direct and indirect subsidiaries in Mexico. against the amount by which income tax exceeds AT in the four subsequent periods.354. The tax consolidation regime was modified to require that flat tax related to the tax consolidation benefits obtained as of 1999 be paid in installments during the period from the sixth to the tenth year following the year in which such benefits were made use of. a decree was published by the Mexican government. Income tax under the tax consolidation regime Controladora Mabe. at the rate of 1%. The flat tax credits are subtracted from the previous taxable income. Peru. granted by the Ministry of Finance on August 22. A. derived from consolidated tax losses on December.810 $7.252) Income tax liability $53. respectively. The existing differences between the consolidated CUFIN and CUFINRE balances and the balances of these same accounts pertaining to the Company’s consolidated subsidiaries can give rise to taxable income. 2011 and 2010.975. Set forth below is a reconciliation of tax-consolidation-related income tax balances: Liability arising from net income tax $29. 2009. were not recognized as an income tax liability due to the fact that the likelihood of payment of the corresponding tax is considered remote. that liability amounted to $44. to be settled in installments as follows: Year of payment 2012 Tax consolidated income Tax. V.775.252) $44. published on December 15.975 (9. 2011 2013 2014 2015 2016 and subsequent years Total $10. 2009. 2011 Movements: Income tax paid during the year Final balance at December 31. at December 31. A. and subsidiaries Notes to the Consolidated Financial Statements At December 31. The dividends paid by the controlled subsidiaries to the Company out of the CUFIN balance. As per Interpretation to MFRS 18 “Recognition of the effects of the 2010 tax amendments on income taxes”. 2011 ($24. and that generated benefits. 2011 and 2010 and for the three years then ended Special consolidation items arising from operations conducted between the consolidating entities. Losses from the sale of shares not yet deducted individually by the controlled company that generated those losses. de C.775 F-41 .251 $10.200) ($24.183 income tax liabilitiy. S.775 and $53. Dividends distributed by the consolidating controlled companies not paid out from the after tax CUFIN or CUFINRE account.200) $20.023 $ 8. the Company took advantage of tax consolidation benefits stemming from 2010 and prior years.723 (9. At December 31. 2010. that initial effect was recorded in retained earnings at that date. - - On the basis of the foregoing.Controladora Mabe.090 $8.775 At December 31.601 $ 44.523 Income tax asset Initial balance at January 1. between 1982 and 1988 of $80. the Company recognized a $37. 305) (18. the depreciation and exchange fluctuation recognized are historical depreciation and the exchange fluctuation when mandatory and due to timing differences whereby certain items are either included in the tax base or deducted for accounting or ESPS purposes. which is calculated by applying the procedures established in the Mexican Income Tax Law. In 2011.062 (461) (66.498) (28. 67. 2011 Interest income Loss on monetary position Interest expense on bonds and loans Factoring discounts Bank fees and early payment discounts Net foreign exchange loss Total $ 20.354) Note 19 .928 in 2010 and $4.817) ($ 125.691 $20. was recorded as part of other expenses for the period.124) (25.Other expenses: Other expenses were comprised as follows: For the year ended December 31.928 1.693) (33.695 $5.973 (897) $ 71.600 in 2009).723 2009 $4. whereas for ESPS purposes.973 ($5.660 $ 4. machinery and equipment Other expenses Total other expenses Restructuring expenses As a result of the re-organization in Brazil mentioned in Note 2. 2011 and 2010 and for the three years then ended Note 18 . which is the most significant item of the restructuring.605 F-42 . ESPS The Company is subject to payment of ESPS.Controladora Mabe.099) ($ 118.584) 2010 $ 15.531) (46. A.600 4.Comprehensive financing cost: Comprehensive financing cost was comprised as follows: For the year ended December 31.054) $ 2009 8. 2011 Restructuring expenses Employee’s Statutory Profit Sharing (ESPS) (Loss) gain on sale of property.196) (19. the Company determined a ESPS currently payable of $4.736 2010 58. severance pay.329) (60.100 $65. V. de C.226) (10.607) (37.780 (1.582 (699) (59. and subsidiaries Notes to the Consolidated Financial Statements At December 31. updated depreciation and accrued foreign exchange fluctuation are recognized. S.118) ($ 127.713) (7. The ESPS base differs from the book value due mainly to the fact that for accounting purposes. as well as to items only affecting book or ESPS results for the year.314 11. The lease agreements in question are for mandatory terms of five or more years and establish the minimum payments shown as follows: Years 2012 2013 2014 2015 onward Amount $ 27. or on the consolidated cash flows.Controladora Mabe. and subsidiaries Notes to the Consolidated Financial Statements At December 31. Although there is no certainty as to the final outcome of such matters. 2011 the Company had reflected a provision of $50. arising from the normal course of operations.700 ($47. determined by the Company’s Management and based on the opinion of its legal advisors. S. A. on the consolidated results of operations. 2011 and 2010 and for the three years then ended On December 31.852 The Company and its subsidiaries are party to a number of labor and adminsitrative lawsuits filed against them and to a number of tax claims. including buildings and machinery. the Company determined a deferred ESPS asset balance. de C. and regarding which probable losses are recognized or can be reasonably estimated. the Company considers that any resulting liability would have no material effect on the consolidated financial position. Provisions for losses are recognized by the Company in its financial statements in connection with such procedures.711 75. At December 31. which was provided for in full. reflecting potential losses considered as probable.604 23.Commitments and contingencies: The Company leases certain property. Note 20 .506 20.000 in 2010) to cover these probable losses. F-43 . V.031 $146. 2011 and 2010. The Company classifies the risk of an adverse ruling in such lawsuits as “remote”. “possible” or “probable”. 642 956.234 $ 808.015 $ 61.401 $ 1.754 $258.660.154 654 Total $3.557 December 31.077.583 $ 2.Financial information by segment: The Company manages and assesses its operations through four operating segments. South America.462.069 $ 10.952 $ 165.476 $ 211.733 F-44 .280 $560.193 87.555 $ 94.185 $ 5.390.326 $ 824 Total $3.159 $ 101. which are Mexico.645 $ $ $ 9.008 $ 110.129 1.289 $ 53.608 $ 2.470 $ 407.Net Total assets Total liabilities $ 1.879 35.293 ($ 12.265.159.181 South America $ 1.314 ($ $ $ 8.127.423 Central America $190.468 $ 1. 2011 and 2010 and for the three years then ended Note 21 .913 $ 1.551. A. The following is condensed financial information on the operating segments: December 31.208.745 South America $ 1.032 $ 2.199 $ $ $ 62.014.710 $ 34.391 $ $ $ $ 104.060.550 $295.204) 46. 2009 México Net sales Operating income Depreciation and amortization Interest expense .007 $ $ 133.638 $ $ 4.196 Central America $ 215.445.717 47.472.622 38.534 $ 25.786 $2.843 $ 402. and subsidiaries Notes to the Consolidated Financial Statements At December 31.925 Total $ 3.577 $ 725.589 $ 2.800 55.076 $ 699.514 Central America $ 208.316. 2011 Mexico Net sales Operating income Depreciation and amortization Interest expense . de C.012. V.382 $ $ 48. S.Net Total assets Total liabilities $ 1.564 $ 111.758 756.483 82.357 $ 12.773 $ 1.241.049 $ 1.698 162.889 Canada $542.653 $ $ 3.108 $ 97.827 9.411 $ 160.086 Canada $ 510.521 $ $ $ 70.932 $ 4. Canada and Central America.140.814 December 31.929 612.086 Canada $ 532.Controladora Mabe.215 28.571) $ 11.098 $148.067.442 36.868 ($ $ $ $ $ 10.Net Total assets Total liabilities $ 1.785 South America $ 1.366 $ 179.053 $ 373.104 $2.099 $ 1.062 $2.561 58. 2010 México Net sales Operating income Depreciation and amortization Interest expense .805.258 $ 970.211) 9.385 $ 5.200 94.845 $ 143. Bulletin C-11.New accounting pronouncements: In December 2011. Mabe Canada Inc. MFRS B-4.Controladora Mabe. plant and equipment” related to the determination of the property. and subsidiaries Notes to the Consolidated Financial Statements At December 31. announced the decision to proceed with the gradual closing of the dryer manufacturing factory in Montreal. “Earnings per share”. MFRS B-3. MFRS B-3 and MFRS B-4 will become effective at January 1. requires that entities must calculate and disclose diluted earnings per share regardless of whether they reflect a continuing operating loss. “Cash and cash equivalents” establishes that short term assets should include cash and cash equivalents. the productive assets will be transferred to a Mexican plant to cover the production of dryers. de C. MFRS B-3. MFRS C-1. Bulletin B-14. along with the provision of MFRS C-6. A. Improvements 2012 include: MFRS A-7. plant and equipment” establishes that it is mandatory to determine the components representative of property.Subsequent event: At the beginning of 2012. “Stockholders’ equity” and MFRS Interpretation 3. “Initial application of MFRS” provide that donations should be recognized in the income statement as income and not as part of the contributed equity in order to be consistent with the changes previously made in other MFRS. Aproximately 700 workers will receive severance payment as production winds down gradually toward a scheduled close by the end of 2014. removes the concept of non-ordinary items and establishes the requirements that other income and expenses should be considered as such. 2013 and Improvements 2012. S. 2012. Bulletin C-15. the Mexican Financial Reporting Standards Board (Consejo Mexicano para la Investigación y Desarrollo de Normas de Información Financiera) issued Improvements to MFRS 2012 (“Improvements 2012”). 2011 and 2010 and for the three years then ended Note 22 . requires that entities disclose additional details with respect to the nature and the amounts in the balance sheet at year end of the estimates and assumptions that have a significant risk or caused a material adjustment in the financial statements. “Presentation and disclosure”. Note 23 . “Property. “Statement of changes in stockholders’ equity” establishes the standards for the presentation of the Statement of changes in stockholders’ equity as well as the required disclosures in the event that movements take place within stockholders’ equity. V. F-45 . unless their usage is restricted to within the following twelve months or after its normal business cycle at the balance sheet date. 2012. During this period. “Comprehensive income statement” establishes the entity’s choice of presenting comprehensive income either in one or two statements. “Comprehensive income statement” and MFRS B-4. “Statement of changes in stockholders’ equity”. In addition. “Property. “Impairment in the long-lived assets value and their disposal” specifies different concepts of long-lived assets intended to be sold and also provides that impairment losses in goodwill should not be reversed and establishes the guidelines for the presentation of impairment losses or reversal within the income statement. plant and equipment components became effective at January 1. plant and equipment in order to depreciate these components in accordance with their useful lives at January 1. MFRS B-3 specifies that other comprehensive income should be presented after net profit or loss. MFRS C-6. de C. b. and condensed combining income statements and statements of cash flows for each of the three years in the period ended December 31. which are also separately reflected in the stand-alone Non-Guarantor Subsidiaries column. S. “Employees’ benefits” establishes that the expense for employees’ statutory profit sharing should be recognized in the same items as costs and expenses in which the entity recognizes the remaining employees’ benefits.Controladora Mabe. S. Additionally. which are also separately reflected in the stand-alone Gurarantor Subsidiaries and Non-Guarantor Subsidiaries columns.V. c. 2011. Controladora Mabe.A. 2011 and 2010 and for the three years then ended MFRS D-3. the Parent column reflects the equity income (loss) of its Guarantor Subsidiaries and Non-Guarantor Subsidiaries. A. the Guarantor Subsidiaries column reflects the equity income (loss) of its Non-Guarantor Subsidiaries. Combining balance sheets as of December 31. Elimination entries necessary to consolidate the Parent and all of its subsidiaries. Note 24 . 2011 and 2010. and subsidiaries Notes to the Consolidated Financial Statements At December 31. combined Guarantor Subsidiaries and combined NonGuarantor Susidiaries with their investments in subsidiaries accounted for using the equity method of accounting and.Subsidiary guarantor information: The following supplemental condensed combining statements present: a. These MFRS are not expected to substantially impact the financial information presented by the Company. V. therefore. de C. (“Parent”). F-46 . 073.575 5 35.654 (227.005 (740.124 678.261) $ 21.429 2.308 2.397.932 642.294 269.774 265.121 (1.485 98.007) (3.871 91.635 20.635 20.802) 402.802 1.Controladora Mabe.983) Consolidated $ 79.328) (73.497 330.104 F-47 .429 10.794 850.966 (30.070 1.555 275.916 37.398) 17. 2011 Thousands of US dollars Assets Current assets: Cash and cash equivalents Accounts receivable: Clients .448 47.901) ($1.279 (47.330.713.735 641 380.104 $ 310.679 (665.135 1.475) (31.995 550. de C.121) 1. S.190 602.067.647 Eliminations ($ 3.784.392) (666.007) (1.947.416 166.421 1.469 440.717 - ($ 3.872 304.285 15.619 Eliminations $ (298.195.592 52. V.520) 552.533 4.930 49.007) (3.295 $ 2.653 2.601 63.384) (629.390.571 2.231 7.432.295 $ 1.932 175.085.019 402.195.388) (7.019 - $ 53 773.121) (550.413 128.803 25.685 32.708 4.399 371.266 253.717) (1.441 128.384) 322.802) 402.156 46.794 674.917 48.140 116.378 85.690 (275.327 197.299 305.934) 18.732 275.475) (32.583 64.983 ($ 53) (371.966 (30.865) 4.517 550.320.477 189.717) ($ 4.468 $2.392 666.658 ($1.786 2.517.927 2.834 $ 4.102 1.169 107.543 1.975 17.173. and subsidiaries Supplemental Condensed Combining Balance Sheet As of December 31.575 41.475) (32.917 48.966 (30.163.457) 402.821) (637.716 (879.517 $1.134) 20.916 37.983) $4.085.429 412.020 (79.799 379.636 -_____ 44.675 402.228 633.983 183.019.440 51.401 678.917 48.219 75.646) (1.094) (24.000 250.654) 229.140) (73.195.320.724) Parent company and combined guarantors $ 25.916 37.543) (1.333 17.330.107. machinery and equipment .830 5.113 23.019 $1.717 1.601 57.Net Derivative financial instruments Total assets Liabilities and Stockholders’ Equity Short-term liabilities: Current portion of long-term debt Notes and account payable to suppliers Factoring Other accounts payable and accrued expenses Taxes payable Derivative financial instruments Total short-term liabilities Long-term liabilities: Long-term debt Deferred income tax Employee benefits Warranties and other long-term liabilities Derivative financial instruments Total liabilities Stockholders’ equity: Capital stock Inflation adjustment to capital stock Additional paid-in capital Retained earnings Consolidated effect of deferred income tax Cumulative translation effects of foreign entities Valuation of derivative financial instruments Controlling interest Non-controlling interest Total stockholders’ equity Commintments and contingencies Subsequent event Total liabilities and stockholder´s equity Parent company $ 68 229.820 1.195.280.330.713.469) (440.009) (280.724) $ 21.344) (1.543 $ 21.816 1.506 6 3.571 (17.619 67.013 1.716) 879.997 $ 1.806 52.618 392.571 93.650 101.390.506 6 612.085.181) 2.717) ($4.543 Combined guarantors $ 25.416 (9.962) (691.Net Prepaid expenses Total current assets Property.516) (79.947.077) 9.224 10.630 71.013 626. A.085.361.007) (3.107.667 128.468 Non-Guarantors $ 54.280.Net General Electric Company (Shareholder) Sundry receivables Tax receivables Inventories .019 402.537 2.295 $ 1.871) (91.007) (642.195.927 928.975 3.497 330.Net Deferred income tax Investments in securities Goodwill Other assets .563 34.763.497 330.816) (1.520 (552.131 34.084) (1.789 63.564 238.074) (438) 64.647 $1.165 311.021.440 51.502 254.085.468 47.088 254.320 1.927 1.451 31.417 2.294 37.219 407.104 (336) 550.000 (20.524 47.372 3.763.953. 842 $ 170.Net General Electric Co.916 37.000 117.287 56.238) 77.129 16.842 $ 75.426 420.335 57.349.764 1.983 313.770) (393.156 1.219 18.588.551.188 35.300) 455.449) 282.738 32.489 (759.459.Net Prepaid expenses Total current assets Property.511 603.459.470 110.132 772.626 1.610 (1.668 642.999 327.453 49.339 1.000 13.534 264.764) (1.543) 1.237.764) (2.505 Parent company ($ 92) 245.253.957) Parent company and combined guarantors $ 20.446 846.255 24.738 32.997 348.842 502.010 52.453 49.551.242 1.Net Deferred income tax Investments in securities Goodwill Other assets .397 53.027 $ 2. machinary and equipment .774 217. V.765 (676.237.041 3.754.475) (6.193) ($ 3.753) 50.957) $ 2.497 330.557 47.470 (7.532) (10.696.606 263.861 Eliminations ($ 2.288) (194.049) 1.824) $ 1.Net Derivative financial instruments Total assets Liabilities and Stockholders’ Equity Short-term liabilities: Current portion of long-term debt Notes and accounts payable to suppliers Factoring Other accounts payable and accrued expenses Taxes payable Derivative financial instruments Total short-term liabilities Long-term liabilities Long-term debt Deferred income tax Employee benefits Warrantiesand other long-term liabilities Derivative financial instruments Total liabilities Stockholders’ equity: Capital stock Inflation adjustment to capital stock Additional paid-in capital Retained earnings Consolidated effect of deferred income tax Cumulative translation effects of foreing entities Valuation of derivative financial instruments Controlling interest Non-controlling interest Total stockholders’ equity Commintments and contingencies Subsequent event Total liabilities and stockholders´equity $ 1.220.095) 118.770 393.213 2.589 2.351 1.182.184.459.337) 490.563 $ 4.594 1.365 $ 2.497 214.204 199.781 (116.669 118.047.013 170.694) 1.136 (30.946 850.394 502.180 3.689 128.206.920 9.222) (1.863.475) (5.149) 502.886 593.349.337) (688.497 330.300 (455.849 ($ 1.195 392.696.623 143.278 15. (Shareholder) Sundry receivables Tax receivables Inventories .530 2.663 356.815) Consolidated $ 112.831 569 45.003.399 215.055.386) (14.062 F-48 .935 35.707 217.883 37 49.518.567.716) (5.281.193 1.136 (30.781) 115.206.171. A.163 80.849 Eliminations $ (668.582 216.842 (12.237.007 1.593) $ 195.171.185 47.497 10.233 477.278 (33.921) (1.281 47.704 540.193) (1.590 464.518.197 378 3.239 79.523 1.835 550. de C.028 Non-Guarantors $ 91.123 $ 4.175.237.917 122.339) (99.266) (170.916 37.695 295.Controladora Mabe.335 44.188 12.283 163.851) 10.221 20.060.124 Combined guarantors $ 20.406) (676.459.546 374.408 654.917 122.968) ($ 1.497 330.448 646.928 143.000 250.595 $ 2.758) (249.237.975 1.739 $ 2.961 41.858 90.668.193 ($ 2.248 16.764) (2. S.243.861 ($ 3.210 (663.232. and subsidiaries Supplemental Condensed Combining Balance Sheet December 31.255 676.416 (1.815) $ 2.953 (33.278) (15.764) (2.249) (7.593 296.243.301 (371) 676.916 37.416 126.796 2.475) (5.136 (30.842 1.755 26.339 99.456 3.049 (1.224 550.148 4.197 378 1.193) $ 177. 2010 Thousands of US dollars Assets Current assets: Cash and cash equivalents Accounts receivable: Clients .764) (1.018.506 52.153 5.489) 759.087.598 197.764) (642.946 616.408) (654.459.071) (1.104) (224.062 $ 6.420) (96.864 10.917 122.422 356.863.000 5.213.237 362.351) (222.255) (12.149) 502.255 ($ 57.842 502. 625) 594 66.247 (99) 125.765) (821. S. V.426 $2. 2011 Thousands of US dollars Parent company Net sales: Domestic Export $ 8.715.855 3.016.364 162.678 Variable costs: Production costs Selling and administration expenses 3.737) (1.631.388 4.944) (117.371) 3.999) (614.608) $ 197.Net Comprehensive financing cost .675 (57.472 1.920 2.365 (3.713) (408.833 1.074) (140.382 2.947 249.800 (130.021 (387) 634 Operating income Other expenses .802 175.136 288.137 73.429.764 1.613) 13.252) (175. A.981) (1.543 (109.160 369.257) (51.502) (1.331 (127.756) 11.028) 19.212 531.Controladora Mabe.425.212) (140.775 2.834) $ 156. de C.548) 12.380.404 (3.863 2.676 237.719.080.875 38.067) 140.163 360.834 (19.Net (Loss) income before income tax benfit (expense) and participation in the results of joint venture Income tax benefit (expense) Participation in the results of joint venture Consolidated net loss Distribution of consolidated net income (loss): (Loss) income from controlling interest Loss from non-controlling interest Consolidated net loss for year (140.834 $ 19.427.678 8.047) ($ 140.321 77.217)) Combined guarantors Eliminations Parent company and combined guarantors Non-Guarantors Eliminations Consolidated $ 755.999 1.584) (141.834) ($ 140.823 175.028 (18.125 3.628) (9.217 ) F-49 .628 74.614.931 1.591 (49.668 3.980) ($ 140.679 3.993) (509) (509) (509) (19.170) (67.679 Contribution margin Fixed expenses: Production cost Selling and administration expenses 4.398 399.202 392.726.834 ($ 607.506 531.217) 19.257 (1.926) (19.749 34.257 934.852.834) $ (19.664 237.559.588 2.558. and subsidiaries Supplemental Condensed Combining Income Statements December 31.943) 21.167.666 48.189.217) $2.170) (43.660.698 71.778) (101.870 (191.075 396.217) - (130.052 249.451 284.194 2.736 (118.012) (3.834) (19.217) 4.217) ($ 140.026 (52.163.221 (1.608 (73.622) 2.083) 123.278 191.396 1.478) (510.427) $ 402.018 580.587) 10.217) ($140.330 (925) ( 140.753 770 (69.604 9.428.191) (104.006 322.136.926) (31. 254.084 ($ 16.662) ($ 46.090) (10.070 441.669 Contribution margin Fixed expenses: Production cost Selling and administration expenses 1.023 143.614 233.276) (4.988 4.218) (1.339) (633.486) $ 181.131) ($ 171.808.932) 53.822 2.433 1.530) Combined guarantors Eliminations Parent company and combined guarantors Non-Guarantors Eliminations Consolidated $ 751.178 94.663 45.865 1.232) (80.909) $ (46.576) $ 165.559) $ (46.315.530) $ (46.576) ($ (46.Controladora Mabe.377 $ 171.440 44.015 174.851) (16.364) 46.031 65.968 68.672 (106.439) 61.293) 76.084) 234.976 3.163) (1.555 316.548) 13.401) (53. de C.946 1.539 320.205 $ 2.221) (12.108 298.151.226 $ 53.425 243.307 (60.695 71.355.890 234.188 1.637 (53.629 3.539 19.451 (12.983) (74.844.573.256) 34. and subsidiaries Supplemental Condensed Combining Income Statements December 31.625) 179.530) 46.804 1.679. V.343. 2010 Thousands of US dollars Parent company Net sales: Domestic Export Variable costs: Production cost Selling and administration expenses $ 4.288) (107.530) (171. A.688 434.988 3.298 2.208. S.064 (1.050 (1.949) (349.622) (664.245.402 356.570 (53.569 (129.672.878) ($ 181.170 (70.012 (4.536) 8.104.890 432.926 962.095.530) F-50 .798 2.824) (283.146 15.576 ($ 591.401) (1.250.530) $ 1.723 (127.015 172.323.874) (740.401) (1.405 (50.439) (1.576) ($ 53.Net (Loss) income before income tax benefit (expense) and participation in the results of joint venture Income tax benefit (expense) Participation in the results of joint venture Consolidated net loss Distribution of consolidated net income (loss): (Loss) income from controlling interest Loss from non.205) $ 411.204 4.205) (9.063 35.421) (86.576 $ 53.745 2.555 2.255.524 254.576 (53.530) 1.648 241.319 (376) (376) Operating income Other expenses .782) 4.758 1.532 536.Net Comprehensive financing cost .530) 53.528 69.512 1.418 287.834 (63.054) (97.977 2.845 65.669 3.669.117) (120.557.840) (1.controlling interest Consolidated net loss for year (46.748.188 287.468 (57.610 69.576) $ (53. 011 410.105.195 277.829) Combined guarantors Eliminations Parent company and combined guarantors Non-Guarantors Eliminations Consolidated $ 1.160 2.312) 12.927 1.008) 62.746.829) (3.271) ($ 331. and subsidiaries Supplemental Condensed Combining Income Statement December 31.766 287.829) $ 56.952 2.829) $1.896 130.336.394 67. V. de C.572) 14. S.779.967 52 33.631) (1.019) (87.354) 19.431 87.277) (53.559 67.048 (22.433) 62.110.245 299.051 67.206 165.739 575.602) 8.999) (31.176 (7.734.829) ($ (56.655 ($ 3.653 1.051) (614.127.971 (8.166 22.108.218.640 180.947) (27.517) (3.606 286.829) ($ 3.963 (2.829) (84) 373 575 118 (12.954 30.320) (28.580) (1.668) $ 727.632) 59.636 4.223) $ (3.896 131.661) (73.Net (Loss) income before income tax benefit (expense) and participation in the results of joint venture Income tax benefit (expense) Participation in the results of join venture Consolidated net loss Distribution of consolidated net income (loss): (Loss) income from controlling interest Loss from non-controlling interest Consolidated net loss for year ( 3. A.275.668) $ (3.070 (2.071 (5.007 20.879 (1.642 2.194 Contribution margin Fixed expenses: Production cost Selling and administration expenses 442 526 526 Operating income Other expenses .446.451 2.971 1.882) (609.554) (85.109.003) (535.823 409.169) 59.250 $2.213 133.194 4.354) (1.177) (277.397) (2.126 2.266.393 (34.271 53.165 1.628.341.605 (125.627) 1.288 277.Controladora Mabe. 2009 Thousands of US dollars Parent company Net sales: Domestic Export Variable costs: Production costs Selling and administration expenses $ 4.845 1.059) (222.161.439 ($ 4.668 $ 53.271) (3.507 2.853 231.515.238 900.483 1.668 (53.658) (313.264 952.Net Comprehensive financing cost .784 198.877) ($ 3.439) $ 65.552.277) (1.688 3.275 (22.636 4.179 (99.829) F-51 .098 62.027) ($ 56.668) $ (53.668 ($ 496.790 $ 53.175.668) ($ 53.794 362.535 199.087) (66.396) 13.680 87.800) 3.277) (1.837) (1.203 329.123 180. 038 $ (78.189 $ (49.006 (29.915) 112.222) 14.741) (590.691 372 254.563) 170.482) 145.447) (143.155 625.334 20.790 (895) (9.099 131.368 137.Controladora Mabe.938) (439.548) 1. de C.266 (17.235 (23.697) 91.130 44.621 20.520 124.000 (248.885) 11.417 $ 90.082 (8.357 46.597 69.504 (7.855) 124.173 (257.367 (255) (101. and subsidiaries Supplemental Condensed Combining Statements of Cash Flows December 31.981) 95.823 (897) (93. machinery and equipment Disposal (acquisition) of others assets Net cash flows from (used in) used investmenting activities 8.330 102.611 (5.275 - 65.999 49.552) 150.796 25.582) 7.935 (895) 205.343 556.928) (28.289) 357.191 (54. 2011 Thousands of US dollars Parent company Operating activities (Loss) income before income tax and participation in the results of joint venture Items related to investing activities: Depreciation and amortization (Loss) gain on property.525 (20.591) (64. A.242 ($141.919 (51. other accounts payable and accrued expenses Income tax Employee benefits Net cash flows from (used in) operating activities Investing activities Acquisition of property.048) 7.709 115.044) (132.784) 163.000 (170.590 $ 79.774) (85.243 (625.070) 305.000 (170.338) (608.248 10.116) (65.652 103.078) 27.742) (10. V.159 (897) (20.979) Financing activities Loans obtained Loan payments Interest paid Net cash flows used in financing activities Adjustments to cash flow from variations in foreign exchange rates and in inflation levels Decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year $ (46.774 351.729) 83.260) 14.899) (86.021 (11.608) - ($ 31.574) (415.465) (62.655) 77.944) 74.086 (20.604 73.533 (37.163) (32.897) (117.591) (17.926) 77.930) 115.811 8.035 (2.909 ($ 175.802 (897) (82. machinery and equipment Interest income Net foreign exchance loss Items related to financing activities: Interest expense ($ 43.643 (Increase) decrease in: General Electric Company (Shareholder) Accounts receivable Inventories Prepaid expenses Notes and accounts payable to suppliers Other assets.648 Combined guarantors Eliminations Parent company and combined guarantors Non-Guarantors Eliminations Consolidated $ 11.704 116.042 (11.886 54.378 14.400) 161 (92) 69 $ 150.552 90.691 372 (324.479 81.452 8.875) (38.243) 90.622) 162.680) $ 66.820) 567.552) (90.675 F-52 .552 $ 150.212) 6.103 111.076) 1.014 (17. S.899) (46.829) 3.384 (13.552 90.726) (83.767 54.065 (160.071) (117.689) (6.221) (228.418) (95) 20.897) 535.811 27.593 65.083 149.566 58.316 94.365) (148.715) (90.581) 4.707) (130.911) 10.760) 371.552 (17.566 49.919 (492. 663) 17.452 (579.199) 3.884) (65.906) (336.807 ($ 97.599) (35.769 192.306) (173.863 (534.104 (5.468 230.118 113.236) (59.092) 16.449) 25.611 93.139) (126) 33.146 69.052) 60.115.673) (65.980 739.467 (69.229 (120.052 (78.235 113.272 (8.313 (669. 2010 Thousands of US dollars Parent company Operating activities (Loss) income before income tax and participation in the results of joint venture Items related to investing activities: Depreciation and amortization (Loss) gain on property machinery and equipment Interest income Net foreign exchance loss Items related to financing activities: Interest expese ($ 50.409 (107.573 ($ 86.512 173.313 (710.654) 174.025 (22.934 1. 144.267) (8.Controladora Mabe.121 (44.199 1.024) 65.678 8.524 1.525) (135.000) (49.243) 3. other accounts payable and accrued expenses Income tax Employee benefits Net cash flows from (used in) operating activities Investing activities Acquisition of property.841) 99.844) Combined guarantors Eliminations Parent company and combined guarantors Non-Guarantors Eliminations Consolidated $ 34.387 172.618 $ ( 73.000) (72.277) 15.492 98.875 447.720 8.357) (1.687 (575.974 93.960 20.144.545 $ 4.976 F-53 .482) (21.100 (15.540) (12.482) (21.406) 61.882 57.073) 981 $ (92) $ (22.531 (179.527 (50.236) 17.578 77. and subsidiaries Supplemental Condensed Combining Statements of Cash Flows December 31.184) 35.654) 138.922 (35.492 (1.650) (175.142) (75.439) (25.657) 76.537) 164.672 (3.272) 40.918) 1.932) 143.731 1.888) 100.885) (215.768 183.891 129.481 92.068) (48.090) 65.791) 95.263) 156.975) ( 93.541) (166.975) (93.620) (125.667) ($ 1.585 (24.975) 668.637 20.229) (5.805) 54.066. machinery and equipment Aquisition of business.505 1.293) 69.000) (112. de C.569 190.374 104.706 1.381) (423.620) (70.015 75 (184.021) 520 (367.153) 136.918 (93.313 (710.237 $ 91.599) (81.955) (113.327 (17.650 56.601 32.015 75 (159.880 64. A.070) 5.418 - ($ 16.108 1.853 $112.080 (10.941) (21.610) (189.797 $ (93.934 1.394) 9.780) 28.451 8.731 206.204 (3.707 228.542 (40.828 - (81.044) (3.095) (51.001 (Increase) decrease in: General Electric Company (Shareholder) Accounts receivable Inventories Prepaid expenses Notes and accounts payable to suppliers Other assets.541) (30. V.590 568.886 $ - 668. net cash Disposals (Acquisition) of other assets Net cash flows from (used in) investing activities Financing activities Loans obtained Loan payments Dividends paid Interest paid Net cash flows used in financing activities Adjustments to cash flow from variations in foreign exchange rates and in inflation levels Decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 235.153) 668.587) 228.976) 1. S.504) (135. 158) (389.697 (3.864 (345.896 3.809 (343.853 797 (12.271) 327.127) 5.544.396) (18. and subsidiaries Supplemental Condensed Combining Statements of Cash Flows December 31.000) (94.316 (504.927) (206.316 (148.138 281.084 $156.312) 67.176 46.180 (494.305) (154.684 24.393 67.523 $ 22.717) 450.408 (397.314 (8.195 4.577 (51.294) 358.302 (41.517 (210.399) (28.139) 90.704 (1. 2011 Thousands of US dollars Parent company Operating activities (Loss) income before income tax and participation in the results of joint venture Items related to investing activities: Depreciation and amortization (Loss) gain on property.554) 222.589) 269.608 (53.616 $ 110.061) (38.103) (41.272 7.233 $ 333.842) Combined guarantors Eliminations Parent company and combined guarantors Non-Guarantors Eliminations Consolidated $ 62.999) (18.194) 14.176 F-54 .896 3.576 536.681) (46.277) - (1.600 161.993 27.661 (12.000) (51.478 76.275) (222.975 3.302 5.176) (46.517 (218. de C.034 430 65.637 $ (46.220) 24.693) (142.080 $ 99.511) 62.710) 128.277) (45.177) $ 85.977 - 196.692) 24.236 922 59 981 (269.020 (461) 3.596) 19.277) (1.231) 205. V.584 (3.127) (45. machinery and equipment Interest income Net foreign exchance loss Items related to financing activities: Interest expense $ 118 (8.Controladora Mabe.844) (447.602 223.062) 37.399) (189.257) (2.967 (2.812) (72.450 7.901) (118.557 76.620 $ 3.039 (2.000) 23.278 161.602) (345.166 (4.277) (1.457) 23.514) 23.604.760) (22.815) (3.741) (679.057 329.242) (395.478) 77.456 100. S.681 (3.139 100.048 133.678 (456) (Increase) decrease in: General Electric Company (Shareholder) Accounts receivable Inventories Prepaid expenses Notes and accounts payable to suppliers Other assets.681 48.347 15.993 3.941 530.211 8.257) 790.741) 287.103) 85.293) (286. other accounts payable and accrued expenses Income tax Employee benefits Net cash flows from (used in) operating activities Investing activities Acquisition of property.055) (48.690) 125.199 (1.599 30. machinery and equipment Net cash flows from (used in) investing activities Financing activities Loans obtained Loan payments Dividends paid Interest paid Net cash flows used in financing activities Adjustments to cash flow from variations in foreign exchange rates and in inflation levels Decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year $ 355.783) 106 (293.528 17.177) (3.631) (3.341) (277. A.604.426.145 (262.274) (34.816) (42.817 95.945 56.255) (23.853 46.191) 45.275 67.011) (299.240 ($ 66.101) $ 19.218) - $ 62.020 (461) (332. 000 250.A.124 633.604 1.457) 402. 2011 Assets Current assets: Cash and cash equivalents Accounts receivable .241 18.468 47.129 $ 21.Net (Note 8) Derivative financial instruments (Note 5) Liabilities and Stockholders’ Equity Short-term liabilities: Current portion of long-term debt (Note 9) Notes and accounts payable to suppliers Factoring (Note 10) Other accounts payable and accrued expenses Taxes payable Derivative financial instruments (Note 5) Total short-term liabilities $ 77.966 (30.Net (Note 6) Prepaid expenses Total current assets Property.308 2. 2012 (unaudited) and December 31.384) 322. 2011 At March 31.245 31.390.224 10.628 (92.020 (79.Controladora Mabe.768 28.475) (31.113 23.820 1.207 15.927 2.653 43.571 93.650 101.289 35.583 64.472 $ 2.000 250. F-55 .925 342.530 47.942 678.786 2.618 392.228 $ 47.729 524.344) (1. de C.930 49.721 4.603 2.104 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.497 330.295 Long-term liabilities: Long-term debt (Note 9) Deferred income tax (Note 13) Employee benefits Warranties and other long-term liabilities Derivative financial instruments (Note 5) Total liabilities Stockholders’ equity (Note 11): Capital stock Inflation adjustment to capital stock Additional paid-in capital Retained earnings Consolidated effect of deferred income tax Cumulative translation effect of foreign entities Valuation of derivative financial instruments Controlling interest Non-controlling interest Total stockholders’ equity 657.Net General Electric Company (Shareholder) Inventories .421.104 Total liabilities and stockholders’ equity $ 2.270 620.158 384.399 353.803 25.917 48.219.917 43.636 Contingencies (Note 16) Total assets $ 2.674) (262) 408. 2012 At December 31.472 $ 2.475) (20.675 476.021.670 426.165 311. 2012 At December 31.709 (30.V.163.685 407.642 64.480 421.916 37. S.098) 316.888 - $ 79.421.333 17. 2011 Thousands of US dollars At March 31.013 1.399 371.067.111 107.916 37.147 91. and subsidiaries Condensed Consolidated Balance Sheets At March 31.Net (Note 7) Deferred income tax (Note 13) Investment in securities Goodwill Other assets .079.497 330.804 10.375 1.104.429 412.390. machinery and equipment . 470 775.598 7.A. S.Net (Note 15) Comprehensive financing cost .337 42 (19.265 $ 641. and subsidiaries Unaudited Condensed Consolidated Income Statements For the three months ended March 31.089 Contribution margin Fixed expenses: Production costs Selling and administration expenses 156.403 140.574 629.007 713.104 96.490 931.549) (13.562 8. 2012 Net sales: Domestic Export 2011 $ 676. F-56 .578 36.270 95.Net (Note 14) Loss before income tax benefit (expense) and participation in the results of joint venture Income tax benefit (expense) (Note 13) Participation in the results of joint venture 24.474 131.470 (20.618 853.683) 4.V.165 (37.047) ($ 15.304) (24.171 Variable costs: Production costs Selling and administration expenses 681.956 211. 2012 and 2011 THOUSANDS OF US DOLLARS For the three months ended March 31.Controladora Mabe. de C.304) (10.465) (5.176 35.916) ($ 24.257) (10.775 254.406) (110) Consolidated net loss Distribution of consolidated net loss: Loss from controlling interest Loss from non-controlling interest Consolidated net loss for the period (15.609 8.088) Operating income Other expenses .949) (4.116) (19.396 84.619 93.465) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.292 131. 916 Additional paid-in capital 37.475) Cumulative translation effects of foreign entities (6.587 ($30.497 330. 2011 47.344) Valuation of derivative financial instruments (1.919) $ 453.A.842 Non-controlling interest (12.195 (262) 6.549) $ 111.475) 10.497 $ 330.916 Additional paid-in capital 37.917 (10.106) $ 316.257) $ 43.569) (36.608 $ 408.586 Capital stock Inflation Historical adjustment Balances at December 31.497 330.670 ($20.505 $ 47.136 Consolidated effect of deferred income tax (30.674) $ 1.457) Controlling interest 402. 2012 and 2011 Thousands of US dollars Capital stock Inflation Historical adjustment Balances at December 31. S.497 $ 330. de C.530 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.394 Controlling interest 502. 2012 47.761 $ 3.917 (5.337) Total 490.917 Retained earnings 48.687) $ 500.098) (6.475) Cumulative translation effects of foreign entities (31. F-57 . and subsidiaries Unaudited Condensed Consolidated Statements of Cash Flows For the three months ended March 31.020 Non-controlling interest (79.155 (2.V.714) ($ 92.966 Consolidated effect of deferred income tax (30. 2010 Comprehensive loss for the year (Note 12) Balances at March 31.475) ($ 6.384) Total 322.709 ($30. 2011 Comprehensive loss for the year (Note 12) Balances at March 31.232) ($ 46.543) Valuation of derivative financial instruments 1.916 $ 37.636 $ 47.916 $ 37.155 (34.101 442) 1.628 (12.917 Retained earnings 122.Controladora Mabe. 467 44.080) (13.159 61.053) (18.544 (13. other accounts payable and accrued expenses Income tax Employee benefits Net cash flows from operating activities Investing activities Acquisition of property.576) (28.104 (7.627 (33.580) (277) 33.959) (46.198) (42.852) (710) 5.164) (55. machinery and equipment Acquisition of other assets Net cash flows used in investing activities Financing activities Loans obtained Loan payments Interest paid Net cash flows used in financing activities Adjustments to cash flow from variations in foreign exchange rates and in inflation levels Decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 4.A.949) 36.080) (27.015 (40.535) (16.972) (31.070 16.082) ($ 19.270 (6.124 54.299 36.675 $ 77. 2012 and 2011 Thousands of US dollars For the three months ended March 31.937) (11. F-58 . de C.727) (29.683) 35.484) (9.Controladora Mabe.V. 2012 Operating activities Loss before income tax benefit (expense) and participation in the results of joint venture Items related to investing activities: Depreciation and amortization Interest income Net foreign exchange loss (gain) Items related to financing activities: Interest expense (Increase) decrease in: General Electric Company (Shareholder) Accounts receivable Inventories Prepaid expenses Notes and accounts payable to suppliers Other assets.946) 79.515 (8.491) (2. S.147 ($ 19.541 2011 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. and subsidiaries Unaudited Condensed Consolidated Statements of Cash Flows For the three months ended March 31.100) 7.245 (4.434) (9.299) 87.048) 112.087 (1.729 (17.592 $ 81.555) 1.918) (27.107) 38.908) 954 8.343 (8. Pursuant to the joint venture agreement. Approximately 700 workers will receive severance payment as production winds down gradually toward a scheduled close by the end of 2014. 2011 are stated in historical Mexican pesos modified by the cumulative inflation effects on the financial information recognized up to December 31. Therefore. According to the provisions of MFRS B-10. These condensed consolidated financial statements are presented in US dollars. During this period. These condensed consolidated financial statements are unaudited. V. and subsidiaries Supplemental Condensed Combining Statements of Cash Flows December 31. 2011 was derived from Mabe’s audited financial statements. certain information and disclosures. 2012 and December 31. 2012 and 2011. normally included in audited financial statements prepared in accordance with MFRS. operations and significant events: Controladora Mabe. the figures in these financial statements at March 31. which is Mabe’s reporting currency. In the opinion of Management.V. A. refrigerators. GE is also the main customer of the Company. licenses to the Company trademarks and patents for products offered and provides Mabe access to relevant technology used in the manufacturing of different products. the productive assets will be transferred to a Mexican plant to cover the production of dryers. Mabe Canada Inc. dryers. The results of these interim periods are not necessarily indicative of results for the entire year. 2007. and distribution of built-in ovens and hoods. microwave ovens and related parts and components in domestic and foreign markets. have been condensed or omitted. 2008. at January 1. Note 2 .A. which holds a 48. dryers and washing machines. announced the decision to proceed with the gradual closing of the dryer manufacturing factory in Montreal. denoted by the symbol “$”. The inflation rates are as follows: December 31. the recognition of the effects of inflation in the financial information is required to be discontinued (disconnection from inflationary accounting). S. based on aggregate product sales.Basis of preparation: These condensed consolidated financial statements have been prepared in accordance with Mexican Financial Reporting Standards (“MFRS”) issued by the Mexican Financial Reporting Standards Board (“Consejo Mexicano para la Investigación y Desarrollo de Normas de Información Financiera” or “CINIF”) for unaudited interim financial statements. 2011 (Amounts expressed in thousands of US dollars) Note 1 .41% equity interest in the Company. de C. since there has been a cumulative inflation below 26% (threshold for defining if an economy should be considered as inflationary) in the most recent three year period (with the exception of Venezuela and Argentina). These condensed consolidated financial statements should be read in conjunction with Mabe’s audited consolidated financial statements and notes at December 31. but does not include all disclosures required by MFRS for audited financial statements. Significant events At the beginning of 2012. 2011 and for the three years then ended. all adjustments (consisting principally of normal recurring adjustments) necessary for a fair presentation of these condensed consolidated financial statements have been included.Company history. Since 1987. the Mexican economy is not in an inflationary environment. dishwashers. and subsidiaries (the “Company” or “Mabe”) are engaged mainly in the manufacturing of ranges. “Inflation effects” (“MFRS B-10”). For purposes of these condensed consolidated financial statements. de C. The Company’s most significant accounting policies have been applied on a consistent basis for the three months ended March 31. the Company has operated as an economic joint venture with General Electric Company (“GE”).Controladora Mabe. water coolers. S. The condensed consolidated balance sheet data at December 31. Consequently. F-59 . and subsidiaries Supplemental Condensed Combining Statements of Cash Flows December 31. Exemption for fair value as deemed cost IFRS 1 allows measurement of a component of property. Mabe followed the requirements contained in MFRS 19. or b) cost or depreciated cost in accordance with IFRS.e. considering the following optional exceptions permitted by IFRS 1: OPTIONAL EXCEPTIONS UNDER IFRS 1 Exemption for determining the cumulative translation differences IFRS 1 allows cancellation of all cumulative losses and gains in the translation of the financial statements of subsidiaries located abroad and of investments accounted for by the equity method generated under MFRS. and b) Such policies should be applied at the date of transition to IFRS (i. Mabe has prepared estimated consolidated balance sheets at December 31. 2012 considering January 1.. The Internationl Accounting Standards Board (“IASB”) standards and IFRS Interpretations Committee (“IFRIC”) interpretations used to prepare these estimated consolidated opening balance sheets were issued and effective at March 31. Based on the result of the transition plan to date. A. V. 2012. Mabe has opted to recognize the translation effect in stockholders’ equity in retained earnings at the transition date. plant and equipment at fair value at the transition date to IFRS and use that fair value as the deemed cost.Conversion process and adoption of International Financial Reporting Standards (“IFRS”): The adoption of IFRS may have effects on the financial position and results of operations of Mabe since the Company is currently finalizing the conversion of its financial statements pursuant to IFRS.e. “The effects of changes in foreign exchange rates” from the date on which the subsidiary or the investment accounted for by the equity method was established or acquired.. December 31. adjusted to recognize changes in an inflation index. S. at the transition date. 2012). 2011 as the expected transition date at which IFRS would replace MFRS as the accounting framework for Mabe. F-60 . In order to determine the estimated consolidated opening balance sheets under IFRS. 2012).20% 2010 4. January 1. as follows: a) An entity will develop accounting policies based on standards and related interpretations effective at the reporting date of its first annual IFRS financial statements (i.82% 12.40% 15.19% Inflation for the year Cumulative inflation in the last three years Note 3 . 2011 and March 31. de C. This exception makes it possible not to calculate the cumulative translation difference under IAS 21. “First-time Adoption of International Financial Reporting Standards” (“IFRS 1”). Mabe adjusted amounts previously reported in its financial statements prepared under MFRS. may differ from those applied in preparing these estimated consolidated opening balance sheets under IFRS. 2011 2011 3. To prepare these estimated consolidated opening balance sheets. The IASB standards and IFRIC interpretations that will be applicable at the date of the reporting of the first set of financial statement under IFRS for Mabe (i.e. December 31. 2011) and throughout all periods presented in the first IFRS financial statements.. including those that will be applicable on an optional basis. “Changes arising from the adoption of International Financial Reporting Standards” and applied the requirements of IFRS 1. or use the restated book value determined under MFRS if that restated book value is comparable to: a) fair value.Controladora Mabe. machinery and equipment) and to allow minor assets to remain at book value under MFRS (computer equipment. “Property. Mabe has opted to carry all property. joint venture and associates in its separate financial statements. Exemption for assets and liabilities of subsidiaries. “Consolidated and separate financial statements” (“IAS 27”). less any impairment losses. For subsequent measurement. If that option is not elected. 2) immediate recognition in Other Comprehensive Income (“OCI”) in stockholders’ equity. or 2) fair value. IFRS 1 allows recognition of all unamortized accumulated actuarial gains and losses at the transition date to IFRS in retained earnings. At the transition date. and 4) early adoption of the amendments to IAS 19 issued in June 2011. Mabe has preliminarily elected to use appraisal values for its most significant assets (property. jointly controlled entities and associates When an entity opts for the cost method rather than fair value for recognition of its investments in subsidiaries. If this option is elected. to quantify the assets and liabilities of the subsidiary (or associate or joint venture) at the transition date. According to IAS 19. Exemption for business combinations F-61 . plant and equipment” (“IAS 16”). or ii) book value at that date used under MFRS. or b) deemed cost. etc. 2011 It must be determined. In accordance with IAS 16.) for initial recognition. subsequent measurement is made at either: cost less accumulated depreciation. machinery and equipment at cost less accumulated depreciation and accumulated impairment losses in accordance with IAS 16. Mabe has opted for subsidiaries subsequently adopting IFRS to use the balances included in Mabe’s consolidated financial statements. it must be applied to all plans. Exemption for investments in subsidiaries.Controladora Mabe. subsequent measurements are made under one of the following options: 1) corridor approach. Mabe has preliminarily opted to adopt the amendments to IAS 19 issued in June 2011. Deemed cost of these investments may be either i) fair value at the transition date in the separate financial statements of the entity. A. “Employee benefits” (“IAS 19”) must be applied retroactively. This had no effect in the consolidated balance sheet at the transition date. office furniture and equipment. in which periods the respective economies qualified as hyperinflationary under IAS 29. and subsidiaries Supplemental Condensed Combining Statements of Cash Flows December 31. The measurement must be applied consistently to each class of fixed asset. at the same book values of those items in the financial statements under IFRS of that subsidiary (or associate or joint venture). 3) immediate recognition in the income statement. de C. IAS 19. The most significant change in the amendments to IAS 19 is that actuarial gains and losses (remeasurements) will be recognized immediately in OCI and will no longer be deferred using the corridor approach or recognized in income. S. In cases in which IFRS are not allowed for certain foreign subsidiaries at the transition date. Mabe has opted to recognize investments in affiliates in its separate financial statements at the book value used under MFRS. Exemption for employee benefits In relation to defined benefit plans. associates and joint venture IFRS 1 makes it possible for the consolidated financial statements of a holding company adopting IFRS for the first time after the date on which they have been adopted by a subsidiary. V. Mabe has opted to recognize unamortized accumulated actuarial gains and losses at the transition date to IFRS in retained earnings. “Financial Reporting in Hyper-Inflationary Economies” (where the three-year inflation rate approaches or exceeds 100%). after consolidation and equity method adjustments and the effects of business combinations in cases where the holding company acquired the subsidiary. For subsequent measurement. IFRS 1 allows valuation of those investments by any of the following methods at the transition date: a) costs as per IAS 27. by country. 390. This option makes it possible to avoid retroactive application involving the reestablishment of all business combinations occurred prior to the transition date. and subsidiaries Supplemental Condensed Combining Statements of Cash Flows December 31.583 67. b. Mabe has opted not to reformulate business combinations recognized prior to the transition date.127 $ 2.000 621. at that date.707 $2.104 $ Adjustments (1) Balances IFRS $ 79.650 101.468 (d).765.141.Controladora Mabe. machinery and equipment .491 $375.930 (b) 93.067.571 (c) 64.260 2. de C.713 197. IFRS mandatory exceptions Set out below are the applicable mandatory exceptions in IFRS 1.767 F-62 . Estimates IFRS estimates at January 1.765.800 407. A.389 148. consequently. 2011: Balance sheet Cash and cash equivalents Accounts receivable . these transactions are reflected as hedges in the Company’s balance sheet.695 678. a.245 59. with no significant effect. and therefore to prospectively apply IFRS 3. Hedge accounting Hedge accounting can only be applied prospectively from the transition date to transactions that satisfy the hedge accounting criteria under IFRS. All of the Company’s hedge contracts satisfy the hedge accounting criteria as of January 1.Net Deferred income tax Investments in securities Goodwill and other assets .636 $2.767 (a) (b) $375. S.707 $ 2.803 633.675 476.Net Total assets Current portion of long-term debt Other short-term accounts payable Long-term debt Employee benefits Deferred income tax Other long-term liabilities Total liabilities Total stockholders’ equity Total liabilities and stockholders’ equity Notes $ Balances MFRS 79. 2011 are consistent with the estimates at the same date made in conformity with MFRS. “Business combinations” (“IFRS 3”) at the transition date or a specific date prior to the transition date.313 101.215. since the requirements under MFRS are the same.245 59.783 104. Any entity deciding to reestablish its acquisitions at a specific date prior to the transition date must include all acquisitions made during that period.663 21.390.571 108.224 10. 2011: derecognition of financial assets and liabilities and non-controlling interest. V.224 10. (e) 322.172 227.009.663 21.800 407.429 1.675 476.803 1. 2011 IFRS 1 allows prospective application of IFRS 3.000 621.695 678.429 1.Net Other accounts receivable and prepaid expenses Inventories .104 $ 43. the Company applied prospectively the following mandatory exceptions starting January 1.141.260 2.972 67.663 $375.640 550. Additionally. 2011 and. Set forth below is the estimated consolidated opening balance sheet of Mabe at December 31.Net Property. 045 426.).287 $ 2. which allows valuation under MFRS at the transition date. S.287 $ 2.729 524.371 2.436 194. 2007. machinery and equipment .251. machinery and equipment .926 146. For all other property. Property.172 (a) (b) $370.421.147 108.792. Therefore.804 10.104. taking into consideration the following: a.521 $ 2.729 524. b.568 72.Changes in deferred income tax represent the impact of deferred taxes on the adjustments necessary for the transition to IFRS. 2012: Balance sheet Cash and cash equivalents Accounts receivable .289 990.289 620.700 $370. Notes At the date of issuance of these financial statements. determined by applying the National Consumer Price Index (“NCPI”) factors to acquisition cost from the date of acquisition to December 31.700 47. The principal effect corresponds to an increase in the deferred tax liability of revaluation of fixed assets.651 540.172 (1) The adjustments set forth above represent the Company’s Management’s best estimate at the date of issuance of these financial statements. represented by historical cost plus restated values for all acquisitions until December 31.811 107. de C.991 $370.Controladora Mabe.Net Other accounts receivable and prepaid expenses Inventories . office furniture and equipment.480 1.421. F-63 . (e) 316. Mabe elected the other IFRS 1 option.530 $ 2.649 657.Net Property.000 604.942 (d).Net Total assets Current portion of long-term debt Other short-term accounts payable Long-term debt Employee benefits Deferred income tax Other long-term liabilities Total liabilities Total stockholders’ equity Total liabilities and stockholders’ equity Notes $ Balances MFRS 77.653 (b) 91.480 1.171. 2011 Set forth below is the estimated consolidated opening balance sheet of Mabe at March 31. A.111 107. V.700 47.472 $ $ 43.783 102. 2007.804 10.709 223.649 657. and subsidiaries Supplemental Condensed Combining Statements of Cash Flows December 31. the information shown is preliminary and subject to changes that might arise from changes to certain options established under current IFRS or from the issuance of new IFRS. In that regard. machinery and equipment) and allow minor assets to remain at book value under MFRS (computer equipment. plant and equipment. the Company’s Management is in the process of studying and adapting the main changes in Mabe’s accounting policies under IFRS.000 604.171. For subsequent measurements.472 Adjustments (1) Balances IFRS $ 77.147 (c) 64. etc. Mabe has preliminarily opted to use appraisal values for its most significant assets (property.207 51.045 426.Net Deferred income tax Investments in securities Goodwill and other assets .207 51. buildings and machinery appraised in monetary terms by an independent appraiser. Deferred income taxes . plant and equipment to be valued at fair value at the time of initial valuation (fair value or value recognized under MFRS at the transition date).792.371 2. Mabe has opted for cost less accumulated depreciation less any impairment losses.642 72.Mabe elected the IFRS 1 option which allows property. Mabe had the most significant land. Controladora Mabe, S. A. de C. V. and subsidiaries Supplemental Condensed Combining Statements of Cash Flows December 31, 2011 c. Employee benefits - Under amendments to MFRS, liabilities for employee benefits would be amortized on a straight line basis over a five year period. At the transition date to IFRS, there is a remaining transition liability to be amortized in the future for such amendments. Under IFRS, these amendments do not apply; therefore, the reversal of the related effects is recognized in retained earnings. Mabe opted to recognize unamortized actuarial profits or losses at January 1, 2011 directly in stockholders’ equity at the transition date under IFRS 1 so as to be in line with the requirements of new IAS 19, which, although effective from January 1, 2013, allows early adoption. For the same reason, plan modifications were also recognized in stockholders’ equity. The changes include elimination of the corridor approach and differences in the presentation of pension expenses in different accounts, such as the portion of financing cost of the liability being recorded under financial costs and the actuarial gains and losses being recognized directly in OCI rather than in income. The liability for termination benefits recognized under MFRS is not allowed under IFRS unless a demonstrable commitment has been made i) to terminate an employee or group of employees prior to the regular retirement date, or ii) to pay a severance as a result of an offer made in order to persuade employees to resign. Therefore, Mabe will recognize that liability only when it has proposed the formal and detailed termination plan to the affected personnel. The amount recognized up to January 1, 2011 will therefore be eliminated. d. Effects of inflation - As mentioned in Note 2, under MFRS B-10, in order for an economy to qualify as hyperinflationary in Mexico, the three-year accumulated inflation must be 26% or more. Therefore, at January 1, 2008, Mabe ceased recognizing the effects of inflation in its financial information. Under IFRS, in order to recognize those effects, accumulated inflation over the most recent three-year period must be equal or greater than 100%. These inflationary effects did not exist in Mexico at January 1, 1998 and therefore Mabe will cancel the effects of inflation against retained earnings. Additionally, the company cancelled the effects of inflation in the other countries in which it has operations and the accumulated inflation over the most recent three-year period was not equal to or greater than 100%. e. Cumulative translation differences - In accordance with the option established in IFRS 1, Mabe opted to recognize the effect of translation on stockholders’ equity in retained earnings at the transition date in its opening balance under IFRS at January 1, 2011. Note 4 - Summary of significant accounting policies MFRS requires the use of critical accounting estimates in the preparation of financial statements. Accordingly, Management’s judgment is required to define the Company’s accounting policies. a. Use of estimates The preparation of financial statements in conformity with MFRS requires Management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting years. Actual results could differ from those estimates. While Management believes that its estimates and assumptions are reasonable, such estimates and assumptions are subject to a number of risks and uncertainties that may cause actual results to differ materially from such estimates. Significant estimates underlying these financial statements include: (1) allowances for doubtful accounts and for obsolete inventory; (2) the valuation of derivative financial instruments and employee benefits liabilities; and (3) the present value of estimated future net cash flows. b. Consolidation – F-64 Controladora Mabe, S. A. de C. V. and subsidiaries Supplemental Condensed Combining Statements of Cash Flows December 31, 2011 These condensed consolidated financial statements include those of Controladora Mabe, S.A. de C.V. and all entities in which it is the owner of 50% or more of the shares or exercises control. Control exists, when an entity has the power, directly or indirectly, to govern the operation, administrative and financial policies of an entity to obtain benefits from its activities. Investments in subsidiaries and all significant balances and transactions carried out among consolidated companies have been eliminated for effects of consolidation. The consolidation was carried out on the basis of the unaudited financial statements of the subsidiaries. At March 31, 2012 and December 31, 2011; the subsidiaries were: % of ownership MÉXICO Mabe, S.A. de C.V. Leiser, S. de R.L. de C.V. Servej, S.A. de C.V. Mabe Integra, S.A. de C.V. Mabesud, S. de R.L. de C.V. Mabe Argentina, S.A. CANADA MC Commercial Inc. Mabe Canada Inc. CENTRAL AMERICA Mabe Guatemala, S.A. Mabe de El Salvador, S.A. de C.V. Mabe Panamá, S.A. Mabe Honduras, S.A. de C.V. Electrodomésticos Mabeca, S.A. Atlas Eléctrica, S.A. Atlas Industrial Group, S.A. Atlas Industrial, S.A. Cetrón de El Salvador, S.A. de C.V. Atlas Commercial & Investment, S.A. Atlas Distribuidora de Productos, S.A. Atlas Distribuidora de El Salvador, S.A. de C.V. Atlas Distribuidora de Guatemala, S.A. Atlas Distribuidora de Honduras, S.A. de C.V. Atlas Distribuidora de Nicaragua, S.A. Atlas del Caribe, S.A. Central American Marketing, S.A. ANDEAN COUNTRIES Mabe Colombia, S.A. Mabe Ecuador, S.A. Mabe Perú, S.A. Mabe Venezuela, C.A. Comercial Mabe Chile, Ltda. BRAZIL Mabe Mercosur Participações, Ltda. Mabe Comercial e Participações, Ltda. Mabe Brasil Electrodomésticos, Ltda. ARGENTINA Kronen Internacional, S.A. 100% 100% 100% 100% 100% 100% 100% 75.97% 58.63% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% F-65 Controladora Mabe, S. A. de C. V. and subsidiaries Supplemental Condensed Combining Statements of Cash Flows December 31, 2011 c. Adoption of new standards At January 1, 2012, the Company adopted the following standards: In December 2011, the CINIF issued Improvements to MFRS 2012 (“Improvements 2012”), MFRS B-3, "Comprehensive income statement" and MFRS B-4, "Statement of changes in stockholders' equity". MFRS B-3 and MFRS B-4 will become effective at January 1, 2013 and Improvements 2012, along with the provision of MFRS C-6, "Property, plant and equipment" related to the determination of the property, plant and equipment components became effective at January 1, 2012. MFRS B-3, “Comprehensive income statement” establishes the entity’s choice of presenting comprehensive income either in one or two statements. In addition, MFRS B-3 specifies that other comprehensive income should be presented after net profit or loss, removes the concept of non-ordinary items and establishes the requirements that other income and expenses should be considered as such. MFRS B-4, “Statement of changes in stockholders’ equity” establishes the standards for the presentation of the statement of changes in stockholders’ equity as well as the required disclosures in the event that movements take place within stockholders’ equity. MFRS C-6, “Property, plant and equipment” establishes that it is mandatory to determine the components representative of property, plant and equipment in order to depreciate these components in accordance with their useful lives at January 1, 2012. Improvements 2012 include: MFRS A-7, “Presentation and disclosure”, requires that entities disclose additional details with respect to the nature and the amounts in the balance sheet at year end of the estimates and assumptions that have a significant risk or caused a material adjustment in the financial statements. Bulletin B-14, “Earnings per share”, requires that entities must calculate and disclose diluted earnings per share regardless of whether they reflect a continuing operating loss. MFRS C-1, “Cash and cash equivalents” establishes that short term assets should include cash and cash equivalents, unless their usage is restricted to within the following twelve months or after its normal business cycle at the balance sheet date. Bulletin C-11, “Stockholders’ equity” and MFRS Interpretation 3, “Initial application of MFRS” provide that donations should be recognized in the income statement as income and not as part of the contributed equity in order to be consistent with the changes previously made in other MFRS. Bulletin C-15, “Impairment in the long-lived assets value and their disposal” specifies different concepts of longlived assets intended to be sold and also provides that impairment losses in goodwill should not be reversed and establishes the guidelines for the presentation of impairment losses or reversal within the income statement. MFRS D-3, “Employees’ benefits” establishes that the expense for employees’ statutory profit sharing should be recognized in the same items as costs and expenses in which the entity recognizes the remaining employees’ benefits. These MFRS are not expected to substantially impact the financial information presented by the Company. d. Impairment of non-financial assets Management performs impairment tests for its property, machinery and equipment when certain events or circumstances suggest that the carrying value of these assets might not be recovered. Goodwill is tested at least annually or more regularly if events indicate that this is necessary. F-66 Controladora Mabe, S. A. de C. V. and subsidiaries Supplemental Condensed Combining Statements of Cash Flows December 31, 2011 The recoverable value is determined using the higher of the estimated discounted net cash flows expected to be generated by the assets or the net sales price. When appropriate, an impairment loss is recognized to the extent that the net book value exceeds the estimated recoverable value of the assets. Subsequently, to the extent that the estimated recoverable value of the assets exceeds the net book value, such impairment may be reduced or reversed, under certain circumstances. The net sales price is determined using market value or the price of transactions involving similar assets, less selling costs. These assets are subject to recognition of impairment, as well as the reversal of such impairment, when appropriate. At March 31, 2012 and December 31, 2011, there were no indications of impairment. Note 5 - Derivative financial instruments: The Company enters into derivative contracts for trading purposes (natural gas swap and aluminum and copper commodity). The Company also periodically enters into financial instrument contracts to economically hedge its exposure to changes in interest rates. At March 31, 2012, the Company had the following derivative financial instruments: (Unaudited) Valuation at March 31, 2012 Financial instrument Short-term: For trading: Natural gas swap Aluminum and copper commodity For hedging: Interest rate cross swap Total short-term at March 31, 2012 Total short-term at December 31, 2011 Total non-current assets at December 31, 2011 Long-term: Interest rate cross swap Interest rate cross swap Total long-term at March 31, 2012 Total long-term at December 31, 2011 Interest rate Interest rate 2012 and 2014 2019 (10,098) (18,505) $ (28,603) ($ 17, 927) ($ 518) (13,296) ($13,296) ($18,739) ($ $ Interest rate 2012 (4,351) (4,604) 2,013) 2,295 (262) ($ 939) ($ ($ 2,778) (2,778) 280) MMBTU Metric Tons 300,000 3,121 December 2012 December 2012 ($ 212) (41) ($ 196) (66) Type of underlying asset Notional amount Comprehensive Comprehensive Maturity Assets (loss) financing date (liabilities)income cost F-67 078 $184.Property.364) 522.688 7. de C.156 (215.Controladora Mabe.363. 2011 $246.350 40.590 143. 2012 $ 288. respectively.248 (119.111 $ At December 31. which is recognized in fixed production costs.621 1. Note 8 . 2011 $ 288.392 (1.604 (72.416 134.120) $ 353. 2011 Note 6 .021) 384.700 15.903.508 Merchandise in transit 41.635 41.667 and $25.560.699 41.380. depreciation expense was $21.248) $ $ 761.289 Note 7 .794) $ 111.383 7.Other assets: (Unaudited) At March 31.042) 551.601 633.462.803 At December 31.208 Accumulated depreciation (1. 2012 Unamortized expenses Balance at March 2012 Gross costs Accumulated amortization Net at March 31.650 Buildings and facilities Machinery and equipment Computer equipment Transportation equipment Office furniture and equipment At March 31.810 (1) F-68 $ 119.914.566 (21.885 41. S.621 1. machinery and equipment: (Unaudited) At March 31. and subsidiaries Supplemental Condensed Combining Statements of Cash Flows December 31.601 620.888 Other Development costs Total . V.805 15.962 14.407) 387.869 1.406 28.981 19. 2012 and 2011. 2012 $ 457.393 1. A.844 Construction in process Land $ 55.Inventories: (Unaudited) At March 31.008 (407.977 (23.666 41.549.781 $ 426.078) $ 242. 2012 Finished products Production in process Raw materials Allowance for obsolete inventory $ 248.822 $407. 2011. 2012 and December 31.308 Balance at December 2011 Gross costs Accumulated amortization Net at December 31.429 $ 678.000 150. 2012 were as follows: 2014 2015 2019 $ 107. (2) On June 23. 2011. plus a 2% margin. $200 million of guaranteed senior notes at a fixed rate of 6. 2012 (Unaudited) $550.604 (67. which is recognized in fixed production costs. At March. A.480 $ 657.554) $ 117. 2011. respectively in escrow accounts in respect of litigations in Brazil. 2012 and March 31.000 154. 2019. 2015. long-term debt was comprised as follows: Maturity date Bond issuances (1) Other loans (2) Less .338) $ 371. Note 9 .2019 2014 At March 31. payable quarterly and maturing on June 16. 2010.100.646 (389. the Company obtained from Deutsche Bank AG a loan denominated in US dollars bearing interest at the LIBOR rate. S. 2014.437 and $10.536) $ 254. Long-term debt maturities at March 31.000 and $53. At March 31. 2011.000 21. 2006. the Company had deposited $47.248 (119. de C. the bonds issued by the Company were comprised as follows: $350 million of guaranteed senior notes at a fixed rate of 7. 2011 (1) At March 31. and subsidiaries Supplemental Condensed Combining Statements of Cash Flows December 31.875% maturing on October 28.Controladora Mabe. 2011 Unamortized expenses $ 456.000 At December 31.571 $657.Short and long-term debt: a.50% maturing on November 17. respectively.147 200. 2011 $550. Interest payable semiannually starting on April 28. 2011 At December 31. V.627 47.000 350. Interest payable semiannually starting on June 15. F-69 .050 Development costs $ 119. amortization expense was $13.627 704.248) $ Total $ 760.808. 2012.794 (202.258 Other $184.147 (1) At March 31.current portion 2015 .147 b.000 700. 2012 and December 31. 2012 and December 31. to obtain credit lines for supporting finished product purchases by clients and payments of accounts payable to suppliers.000 The capital stock is comprised of nominal common shares. MCM Americas. de C.Controladora Mabe. S.V. S. Series “A”. S.A.048 199.852 16. Note 12 . Mabe México. with no par value.L. V. de C. 2011 The borrower under this agreement is Mabe. At March 31..L.L. Leiser. applicable to monthly balances. The loan is guaranteed on a joint and several basis by Controladora Mabe.000. 2012 Loss from controlling interest for the period ($ F-70 5. the outstanding balances under these agreements amounted to $384.Comprehensive loss: The comprehensive loss for the three months ended March 31. and subsidiaries Supplemental Condensed Combining Statements of Cash Flows December 31. de C. S. S.V. Variable capital is unlimited.549) . 2011.. 2012 and 2011 was comprised as follows: (Unaudited) For the three months ended March 31. the Company has guaranteed payment to the lenders in the event that the borrowers are unable to cover their repayment obligations.000 429.764. de C.925 and $392. de R.370.165. Note 10 . According to the terms of these agreements. A.V. clients and financial institutions.. 2012 was comprised as follows: Shares 100 Description Series “A” Represents fixed capital stock without withdrawal rights Series “A-1”: represents variable capital stock with withdrawal rights Series “B-1”: represents variable capital stock with withdrawal rights Series “Lp”: represents variable capital stock with withdrawal rights Total 213.V. and MC Commercial Inc. S. de R.V.Factoring: Subsidiaries of the Company have entered into factoring agreements with various suppliers. de R. Series “B-1” represents 49% of the capital stock and subscription thereof is unrestricted.257) 2011 ($ 10. The fixed interest rate under each of these agreements is LIBOR plus a margin.A. de C. “A-1” and “Lp” represent 51% of the capital stock and acquisition thereof is restricted to Mexican nationals only.Stockholders’ equity: The capital stock at March 31.135. respectively . de C. Note 11 . Provisions for losses are recognized by the Company in its financial statements in connection with such procedures.890) (14.631 332 $8. de C.919) ($ 37.908 (367) (14. reflecting potential losses considered F-71 2011 $5.232) ($ 36. The Company classifies the risk of an adverse ruling in such lawsuits as “remote”.Income tax: For the three months ended March 31.337 as a result of the application of effective tax rate of the projected income tax for fiscal year 2012.406 as a consequence of the application of the effective tax rate for fiscal year 2011.490) (14.761 (34. the Company recorded a tax benefit of $4.044 3. S.670 1.882 239 $ 7. “possible” or “probable”.Comprehensive financing cost: Comprehensive financing cost was comprised as follows: For the three months ended March 31. machinery and equipment Employee’s Statutory Profit Sharing $3. Note 14 . which was estimated to be 30% of pre-tax income. and subsidiaries Supplemental Condensed Combining Statements of Cash Flows December 31.507 2. 2012 Restructuring expenses Gain on sale of property.704) 11.Contingencies: The Company and its subsidiaries are party to a number of labor and adminsitrative lawsuits filed against them and to a number of tax claims.607) (10.872 ($ 20.165 Note 16 .470 $ 7.106) 6. 2011 Cumulative translation effect of foreign entities Valuation of derivative financial instruments.088) 10.714) $ (6.204) (10. arising from the normal course of operations. the Company recorded tax charges of $4. net of taxes Non-controlling interest Comprehensive loss for the period Note 13 .937 (382) (17.195 (12.101 1. 2012 Interest income Loss on monetary position Interest expense on bonds and loans Factoring discounts Bank fees and early payment discounts Net foreign exchange loss (gains) Total Note 15 . V.Controladora Mabe. A. 2012.Other expenses: Other expenses were comprised as follows: (Unaudited) Three months ended March 31.690) (587) 2011 $ 6.116) . For the three months ended March 31 2011. which was estimated to be 2% of pretax income. 086 $407.067.942 (Unaudited) For the three months ended March.085 132 $ $ $ $ 853.660 $ $ $ 620 1. V.437 $400.774 ($ $ $ 3. 2012.721 $ 9.Net Total assets Total liabilities $ 361.873 $ 2.425 $ 712.382 873 $ 46.Controladora Mabe. At March 31.473 140 $ $ $ $ Total 931.Net $ 344.190 21.Financial statements issuance authorization: These condensed consolidated financial statements and notes were authorized for issuance on April 30.929 $ 612.102.672) 2. determined by the Company’s Management and based on the opinion of its legal advisors.733 19.876 $ 189.652 2. Although there is no certainty as to the final outcome of such matters. 2011 as probable. and subsidiaries Supplemental Condensed Combining Statements of Cash Flows December 31.082 21. 31 2011 Net sales Operating income Depreciation and amortization Interest expense .825 ($ $ $ 1.098 $ 148.970 $ $ $ 7. Canada and Central America. de C.574 8. F-72 .408 ($ 1. Vice President of Finance . Javier Burkle Elizondo. South America.366 $ 179.162 $ 808.609 18. The following is condensed financial information on the operating segments: (Unaudited) For the three months ended March 31.265 24. by Mr.390.364 Central America $ 44. 421. the Company considers that any resulting liability would have no material effect on the consolidated financial position.307 $356.104. A.710 $ 34.Chief Financial Officer.792 $ $ $ 17.270 31.300 ($50. and regarding which probable losses are recognized or can be reasonably estimated.444 12.468 Note 18 . S.401 South America $ 404.700 in December 31.072) $ 13.472 $ 2.Financial information by segment: The Company manages and assesses its operations through four operating segments.056 $ 924. Note 17 .266 $ 105.789 12.391) 2. which are Mexico.145 $ 100.470 $ 756.104 36. 2012 the Company had reflected a provision of $48. on the consolidated results of operations.241.609 36.077. or on the consolidated cash flows. 2011 Total assets Total liabilities $ 1.598 35.026 $ 1.257 Canada $ 119.104 $ 2.576 $ 288.814 $ 2. 2012 Mexico Net sales Operating income Depreciation and amortization Interest expense .732 $ $ $ 12.678 $ $ $ 936 1.099 $1. 2011) to cover these probable losses.578 December 31. therefore. and subsidiaries Supplemental Condensed Combining Statements of Cash Flows December 31. 2011.Subsidiary guarantor information: The following supplemental condensed combining statements present: a. de C.Controladora Mabe. which are also separately reflected in the stand-alone NonGuarantor Subsidiaries column. (“Parent”). de C. S. 2012 and March 31. A. Combining balance sheets at March 31.A. b. 2011 Note 19 . F-73 . S. c. combined Guarantor Subsidiaries and combined Non-Guarantor Susidiaries with their investments in subsidiaries accounted for using the equity method of accounting and. Elimination entries necessary to consolidate the Parent and all of its subsidiaries. the Parent column reflects the equity income (loss) of its Guarantor Subsidiaries and NonGuarantor Subsidiaries. and condensed combining income statements and statements of cash flows for each of the three month periods ended March 31. Additionally. Controladora Mabe. 2012.V. V. which are also separately reflected in the stand-alone Gurarantor Subsidiaries and Non-Guarantor Subsidiaries columns. the Guarantor Subsidiaries column reflects the equity income (loss) of its Non-Guarantor Subsidiaries. 356.475) (20.003.892.530 $ 2.055.810 140.810 99.955 - $ 52.231 698.Net Prepaid expenses Total current assets Property.048) $ 2.421.223 818.392) (666.457.454 (751.934 3.937) 408.816) 744.284.917 43.584 74.670 426.803 264.815 1.828) $ 2.080 35.863 (57.888 - $ 1.Net Deferred income tax Investments in securities Goodwill Other assets .916 37.706) (4.375 657.921 596.055.098) (517.147 91.497 330.768 28. S.476) 26.421.562 - $ (808.043 (632.725) (1. machinery and equipment .473 91.976 18.003.288 140 (1.241 18.594) (1.402) (827.594) (2.312 5.392 666.594) 10.351 135.139 357.566 75.476) 10.917 43. and subsidiaries Supplemental Unaudited Condensed Combining Balance Sheet At March 31.299.700) (661.312 5.223 3.805 10.937) 408.983 118.269) 31.043) 632.166 2.475) (20.917 43.288) (140) 1.498 633.534 3.Net General Electric Company (Shareholder) Inventories .416 (5. V.411 (18.219.729 524.901.890 52.048) F-74 .110 302.616 642.710 (30.721 4.165 (853) (245.062 937.823.833 550.640 253.027 17.975 44.289 35.969.476 - ($ 2.474) (91.497 330.079.207 15.323) - $ 47.807) 74.375 1.476) - $ 42.901.762 262.902.778 1.696 149.890 47.604 1.358 222.254 $ 4.674) (262) (92.472 $ 324.891 5.867) 50.138.002 ($ 1.604 (939.564 247.147 (19.594) (2.628 - $ 4.020 1.829 390.467.191.000 (22.807 (74.902.360 357.319 18.726) 63.299 40.135 107.457.147 3.Controladora Mabe.346.299.828) $ 2.151 1.045.270 620.836 3.602) (140) (92.652 774. de C.416 184.135 80.710 (30.454 33.642 64.351 135.924 342.603 2.Net Derivative financial instruments Total assets Liabilities and Stockholders’ Equity Short-term liabilities: Current portion of long-term debt Notes and accounts payable to suppliers Factoring Other accounts payable and accrued expenses Taxes payable Derivate financial instruments Total short-term liabilities Long-term liabilities: Long-term debt Deferred income tax Employee benefits Warranties and other long-term liabilities Derivative financial instruments Total liabilities Stockholders’ equity: Capital stock Inflation adjustment to capital stock Additional paid-in capital Retained earnings Consolidated effect of deferred income tax Cumulative traslation effect of foreign entities Valuation of derivative financial instruments Non-controlling interest Total stockholders’ equity Contingencies Total liabilities and stockholders’ equity $ 1.816 (744.346.098) 316.088.628 $ 1.518 $ 1.566 93.158 384.352) (642.601.469 623.472 $ 4.653 43.242 (2.646.497 330.002 ($ 1.129 657.379 30.224 - ($ 744.299.709 (30.791) (11.397.111 107.104.518 $ 1.829 2.475) (20.580 62.902. 2012 Thousands of US dollars Parent company Combined guarantors Parent company and combined guarantors Assets Eliminations Non-Guarantors Eliminations Consolidated Current assets: Cash and cash equivalents Accounts receivable .344 378.916 37.916 37.921 850.370 264.207 1.864 (122) 425.977 197.850) 1.150 33.853) (17.942 47.092 ($ 4.925 180.092 ($ 4.242 - $ 25.442 52.103) 2. A.480 421.191.399 353.831 120.462 37.000 250.878 832.823.660) (7.626 47.207 3.902.372 - $ 77.481 47.254 $ 42.132 - ($ 2.975 44.469) (623.568) 23.419) - $ 23. 204 9.534 106.104 96.052 805.791) 4.304) F-75 .186) $ 11.804 10. 2012 Thousands of US dollars Parent company Combined guarantors Eliminations Parent company and combined guarantors Non-Guarantors Eliminations Consolidated Net sales: Domestic Export $ 2.173) ($ (16.574 $ 11.047) 15.304) Loss from controlling interest Loss from non – controlling interest Consolidated net loss for the period ($ (15.513 97.335 52.932 (244.Net Loss before income tax benefit (expense) and participation in the results of joint venture Income tax benefit (expense) Participation in the results of joint venture Consolidated net loss ($ 1.259 140.165 (37.072 (130) 14.710 407.775) (381.651) (21.463 (163) (163) - 19.683) 4.176 $ 96.614 (21.800 $ 555.812) ($ (4.972 8.912) (31.116) Operating income Other expenses . and subsidiaries Supplemental Unaudited Condensed Combining Income Statements For the three months ended March 31.103 45.371) 4.248) 21.763 348.942) 19.304 (10.570 (2.265 681.583) (147.181 (382.824 (2.812) (15. de C.430 922 11.405 76.812) 14.794) 35.275 547.173) ($ 15.089 156.459 78. A.210 (2.950 336 336 19.303) 15.470 775.509 98.458) (27.303) $ 15.399) 2.176 Variable costs: Production costs Selling and administration expenses 791 791 Contribution margin Fixed expenses: Production costs Selling and administration expenses 1.474 131.205 295.693) (919) (382.257) (10.776 (92) 9.226 75.103 45.942 ($ (14.490 931.801) $ 676.380) (3.333 400.719) (15.282) (99.013 ($ 143.942 14.871 425.186 640.257 ($ (19.568) (120.303) $ 14.612) (163) $ 24.594) (239.741 2.812) (14.578 24.Net Comprehensive financing cost .Controladora Mabe.642 52.388) 139 11.873 64.619 93.942 $ (14. S.337 42 15.741 $ 165.598 7.976 11.173) ($ (11.239 677.564 (15.118 ($ (5.891 730.405) (19.488 15.399) (18.701 64.739) 4.775 254.850) (26. V.388) 1.202 653.173) 15. de C.193) $ 33.450 61.182 119.465) $ (47.Net Loss before income tax benefit (expense) and participation in the results of joint venture Income tax benefit (expense) Participation in the results of joint venture Consolidated net loss $ 539 (657) 35.controlling interest Consolidated net loss for the period $ (24.916) (24.773) (58.123 86.408 $ 184.913) $ 12.292 131.007 713.800 (657) (14.301 1.692) (132.941) $ (12.117) $ 46.733 (95.123) $ 641.518 543.773) (11.145 (4.679 664.052) (141) 59.591) 21.549) (13.357 2.408 331.382) 36.744) 84.381 2.932 45.956 211. 2011 Thousands of US dollars Parent company Combined guarantors Eliminations Parent company and combined guarantors Non-Guarantors Eliminations Consolidated Net sales: Domestic Export $ 1.667 63.618 (975) (334.045) 8. and subsidiaries Supplemental Unaudited Condensed Combining Income Statements For the three months ended March 31.403 140.057 (2.264 362.531) (334.352) 59.077) 271.226 (2.941) $ 2. V.988 (333.501 $ 504.319 64.574 Variable costs: Production costs Selling and administration expenses 604.236 395.285 $ (152.248 (9.837 629. S.114) (1.664) (1.Controladora Mabe.058) (1.978) (33.618 853.941) (24.932 45.117) (47.425 61.028) (107.465) (24.134) (2.949) (4.767 728.408 1.088) Operating income Other expenses .034) (24.151) (24.493) 8.261 (476) (49.465) Loss from controlling interest Loss from non.074 590.854) (141) (141) 476 - 15.117 46.465) $ (47.262) $ 3.263 36.405 81.562 8.396 704 704 (12.609 8.641 $ (11.821 103.645) 10.379) (24.Net Comprehensive financing cost .470 (20.117) $ (476) 47.641 $ (24.389 $ (10.911 369.067) (31.171 Contribution margin Fixed expenses: Production costs Selling and administration expenses 704 165 165 15. A.838 $ (19.849 12 (23) 3.293 $ 104.859) 2.117) (47.947 (3.070 (3.270 95.662) (181.459 (2.641 46.569 (236.463 100.627 489.465) F-76 .406) (110) (24. A. and subsidiaries Supplemental Unaudited Condensed Combining Statements of Cash Flows For the three months ended March 31.458) 486 3.417 19.016) 5.727) (29.440 19.180) 13.639) 179.497 68 1.603 74.217) 369.885 (44.070 (15.485 102.160) (1.Controladora Mabe.250 (23) (23) 4.288) (1.360 (141.197 14.104 (7. 2012 Thousands of US dollars Parent company Combined guarantors Eliminations Parent company and combined guarantors Non-Guarantors Eliminations Consolidated Operating activities: Loss before income tax benefit (expense) and participation in the results of joint venture Ítems related to investing activities: Depreciation and amortization Interest income Net foreign exchange loss (gain) $ (19.221) (7.082) (110.305 $ (75.053) (18.627 (33.729 F-77 .806) (5.615) 44.907) 25.422) $ (6.046) (732) 17.678 (373.580) (277) 33.585) 25.930) (3.587) (6.872) 16.630) (159. other accounts payable and accrued expenses Income tax Employee benefits Net cash flows from (used in) operating activities Investing activities: Acquisition of property.885) 10.413 (191.485 (154.069) 16.284 (417.299 36.852 (23.791) $ 15. S.336 (1.389 98.015 (40.389 (1.848) (46.666) $ 1.638) (44.387) (1.286 256.675 77.173) 5.387) (13.080) (13.125) 15.819) (175.719) $ (16.927 (182.933) (64.082) (110. machinery and equipment Net cash flow from (used in) investing activities Financing activities: Loans obtained Interest paid Net cash flows from financing activities Adjustment to cash flow from variations in foreign exchange rates and inflation levels Decrease in cash and cash equivalents Cash and cash equivalent at beginning of period Cash and cash equivalent at end of period $ 13.190 52.125) (4.263 1.213 (101.885) 54.103 (288) (5.250 15.080) (11.580 4.082) 98.846 $ 7.103 (3.806) (5.946) 79.518) (1.245 (4.872 16.683) (2.148) (4.530) 18.864 (13.244 (179.733 183.711 19.702 $ (19.444 35.284 (219.627 (33.038 (2.555) 1.180) (6.218 46.704) (29.846 179.819) $ 89.067 - 17. V.630) 19.679) 463 359.908) 954 Items related to financing activities: Interest expense (Increase) decrease in: General Electric Company (Shareholder) Accounts receivable Inventories Prepaid expenses Notes and accounts payable to suppliers Other assets.217) 173.695 (5.087 (1.082) - (110.484) (9.271) - 19.147 12.072 $ $ (4.069) (191.647 29.832 $ (175.565 $ 88.077) - 4.413) 182. de C.459 (5.100) 549 1.096 - (110.399) 35.148) (11. 647) 69 210.661) (388.121 (218.955) 91.616) (6.039 7.821) $ 37.082) 13.491) 38.591) 41.311) (65.343 (8.056 (68.456) 10.648 (5.128) 212 (48.530 789 (1.648) 18.849 (1.164) (55.000 (199.711) 10.470 $ 3.067) $ 24.393 (216.761 49.531) 186.395 (146.592 81.Thousands of US dollars Parent company Operating activities: Loss before income tax benefit (expense) and participation in the results of joint venture Items related to investing activities: Depreciation and amortization Interest income Net foreign exchange loss (gain) Items related to financing activities: Interest expense (Increase) decrease in: General Electric Company (Shareholder) Accounts receivable Inventories Prepaid expenses Notes and accounts payable to suppliers Other assets.087 (73.959) (46.288) 3.885 (5.937) (11.891) 19.340 (13.354) 753 (212.155) (297.668 (1.252 10.576) (28.198) (42.434) (9.213) 292.912) 20.124 54.887 67.555) 150.647) 69 62.002) 516.847 23.279) 480.849 (7.133) 71.533 (18.673 42.118) 20.567) (362.918) (27.966) 212.792 $ (55.241) (4.313) 13.458 $ (476) $ (11.354) (7.535) (16. other accounts payables and accrued expenses Income tax Employee benefits Net cash flows from (used in) operating activities Investing activities: Acquisition of property.949) 36.821) (3.678 $ 475 (3.044) (1.131) $ (19.932 (377) 44.538) (10.309) 187.797 19.200) (10.720 532 (4.671 (8.948 409.637) (339.420) 5.299) 87.932 (3.671) (8.067) 4.682) (5.159 61.545) (102.422 5.933 $ (17.459 (2.819 $ (17.048) 112.305 (135.985 52. machinery and equipment (Acquisition) disposal of other assets Net cash flows apply to (used in) investing activities Financing activities: Loan payments Interest paid Net cash flows used in financing activities Adjustments to cash flow from variations in foreign exchange rates and inflation levels Decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period $ $ 36.668) (46.423) (10.541 (27.405 (8.972) (31.705 9.058) (58.854 (23.610 (158.718 $ (47.562) (71.859 (297.389) 20.134) 15.515 Combined guarantors Parent company and combined guarantors Eliminations Non-Guarantors Eliminations Consolidated (83.056 (372.270 (6.073 20.974) (92) (6.544 F-78 .497 830 137.852 33.317 (8.109) (10.520) 18.511) (4.447 14.852) (710) 5.664) 21.176 $ (12.269 532 338.155) 753 220.819 3.117) 15.314) 76.193 (5. 4E New York. NY 10286 United States .The Trustee. Registrar. Paying Agent and Transfer Agent: The Bank of New York Mellon 101 Barclay Street.