STRENGTH IN OUR STRATEGY

Arcos Bosques Marco IIPaseo de Tamarindos 90, Tower 1

25th, Bosques de las LomasC.P. 05120, Mexico City, Mexico

consorcioara.com.mxara.com.mx

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2013STRENGTH IN OUR STRATEGY, CLARITY IN OUR DIRECTION.

ANNUAL AND SUSTAINABILITY REPORT

In Consorcio ARA we maintain a solid commitment to our clients; we know that the homes we offer are a patrimony to share with the family, the fulfillment of a dream and a just reward for many years of hard work and dedication. This is why we work every day to fulfill our mission to develop homes and commu-nities where people can be proud to live.

In our 37 years of experience, we have built and sold over 298 thousand houses, which are home to 1.2 million Mexicans. This is a source of pride and also a challenge to continue maximizing the value proposi-tion for our clients.

Our range of products includes the construction and marketing of progresiva, affordable entry level, middle income and residential housing. We have also successfully diversified our activities through the development and operation of six shopping malls.

We have a healthy financial structure and a mod-erate level of debt. For eight consecutive years we have maintained the best credit ratings for the Mexican housing sector: “mxA” by Standard & Poor’s and “A2.mx” by Moody´s, both with a sta-ble outlook. Since 1996, we have been listed on the Mexican Stock Exchange under the symbol ARA*, and our ADRs are quoted on the New York Stock Exchange.

MISSIONTo develop homes and communities for Mexican lifestyles, where people can be proud to live.

VISIONTo be the most reliable, profitable and innovative real estate developer in Latin America.

Investor Relations

Alicia Enriquez Pimentel [email protected](52.55) 5596 8803(52.55) 5246 3100 Ext. 4096

Independent Auditor

Galaz, Yamazaki, Ruiz Urquiza, S.C.Member of Deloitte Touche Tohmatsu Limited

FOUNDING MEMBER OF

VIVIENDA Y ENTORNO

SUSTENTABLE, A.C.

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CONTENTSFINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . 1

PRESENCE ANDLAND BANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

MESSAGE TO OURINVESTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

RESULTS 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

HOUSING SECTOR IN MEXICO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

HOUSING PRODUCTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

STRATEGY AND INTEGRATION . . . . . . . . 22

SUSTAINABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

CORPORATE GOVERNANCE . . . . . . . . . . . . . . 36

BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . 38

ABOUT THIS REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 49

| G4-9 |

FINANCIAL HIGHLIGHTS 2013 2012Total Current Assets 13,602.9 13,967.4Total Assets 15,714.0 16,375.9Total Current Liabilities 1,564.7 2,661.9Total Liabilities 5,486.8 6,662.5Retained Earnings 9,154.6 8,687.1Stockholders’ Equity 10,227.1 9,713.4 +5.3%Net Working Capital 13,123.1 12,775.6Capital Expenditures 22.5 35.9Cost Bearing Debt 2,430.6 3,179.8 -23.6%Net Debt 1,787.6 1,563.4Revenues 5,735.7 6,514.7

Units Sold 10,862 13,517Average Price (thousands of pesos) 515.1 472.7Gross Profit 1,550.3 1,863.5Income from Operations 528.4 751.3Financial Expenses – Net 8.1 4.2Net Income 464.3 567.4EBITDA 897.3 1,157.0

Gross Margin 27.0% 28.6%Operating Margin 9.2% 11.5%Net Margin 8.1% 8.7%EBITDA Margin 15.6% 17.8%Free Cash Flow for the Firm -50.8 660.4

LEVERAGE RATIOS 2013 2012 /Stockholders’ Equity 0.24 0.33Cost Bearing Debt /Total Assets 0.15 0.19 /EBITDA (12m) 2.71 2.75Net Debt / EBITDA (12m) 1.99 1.35Net Debt / Stockholders’ Equity 0.17 0.16Interest Coverage 4.37 4.73Total Current Assets Less Inventory / Total Current Liabilities 1.38 1.15Total Liabilities / Stockholders’ Equity 0.54 0.69

Millions of pesos

Times

| G4-5, G4-6, G4-8 | PRESENCE AND LAND BANK

As of December 31, 2013, Consorcio ARA’s land bank con-sisted of 39.5 million m2 distributed around 19 Mexican states, and was adequate to build 163,644 master-plan homes. This reserve includes 2.9 million m2 for real estate projects other than housing, such as shopping malls, indus-trial parks and tourism developments.

Our land bank is strategically located in areas of the coun-try with high economic and population growth, and its ac-quisition value at the close of 2013 was $4,734 million, in accordance with the International Financial Reporting Stan-dards (IFRS).

In light of the current housing policy, all our land bank is suitable for housing development, which is a key competi-tive advantage and clear differentiating factor within our sector.

In light of the current administration’s housing policy, all our land bank is suitable for housing development.

2 annual and sustainability report 2013

State Units %

State of Mexico 53,003 32.4

Quintana Roo 38,279 23.4

Nuevo León 10,742 6.6

Baja California 9,261 5.7

Veracruz 8,374 5.1

Puebla 7,478 4.6

Guerrero 7,437 4.5

Hidalgo 6,861 4.2

Jalisco 5,449 3.3

Tamaulipas 4,438 2.7

Querétaro 3,955 2.4

Guanajuato 2,243 1.4

Morelos 2,032 1.2

Sonora 1,814 1.1

Nayarit 1,051 0.6

Federal District 1,010 0.6

Chihuahua 115 0.1

Sinaloa 72 0.04

Tabasco 30 0.02

TOTAL 163,644 100

LAND BANK > BY HOUSING TYPE

Operation in:

16 States 18 Cities 34 Municipalities 43 Developments

States in which we operate

States with land bank

18.7%

57.5%

16.7%

7.1%

Progresiva

Affordable entry level

Middle income

Residential

PRESENCE

strength in our strategy, clarity in our direction 3

GOOD PROSPECTS

Given the panorama of 2013, Consorcio ARA showed it has strength in its strategy and clarity in its direction.

In light of the poor results of the previous year, 2014 prom-ises to be a year of great challenges and opportunities in which Consorcio ARA can deploy its institutional strength, flexibility and operating effectiveness to firmly establish it-self as a leader in the Mexican housing sector.

Looking ahead to 2014, and given the current situation, the outlook for economic activity in Mexico is positive. The factors that contributed to the 2013 slowdown have been mitigated and, given the recently adopted structural reforms, this outlook has a potential upside. In particular, employment, wages and consumer confidence are expect-ed to improve.

Favorable conditions for Mexico are confirmed by the sup-port of the rating agencies and the expectations of eco-nomic analysts for over 3% GDP growth in 2014, against an increase of only 1.1% in 2013.

During 2013, the Mexican economy lost momentum in an environment of low growth in world trade and less public spending, as often happens at the start of a new federal administration.

The mortgage market was not immune to this down-turn. Both the number of mortgages granted and their amounts fell by 10% and 4%, respectively, in 2013 com-pared to 2012.

Today, however, there are new mortgage schemes that give consumers greater purchasing power and access to higher-value housing, which in turn represents a com-petitive advantage for the marketing of our products. In 2014, INFONAVIT is expected to grant 380,000 credits and FOVISSSTE, 75,000.

The new housing policy announced in early 2013 is aimed at achieving greater urban integration through land re-covery, re-densification and development in areas where it is needed. In ARA we see the federal subsidy program as a public policy instrument designed to strengthen cities and support social development. The Federal Government announced an ambitious subsidy program to which it will allocate 12.6 billion pesos in 2014.

In 2013, we were careful to implement strategies to address market segments eligible for subsidy, while maintaining a

| G4-1, G4-2 | MESSAGE TO OUR

INVESTORS


2014 will be a year of great challenges and opportunities in which Consorcio ARA can deploy its solid institutional strength, flexibility and operative effectiveness to firmly establish as the leader of the Mexican housing sector.

5

MESSAGE

wide and diversified range of products that includes middle income and residential hous-ing: distinctive, key segments in ARA’s business model.

Mexico’s housing market is ever more sophisticated, competitive, dynamic and changing. Consumers, meanwhile, have evolved to become more demanding and knowledgeable, and satisfying their needs has therefore become more challenging.

In ARA we are very aware of this reality, which is why we look after quality, customer service, location and environment. We have made significant efforts to innovate and en-hance the architectural and urban design of our housing developments, through major urban infrastructure works, with an emphasis on quality of life and sustainability.

As an example of the aforementioned, Consorcio ARA was recognized with the Work of the Year Award 2013, in its tenth edition, in the “Housing Development” category, awarded annually by Grupo Expansión.

Another element of diversification is our group of six shopping malls in operation, adja-cent to our housing developments and forming a gross leasable area (GLA) of 157,000 m2, as well as unicenters and minicenters with 7,500 m2 of GLA.

Sustainability is an integral part of our business vision and we, therefore, maintain a com-mitment to our clients, suppliers and investors. We are convinced that good operative and financial performance should be accompanied by an equally solid performance in environmental and social spheres.

PARAÍSO COUNTRY CLUB, Morelos SEGMENT: Residential


Work of the Year Award 2013

Ing. Germán Ahumada Russek Ing. Luis Felipe Ahumada Russek

“Housing Development”Category

This report details our activities in these dimensions, and for the second year it was done under the standards of the Global Reporting Initiative (GRI). It should be mentioned that for the fiscal year 2013 and for the eighth consecutive occa-sion, Consorcio ARA was recognized as a Socially Responsible Company by the Mexican Center for Philanthropy.

Despite the liquidity crisis that deeply affected some companies in our industry, ARA maintained its credit rating from Standard & Poor’s at “mxA” and from Moody’s at “A2.mx,” both with a stable outlook. We have held the highest credit rating in the Mexican housing sector for eight years running.

In financial terms, we made three notable achievements in 2013: i) debt reduc-tion; ii) capital increase; and iii) debt rescheduling.

We reduced our cost bearing debt by 750 million pesos, or 23.6%, and increased stockholders’ equity by 514 million pesos, or 5.3%. Furthermore, in an environ-ment of scarce funding for the housing sector, in ARA we were able to satisfac-torily reschedule debt. At the close of 2013, short-term debt was 15.8% and long-term debt, 84.2%, which compares favorably to maturity at the close of 2012, of 34.4% short term and 65.6% long term. Moreover, ARA has credit lines for bridge loans amounting to 2 billion pesos. All this leaves us in a strong financial position and allows us to envision a bright future.

The annual yield of the ARA* share in 2013 was 23.7%, a figure that contrasts with the performance of the CPI of -2.2%. At the close of 2013, ARA represented 66% of the market value of all the housing companies listed on the Mexican Stock Exchange.

Our great team at ARA shares the responsibility and challenge to generate value. We focus on what we do best and our strategies are supported by our actions. We work to substantially improve the coordination of business and construc-tion cycles. We anticipate change and are flexible enough to meet it head on.

We appreciate the commitment and dedication of our employees and the con-fidence of our clients, suppliers and shareholders, with whom we share a solid, long-term business vision based on professionalism and perseverance, financial prudence and a focus on generating value.

We have strength in our strategy and clarity in our direction.

Chief Executive Officer Chief Executive Officer Housing Division Shopping Malls Division

MESSAGE

Our great team at ARA shares the responsibility and challenge to generate value. We work to substantially improve the coordination of business and construction cycles. We anticipate changes and are flexible enough to meet them head on.


2013

15.3%

27.1%

Progresiva


18.5% Progresiva

26.3%

37.5%

15.8%


Middle income

Residential

34.8%

20.3%

Middle income

Residential

2.5% Other

1.9% Other

RESULTS2013

REVENUES BY TYPE OF HOUSING

2012 UNITS AVERAGE REVENUES [2] % UNITS AVERAGE REVENUES [2] % PRICE [1] PRICE [1]

PROGRESIVA 3,110 282.0 877.0 15.3 4,391 274.8 1,206.9 18.5

AFFORDABLE ENTRY LEVEL 4,297 361.4 1,552.7 27.1 4,834 353.6 1,709.4 26.3

MIDDLE INCOME 2,779 719.5 1,999.4 34.8 3,683 662.9 2,441.6 37.5

RESIDENTIAL 676 1,724.1 1,165.5 20.3 609 1,692.9 1,031.0 15.8

HOUSING TOTAL 10,862 515.1 5,594.5 97.5 13,517 472.7 6,388.9 98.1

OTHER REAL ESTATE PROJECTS 141.2 2.5 125.8 1.9

TOTAL 10,862 5,735.7 100 13,517 6,514.7 100

[1] Figures in thousands of pesos. [2] Figures in millions of pesos.

PERCENTAGE OF REVENUES > BY TYPE OF HOUSING 2013

PERCENTAGE OF REVENUES >BY TYPE OF HOUSING 2012



RESULTS 2013

2013

54.7%

11.3%

INFONAVIT

INFONAVIT TOTAL, INFONAVIT TOTAL AG AND COFINAVIT

FOVISSSTE

SHF, Banks and without credit

51.3%

15.7%

24.0%

INFONAVIT

INFONAVIT TOTAL, INFONAVIT TOTAL AG AND COFINAVIT

FOVISSSTE

24.4%

9.6%

9.0%

In 2013 we maintained a wide and diversified offer that includes medium and residential type housing, segments that are distinctive and essential in ARA’s business model.

TITLED HOMES BY TYPE OF FINANCING

2012 INSTITUTION NUMBER OF NUMBER OF

TITLED HOMES % TITLED HOMES %

INFONAVIT 5,937 54.7 6,934 51.3

INFONAVIT TOTAL, INFONAVIT TOTAL AG AND COFINAVIT 1,230 11.3 2,119 15.7

SUBTOTAL 7,167 66.0 9,053 67.0

FOVISSSTE 2,648 24.4 3,239 24.0

SHF, BANKS AND WITHOUT CREDIT 1,047 9.6 1,225 9.0

SUBTOTAL 3,695 34.0 4,464 33.0

TOTAL 10,862 100 13,517 100

PERCENTAGE OF TITLED >HOMES BY TYPE OF FINANCING 2013

PERCENTAGE OF TITLED >HOMES BY TYPE OF FINANCING 2012

SHF, Banks and without credit

AN APPEALING MARKET

While the Mexican economy experienced difficult times in 2013, 2014 is expected to be a better year for our sector.

The housing sector was affected by the economic deceleration the country experienced. In 2013, both the number of mortgages granted and the amounts of those mortgages fell by 10% and 4%, respectively, compared to 2012.

Nevertheless, Mexico continues to be an attractive housing market. Macroeconomic indicators remain reasonably solid; the population growth rate and its average age (low in comparison with other nations) raise the appeal of the demographic bonus, in addition to the great housing deficit that persists in the coun-try: around 9 million homes according to data from the Federal Mortgage Society.

HOUSING SECTOR

IN MEXICO

ALTAVELA, Nayarit SEGMENT:

Middle income


HOUSING

Today there are new mortgage plans that increase the borrower’s purchasing capacity and give access to better quality housing, which is a competitive advantage for ARA.

11

HOUSING SECTOR

IN MEXICO

HOUSING

In addition to the above, the housing policy rolled out by the current administration seeks to achieve greater urban integration, strengthen our cities and contribute to social development. Under the leadership of the Secretariat of Agrarian, Land and Urban Development (Secretaría de Desarrollo Agrario, Territorial y Urbano, SEDATU), this new strategy fosters effective coordination between housing bodies and com-mercial banking which results in better housing options for Mexicans.

The Federal Government announced a 12.6 billion-peso subsidy program for 2014, which will undoubtedly contribute to the recovery of the sector. Both INFONAVIT and FOVISSSTE, which altogether provide more than 80% of housing credit in Mex-ico, are expected to grant over 450,000 housing loans in 2014.

12

HOUSING

Elements such as the new housing policy, access to a second INFONAVIT credit and the Federal Government subsidy program, enable us to forecast a good year for our sector in 2014.

NUEVO PALMA REAL,

Veracruz SEGMENT:


Today there are new mortgage plans that increase the borrower’s purchasing capacity and give access to better quality homes, which represents a competitive advantage for ARA since our product range also includes middle income and residential housing.

Moreover, both INFONAVIT and FOVISSSTE have been adjusting and enhancing their mortgage products, such as the possibility of acquir-ing a second INFONAVIT credit as well as mortgage access for state and local government employees.

All this allows us to look forward to a good year for our sector in 2014.

COLINAS DE ALTAR,

Morelos SEGMENT:



DIVERSIFICATION AND PROFITABILITY

Our mix of products includes progresiva, affordable entry level, middle income and residential housing.

HOUSING PRODUCTS

14

A key part of ARA’s value proposition is the diversification of our housing product range. This attractive mix is a strategic competitive advantage.

| G4-4 | At the close of 2013 we had 43 developments in operation with progresiva, affordable entry level, middle income and residential developments in 16 states around the country. Our objective is to position ourselves in the most profitable housing sectors that better satisfy the needs of our clients.

In Consorcio ARA we have the capacity and experience to serve middle income and residential segments, sectors with favorable growth expectations. In the last two years, those segments have represented more than 50% of our total income.

PRODUCTS

FORESTA CRYSTAL LAGOONS,

State of Mexico SEGMENT:Residential

15

PROGRESIVA

PRICE RANGE:$230,000 to $300,000

CONSTRUCTION [m2]:38 to 45

LAND [m2]:60 to 96

MORTGAGE FINANCING:INFONAVIT, FOVISSSTE**,SHF, SOFOLES

MONTHLY INCOME:$4,000 to $8,000

TMMS***:2 to 4

SOCIOECONOMIC LEVEL:D

PRICE RANGE:$300,001 to $550,000


LAND [m2]:70 to 96

MORTGAGE FINANCING:INFONAVIT*, FOVISSSTE**,SHF, BANKS, SOFOLES


TMMS***:4 to 10

SOCIOECONOMIC LEVEL:D+ / C-

AFFORDABLE ENTRY LEVEL

PRODUCT PORTFOLIO

*Includes every financing scheme: Infonavit Total, Cofinavit, Apoyo Infonavit.**Includes every financing scheme: Alia2 Plus, Respalda2, Conyugales, Pensiona2.***Times the Minimum Monthly Salary, equal to $2,045.61 pesos in 2014.


PRICE RANGE:$550,001 to $1,100,000


LAND [m2]:96 to 140



TMMS***:10 to 20

SOCIOECONOMIC LEVEL:C

PRICE RANGE:From $1,100,001


LAND [m2]:120 to 500


MONTHLY INCOME:More than $39,001

TMMS***:More than 20

SOCIOECONOMIC LEVEL:C+

MIDDLE INCOME

RESIDENTIAL

Our aim is to position ourselves in the most profitable housing sectors and which best satisfy our clients’ needs.

PRODUCTS


PRODUCTS

❱ Affordable entry level and middle income housing

PRODUCT DIVERSIFICATION

❱ Middle income and residential housing

❱ Urban concentration and sustainability projects

❱ Residential areas

❱ Projects with clear lagoon

INCOME MIX

Units100%

80%

60%

40%

20%

0%

100%

80%

60%

40%

20%

0%2009 20092011 20112010 20102012 20122013 2013

37.0%

22.7%

33.0%

28.6%

20.6%

28.6%

4.2%

15.9%

5.2% 4.2%

33.9%

21.5%

34.1%

30.2%

3.3%13.7%

18.2%

25.0%

26.9%

34.8%

27.2%

37.5%

25.6%

34.8%

4.5%

15.8%

6.2%

20.3%

3.7%

13.7%

1.0%3.9%

1.9% 2.5%

10.5% 9.6%

33.8%

19.5%

34.6%

28.1%

32.5%

18.5%

35.8%

26.3%

28.6%

15.3%

39.6%

27.1%

Amount


Progresiva Affordable entry level Middle income Residential Other real estate projects

❱ Shopping center construction and operation

PASEO VENTURA, Project,

State of Mexico

SHOPPING MALLSOur six shopping malls are a key element in our diversifi-cation strategy and the ideal complement to our housing developments, rounding out the Company’s value propo-sition and increasing the appreciation of the surrounding homes.

Thanks to a clear vision of long-term investment, Con-sorcio ARA has been able to anticipate the sturdy demo-graphic growth in the regions where we have built our shopping malls. Thus, the shopping mall segment has continued to grow significantly, despite the challenging economic environment.

Our shopping malls have a gross leasable area (GLA) of 157,000 m2 (in addition to 7,500 m2 GLA in unicenters and minicenters) and in 2013 reported 95% occupancy. During the year these malls received in excess of 28 million visitors; to put this information into perspective, it is the approxi-mate equivalent of a fourth of the national population.

It should be mentioned that at the end of 2013, we sold Plaza Cañada Huehuetoca, a shopping mall in which we had a 50% share.

All this allowed our shopping mall business during the year to increase its total income by 8.8% compared to 2012. The outlook for this segment is encouraging: the growth components of the market - demographics and domestic consumption - remain healthy and there are still regions where we can achieve sustained growth.

PRODUCTS

More than 28 million people visited our six shopping malls during 2013, a figure which represents a quarter of the national population.


We are currently working on the planning and executive design of Paseo Ventura, our most recent development which we plan to open in 2015. This new project is located in one of the most attractive commercial environments of Ecatepec, State of Mexico, and will be the ideal comple-ment to our Las Américas Shopping Mall, currently one of the ten largest in the entire country. The commercial mix

of Paseo Ventura will integrate entertainment and leisure, with a broad range of culinary options.

It is important to mention that with the opening of Paseo Ventura, the gross leasable area of our commercial portfo-lio will reach 178,000 m2, a 13% growth.

20,000 m2 OF GLA1 (ACCORDING TO PROJECT) ◾ PROPERTY: 100% ARA

It is located on Avenida Insurgentes, one of the most interesting shopping areas in Ecate-pec. ◾ Paseo Ventura was created to satisfy the need to complement Centro Regional Las Américas’ fashion and services offer. ◾ It is close to 16 thousand houses that are part of the “Las Américas” Housing Development. ◾ Its secondary influence area covers the Mu-nicipalities of Tultitlán, Coacalco, Texcoco, Tecámac, Acolman and Jaltenco.ECATEPEC,

STATE OF MEXICO

20

PRODUCTS

61,314 m2 OF GLA(1) ◾ PROPERTY: 50% ARA AND 50% PARTNER(2)

It is among the country’s ten largest shopping centers. ◾ Commercial mix that has no competition within a 30-km radius. ◾ It has rapid access roads for public and private trans-portation. ◾ The “Las Américas” Mexibus station provides quick access to the shopping center. The exit to the Circuito Exterior Mexiquense is located less than three minutes away. ◾ Ecatepec has 10,500 inhabitants per km2. ◾ The offer includes a shopping mall, power center, hotel, gym, restaurants and banks.


Community Shopping Center located east of Tijuana. ◾ 75,000 inhabitants only six minutes away and 500,000 inhabitants 20 minutes away. ◾ Shopping Center that is 100% anchored by Comercial Mexicana, Cinemex, FAMSA and Sólo un Precio. ◾ The center’s movie theater records sustained growth (Cinemex). ◾ Competitive advantages thanks to the growth of real estate in the eastern part of Tijuana, which increases the number of potential customers.


Essential shopping source for 512,000 inhabitants. ◾ Direct access to the Mexico-Quereta-ro highway and easy access to public transportation. ◾ Densely populated area with 4,600 inhabitants/m2. ◾ The mix of options includes entertainment, shopping, fashion, food and services. ◾ It has the best banking offer in the area (Bancomer, Banamex, Santander and Inbursa).


Neighborhood Shopping Center located southeast of the State of Mexico. ◾ Close to 24,000 houses, it is the only shopping center in the area. ◾ It has a large and comfortable parking area. ◾ It is strongly anchored by the only Bodega Aurrera in the area. ◾ It is the main source of shopping for 120,000 people. ◾ Located by the Mexico-Puebla highway, it has direct access from both directions.

14,600 m2 OF GLA(1) ◾ PROPERTY: 100% ARA

It is located in an area that has high demographic growth potential. ◾ The main public trans-portation routes in the area go by the plaza. ◾ This plaza is the best commercial offer for the area that is comprised by the municipalities of Cuautitlán, Tultepec and Melchor Ocampo. ◾ The parking area is paved with Ecocreto, a material that enables the filtration of rain water to the underground, naturally replenishing water-bearing stratums.

18,992 m2 OF GLA(1) ◾ PROPERTY: 100% ARA

Located in an area known as Río Medio, which records the highest population and eco-nomic growth in the port of Veracruz. ◾ It is surrounded by more than 180 thousand inhabitants who live in the Río Medio, Las Brisas, Hortalizas, Renacimiento and Playa Linda residential areas. ◾ It offers comfortable facilities and is anchored by a Mega Co-mercial Mexicana. ◾ The demand for basic products and services makes it a shopping center with huge potential in the region.

ECATEPEC, STATE OF MEXICO

CUAUTITLÁN IZCALLI, STATE OF MEXICO

CUAUTITLÁN IZCALLI, STATE OF MEXICO

VERACRUZ, VERACRUZ

IXTAPALUCA, STATE OF MEXICO

TIJUANA, BAJA CALIFORNIA

PRODUCTS


(1) Gross Leasable Area.

(2) O´Connor North America Property Partners.

PRUDENCE AND PROFITABILITY

Our financial strength is a key factor in Consorcio ARA’s strategy and allows us to foresee an optimistic future.

STRATEGY AND

INTEGRATION

22

The financial prudence that characterizes us and our goal to be a high value, moderate growth and profit focused company proved to be the right strategy, as we were able to successfully face a challenging environment in 2013 and emerge even stronger.

STRATEGY

FORESTA CRYSTAL LAGOONS,

State of Mexico SEGMENT:Residential

23

STRATEGY

CITARA, State of Mexico SEGMENT:Affordable entry level

FINANCIAL STRENGTHThe financial prudence that characterizes Consorcio ARA and by which we have always been guided, showed its true worth in 2013. Our strategy to be a high value, moderate growth and profit focused company proved to be right, as we were able to successfully face a difficult environment and emerge stronger off it.

As part of this strategy, we have maintained healthy leverage ratios and moderate debt, as shown by our cost bearing debt to EBITDA indicator, which at the close of 2013 stood at 2.71 times.

Furthermore, in 2013, our cost bearing debt dropped in comparison with 2012 by $750 million, a decrease of 23.6%, and we increased stockholders’ equity by $514 million, an increase of 5.3%. In addition to the above, we were able to extend our debt maturity: at the close of 2013, 15.8% of debt was short term and 84.2%, long term, figures which compare favorably to the 2012 maturities of 34.4% and 65.6% for short and long terms, respectively.

ARA has credit lines for bridge loans amounting to 2 billion pesos. The access to these credit lines as well as the restructuring mentioned earlier have even greater merit in light of the adverse environment in terms of access to financing for the housing sector experienced dur-ing the reported year.

In 2013, and for the eighth consecutive year, Consorcio ARA main-tained the best credit ratings in the Mexican housing sector by both Standard & Poor’s and Moody’s, with “mxA” and “A2.mx,” respectively. We foresee an optimistic future for the Company.

VERTICAL INTEGRATIONConsorcio ARA has long been a vertically integrated company. COMACI (ready-mixed Concrete, Machinery and Formwork) operates eleven ready-mixed concrete plants strategically located to timely supply ongoing developments, which translates to scale economies, better quality and improved delivery times.


VALUE CHAIN

VISTA HERMOSA, State of Mexico

SEGMENT:Residential

Titling processing

Delivery

Construction

Post-sale service

Sales

END

Procurement COMACI

BEGINNING

PurchasesProcess

management

Business and market

analysis

Housing and development

design

Land bank planning and purchasing


| G4-12 |

STRATEGY

FOR THE COMMON GOOD

We are convinced that our economic growth should be accompanied by an equally solid environmental and social performance.

SUSTAINABILITYSTAKEHOLDERS | G4-24, G4-25 | In Consorcio ARA we have defined six stakeholder groups, with whom we maintain strategic long-term relationships based on mutual value gen-eration: employees, clients, suppliers, shareholders, community and government authorities.

| G4-26 | We have various mechanisms to encourage interaction with our stake-holder groups, such as the confidential complaints hotline, quarterly telephone conferences with shareholders, as well as internal e-mail and the “Juntos” em-ployee magazine, among other channels. Similarly, we are in permanent contact with our clients and other stakeholder groups through social networks, particu-larly Facebook, Twitter and YouTube.

Authorities

Employees

Clients

Community

Shareholders

Suppliers


In Consorcio ARA we are convinced that it is our responsibility to contribute to build a better planet for future generations.

SUSTAINABILITY

LOS ALAMOS, State of Mexico

SEGMENTS:Progresiva and


27

ECONOMIC DIMENSION | G4-EC1 | As a key player in the Mexican housing sector, Consorcio ARA’s economic contribution to the country is also important. Our Consolidated Financial Statements show the economic value generated and distributed by ARA during 2013 as part of its commitment to the social, environmental and economic requirements of its stake-holders.

| G4-EC4, G4-SO6, G4-SO7, G4-SO8 | Consorcio ARA did not receive any financial help from the government or make political contributions. The Company did not receive any complaints for monopolistic or anti-competitive practices, or incur any penalties for breach of regulations.

| G4-EC6, G4-EC7, G4-EC9 | We make our purchases centrally, al-most exclusively from domestic suppliers. All our senior of-ficers are Mexican and as far as possible have experience in the locations where they work. In 2013, we invested a total of 896 million pesos in infrastructure and equipment.

| G4-PR2, G4-PR7 | The design and construction of our develop-ments meet all the specifications established in the appli-

cable legislation for urban and housing development. No cases of non-compliance with the regulations were record-ed in regard to advertising or marketing.

| G4-PR8, G4-PR9 | In ARA we are obliged to protect the personal data of our clients in accordance with the Federal Law on the Protection of Personal Data Held by Private Parties. No significant complaints were registered in this respect in any of our projects, and we have technological tools to avoid future occurrences.

ENVIRONMENTAL DIMENSION| G4-14 | In Consorcio ARA we have taken specific actions aimed at the conservation and care of the environment; we are convinced that it is our responsibility to contribute to the building of a better planet for future generations.

Energy and Sustainable Housing

| G4-EC2, G4-EN7, G4-EN19, G4-EN27 | The Green Mortgage program was launched by INFONAVIT in 2010, and grants an addi-

In 2013 ARA applied 7,167 green mortgages, which favors the acquisition of energy efficient housing with low CO2 emissions.


Eco-techniques (2013 and 2012 purchases)

Description 2013 2012

Solar heaters 1,627 583

Energy-saving bulbs 79,072 52,854

Mixer/single lever faucets 27,886 18,312

Water purifiers 6,887 4,802

Econ and residential ecosan toilets 16,199 14,754

Water-saving showers 4,301 8,518

Organic and inorganic waste baskets 1,446 2,700

FORESTA, State of Mexico

SEGMENT: Residential

SUSTAINABILITY

tional amount to eligible potential owners so they can ac-quire housing with eco-techniques, efficient technologies for water, energy and CO2 emissions. During 2013 ARA ap-plied a total of 7,167 green mortgages.

It should be mentioned that besides contributing to the care and conservation of the environment, eco-techniques save families between $215 and $400 pesos a month (ac-cording to studies by the Institute itself) by reducing water and energy consumption.


In addition to eco-techniques, Consorcio ARA includes the necessary facilities in its developments for residents to en-joy a better quality of life. From 2010 to 2013, those facili-ties have consisted of:

• 92 kindergarten classrooms;• 142 elementary school classrooms;• 121 middle school classrooms;• 48 high school classrooms;• 325,414 m2 community gardens;• 135,332 m2 sports area; and• 8,753 m2 children’s playground.

Materials, Water, Biodiversity and Waste| G4-EN1, G4-EN2 | The materials most used in housing construc-tion are concrete and steel. In 2013 we consumed in total close to 432,000 m3 of concrete and 10,900 tons of steel. We do not use valorized or recycled materials for construction.

| G4-EN9, G4-EN10 | We aim for our developments to be efficient in water consumption, and we give them treatment plants so it can be reused. In particular, the ARA Crystal Lagoons projects capture rainwater for consumption in houses. Our operations do not affect any primary water source.

SUSTAINABILITY


| G4-EN11 | Our developments and shopping centers as well as our land reserve in its entirety are located outside pro-tected or high biodiversity areas, and therefore present no danger whatsoever in that respect.

Consorcio ARA volunteers helped to plant 4,300 trees in the Sierra de Guadalupe, in a program promoted by the ARA Foundation and other civil organizations.

| G4-EN6 | As part of our system to improve environmental performance, a recycling and waste management program was rolled out in our corporate offices, through which we collected a total of 1,386 kg of various types of paper, 141 kg of PET, 37 kg of aluminum cans and 362 kg of cardboard.This scheme avoided the felling of 41 trees to manufacture new paper and saved 63,908 liters of water; in addition, the recycled aluminum would be sufficient to light a 60 watt bulb for eighteen months.

| G4-EN13 | In addition the ARA Foundation helped the Civil Association of Mexican Flora, Fauna and Culture and the National Commission for Protected Natural Areas to eradi-

cate the exotic cluster pine, an invasive tree species in the Nichupté Lagoon, in Quintana Roo.

Consorcio ARA, together with PRONATURA México A.C., conducted an Environmental Performance Diagnosis which enabled to identify opportunities to mitigate the impacts on nature and the design of practical policies aimed at reducing energy and water consumption and waste generation, promoting green purchases and lessen-ing the impact on biodiversity.

| G4-15 | The results of the diagnosis enabled PRONATURA to grant Consorcio ARA the “Satisfactory” level Business Sustainability Standard. Thus began the implementation process of the environmental performance improvement system in our operations.

| G4-EN22, G4-EN23, G4-EN24, G4-EN25, G4-EN26, G4-EN29, G4-EN30 | In terms of waste, no dumping or sewage spills were recorded dur-ing the year, nor any kind of waste management or waste transportation. We did not receive any significant environ-mental fines or penalties. To mitigate transport-related en-vironmental impacts as much as possible, we have three transport routes for staff and the COMACI plants are lo-cated close to our projects to optimize the transportation of concrete to our developments.

| G4-EN31 | In summary, in 2013 Consorcio ARA invested $36 million in environmental technologies such as green tech-nologies.

| G4-EN32, G4-LA14, G4-HR4, G4-HR10, G4-SO9 | To date, Consorcio ARA has not investigated its suppliers in terms of their environ-mental, labor, social or human rights practices; however, we recognize the importance of integrating the entire value chain into our vision of sustainability.

SOCIAL DIMENSIONOur social responsibility is based on seeking the well-be-ing of our employees on the inside and the community on the outside.

SUSTAINABILITY

Human Capital

For Consorcio ARA, being a quality employer is a strategic priority; we are convinced that our employees are a key part of the Company’s sustainable success.

Employment

| G4-9, G4-10, G4-11, G4-LA1, G4-HR4 | We recog-nize the right of our employees to join the union of their choice; how-ever, our entire workforce consists of non-unionized staff, who are there-fore not attached to collective bar-gaining agreements. At the close of 2013, ARA had 675 employees (in the Housing Division only), divided in the following way:

By Age

Age Number %

Under 18 0 0%

From 18.1 to 25 years 13 2%

From 26 to 30 years 93 14%




Over 61 years 13 2%

Total 675 100%

By Gender

Gender Number %

Female 272 40%

Male 403 60%

Total 675 100%

| G4-LA2, G4-EC3, G4-EC5 | Consorcio ARA offers its employees an average entry salary several times above the current minimum wage, and allowances and benefits above the requirements of labor legislation:

• Thirty days Christmas bonus.• Vacation bonus. • Savings fund. • Punctuality and attendance award. • Arrangements with restaurants. • Staff transportation. • Arrangements with businesses for

discounts.


| G4-LA4 | The Company is unable to offer its employees a minimum period of notice prior to organizational changes.

| G4-LA3 | Eighteen of our female employees took a total of 1,156 days maternity leave, and they all returned to the Company. Consorcio ARA also offers paternity leave, al-though none of our male employees took advantage of it during the year.

| G4-LA16 | During 2013, twelve work-related complaints were received, of which nine went into procedure.

Training

| G4-LA9, G4-LA10 | Aware that our employees are our most im-portant investment, in Consorcio ARA we aim to provide a work environment that allows personal, social and pro-fessional development. Therefore, in 2013, a total of 10,335 man hours of training were given, an average of 15.3 hours per worker. The topics of the courses were, among others:

• Forming agents of change.• Housing loans advisory workshop.

• Management skills workshop.• Leadership Fundamentals Training.• Training and Development Program for Sales Con-

sultants.

In this regard, 199 of our sales consultants were certified on housing loans under the ECO133 standard.

| G4-52, G4-LA11 | In order to ensure ongoing improvement in all our operations, our employees at all levels and in all areas regularly receive performance and professional develop-ment evaluations. A total of 2,396 such evaluations were given for fiscal year 2013.

Diversity and Equal Opportunities

| G4-LA12, G4-LA13 | Consorcio ARA offers equal opportunities to men and women in terms of hiring, training, develop-ment and promotions, and there are no gender-based differences in wages. 54 of the 272 women who work in Consorcio ARA (20%) occupy management or senior management positions. In addition, Company employees received 35 promotions and 76 salary adjustments.

32

Health and Safety

We know that many of the safety risks at work are caused by natural phenomena or human carelessness. To address this, in Consorcio ARA we foster a culture of safety in the workplace through preventive and coordinated measures.

| G4-LA5 | The aim of the ARA Brigade is to diffuse self-pro-tection measures and promote the active collaboration of staff in risk prevention and management tasks. Thus, 38 of our employees received ARA Brigade training during 2013, while 201 employees participated in the general evacuation drill on September 19.

| G4-LA5, G4-LA6 | The Company has disease prevention and health care schemes for all staff. All our employees are registered with the Mexican Social Security Institute. It is important to note that no human losses were recorded in our work centers in 2013.

Human Rights

| G4-HR3, G4-HR8, G4-HR9, G4-HR12 | In 2013, there were no reports of incidents or complaints related to discrimination or hu-man rights or indigenous rights violations, and our work centers were not subject to inspection in that regard.

| G4-HR2, G4-HR5, G4-HR6 | Consorcio ARA does not employ peo-ple under eighteen years of age and no-one is forced to work against their will. To date, we have not implemented any training programs on human rights for our employees.


For Consorcio ARA, being a quality employer is a strategic priority; we are convinced that our employees are a key part of the sustainable success of the Company.

SUSTAINABILITY

SUSTAINABILITY

| G4-SO1 | ARA FOUNDATION

Through the years, Consorcio ARA has proven to be highly committed to the country’s most vulnerable sectors. The ARA Foundation provides support for construction, urban improvement, education, health, environment and volun-teer projects. In summary, the ARA Foundation and its

partners performed over 569 thousand actions of social responsibility in 2013.

The social commitment of Consorcio ARA led to the Com-pany being recognized once again with the Socially Re-sponsible Company distinction from the Mexican Center for Philanthropy (CEMEFI).

Initiative Program Actions in 2013 Beneficiaries in the year Investment

HabitARA

Partnerships that Build (Alianzas que Construyen)

• As a key part of the PROVIVAH Trust Fund, 1,920 homes were built, adding up to 19,653 over the last eight years to the benefit of 98,265 people.

9,600 $480 million

Urban Heart (Corazón Urbano)

• Training for 1,897 people to learn trades: painter, weather-proofer and stucco applier.

• Urban image enhancement of fourteen municipalities by the painting of 44,914 facades.

224,570 $224 million

United for Them (Unidos por Ellos)

• In the aftermath of hurricanes “Ingrid” and “Manuel”, the ARA Foundation and more than 70 companies attended and helped thousands of victims in 254 municipalities.

• Together with DIF Nacional, the Armed Forces, SEDESOL and a variety of Federal Government agencies, more than 276,285 tons of food, 580,000 liters of water, 20,784 toiletry products and 11,265 units of equipment and supplies such as mobile kitchens, water plants and school kits were channeled to the devastated areas.

• Through the banks and employees of companies in the network, more than $168 million was collected; ANTAD, UNIRED and CADENA set up 1,053 collection centers and with the help of Volaris, 1,885 people were transferred to safe zones.

EducARA

Just Raise your Hand(Sólo Levanta la Mano)

• To generate a positive, long-term impact on the education of Mexican children.

• Nine more schools were affiliated to the program, making twenty-six in twenty-one states.

• In the last three years 7,028 children, 280 teachers and 4,615 parents have benefitted.

4,500 $52 million

See Well to Learn Better (Ver Bien para Aprender Mejor)

• In partnership with the Ver bien para Aprender Mejor Trust Fund, 423 thousand children in 6,157 schools of sixteen states were tested.

115 thousand glasses were

given$57 million

Mayatlón • Together with our suppliers, we donated cement, lime and kitchenettes for the construction of rural teacher housing in the community of Pacchen, Quintana Roo.

From Middle School to the Antarctic (De la Secu a la Antártica)

• A grant was authorized for one student to participate in an expedition to the Antarctic.

1 $162,500


The ARA Foundation and its partners carried out over 569,000 acts of social responsibility in 2013.

Initiative Program Actions in 2013

ARA Community

I Volunteer (Soy Voluntario)

• Collection of toys for Children’s Day, with the partici-pation of our staff.

• For Children’s Day and with the participation of ARA staff, more than 2,450 toys were gathered for children in twelve pediatric hospitals in Mexico City, the Acapulco General Hospital, Movimiento RAS for children with cancer and the JUCONI Foundation.

Health Rally (Rally de la Salud)

• 120 optometry tests were given to ARA employees and their families; in turn, staff donated 160 pairs of glasses to low-resource children.

Summer and Teletón Campaign 2013

• More than thirty volunteers from the ARA Founda-tion participated in activations attended by 200 children.

• With the participation of ARA employees $35,600 was collected in the second annual collection in support of Teletón.

• In conjunction with Cementos Moctezuma, 70 tons of cement were delivered to the Teletón Children’s Oncology Hospital in Querétaro.

Race for Housing (Carrera por la Vivienda)

• 120 runners with a cause, ARA staff and families participated and donated 240 pairs of glasses for low-resource children.

Sale of Products with a Cause (Venta de Productos con Causa)

• Our employees purchased more than 1,700 Products with a Cause in the ARA Boutique, resources which help our partners to provide jobs to young people with different abilities and treatment for children with cancer.


Visit our 2013 Annual Report in: www.fundacionara.org.mx

WE ARE GRATEFUL TO OUR PARTNERS:

Companies3e de México, Alltournative, ANTAD, ATEN-TO, CANADEVI, Cementos Moctezuma, CEMEX, Cinépolis, COMEX, Costco de México, FTP, Galia Moss, HSBC México, Of-fice Depot, Universidad Anáhuac, Vitromex de Norte América Construcción, Volaris, Walmart de México.

NGOsBécalos, Casa de la Amistad para niños con Cáncer, Centro Mexicano para la Filantropía, CENACED, Chunches, Comité de Ayuda en casos de Emergencias Nacionales, Consejo de la Comunicación, Corazón Urbano, Cruz Roja de México, Fideicomiso PROVIVAH, Fideicomiso Ver Bien para Aprender Mejor, Flora, Fauna y Cultura de México, Fundación Audios, Fundación Barrilito, Fundación Chedraui, Fundación Chrysler, Fundación CO-MEX, Fundación Dr. Simi, Fundación Gonzalo Río Arronte, Fundacion Karla Wheelock, Fundación Lazos, Fundación Telefónica, Fundación TELETÓN, Fundación Televisa, Fundación Vizcarra, Inclúyeme, KADIMA, Nacional Monte de Piedad, PRONATURA, Recupera Centros de Reciclaje, UNICEF, UNIRED.

GOVERNMENTCONAVI, Iztacalco delegation, DIF of the State of Mexico, FONHAPO, governments of the states of Baja California Norte, Baja California Sur, Chiapas, Chihuahua, Coa-huila, Colima, Mexico City, State of Mexico, Guanajuato, Guerrero, Hidalgo, Jalisco, Mi-choacán, Morelos, Puebla, Quintana Roo, Sonora, Tabasco, Tamaulipas, and Yuca-tán, municipalities of Cozumel, Ecatepec, El Marqués, Ixtapaluca, Jacala, Metepec, Naucalpan, Pachuca, Tlajomulco de Zúñiga and Zapopan, the Office of the First Lady of Mexico, Ministry of Public Education and its State Delegations, Ministry of Health of the Federal Government, Ministry of Health of the Government of Mexico City and the National System for Integrated Family De-velopment (DIF Nacional).

CORPORATE GOVERNANCE

| G4-34, G4-39 | In accordance with the provisions of the Com-pany bylaws and the Securities Market Law, the Board of Directors meets four times a year. During 2013, the av-erage attendance at those meetings was over 90%. The Chairman of the Board holds an executive position in the Company, as CEO of the Housing Division. | G4-38 | The Board consists of eleven members, eight of whom are independent (73%) according to the classifica-tion established by the Code of Best Corporate Practices. All members are men, except for one woman who acts as an alternate. The length of service of its members is indi-cated in the following table:

Length of service in years as of Dec 31, 2013

Germán Ahumada Russek 25 ChairmanLuis Felipe Ahumada Russek 25 Vice ChairmanGermán Ahumada Alduncin 10 Vice ChairmanPedro Alonso Angulo 10 Board MemberLuis Ramón Carazo Preciado 10 Board MemberRoberto Danel Díaz 10 Board MemberFélix Gavito Marco 18 Board MemberFrancisco Javier Lomelín Anaya 6 Board MemberAndrés Massieu Berlanga 15 Board MemberRicardo Paullada Nevarez 8 months Board MemberMarcos Ramírez Miguel 17 Board Member

| G4-40, G4-41, G4-51 | The Board of Directors considers profes-sional experience, capacity and prestige in the selection of its independent members, and verifies the absence of conflicts of interest in the performance of their duties. The appointment and ratification of its members is subject to

the approval of the Shareholders Meeting, while remunera-tion is detailed in the Company’s financial statements. All the Board Members of Consorcio ARA have a proven track record and are experts in our sector, finance and corporate governance.

| G4-34, G4-42 | The Board has an Audit Committee, a Corpo-rate Practices Committee and a Finance and Planning Com-mittee.

The responsibilities of the Audit Committee are: to discuss the Company’s financial statements; monitor the internal control system; evaluate the performance of external audi-tors; report on internal audit functions; inform the Board of the irregularities of which it becomes aware; receive and analyze the comments and observations made by the shareholders, Board members and executive officers; and other powers under the Securities Market Law.

| G4-51, G4-52 | Meanwhile, among the activities of the Cor-porate Practices Committee are to deliver an opinion on the policies and guidelines for the use of Company assets by related parties, and the evaluation and compensation of the CEO and senior officers.

| G4-46 | The Finance and Planning Committee oversees the policies and practices of Consorcio ARA in financial mat-ters, provides a strategic vision of the Company to ensure its viability and permanence, and is responsible for risk management in the Organization.

| G4-45 | Likewise, the Board of Directors warns of risks, man-ages impacts and evaluates the economic opportunities for the Company through the Annual Report that is presented


in accordance with the general provisions applicable to Se-curities Issuers and other Securities Market participants, for the fiscal year ending December 31, 2013.

| G4-35, G4-36, G4-47 | The ARA management team interacts with the committees at least once a quarter to review issues rel-evant to the Company. The Audit and Corporate Practices committees are comprised of independent members, while the Finance and Planning Committee is chaired by an inde-pendent member.

| G4-56, G4-SO4 | Implemented in 2006, our Code of Conduct and Ethics at Work is strictly enforced in all our operations. It es-tablishes basic criteria that regulate the ethical behavior that Board members, officers and employees of the Company should adopt in our relationships with colleagues, investors, customers, suppliers, competitors and authorities.

| G4-EN34, G4-37, G4-57, G4-58, G4-LA16 | We ensure compliance with this Code through the ARA Advisory and Reporting Sys-tem, which includes the ARA Confidential Hotline to report any violation:

• Metropolitan area: 5251 7489• Interior of the Republic: 01800 823 07 22• E-mail [email protected]

The complaints received and dealt with in the last three years are:

Year No. Complaints2013 372012 342011 44

| G4-49, G4-50, G4-HR3, G4-HR12, G4-SO5, G4-SO11 | The most frequent topics that were received by this system were made known to the Board of Directors. Of the 37 complaints received in 2013, 30 went into procedure, and of these, 10 resulted in corrective actions, ranging from reprimands by the imme-diate superior to the definitive dismissal of the employee in case of corruption. No complaints were received on en-vironmental issues, discrimination, human rights violations or claims about social impacts.

| G4-35 | Since 2003, Consorcio ARA adheres to the Code of Best Corporate Practices issued by the Business Coordinat-ing Council, and reports its compliance annually to the Mexi-can Stock Exchange through the Best Corporate Practices Questionnaire. In 2013, Consorcio ARA did not incur any penalties or sig-nificant fines resulting from non-compliance with laws and regulations.

| G4-SO6 | Our Code of Conduct and Ethics at Work estab-lishes that employees may not participate in political or re-ligious activities inside Company premises.

The Code of Conduct and Ethics can be consulted at: www.consorcioara.com.mx

CODE OF CONDUCT AND ETHICS AT WORK


ARA VALUES

• Honesty• Responsibility

• Honesty• Quality

38

BOARD OF DIRECTORS

NAME POSITION ALTERNATE Germán Ahumada Russek▴▪ . . . . . . . . . . chairman . . . . . . . . . Jorge Alduncin Beardsley▴

Luis Felipe Ahumada Russek▴▪ . . . . . . vice chairman . . . . . Gonzalo Javier Flores Fierro▴

Germán Ahumada Alduncin▴▪ . . . . . . vice chairman . . . . . J. Sacramento Soto Solís▴

Pedro Alonso Angulo• . . . . . board member . . . . María Cristina Hernández Trejo•

Luis Ramón Carazo Preciado• . . . . . board member . . . . Eugenio Riveroll Picazo•

Roberto Danel Díaz• . . . . . board member . . . . Manuel Gutiérrez García•

Ricardo Paullada Nevárez• . . . . . board member . . . . Alfredo Sánchez Torrado•

Félix Gavito Marco• . . . . . board member . . . . Lorenzo Lucas Sánchez•

Francisco Javier Lomelín Anaya• . . . . board member . . . . Carlos Hernández Magallanes•

Andrés Massieu Berlanga• . . . . . board member . . . . Alejandro C. Álvarez Certucha•

Marcos Ramírez Miguel• . . . . . board member . . . . Raúl Robledo Tovi•

Ricardo Maldonado Yáñez . . . . . . . . . . . secretay Lorenza K. Langarica O’hea . . . . . . pro-secretary

The members of the Board of Directors and of the auxiliary

committees for 2014, will be appointed or ratified at the

Ordinary Meeting on April 24, 2014.

• Independent Board Member▴ Related Board Member▪ Owner Board Member

BOARD


Auditing CommitteeFélix Gavito Marco• | ChairmanRoberto Danel Díaz• | Full memberRicardo Paullada Nevárez• | Full memberAndrés Massieu Berlanga• | Full member

Corporate Practices CommitteeRoberto Danel Díaz• | ChairmanPedro Alonso Angulo• | Full memberLuis Ramón Carazo Preciado• | Full memberRicardo Paullada Nevárez• | Full memberAndrés Massieu Berlanga• | Full member

Finance and Planning CommitteeMarcos Ramírez Miguel• | ChairmanGermán Ahumada Russek▴▪ | Full memberLuis Felipe Ahumada Russek▴▪ | Full memberGermán Ahumada Alduncin▴▪ | Full memberPedro Alonso Angulo• | Full memberLuis Ramón Carazo Preciado• | Full memberRoberto Danel Díaz• | Full memberRicardo Paullada Nevárez• | Full memberFrancisco Javier Lomelín Anaya• | Full member

A strong Corporate Governance is essential to operate in an ethical, efficient and responsible manner.

CORPORATEDIRECTORS

40

Germán Ahumada Russek | CEO HOUSING DIVISION

Luis Felipe Ahumada Russek | CEO SHOPPING MALLS DIVISION

HOUSING DIVISION

Gabriel Altamirano Hernández | GOVERNMENT RELATIONS DIRECTOR AND ARA FOUNDATION

Alicia Enriquez Pimentel | INVESTOR RELATIONS DEPUTY DIRECTOR

Martín Guevara Hernández | BUSINESS DEVELOPMENT DIRECTOR

Miguel Lozano Pardinas | OPERATIONS DIRECTOR

Edgar Martínez Chavolla | PROJECT DIRECTOR

J. Sacramento Soto Solís | ADMINISTRATIVE AND FINANCIAL DIRECTOR

Rodolfo Trujillo Mondragón | LEGAL DIRECTOR

REGIONAL COMMERCIAL DIRECTORS | HOUSING DIVISIONCarlos Ávila Viveros | STATE OF MEXICO – BAJÍO State of Mexico, Guanajuato, Hidalgo, Querétaro

Fernando Calderón Nava | FEDERAL DISTRICT

Carlos Falcón Pimienta | EAST Puebla, Veracruz

Ricardo Martínez Hernández | CENTER - SOUTH Guerrero, Morelos, Quintana Roo

Eduardo Ordaz de la Fuente | RIALTA - NORTH - WEST Baja California, Chihuahua, State of Mexico, Jalisco, Morelos, Nayarit, Nuevo León, Sinaloa, Sonora, Tamaulipas

PARAÍSO COUNTRY CLUB,

Clubhouse, Morelos


ABOUT THIS REPORT

| G4-28, G4-29, G4-30, G4-32 | This is our second annual sustainability report; it covers the 2013 fiscal year and was prepared in accordance with the G4 guidelines of the Global Report-ing Initiative (GRI), in its essential form. For more information about our Company, its operative and financial performance, and previous annual reports in electronic formats, please refer to: www.consorcioara.com.mx

Consorcio ARA is one of the first companies in Mexico to publish a sustainability report under the G4 guidelines. We are aware that there are areas o opportunity to improve our sustainability indicators and the way we communicate them. This is why we have registered the present document before the GRI, and our commitment is to report our performance with ever more adherence to its guidelines.

| G4-17, G4-20 | This report covers all the operations of Consorcio ARA and those subsidiar-ies under our control or over which we exercise significant influence, and communicates in an open, objective and transparent manner the major developments, challenges and areas of opportunity in sustainability issues which we consider priorities.

| G4-18, G4-19 | The material issues for Consorcio ARA were defined through an analysis of the key sustainability issues facing the sector in which we participate, as detailed in the preceding chapters.

| G4-48 | The Investor Relations Department is the area responsible for reviewing and ap-proving this financial and sustainability report.

| G4-22, G4-23 | The information presented on sustainability has not been reformulated, nor has its coverage and scope changed in regard to previous reports.

| G4-31, G4-33 | This sustainability report has not been audited by an independent third party. Any comment related to this report should be directed to [email protected].

The Company does not have information available regarding the G4 indicators that are not answered in this report.


| G4-32 | GRI INDEX

GENERAL BASIC CONTENTS

Indicator Page Comments (report does not have external verification)

STRATEGY AND ANALYSIS

G4-1 4

G4-2 4

ORGANIZATIONAL PROFILE

G4-3 49

G4-4 15

G4-5 2

G4-6 2

G4-7 49

G4-8 2

G4-9 1, 31

G4-10 31

G4-11 31

G4-12 25

G4-13In 2013 Consorcio ARA reduced its workforce by around 20%.

G4-14 28

G4-15 30

G4-16

• Vivienda y Entorno Sustentable, A.C.• Real Estate Developers Association (Asociación de

Desarrolladores Inmobiliarios, ADI)• ARA Foundation




MATERIAL ASPECTS AND BOUNDARIES

G4-17 41A more detailed description of Consorcio ARA sub-sidiaries can be found in the Consolidated Financial Statements

G4-18 41

G4-19 41

G4-20 41

G4-22 41

G4-23 41

STAKEHOLDER ENGAGEMENT

G4-24 26

G4-25 26

G4-26 26

REPORT PROFILE

G4-28 41

G4-29 41

G4-30 41

G4-31 41

G4-32 41, 42

G4-33 41

GOVERNANCE

G4-34 36

G4-35 37

G4-36 37

GRI INDEX


GRI INDEX



GOVERNANCE

G4-37 37

G4-38 36

G4-39 36

G4-40 36

G4-41 36

G4-42 36

G4-45 36

G4-46 36

G4-47 37

G4-48 41

G4-49 37

G4-50 37

G4-51 36The compensation of the Board is detailed in the Con-solidated Financial Statements

G4-52 32, 36

ETHICS AND INTEGRITY

G4-56 37

G4-57 37

G4-58 37


GRI INDEX



ECONOMIC PERFORMANCE

G4-EC1 28

G4-EC2 28

G4-EC3 31

G4-EC4 28

G4-EC5 31

G4-EC6 28

G4-EC7 28

G4-EC9 28

ENVIRONMENT

G4-EN1 29

G4-EN2 29

G4-EN6 30

G4-EN7 28

G4-EN9 29

G4-EN10 29

G4-EN11 30

G4-EN13 30

G4-EN19 28

G4-EN22 30

G4-EN23 30

G4-EN24 30

G4-EN25 30


GRI INDEX



ENVIRONMENT

G4-EN26 30

G4-EN27 28

G4-EN29 30

G4-EN30 30

G4-EN31 30

G4-EN32 30

G4-EN34 37

LABOR PRACTICES AND DECENT WORK

G4-LA1 31

G4-LA2 31

G4-LA3 32

G4-LA4 32

G4-LA5 33

G4-LA6 33

G4-LA9 32

G4-LA10 32

G4-LA11 32

G4-LA12 32

G4-LA13 32

G4-LA14 30

G4-LA16 32, 37


GRI INDEX



HUMAN RIGHTS

G4-HR2 33

G4-HR3 33, 37

G4-HR4 30, 31

G4-HR5 33

G4-HR6 33

G4-HR8 33

G4-HR9 33

G4-HR10 30

G4-HR12 33, 37

SOCIETY

G4-SO1 34, 35

G4-SO4 37

G4-SO5 37

G4-SO6 28, 37

G4-SO7 28

G4-SO8 28

G4-SO9 30

G4-SO11 37

PRODUCT RESPONSIBILITY

G4-PR2 28

G4-PR7 28

G4-PR8 28

G4-PR9 28


Consolidated Financial Statements for the Years Ended December 31, 2013 and 2012, and Independent Auditors’ Report Dated March 26, 2014

contents

50 auditors’ report

52 consolidated statements of financial position

54 consolidated statements of profit or loss and other

comprehensive income

55 consolidated statements of changes in stockholders’ equity

56 consolidated statements of cash flows

58 notes to the consolidated financial statements

CONSORCIO ARA, S .A.B. DE C.V.AND SUBSIDIARIES

Independent Auditors’ Report and Consolidated Financial Statements for 2013 and 2012

| G4-3, G4-7 |


INDEPENDENT AUDITORS’ REPORT TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF CONSORCIO ARA, S. A. B. DE C. V.

We have audited the accompanying consolidated financial statements of Consorcio ARA, S. A. B. de C. V. and subsidiaries (the Entity), which comprise the consolidated statements of financial position as of December 31, 2013 and 2012, and the consolidated statements of profit or loss and other comprehensive income, consolidated statement of changes in stockholders’ equity and consolidated statements of cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidat-ed financial statements in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated finan-cial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with International Stan-dards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the con-solidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected de-pend on the auditor’s judgment, including the assessment of the risks of material mis-statement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and

the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material re-spects, the financial position of Consorcio ARA, S. A. B. de C. V. and subsidiaries as of December 31, 2013 and 2012 and its financial performance and its cash flows for the years then ended, in conformity with International Financial Reporting Standards, as issued by the International Accounting Standards Board.

The accompanying consolidated financial statements have been translated into English for the convenience of readers.

Galaz, Yamazaki, Ruiz Urquiza, S. C.Member of Deloitte Touche Tohmatsu Limited

C. P. C. Rafael García GómezMarch 26, 2014

REPORT



STATEMENTS CONSORCIO ARA, S .A.B . DE C .V. AND SUBSIDIARIES

ASSETS notes 2013 2012 january 1 2012 (restated) (restated) (note 2) (note 2)

Current assets: Cash and cash equivalents 6 $ 599,598 $ 1,573,072 $ 1,042,981 Trade accounts receivable - Net 7 740,283 703,817 699,985 Due from equity method investees 8,608 62,455 61,526 Inventories 8 11,494,249 10,952,069 10,431,607 Golf club memberships available for sale 205,064 207,044 209,718 Other current assets 10 555,077 468,937 539,496

Total current assets 13,602,879 13,967,394 12,985,313

Shopping mall available for sale 9 451,796 415,994 419,399 Restricted cash 6 43,369 43,369 43,369 Long-term land held for development 8 1,247,305 1,446,278 1,622,294 Investments in equity method investees 11 55,202 87,320 78,925 Employee benefits 2,142 — — Derivative financial instrument (Equity swap) 20 — 782 — Property, machinery and equipment — Net 12 311,269 414,805 503,672 Total long-term assets 2,111,083 2,408,548 2,667,659 Total assets $ 15,713,962 $ 16,375,942 $ 15,652,972

See accompanying notes to consolidated financial statements.

Consolidated Statement of Financial Positionas of december 31, 2013, 2012 and january 1, 2012 (In thousands of Mexican pesos)


STATEMENTSCONSORCIO ARA, S .A.B . DE C .V. AND SUBSIDIARIES

LIABILITIES notes 2013 2012 january 1, 2012AND STOCKHOLDERS’ EQUITY (restated) (restated) (note 2) (note 2)

Current liabilities: Current portion of long-term debt 14 $ 377,668 $ 1,075,155 $ 1,110,589 Current portion of capital lease obligations 17 6,128 18,613 27,726 Trade accounts payable 358,781 326,608 463,195 Accrued expenses and taxes, other than income taxes 15 698,630 1,175,042 880,509 Advances from customers 123,448 66,442 78,073 Total current liabilities 1,564,655 2,661,860 2,560,092 Long-term debt 14 2,045,555 2,079,353 1,911,388 Capital lease obligations 17 1,261 6,723 20,936 Employee benefits 18 — 126 3,022 Other long-term liabilities 55,169 54,886 51,551 Deferred income tax 16 1,820,182 1,859,568 1,950,390 Total long-term liabilities 3,922,167 4,000,656 3,937,287 Total liabilities 5,486,822 6,662,516 6,497,379

Stockholders’ equity: Common stock 21 $ 645,746 $ 641,854 $ 642,839 Additional paid-in capital 347,146 328,854 337,396 Reserve for acquisition of own stock 44,822 2,528 13,373 Premium on sale of purchases stock — — (8,929) Retained earnings 21 9,154,626 8,687,103 8,122,104 Controlling interest 10,192,340 9,660,339 9,106,783 Noncontrolling interest 34,800 53,087 48,810 Total stockholders’ equity 10,227,140 9,713,426 9,155,593 Total stockholders’ equity and liabilities $ 15,713,962 $ 16,375,942 $ 15,652,972



notes 2013 2012 Revenues 23 $ 5,735,727 $ 6,514,653

Costs 23 4,185,396 4,651,141

Gross profit 1,550,331 1,863,512

General and administrative expenses 1,033,572 1,085,914

Other expense - Net (11,636) 26,265

Income from operations 528,395 751,333

Financial expense :

Interest expense 25,123 42,734

Interest income (39,403) (48,888)

Loss on derivative financial instruments 21,350 4,465

Exchange loss - Net 1,078 5,907

8,148 4,218

Equity in earnings of equity method investees 11 124,240 68,771

Income before income taxes 644,487 815,886

Income taxes 16 180,183 248,480

Consolidated income for the year $ 464,304 $ 567,406

Other comprehensive income

Remeasurement of employee benefits obligations 3,219 —

Total comprehensive income for the year $ 467,523 $ 567,406

Controlling interest $ 462,908 $ 564,999

Noncontrolling interest 1,396 2,407

Consolidated income for the year $ 464,304 $ 567,406

Basic earnings per common share $ 0.35 $ 0.43

Weighted average number of shares outstanding 1,304,482,889 1,300,036,034

Consolidated Statements of Profit or Loss and other Comprehensive Income for the years ended december 31, 2013 and 2012(In thousands of Mexican pesos, except common share and earnings per share amounts)




Consolidated Statements of Changes in Stockholders’ Equity for the years ended december 31, 2013 and 2012 (In thousands of Mexican pesos)


Commonstock

Additionalpaid-incapital

Reservefor acquisition

of ownStock

Premium onsale of

repurchasedstock

Retainedearnings

Non-controlling

interest

Total stockholders’

equity

Balances as of January 1, 2012 (restated) $ 642,839 $ 337,396 $ 13,373 $ (8,929) $ 8,122,104 $ 48,810 $ 9,155,593

Repurchase of own stock (985) (8,542) (10,845) 8,929 — — (11,443)

Comprehensive income for the year — — — — 564,999 4,277 569,276

Balances as of December 31, 2012 (restated) 641,854 328,854 2,528 — 8,687,103 53,087 9,713,426

Repurchase of own stock 3,892 18,292 42,294 — — — 64,478

Comprehensive income for the year — — — — 467,523 (18,287) 449,236

Balances as of December 31, 2013 $ 645,746 $ 347,146 $ 44,822 — $ 9,154,626 $ 34,800 $ 10,227,140



2013 2012 Operating activities:

Income before income taxes $ 644,487 $ 815,886

Items related to investing activities:

Depreciation and amortization 88,241 101,449

Interest income (39,403) (48,888)

Derivative financial instrument (Equity swap) 782 (782)

Equity in earnings of equity method investees (124,240) (68,771)

Items related to financing activities:

Interest expense 260,939 248,885

830,806 1,047,779

(Increase) decrease in:

Trade accounts receivable – Net (36,466) (3,832)

Due from equity method investees 53,847 (929)

Shopping mall available for sale (35,802) 3,405

Inventories and long-term land held for development (343,207) (344,446)

Other current assets (86,140) 70,559

Golf club memberships available for sale 1,980 2,674

Increase (decrease) in:

Trade accounts payable 32,173 (136,587)

Accrued expenses and taxes, other than income taxes (497,262) 294,203

Advances from customers 57,006 (11,631)

Income taxes paid (203,334) (337,432)

Employee benefits 2,016 (64)

Other long-term liabilities 283 3,335

Net cash flows from operating activities (224,100) 587,034

Investing activities:

Purchase of machinery and equipment (22,506) (35,908)

Collection of interest 39,403 48,888

Investments in equity method investees 16,227 13,376

Dividends received from equity method investees 140,132 47,000

Net cash flows from investing activities 173,256 73,355

Cash (to be obtain from) to be applied to financing activities (50,844) 660,390

Consolidated statements of cash flows for the years ended december 31, 2013 and 2012Indirect method (In thousands of Mexican pesos)

(continued)



2013 2012 Financing activities:

Proceeds from long-term debt 2,538,921 1,540,750

Payments of current portion of long-term debt (84,647) (35,434)

Payments of long-term debt (3,185,558) (1,372,785)

Interest paid (254,897) (251,387)

Reserve and premium for acquisition of own stock 60,586 (10,458)

Relocation by purchase of own shares 3,892 (985)

Amortization of others finance (927) -

Net cash from financing activities (922,630) (130,299)

Net (decrease) increase in cash and cash equivalents (973,474) 530,091

Cash and cash equivalents at beginning of year 1,616,441 1,086,350

Cash and cash equivalents at end of year

(including restricted cash of $43,369) $ 642,967 $ 1,616,441

During 2013 and 2012 the Entity acquired machinery, furniture and equipment for $821 and $4,853 respectively,

through capital leases.

(concluded)




Notes to Consolidated Financial Statements for the years ended December 31, 2013 and 2012(In thousands of Mexican pesos, except share amounts)

1. Nature of business

Consorcio ARA, S. A. B. de C. V. and subsidiaries (collectively, the “Entity”) buys and sells land; designs, develops, constructs and markets affordable entry-level and middle-income residential housing developments; and markets commercial and in-dustrial developments. In addition, the Entity rents mini-supermarkets under operating leases in México.

The Entity hires the services of subcontractors in order to construct its housing developments. The terms of such arrange-ments include the subcontractors’ obligations to fulfill, using their own resources or with the assistance of third parties, the construction commitments in accordance with technical requirements set by the Entity.

The Entity has a duration of 99 years and the principal place of business is Arcos Bosques Marco II, Paseo de Tamarindos No. 90, Tower I, 25th Floor, Bosques de las Lomas, CP 05120, Mexico, D.F.

2. Basis of presentation

Explanations for translation into English - The accompanying consolidated financial statements have been translated from Spanish into English for use outside of Mexico.

a. New and revised IFRSs affecting amounts reported and/or disclosures in the financial statements

In the current year, the Entity has applied a number of new and revised IFRSs issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after January 1, 2013.

New and revised Standards on consolidation, joint arrangements, associates and disclosures

In May 2011, a package of five standards on consolidation, joint arrangements, associates and disclosures was issued comprising IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, IAS 27 (as revised in 2011) Separate Financial Statements and IAS 28 (as revised in 2011) Investments in Associates and Joint Ventures. Subsequent to the issue of these standards, amendments to IFRS 10, IFRS 11 and IFRS 12 were issued to clarify certain transitional guidance on the first-time application of the standards.

In the current year, the Entity has applied for the first time IFRS 10, IFRS 11, IFRS 12 and IAS 28 (as revised in 2011) together with the amendments to IFRS 10, IFRS 11 and IFRS 12 regarding the transitional guidance.

The impact of the application of these standards is set out below.



Impact of the application of IFRS 10

IFRS 10 replaces the parts of IAS 27 Consolidated and Separate Financial Statements that deal with consolidated fi-nancial statements and SIC-12 Consolidation – Special Purpose Entities. IFRS 10 changes the definition of control such that an investor has control over an investee when a) it has power over the investee, b) it is exposed, or has rights, to variable returns from its involvement with the investee and c) has the ability to use its power to affect its returns. All three of these criteria must be met for an investor to have control over an investee. Previously, control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Additional guidance has been included in IFRS 10 to explain when an investor has control over an investee. Some guid-ance included in IFRS 10 that deals with whether or not an investor that owns less than 50% of the voting rights in an investee has control over the investee is relevant to the Entity.

Management made an assessment as of the date of initial application of IFRS 10 (i.e. January 1, 2013) as to whether or not the Enity has control over the subsidiaries in accordance with the new definition of control and the related guid-ance set out in IFRS 10. Management concluded that it has had control.

The adoption of this standard had no effect on the consolidated financial statements of the Entity.


IFRS 11 replaces IAS 31 Interests in Joint Ventures, and the guidance contained in a related interpretation, SIC-13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers, has been incorporated in IAS 28 (as revised in 2011).

IFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified and accounted for. Under IFRS 11, there are only two types of joint arrangements – joint operations and joint ventures.

The classification of joint arrangements under IFRS 11 is determined based on the rights and obligations of parties to the joint arrangements by considering the structure, the legal form of the arrangements, the contractual terms agreed by the parties to the arrangement, and, when relevant, other facts and circumstances. A joint operation is a joint ar-rangement whereby the parties that have joint control of the arrangement (i.e. joint operators) have rights to the as-sets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint ventures) have rights to the net assets of the arrangement. Previously, IAS 31 contemplated three types of joint arrangements – jointly controlled entities, jointly controlled op-erations and jointly controlled assets. The classification of joint arrangements under IAS 31 was primarily determined based on the legal form of the arrangement (e.g. a joint arrangement that was established through a separate entity was accounted for as a jointly controlled entity).

The initial and subsequent accounting of joint ventures and joint operations is different. Investments in joint ventures are accounted for using the equity method (proportionate consolidation is no longer allowed). Investments in joint op-erations are accounted for such that each joint operator recognizes its assets (including its share of any assets jointly held), its liabilities (including its share of any liabilities incurred jointly), its revenue (including its share of revenue from the sale of the output by the joint operation) and its expenses (including its share of any expenses incurred jointly). Each joint operator accounts for the assets and liabilities, as well as revenues and expenses, relating to its interest in the joint operation in accordance with the applicable Standards.



The adoption of this standard had no effect on the consolidated financial statements of the Entity.


IFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the application of IFRS 12 has resulted in more exten-sive disclosures in the consolidated financial statements.

IFRS 13 Fair Value Measurement

The Entity has applied IFRS 13 for the first time in the current year. IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The scope of IFRS 13 is broad; the fair value measurement requirements of IFRS 13 apply to both financial instrument items and non-financial instrument items for which other IFRSs require or permit fair value measurements and disclosures about fair value measurements, except for share-based payment transactions that are within the scope of IFRS 2 Share-based Payment, leasing transactions that are within the scope of IAS 17 Leases, and measurements that have some similarities to fair value but are not fair value (e.g. net realizable value for the purposes of measuring inventories or value in use for impairment assessment purposes).

IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market condi-tions. Fair value under IFRS 13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique. Also, IFRS 13 includes extensive disclosure requirements.

IFRS 13 requires prospective application from January 1, 2013. In addition, specific transitional provisions were given to entities such that they need not apply the disclosure requirements set out in the Standard in comparative information provided for periods before the initial application of the Standard. In accordance with these transitional provisions, the Entity has not made any new disclosures required by IFRS 13 for the 2012 comparative period. Other than the additional disclosures, the application of IFRS 13 has not had any material impact on the amounts recognized in the consolidated financial statements.

Amendments to IAS 1 Presentation of Items of Other Comprehensive Income

The Entity has applied the amendments to IAS 1 Presentation of Items of Other Comprehensive Income for the first time in the current year. The amendments introduce new terminology, for the statement of comprehensive income and income statement. Under the amendments to IAS 1, the ‘statement of comprehensive income’ is renamed as the ‘statement of profit or loss and other comprehensive income’ and the ‘income statement’ is renamed as the ‘statement of profit or loss’.

The amendments to IAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to IAS 1 require items of other comprehensive income to be Entityd into two categories in the other comprehensive income section: (a) items that will not be reclassified subsequently to profit or loss and (b) items that may be reclassified subsequently to profit or loss



when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis – the amendments do not change the option to present items of other comprehensive income either before tax or net of tax. The amendments have been applied retrospectively, and hence the presentation of items of other comprehensive income has been modified to reflect the changes. Other than the above mentioned presentation changes, the application of the amendments to IAS 1 does not result in any impact on profit or loss, other comprehen-sive income and total comprehensive income.

IAS 19 Employee Benefits (as revised in 2011)

In the current year, the Entity has applied IAS 19 Employee Benefits (as revised in 2011) and the related consequential amendments for the first time.

IAS 19 changes the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in the fair value of plan assets when they occur, and hence eliminate the ‘corridor approach’ permitted under the previous version of IAS 19 and accelerate the recognition of past service costs. All actuarial gains and losses are recognized immediately through other comprehensive income in order for the net pension asset or liability recognized in the consolidated statement of financial position to reflect the full value of the plan deficit or surplus. Furthermore, the interest cost and expected return on plan assets used in the previous version of IAS 19 are replaced with a ‘net interest’ amount under IAS 19 (as revised in 2011), which is calculated by applying the discount rate to the net defined benefit liability or asset. These changes have had an impact on the amounts rec-ognized in profit or loss and other comprehensive income in prior years (see the tables below for details). In addition, IAS 19 (as revised in 2011) introduces certain changes in the presentation of the defined benefit cost including more extensive disclosures.

Specific transitional provisions are applicable to first-time application of IAS 19 (as revised in 2011). The Entity has applied the relevant transitional provisions and restated the comparative amounts on a retrospective basis (see the tables below for details).

Impact on assets, liabilities and equity as of January 1, 2012 derivate of the application of the amendments to IAS 19 (as revised in 2011):

Decrease in retirement benefit obligation $ 20,281Increase in net assets 1,512Increase in retained earnings $ 21,793Increase in equity $ 21,793

The effects at January 1, 2012 are shown in the consolidated statement of financial position, against retained earnings and the liability for employee benefit at $21,793.



b. New and revised IFRSs in issue but not yet effective

The Entity has not applied the following new and revised IFRSs that have been issued but are not yet effective:

IFRS 9 Financial Instruments2

Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date of IFRS 9 and Transition Disclosures3

Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities1

IFRS 9 Financial Instruments

IFRS 9, issued in November 2009, introduced new requirements for the classification and measurement of financial as-sets. IFRS 9 was amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition.

Key requirements of IFRS 9:

• All recognized financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measure-ment are required to be subsequently measured at amortized cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. In addition, under IFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in net income.

• With regard to the measurement of financial liabilities designated as of fair value through profit or loss, IFRS 9 re-quires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under IAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss is presented in profit.

1 Effective for annual periods beginning on or after January 1, 2014, with earlier application permitted.2 Effective for annual periods beginning on or after January 1, 2015, with earlier application permitted.3 Effective for annual periods beginning on or after January 1, 2016, with earlier application permitted.



3. Significant accounting polices

a. Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Stan-dards released by IASB.

b. Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis.

i. Historical cost Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

ii. Fair value Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

c. Classification of costs, expenses, and operating income

The Entity has prepared its statements of profit or loss and other comprehensive income classified by the function of its components, since grouping its costs and expenses on this basis allows the various levels of utility.

Additionally, for an improved analysis of their financial position the Entity has considered necessary to the amount of operating income on what separate statements of profit or loss and other comprehensive income, because such information is a common practice in the industry to disclosure which owns the Entity.

d. Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Consorcio ARA, S. A. B. de C. V. (ARA) and its subsidiaries controlled by it. Control is achieved when the Consorcio ARA, S. A. B de C. V:

• Has power over the investee;• Is exposed, or has rights, to variable returns from its involvement with the investee; and• Has the ability to use its power to affect its returns.

The Entity reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

When the Consorcio ARA, S. A. B. de C. V. has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. Consorcio ARA, S. A. B de C. V. considers all relevant facts and circumstances in assessing whether or not the Entity’s voting rights in an investee are sufficient to give it power, including:



• The size of the Consorcio ARA, S. A. B. de C. V holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

• Potential voting rights held by the Entity, other vote holders or other parties;• Rights arising from other contractual arrangements; and• Any additional facts and circumstances that indicate that the Entity has, or does not have, the current ability to direct

the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

Consolidation of a subsidiary begins when the Consorcio ARA, S. A. B de C. V. obtains control over the subsidiary and ceases when the Entity loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit and other comprehensive income from the date of acquisition or until the date of disposal, as appropiate.

Net income and each component of other comprehensive income are attributed to the owners of the Entity and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Entity and to the non-controlling interests even if this results in the non-controlling interests having a deficit.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Consorcio ARA, S. A. B. de C. V. accounting policies.

All balances and transactions between entities of the entity have been eliminated in consolidation.

e. Golf club memberships available for sale

Are initially recorded at the lower of acquisition cost or realizable value.

f. Investments in associates and joint ventures

An associate is an entity over which the Entity has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with IFRS 5. Under the equity method, an investment in an associate or a joint venture is initially recognized in the consolidated statement of financial position at cost and adjusted thereafter to recognize the Entity’s share of the profit or loss and other comprehensive income of the associ-ate or joint venture. When the Entity’s share of losses of an associate or a joint venture exceeds the Entity’s interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Entity’s net investment in the associate or joint venture), the Entity discontinues recognizing its share of further losses. Ad-



ditional losses are recognized only to the extent that the Entity has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture.

An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the Entity’s share of the net fair value of the identifiable assets and liabilities of the investee is recognized as goodwill, which is included within the carrying amount of the investment. Any excess of the Entity’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognized immediately in profit or loss in the period in which the investment is acquired.

The requirements of IAS 39 are applied to determine whether it is necessary to recognize any impairment loss with respect to the Entity’s investment in an associate or a joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

The Entity discontinues the use of the equity method from the date when the investment ceases to be an associ-ate or a joint venture, or when the investment is classified as held for sale. When the Entity retains an interest in the former associate or joint venture and the retained interest is a financial asset, the Entity measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with IAS 39. The difference between the carrying amount of the associate or joint venture at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate or joint venture is included in the determination of the gain or loss on disposal of the as-sociate or joint venture. In addition, the Entity accounts for all amounts previously recognized in other comprehensive income in relation to that associate or joint venture on the same basis as would be required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognized in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Enitty reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued.

The Entity continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests.

When the Entity reduces its ownership interest in an associate or a joint venture but the Entity continues to use the equity method, theEntity reclassifies to profit or loss the proportion of the gain or loss that had previously been rec-ognized in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities.



When an Entity carries out transactions with an associate or a joint venture, profits and losses resulting from the transactions with the associate or joint venture are recognized in the Entity’s consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Entity.

g. Non-current assets classified as held for sale

Non-current assets and disposal are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset (or disposal) is available for immediate sale in its present condition subject only to terms that are usual and custom-ary for sales of such asset (or disposal) and its sale is highly probable. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

When the Entity is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Entity will retain a non-controlling interest in its former subsidiary after the sale.

When the Entity is committed to a sale plan involving disposal of an investment, or a portion of an investment, in an associate or joint venture, the investment or the portion of the investment that will be disposed of is classified as held for sale when the criteria described above are met, and the Entity discontinues the use of the equity method in relation to the portion that is classified a held for sale. Any retained portion of an investment in an associate or a joint venture that has not been classified as held for sale continues to be accounted for using the equity method. The Entity discontinues the use of the equity method at the time of disposal when the disposal results in the Entity losing significant influence over the associate or joint venture.

After the disposal takes place, the Entity accounts for any retained interest in the associate or joint venture in ac-cordance with IAS 39 unless the retained interest continues to be an associate or a joint venture, in which case the Entity uses the equity method (see the accounting policy regarding investments in associates or joint ventures above).

Non-current assets (and disposal) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.

h. Recognition of revenues and cost, advances from customers

Revenues are recognized when the Entity transfers to its customers the significant risks and rewards derived from the ownership of the real estate property, which normally occurs at the time the transactions are legalized (transfer of title) Furthermore, current liabilities shown in the balance of advances from customers represent cash received from the customers for the down payment and expenses and payments received during the presale stage before the properties are legalized.



i. iLeases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

– The Entity as lessor Revenues and costs for leasing and mini shopping unicentros are recognized as earned.

– The Entity as lessee The assets held under finance leases are initially recognized as assets of the Entity at their fair val-ue at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Entity’s general policy on borrowing costs (see Note 3.j). Contingent rentals are recognized as expenses in the periods in which they are incurred. Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognized as an ex-pense in the period in which they are incurred.

j. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

k. Employee benefits from termination, retirement and statutory employee profit sharing (PTU)

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.



For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the statement of financial position with a charge or credit recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Past service cost is recognized in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorized as follows:

• Service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settle-ments).

• Net interest expense or income.• Remeasurement.

The Entity presents the first two components of defined benefit costs in profit or loss in the line item. Gains and losses for reduction of service are accounted for as past service costs

The retirement benefit obligation recognized in the consolidated statement of financial position represents the actual deficit or surplus in the Entity’s defined benefit plans. Any surplus resulting from this calculation is limited to the pres-ent value of any economic benefits available in the form of refunds from the plans or reductions in future contribu-tions to the plans.

A liability for a termination benefit is recognized at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognizes any related restructuring costs.

PTU is recorded in the results of the year it is incurred and presented under other income and expenses in the income statement.

PTU is determined based on the taxable income under Section I of Article 10 of the LISR.

l. Income taxes

Income tax expense represents the sum of the tax currently payable and deferred tax.

1. Current taxCurrent income taxes, calculated as the higher of the regular Mexican income tax (ISR) or the Business Flat Tax (IETU), repealed as of January 1, 2014, are recorded in the results of the year in which they are incurred.

2. Deferred income tax Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. De-ferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally



recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be avail-able against which those deductible temporary differences can be utilized.

Such deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recog-nition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill.

As a consequence of the 2014 Tax Reform, as of December 31, 2013 deferred IETU is no longer recognized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Entity is able to control the reversal of the tempo-rary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Entity expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

For the purposes of measuring deferred tax liabilities and deferred tax assets for investment properties that are measured using the fair value model, the carrying amounts of such properties are presumed to be recovered en-tirely through sale, unless the presumption is rebutted. The presumption is rebutted when the investment property is depreciable and is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale.

The Entity’s management reviewed the Entity’s investment property portfolios and concluded that none of the Entity’s investment properties are held under a business model whose objective is to consume substantially all of the economic benefits embodied in the investment properties over time, rather than through sale. Therefore, the Entity’s management have determined that the ‘sale’ presumption set out in the amendments to IAS 12 is not rebutted. As a result, the Entity has not recognized any deferred taxes on changes in fair value of the investment properties as the Entity is not subject to any income taxes on the fair value changes of the investment properties on disposal.



3. Current and deferred tax for the year Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the ini-tial accounting for a business combination, the tax effect is included in the accounting for the business combination.

4. Tax on assetsThe tax on assets (IMPAC) expected to be recovered is recorded as a tax receivable is recorded as a tax credit and is presented in the balance sheet in the deferred taxes line item.

m. Property, machinery and equipment

Property, machinery and equipment held for use in the operation of the Entity or for administrative purposes, are presented in the statement of financial position at acquisition cost. Balances arising from acquisitions made through December 31, 2007 were restated using National Consumer Price Index (NCPI) factors to date, in accordance with deemed cost exemptions allowed in the transition to IFRS. Depreciation is calculated under the straight-line method based on the remaining useful life of the asset components as follows:

Average yearsBuildings 36Leasehold improvements 2Machinery and equipment 4Vehicles 3Office furniture and fixtures 3

The estimated useful lives, the possible residual value and depreciation method of assets in this category are reviewed at the end of each year, and the effect of any changes in the estimate recorded is recognized on a prospective basis.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

n. Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Entity reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Entity estimates the re-coverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest Entity of cash-generating units for which a reasonable and consistent allocation basis can be identified.



Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market as-sessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is in-creased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revalu-ation increase.

o. Inventories, long-term land held for development

Inventories are maintained at the lower of cost or net realizable value for which the entity reviews the book value of inventories and land held for long-term development in order to verify that the value of such inventories, the cost does not exceed or market value.

i. The construction materials are valued at acquisition cost, which includes all costs inherent to real estate inventories. Work in process is valued equally to acquisition cost plus financial cost. The balances of work in process and devel-opments in progress represent the real cost incurred, and represent the cost incurred on housing projects for which the Entity has not transferred ownership to customers.

ii. Land held for future development and real estate developments in progress are valued at acquisition cost plus financial cost.

p. Provisions

Provisions are recognized when the Entity has a present obligation (legal or constructive) as a result of a past event, it is probable that the Entity will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obliga-tion at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).



q. Financial instruments

Financial assets and financial liabilities are recognized when a Entity becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisi-tion of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit.

r. Financial assets

Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial rec-ognition. All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

1. Effective interest methodThe effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated fu-ture cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as of FVTPL.

2. Financial assets at FVTPLFinancial assets are classified as of FVTPL when the financial asset is either held for trading or it is designated as of FVTPL.

A financial asset is classified as held for trading if:

• It has been acquired principally for the purpose of selling it in the near term; or• On initial recognition it is part of a portfolio of identified financial instruments that the Entity manages together

and has a recent actual pattern of short-term profit-taking; or• It is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as of FVTPL upon initial recognition if:

• Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would oth-erwise arise; or



• The financial asset forms part of a Entity of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Entity’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• It forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract to be designated as of FVTPL.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the ‘other income (expenses) - Net’.

3. Held-to-maturity investmentsHeld-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Entity has the positive intent and ability to hold to maturity. Subsequent to initial recogni-tion, held-to maturity investments are measured at amortized cost using the effective interest method less any impairment.

4. Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables including trade and other receivables, bank balances and cash, and others are measured at amortized cost using the effective interest method, less any impairment.

Interest income is recognized by applying the effective interest rate, except for short-term receivables when the ef-fect of discounting is immaterial.

s. Financial liabilities

1. Classification as debt or equityDebt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

2. Financial liabilities at FVTPLFinancial liabilities are classified as of FVTPL when the financial liability is either held for trading or it is designated as of FVTPL.

A financial liability is classified as held for trading if:

• It has been incurred principally for the purpose of repurchasing it in the near term; or• On initial recognition it is part of a portfolio of identified financial instruments that the Entity manages together and has a recent actual pattern of short-term profit-taking; or

• It is a derivative that is not designated and effective as a hedging instrument.



• Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would oth-erwise arise; or

• The financial liability forms part of a Entity of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Enityt’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• It forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract to be designated as of FVTPL.

Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest paid on the financial liability and is included in the statement of profit or loss and other comprehensive income/income statement.

3. Other financial liabilitiesOther financial liabilities (including borrowings and trade and other payables) are subsequently measured at amor-tized cost using the effective interest method.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated fu-ture cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

4. Derecognition of financial liabilitiesThe Entity derecognizes financial liabilities when, and only when, the Entity’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

t. Earnings per share

Basic earnings per common share are calculated by dividing majority net income by the weighted average number of shares outstanding during the year.

4. Critical accounting judgments and key sources of estimation uncertainty

In applying the entity’s accounting policies, which are described in Note 3, management must make judgments, esti-mates and assumptions about the carrying amounts of assets and liabilities that are not easily found in other sources. The estimates and assumptions are based on experience and other factors considered relevant. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on a regular basis. The reviews at accounting estimates are rec-ognized in the period of the revision and future periods if the revision affects both current period and to subsequent periods.



a. Critical judgments in applying accounting policies

The following are essential judgments, apart from those involving estimations (see Note 4.b), made by the manaag-ment of the Entity during the process of applying the entity’s accounting policies and that have a significant effect on the amounts recognized in the financial statements.

1. Classification of leasesManagement has determined that certain leases must be classified as capital leases. The classification of leases depends on the extent to which risks and rewards incidental to ownership of the leased asset are transferred to the lessee, considering the substance of the transaction rather than the form of contracts. The Entity has determined, based on the terms and conditions of the contract, which has substantially all the risks and benefits for certain, leased assets.

b. Key sources of estimation uncertainty

The following discusses the key assumptions concerning the future and other key sources of estimation uncertainty at the end of the period over which it is reported, that have a significant risk of causing significant adjustments in values carrying amounts of assets and liabilities over the next year.

1. Asset Life.- Management reviews the estimated useful lives of property, plant and equipment at the end of each annual period.

2. Fair value measurements and processes valuación.- In estimating the fair value of an asset or a liability, the Company uses observable market data to the extent that they are available.

3. Costs.- Management determines an estimate of the costs incurred for each housing development plan. A portion of the total estimated costs to be incurred is then allocated to each unit to determine the cost of sales. The estimate is based on a technical analysis.

4. Reserve housing slow movement.- Management recorded a reserve for the entire cost to housing slow movement, based on an analysis that considers the age of housing and special features of the development.

5. Allowance for doubtful accounts.- Management has created a reserve for all accounts receivable determined to be uncollectible based on an evaluation of credit characteristics.

6. Valuation of Financial Instruments.- As described in Note 3.q., the Entity uses valuation techniques that include information that is not obtained from observable markets to estimate the fair value of certain financial instruments. Management believes that the valuation techniques and assumptions selected are appropriate for determining the fair value of financial instruments.

7. Employee Benefits.- The valuation of other postretirement benefits to employees is based on actuarial calcula-tions using assumptions for discount rates, salary increases, among others. The assumptions are updated annually. Changes in these assumptions could have a significant effect on the amount of the liabilities and results of the Entity.



5. Non-cash transactions

During the current year, the Entity entered into the following non-cash investing and financing activities which are not reflected in the consolidated statement of cash flows:

• Adquisition of machinery, furniture and equipment under capital leases for $821 in 2013 y $4,853 in 2012.

6. Cash and cash equivalents

For the purposes of the consolidated statement of cash flows, cash and cash equivalents include cash on hand and in banks, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the reporting period as shown in the consolidated statement of cash flows can be reconciled to the related items in the consolidated statement of financial position as follows:

2013 2012 Cash and cash equivalents $ 77,640 $ 152,274Readily available investments 521,958 1,420,798 $ 599,598 $ 1,573,072Restricted cash (1) $ 43,369 $ 43,369

(1) The Entity entered into a trust contract with Nacional Financiera, S. N. C., for the purpose of promoting the development of micro, small and medium-size companies through a system that grants financial support to the Entity’s suppliers. For these purposes, a reserve for payment was created, which may only be used to fund obligations payable by the fund.

7. Trade accounts receivable

2013 2012As developer:

Billed revenues $ 745,171 $ 715,670Construction costumers 12,576 9,009Receivables from lessees 4,038 640 761,785 725,319

Allowance for doubtful accounts (21,502) (21,502)

$ 740,283 $ 703,817

Customers by titling according to mortgage credit granting institution are as follows:

2013 2012INFONAVIT (Including cofinancing) $ 225,577 $ 363,676SHF , FOVISSSTE and commercial banks 519,594 351,994

$ 745,171 $ 715,670



a. Accounts receivable

Accounts receivable are stated at amortized cost. The average credit period on sales of goods is 48 days. There is no interest charge on the receivables to such institutions.

The Entity uses rigorous processes to integrate the information be sent to institutions. Additionally, this process is complemented by entities that grant mortgage loans used to accept clients. Strict adherence to the processes of each institution is the only medium existingt that permit to the entity to sell, notarize and collect products through them. Accounts receivable include amounts that are past due at the end of the reporting period under review (see discus-sion of aging), for which the Entity has recognized an estimate based on the likely risk. Receivables past due but not impaired are those that are aged more than 90 days.

Age of accounts receivables

2013 201230 days $ 412,325 $ 528,84260-90 days 46,052 32,563Over 90-120 days 303,408 163,914Total $ 761,785 $ 725,319Average age (days) 48 40

Change in allowance for doubtful accounts

2013 2012Balance at beginning of year $ 21,502 $ 23,549

Increase — 6,277 Cancelation — (8,324)

Balance at end of year $ 21,502 $ 21,502

8. Inventories 2013 2012

Work in process (1) $ 7,662,148 $ 6,919,056Land in process of development 2,156,664 2,379,926Land held for development short-term 1,330,003 1,154,804Construction materials 267,800 342,767Borrowing cost 77,634 155,516 11,494,249 10,952,069Land for long-term development 1,247,305 1,446,278 $ 12,741,554 $ 12,398,347

(1) As of December 31, 2013 and 2012, the balance of work in process inventory includes 1,723 and 1,640 completed housing units, respectively.



a. The Entity’s policy is to locate and acquire land each year, classifying land currently being developed or land planned to be developed within the Entity’s operational cycle as current assets, and as long-term all remaining land for which the Entity has no current plans to develop.

b. The Entity to September 30, 2013 obtained a syndicated loan with a mortgage guarantee and land reserve is long term with a book value of $1,809,400. The Entity is not authorized to grant these inventories in guarantee of other loans or sell them to another entity.

c. Borrowing cost is based on the average annual balance of work in process and land in process that are qualifying as-sets pending completion. In 2013 and 2012, the annualized average base was $2,437,104 and $2,665,154, respectively.

Also, at December 31, 2013 and 2012, accumulated borrowing cost included in inventories was $214,466 and $201,686, respectively, and borrowing cost of $292,348 and $277,911, respectively, was transferred to cost as a part of the sale of such inventory.

The annualized average capitalization rate in 2013 and 2012 was 6.76% and 7.16%, respectively.

9. Shopping mall available for sale

2013 2012 Buildings held for lease $ 290,483 $ 226,250Commisions paid for leasing contracts 1,997 1,722

292,480 227,972 Accumulated depreciation (38,744) (17,324)

253,736 210,648 Land 196,353 193,380Construction in progress 1,707 11,966

$ 451,796 $ 415,994

10. Other current assets

2013 2012 Advances to suppliers $ 181,743 $ 203,386Security deposits 127,418 115,015Recoverable taxes, principally ISR income tax 201,616 90,963Other accounts receivable 30,606 36,025Advance payments 13,694 23,548

$ 555,077 $ 468,937



11. Investments in equity method investees

a. The Entity’s investments accounted for by the equity method are summarized as follows:

related party % ownership equity in net assets equity in earnings of equity

method investees

2013 2012 2013 2012Centro San Miguel, S. de R. L. (i) (ii) (CSM) 50.00 $ 4,598 $ 5,887 $ 9,218 $ 8,351

Centro Regional las Américas, S. de R. L. (i) (ii) (CRAS) 50.00 53,118 29,844 67,199 57,311

Centro San Francisco, S. de R. L. (i) (ii) 50.00 — — 3,898 30

Exhibidora Cinematográfica San Francisco, S. de R. L. (iii) 50.00 — — (2,694) (1,899)

Trust – 738 (iv) 50.00 (2,514) 51,589 46,619 4,978

$ 55,202 $ 87,320 $ 124,240 $ 68,771

The associates are recognized using the equity method in the consolidated financial statements.

(i) The main purpose of this investment is the construction, rental, and administration of all projects including shopping malls.

(ii) As of December 31, 2013 and 2012, land sales, capitalized interest and administrative services of $66,475 and $66,474 respectively, were eliminated.

(iii) The main purpose of this investment is the purchase, sale and operation of movie theatres.

(iv) On January 29, 2010, Plaza Cañada Huehuetoca, S. de R. L., a subsidiary of PDCC, executed an irrevocable management trust contract with MRP Hue-huetoca, S. de R. L., with a participation of 50% equity. The purpose of this trust is to plan, design, build, and operate a shopping center, which was inaugurated in December, 2010. In December 2013, Cañada Huehuetoca Plaza mall was sold, in which we had 50% stake.

b. The financial information relating to the most significant associated (CRAS) of the Entity is summarized below:

2013 2012Current assets $ $77,604 $ $60,614

Total Assets $ 1,044,663 $ 998,284

Current liabilities $ 54,950 $ 46,681

Total Liabilities $ 810,691 $ 810,481

2013 2012

Income $ 257,683 $ 242,101

Income before inome taxes $ 157,802 $ 142,259

Net income $ 112,169 $ 95,075



12. Property, machinery and equipment

Reconciliation of beginning and ending book balances in 2013 and 2012 is as follows:

invesment:

balance as of 1 january

2012 additions disposals

balance as of december

31, 2012 additions disposals

balance as of december

31, 2013

Buidings $ 37,861 $ 428 $ 1,312 $ 36,977 $ 421 $ 874 $ 36,524

Leasehold improvements 60,231 3,131 — 63,362 — — 63,362

Commercial facilities and mini-supermarkets for rent 30,083 — — 30,083 — 27,397 2,686

Machinery and equipment 995,696 3,681 850 998,527 2,216 3,392 997,351

Vehicles 124,949 3,214 9,270 118,893 4,824 8,798 114,919

Office furniture and fixtures 83,791 1,776 106 85,461 1,000 2,065 84,396

Land 36,017 570 39 36,548 4,895 18,187 23,256

Improvements and adaptations in progress 12,874 715 3,722 9,867 77 — 9,944

Total invesments 1,381,502 13,515 15,299 1,379,718 13,433 60,713 1,332,438

Depreciation:

Buildings (9,041) (172) (424) (8,789) (690) (2,118) (7,361)

Leasehold improvements (25,657) (8,933) — (34,590) (8,940) — (43,530)

Commercial facilities and mini-supermarkets for rent (12,497) (546) — (13,043) — (13,043) —

Machinery and equipment (735,788) (63,900) (278) (799,410) (58,020) (1,494) (855,936)

Vehicles (62,074) (10,480) (7,547) (65,007) (8,516) (7,851) (65,672)

Office furniture and fixtures (32,773) (11,341) (40) (44,074) (6,627) (2,031) (48,670)

Total accumulated depreciation (877,830) (95,372) (8,289) (964,913) (82,793) (26,537) (1,021,169)

Net invesment $ 503,672 $ (81,857) $ 7,010 $ 414,805 $ (69,360) $ 34,176 $ 311,269

Machinery, equipment and furniture acquired under capital lease- net of accu-mulated depreciation of $572,791and $532,295 at December 31, 2013 and 2012, respectively

2013

$ 32,128

2012

$ 78,427

13. Investments in Subsidiaries

The consolidated financial statements include the financial statements of Consorcio ARA, S. A. B. de C. V. (ARA) and those of its subsidiaries over which it maintains control. ARA’s ownership interest in its subsidiaries at December 31, 2013 and 2012, is shown below:



subsidary or subsidiary grouppercentage of equity stake

and voting power in 2013 and 2012

Consorcio de Ingeniería Integral, S.A. de C.V. (CIISA)Proyectos Urbanos Ecológicos, S.A. de C.V. (PUESA)Constructora y Urbanizadora ARA, S.A. de C.V. (CUARA)Inmobiliaria ACRE, S.A. de C.V. (ACRE)Asesoría Técnica y Administrativa GAVI, S.A. de C.V. (GAVI)Comercialización y Ventas, S.A. (COVENSA)Promotora y Desarrolladora de Centros Comerciales, S.A. de C.V. (PDCC) (i)Desarrollos Inmobiliarios Turísticos ARA, S.A. de C.V. (DITA)Consorcio ARA, LLC (ii) Inmobiliaria el Globo, S.A. de C.V.

99.6%99.9%99.9%99.1%99.9%98.0%99.9%

100.0%100.0%99.4%

(i) As part of the Entity’s overall development plan, the Entity created PDCC, which holds five 99.9% owned subsidiaries, Operadora de Unicentros y Locales Comerciales, S. A. de C. V., Servicios Administrativos ARADCD, S. A. de C. V., Operadora de Espacios Las Américas, S. de R. L., Plaza Cañada Huehuetoca, S. de R. L. and Centro Veracruzano Río Medio, S. de R. L. These entities rent commercial facilities and mini-supermarkets.

(ii) The Entity established Consorcio ARA, LLC in the United States, with representative offices in New York and Chicago. The main objective is the marketing of its housing in Mexico to Mexican citizens residing in the United States. During 2010, the Entity decided to close such representative offices.

Intercompany balances and transactions have been eliminated in these consolidated financial statements.

Investments in associates in which the entity has significant influence, but not control, are valued as described in note 3.f.

14. Long-term debt

2013 2012

Syndicated loan with BBVA Bancomer acting as administrative agent, collate-ralized by a mortgage guarantee (Note 8.b) for $2,328,000. Interest is determi-ned based on the leverage ratio of debt to EBITDA. If this ratio is less than 2.75, the rate will be the Interbank Interest Rate Balance (TIIE) plus 250 basis points, and if greater than 2.75, the rate will be TIIE plus 300 basis points (effective interest rate of 6.53% at December 31, 2013). Tranche A is due in September 2018 and tranche B is due in September 2016.

$ 2,250,300

$ —

Note payable of $500,000 to BBVA Bancomer, S. A., which accrues interest monthly at the rate of 7.18%, which was fixed by the swap agreement and ma-tures on August 23, 2015. Payments of principal were made in quarterly install-ments and interest payments on this note were made in monthly installments. The loan was prepaid on September 30, 2013. — 458,334



2013 2012

Note payable of $500,000 to BBVA Bancomer, S. A. bearing interest atTIIE interest plus 1% whereby TIIE must not be greater than 9.00%; the maturity of the note was on May 26, 2016. The effective annual interest rate as of Decem-ber 31, 2012 was 5.85%. Payments of principal and interest on this note were made in monthly installments. The loan was prepaid on September 30, 2013.

$ — $ 170,833

Note payable of $500,000 to Banco Santander México, S. A. which accrues interest monthly at the rate of 7.59%, which was fixed by the swap agreement. The maturity of the note was on May 31, 2015. Payments of principal and inter-est on this note were made in semiannual installments. The loan was prepaid on September 30, 2013. — 76,530

Note payable of $500,000 to Banco Santander México, S. A. which accrues interest monthly at the rate of 7.59%, which was fixed by the swap agreement. The maturity of the note is on July 7, 2015. Payments of principal are made in quarterly installments and interest payments on this note are made in monthly installments. The loan was prepaid on September 30, 2013. — 196,429

Note payable of $960,000, to Banco Nacional de México, S. A., which accrues interest monthly at the rate of 7.59%, which was fixed by the wwap agreement. The maturity of the note in on January 26, 2015. Payments of principal are made in quarterly installments while interest payments on this note are made in monthly installments. The loan was prepaid on September 30, 2013. — 960,000

Note payable of $600,000 to Banco Santander México, S. A., which accrues interest monthly at the rate of 7.68%, which was fixed by the swap agree-ment. The maturity of the note is on March 31, 2016. Payments of principal were made in six month installments while interest payments on this note were made in monthly installments. The loan was prepaid on September 30, 2013. — 388,889

Note payable of $200,000 to Banco Santander México, S. A., which accrues interest monthly at the rate of 7.68%, which was fixed by the wwap agree-ment. The maturity of the note was on March 31, 2016. Payments of principal were made in six month installments while interest payments on this note were made in monthly installments. The loan was prepaid on September 30, 2013. — 129,630

Note payable of $500,000 to Banco Mercantil del Norte, S. A., bearing TIIE interest rate plus 2.50%; the maturity of the note was on December 15, 2014. The effective annual interest rate as of December 31, 2012 was 7.34%. Pay-ments of 48% of principal were made in monthly installments with a one year grace period and the remaining 52% of the principal will be repaid at maturity. Interest payments on this note were made in monthly installments. The loan was prepaid on September 30, 2013. — 500,000



2013 2012

Note payable of $200,000 to Banco Regional de Monterrey, S. A., which ac-crues interest monthly at the rate of 7.26%, which was fixed by the swap agree-ment, the maturity of the note is on September 28, 2015. Payments of principal and interest on this note are made in monthly installments. $ 87,500

$ 137,500

Note payable of $66,000 to Banco Mercantil del Norte, S. A. bearing TIIE inter-est rate plus 3.5% wherein TIIE must not be greater than 10%; the maturity of the note is on July 25, 2020. The effective annual interest rate as of December 31, 2012 was 7.27%. Payments of approximately 17% of principal were made in monthly installments with a one year grace period and the remaining 83% of the principal will be repaid at maturity, interest payments on this note were made in monthly installments. The loan was prepaid on September 30, 2013. — 56,093

Note payable of $80,750 guarantee ownership rights and collection with Sco-tiabank Inverlat, S. A., which accrues monthly interest at the TIIE rate plus 3.25%, the maturity of the note is on December 16, 2016. The effective annual interest rate as of December 31, 2013 and 2012 is 8.04%. 74,503 80,270

Note payable of $10,920 to BBVA Bancomer, S. A., bearing TIIE interest rate plus 3%; the maturity of the note is on December 8, 2015. The effective annual interest rate as of December 31, 2013 is 6.99%. The principal will be repaid at maturity and interest payments on this note are made in monthly installments. 10,920 —

2,423,223 3,154,508

Less - Current portion (377,668) (1,075,155)

Long-term debt $ 2,045,555 $ 2,079,353

As of December 31, 2013, long-term debt matures as follows:2015 2016 2017

Thereafter

$ 420,489581,667510,599532,800

$ 2,045,555

On September 30, 2013 the Entity entered into a syndicated loan with BBVA Bancomer, S. A. acting as administrative agent and collateralized by a mortgage guaranteein the amount of $2,328,000. The interest rate is determined based the leverage ratio of debt to EBITDA. If this ratio is less than 2.75, the interest rate isTIIE plus 250 basis points, and if greater than 2.75, the rate shall be TIIE plus 300 basis points. The proceeds of the loan were used to prepay debt on September 30, 2013. The term of this loan resulted in extends over longer a period than the debt it replaces. (note 8.b).

The loan agreements contain restrictive covenants, which require that the Entity maintain certain minimum financial ratios and fulfill the contractual obligations during the period of the agreement. Management believes the Entity is in compliance with such covenants as of December 31, 2013 and 2012.



During 2013 and 2012, the Entity drew $2,538,921 and $1,540,750, from available lines of credit and repaid $3,270,205 and $1,408,219 of these credits, respectively.

Additionally, as of December 31, 2103 the Entity maintains available credit lines with financial institutions of $2,431,389.

15. Accrued expenses and taxes, other than income taxes

2013 2012Taxes, other than IETU and ISR $ 121,754 $ 137,290Accrued expenses 160,686 146,753Factoring with no resources — 523,001Accrued interest 9,912 3,870Deposits from suppliers 396,527 354,843Direct employee benefits 9,751 9,285

$ 698,630 $ 1,175,042

16. Income taxes

The Entity is subject to ISR and determined its tax results on an entity by entity basis; therefore, the Entity and its subsidiar-ies do not file a consolidated tax return. Until 2013 the Entity was subject to the IETU.

ISR – The rate was 30% in 2013 and 2012 and as a result of the new ISR law, the rate will continue at 30% in 2014 and thereafter.

IETU - IETU was eliminated as of 2014; therefore, up to December 31, 2013, this tax was incurred both on revenues and de-ductions and certain tax credits based on cash flows from each year. The respective rate was 17.5%.

As of 2008, the Asset Tax Law (LIMPAC) was eliminated, but under certain the amount of this tax paid in the 10 years im-mediately prior to that in which ISR is first paid may be recovered in accordance with applicable tax provisions.

Until 2013 income tax incurred was the higher of ISR and IETU.

Until 2013, based on its financial projections, the Entity determined that it will basically pay ISR. Therefore, it only recognizes deferred ISR. As of 2014, only deferred ISR is calculated due to the elimination of IETU.

For ISR purposes, effective in 2005, cost of sales is deducted instead of inventory purchases. Taxpayers had the option, in 2005, to ratably increase taxable income over a period from 11 to 12 years by the tax basis of inventories as of December 31, 2004, determined in conformity with the respective tax rules, and taking into account inventory turnover. The net balance of this deferred income for tax purposes as of December 31, 2013 and 2012 was $997,962 and $1,385,721, respectively. PTU paid is fully deductible.



a. ISR consist of the following:

2013 2012ISR: Current $ 220,110 $ 339,302Deferred (39,972) (90,822)

$ 180,183 $ 248,480

The effective ISR rate for fiscal 2013 and 2012 differs from the statutory rate, mainly due to permanent differences, such as nondeductible expenses and the effects of inflation as follows:

2013 2012 % %

Statutory rate 30.0% 30.0%Effect of permanent differences:

Effect of inflation 1.8% 1.2%Non-deductibe expenses 1.7% 2.4%Land 3% accumulation 6.3% 4.8%Others (11.8)% (7.9)%

Effective tax rate 28.0% 30.5%

b. The main items comprising the liability balance of deferred income tax are as follows:

2013 2012Deferred income tax assets (liabilities):

Inventories and long-term land for development $ (1,832,431) $ (1,876,419)Property, machinery and equipment (26,965) (32,503)Advances from customers 8,706 5,405Allowance for doubtful accounts 3,400 3,218Others – Net 1,465 (3,793)Net deferred ISR liability from temporary differences (1,845,825) (1,896,506)

Effect of tax loss carryforwards 85,890 99,116Recoverable tax on assets paid 12,388 15,038 98,278 114,154Valuation allowance for the deferred ISR (1) (72,635) (77,216)

Net long-term deferred ISR liability $ (1,820,182) $ (1,859,568)

(1) Certain deferred income tax assets generated by ARA and PDCC were not recorded because there is not a high probability of recovery.



c. Tax loss carryforwards and recoverable IMPAC for which the deferred ISR asset and prepaid ISR, respectively, have been partially recognized can be recovered subject to certain conditions. Restated amounts as of December 31, 2013 and expiration dates are:

year of tax loss recoverable expiration carryforwards impac

2014 $ 2,817 $ 2,383 2015 18,551 2,721 2016 32,451 4,281 2017 14265 3,003 2018 17,383 — 2019 44,586 — 2020 23,790 — 2021 26,694 — 2022 51,193 —

2023 54,570 —

$ 286,300 $ 12,388

17. Capital lease obligations

a. Capital lease obligations for equipment bear annual compound average interest rate of 6.05% at December 31, 2013.

b. At December 31, 2013 and 2012, minimum rental commitments under capital leases are comprised of the following:

2013 2012Total minimum lease obligations $ 7,389 $ 25,336Current portion of obligations (6,128) (18,613)

Long-term portion of capital lease obligations $ 1,261 $ 6,723

Capital lease obligations, which have a purchase option at the end of the lease term matures as follows:

Year ending December 31 2015 $ 1,163 2016 98

$ 1,261



18. Retirement employee benefits

a. Defined contribution plans

The Entity by law make payments equivalent to 2% of wage workers integrated (ceiling) to plan a defined contribution system of retirement savings specified in the law.

The Entity operates defined contribution retirement benefit plans for all qualifying employees. The assets of the plans are held separately from those of the Entity in funds under the control of trustees. Where employees leave the plans prior to full vesting of the contributions, the contributions payable by the Entity are reduced by the amount of for-feited contributions.

The total expense recognized in profit of $1,687 and $2,866 in 2013 and 2012, respectively, represents contributions payable to these plans by the Entity at rates specified in the rules of the plans.

b. Defined benefit plans

The Entity sponsors funded defined benefit plans for qualifying employees. The defined benefit plans are administered by a separate Fund that is legally separated from the entity. The Entity manages a plan which also covers seniority premiums, which consist of a one payment of 12 days per year of service based on their final salary, not to exceed twice the minimum wage established by law. The related liability and annual cost of benefits is calculated by an independent actuary on the bases defined in the plans using the projected unit credit method.

The Entity manages defined benefit plans for employees who qualify. In accordance with these plans, employees are entitled to retirement benefits that meet the retirement age of 65 years and at least 10 years of service in the Entity, which is to provide a lifetime monthly pension payments secured by 120, based the average net salary of the last 12 months before retirement, and equivalent to 2.5% of pensionable salary over 0.55% of pensionable salary for each year of service.

The plans typically expose the Entity to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.

Investment risk. - The present value of the defined benefit plan liability is calculated using a discount rate determined by reference to high quality corporate bond yields; if the return on plan asset is below this rate, it will create a plan defi-cit. Currently the plan has a relatively balanced investment in equity securities, debt instruments and real estates. Due to the long-term nature of the plan liabilities, the board of the pension fund considers it appropriate that a reasonable portion of the plan assets should be invested in equity securities and in real estate to leverage the return generated by the fund.

Interest risk. - A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on the plan’s debt investments.



Longevity risk. - The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expec-tancy of the plan participants will increase the plan’s liability.

Salary risk. - The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.

The risk relating to benefits to be paid to the dependents of plan members (widow and orphan benefits) is re-insured by an external insurance company.

No other post-retirement benefits are provided to these employees.

The most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out as of December 31, 2013 by independent actuaries, Member of the Institute of Actuaries of Mexico. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the pro-jected unit credit method.

The principal assumptions used for the purposes of the actuarial valuations were as follows.

2013 2012 % %

Discount rate 7.85 7.25Expected rate of salary increase 5.80 5.80Expected return on plan assets 7.85 7.25

Average longevity at retirement age for current

employees (future pensioners) (years)* Males 17 17Females 17 17

Amounts recognized in comprehensive income in respect of these defined benefit plans are as follows.

2013 2012Service cost:

Labor current service cost $ 4,501 $ 7,179Interest expense 3,607 4,483Return on plan assets (3,579) (3,399)Prior service cost and loses (gains) liquidations 304 (1,974)Actuarial gains (6,520) (9,155)

Net income for the total period $ (1,687) $ (2,866)

The current service cost and the net interest expense for the year are included in the employee benefits expense in profit or loss.



The remeasurement of the net defined benefit liability is included in other comprehensive income.

The amount included in the consolidated statement of financial position arising from the entity’s obligation in respect of its defined benefit plans is as follows:

2013 2012Present value of funded defined benefit obligation $ (51,002) $ (49,721)Fair value of plan assets 53,144 49,595 Net assets (liability) arising from defined benefit

obligation $ 2,142 $ (126)

Movements in the present value of the defined benefit obligation in the current year were as follows:

2013 2012Opening defined benefit obligation $ 49,721 $ 59,097Current service cost 4,501 7,179Interest cost 3,256 4,262Remeasurement (gains)/losses: Actuarial gains arising from changes in demographic assumptions (2,046) (21,933) Actuarial (gains) and losses arising from changes in financial assumptions (3,751) 1,614 Benefits paid (679) (498) Closing defined benefit obligation $ 51,002 $ 49,721

Movements in the fair value of the plan assets in the current year were as follows:

2013 2012Opening fair value of plan assets $ 49,595 $ 45,862Interest income 3,859 3,978Contributions from the employer 103 — Benefits paid (413) (245)

Closing fair value of plan assets $ 53,144 $ 49,595

Significant actuarial assumptions for the determination of the defined obligation are discount rate, expected salary in-crease and mortality. The sensitivity analysis presented below were determined based on reasonably possible changes in the respective cases occurred at the end of the reporting period, while all other assumptions remain constant.

• If the discount rate is 100 basis points higher (lower), the defined benefit obligation would decrease by $4,497 (in-crease by $4,497).

• If the expected salary growth increases (decreases) by 1%, the defined benefit obligation would increase by $3,079 (decrease by $3,079).



• If the life expectancy increases (decreases) by one year for both men and women, the defined benefit obligation would increase by $1,608 (decrease by $1,608).

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obliga-tion as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assump-tions may be correlated.

There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.

Each year an Asset-Liability-Matching study is performed in which the consequences of the strategic investment poli-cies are analyzed in terms of risk-and-return profiles. Investment and contribution policies are integrated within this study.

There has been no change in the process used by the Entity to manage its risks from prior periods.

19. Risk management

a. Significant accounting policies

Los detalles de las políticas contables y métodos adoptados (incluyendo los criterios de reconocimiento, bases de valuación y las bases de reconocimiento de ingresos y egresos) para cada clase de activo financiero e instrumentos de capital se revelan en la nota 3.

b. Categories of financial instruments and risk management policies

The main categories of financial instruments are:

2013 2012Cash and cash equivalents (i) $ 599,598 $ 1,573,072Restricted cash (i) 43,369 43,369 Accounts Receivable Customer – Net (i) 740,283 703,817Due from equity method investees (i) 8,608 62,455

Others financial liabilities Trade accounts payable (ii) 358,781 326,608Long-term debt (iii) 2,423,223 3,154,508Capital lease obligations (iii) 7,389 25,336

The assets and liabilities of the Entity are exposed to various financial risks including:(i) Credit risk(ii) Liquidity risk, and (iii) Financial market risks (interest rate)



The Entity seeks to minimize potential adverse effects of the above risks on its financial performance through different strategies, which are described below:

a. Credit Risk Management

Credit risk refers to the risk that counterparties will default on their contractual obligations resulting in a loss for the Entity. In the case of the Entity, the principal credit risk arises from cash and cash equivalents and accounts receivable. With respect to cash and cash equivalents, the Entity’s policy to conduct transactions only with reputable institutions and high credit. With respect to accounts receivable, the Entity has credit policies that allow you to adequately manage credit risk. They are described in Note 7.

b. Liquidity Risk Management

Liquidity risk refers to the risk that an entity will encounter difficulty filling its obligations associated with financial liabilities that are covered by delivering cash or another financial asset. The Entity manages liquidity risk through the establishment of appropriate policies for monitoring the working capital, which allows management to manage the financing requirements. The excess cash is invested primarily in government paper. 100% of such excess is invested regularly within less than 30 days. The Entity’s policy allows the excess may also be invested in bank paper as long as they meet certain requirements of risk and return on investment.

The Entity has continued monitoring of projected cash flows and real and has financial factoring options and lines of credit for working capital.

Additionally, the Entity control the cash flow allocated to the business lines in order to optimize the return on invest-ment, maintaining a balance between the sale and construction program.

The maturities of long-term debt are presented in note 14.

The following table shows the contractual maturities of financial liabilities of the entity based on pay periods are:

at december, 31 2013 less than 1 year

more tan 1 year and less

than 3more tan 3

years total

Trade accounts payable $ 358,781 $ — $ — $ 358,781

Long-term debt include interest 537,960 562,155 1,813,196 2,913,311

Capital lease obligations 6,379 1,202 100 7,681

$ 903,120 $ 563,357 $ 1,813,296 $ 3,279,773

at december, 31 2012 less than 1 year

more tan 1 year and less

than 3more tan 3

years total

Trade accounts payable $ 326,608 $ — $ — $ 326,608

Long-term debt include interest 1,264,652 1,432,963 808,512 3,505,127

Capital lease obligations 19,843 6,236 825 26,904

$ 1,611,103 $ 1,439,199 $ 809,337 $ 3,858,639



c. Financial Market Risk

Entity’s activities expose it primarily to financial risks of changes in interest rates and exchange rate.

Management the risk of interest rate - The entity is exposed to risks in the interest rate, because it has contracted variable rate debt (TIIE). To mitigate this risk likely the Entity has a policy of hiring Swap which protect the movement of the reference rate TIIE (see note 20). In 2013, the Entity did not hire interest rate swaps.

Sensitivity analysis determines the Entity is prepared based on the exposure to interest rates do not cover the debt, held at variable rates. For this purpose, an analysis is prepared assuming the amount of liability outstanding at the end of the reporting has been the outstanding liability for the year.

If the interest rate TIIE have had an increase / decrease of 91 basis points at each reporting period and all other vari-ables had remained constant, the interest charge at December 31, 2013 and 2012 would have increased by $10,485 and $3,190, respectively, which have been capitalized in work in progress.

Management foreign exchange risk - The Entity holds investments in foreign currencies mainly short term as part of the diversification strategy, as well as supporting the needs of the operation. Although the Entity is exposed to fluctuations in the exchange rate, these are marginal because the proportion who keep the assets and liabilities in foreign currency.

At December 31, the foreign currency monetary position is as follows:

2013 2012Thousands of U.S. dollars:

Monetary assets 4,521 7,503Monetary liabilities (433) (93) Posición activa, neta 4,088 7,410

Net monetary asset position $ 53,470 $ 96,108

Transactions denominated in U.S. dollars were as follows:

2013 2012Thousands of U.S. dollars:

Equipment acquisitions 95 28

Offices leases 1,891 2,665



The exchange rates in effect at the dates of the balance sheets and of issuance of the consolidated financial state-ments were as follows:

december 31, 2013 december 31, 2012 U.S. dollar $ 13.08 $ 12.97

a. Fair value of financial instruments

The fair value of financial instruments presented below has been determined by the Entity using available market information or other valuation techniques that require judgment in developing and interpreting the estimates of fair values, also uses assumptions that are based on market conditions existing at each of the dates of the consolidated statements of financial position.

Consequently, the estimated amounts presented are not necessarily indicative of the amounts the Entity could realize in a current market exchange. The use of different assumptions and / or estimation methods may have a material ef-fect on the estimated fair value amounts.

Financial instruments that are measured subsequent to initial recognition at fair value are grouped at the levels below, covering the extent to which the fair value is observed.

Level 1, the fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2, the fair value measurements are those derived from indicators other than quoted prices included within Level 1, but including indicators that are observable for the asset or liability, either directly or indirectly quoted prices, ie derivatives of these prices, and

Level 3, the fair value measurements are those derived from valuation techniques that include indicators for the asset or liability that are not based on observable market data (unobservable indicators).

The amounts of cash and cash equivalents of the Entity, as well as accounts receivable and payable of third parties and related parties approximate their fair value because they have short-term maturities. The long-term debt of the Entity is recorded at amortized cost, which is debt bears interest at fixed and variable rates that are related to market indicators. To obtain and disclose the fair value of long-term debt, the Entity uses the quoted market prices or quota-tions for similar instruments.

20. Financial instruments

a. In order to change the profile of the interest rate from variable to fixed, in 2012 the Entity contract Swaps interest rate for specific loans most of them were anticipated payed in 2013, the liquidation dates are the same as at the date of interest payment. The loans bear interest at the TIIE rate plus 2.5 percentage points and by derivative fixing such rates between 7.18% and 7.68%, the instruments are due on the same dates of credit agreements and exercise dates set monthly.



The financial cost for the acquisition of these financial instruments is implicit in the agreed fixed rate itself that is recognized in the financial expense, to December 31, 2013 the net payment for the cost amounts to $19,764. Given the characteristics of the derivatives´ contract the Entity does not require liquidity sources and does not expect change in the financial situation that could result in significant variations in cash flow so that the liquidity of the same, are affected or at risk.

b. At December 31, 2013, the Entity has paid as net premium amounting to $9,981; the decrease in the fair value of the

instrument was recognized in financial costs. Given the nature of contract of financial instruments, the Entity does not require sources of liquidity. Some credits charge a premium for exercising their right in the option of sale to the date of liquidation for the movements of rate of reference TIIE for below 4.8%. There were no important changes in its financial position that involved significant variations in cash flow, or its liquidity of the same, shall not be affected or at risk.

The Company contracted during 2011 and 2010 credits with maturity in 2015 as it continues:

balance of credit as of tiie rate + cap % floor % december 31, 2013

291,667 (1) 2.20 7.18 4.8 45,918 (1) 2.50 7.59 N/A 124,999 (1) 2.50 7.59 N/A 185,185 (1) 2.50 7.68 N/A 92,593 (1) 2.50 7.68 N/A 92,593 (1) 2.50 7.68 N/A 87,500 2.25 7.26 N/A

(1) At December 31, 2013 these loans were liquidated early.

* Swap - Contract by which two parties agree to exchange amounts of money at a future date, usually the exchange of money are tied to future interest rates.

c. Equity Swap - On August 14, 2012 the Entity, entered into a contract for share exchange derivative financial instru-ment, which established the exchange shares for up to a notional amount not exceeding $ 155,000 and at due date was settled in cash, paying the difference between the value of the purchase action against the value of the action to the settlement date. The financial cost of this instrument is the TIIE rate plus 2.5 percentages on the amount of operations at December 31, 2013 amounted to $6,198 and is recognized in other expenses in the statements of profit or loss and other comprehensive income.

Due to characteristics of this instrument is called of negotiation and as mentioned in note 3 q, the Entity recognizes all assets or liabilities arising from operations in the balance sheet at fair value. In 2013 the operation was liquidate.



21. Stockholders’ equity

a. Capital stock consist of 1,312,847,496 ordinary shares, with no par value, no subscription limitations, fully subscribed and paid.

b. On October 1, 2009, a resolution was authorized to create and implement a share base payment plan for the Entity’s executives and employees. As of December 31, 2013, such plan has not been implemented.

c. In 2013 and 2012, the Entity purchased and sold its own stock resulting in an increase (reduction) in subscription premium of $18,292 and $(387), respectively.

At December 31, 2013, the Entity repurchased 2,794,665 shares. The market value of the Entity’s shares, as reported on the Mexican Stock Exchange, was Ps. $5.11 per share.

d. Retained earnings include the statutory legal reserve. The General Corporate Law requires that at least 5% of net income of the year be transferred to the legal reserve until the reserve equals 20% of capital stock at par value. The legal reserve may be capitalized but may not be distributed unless the entity is dissolved. The legal reserve must be replenished if it is reduced for any reason. At December 31, 2013 and 2012, the legal reserve was $212,937.

e. Stockholders’ equity, except restated paid-in capital and tax retained earnings will be subject to income tax payable by the Entity at the rate in effect upon distribution. Any tax paid on such distribution may be credited against annual and estimated income taxes of the year in which the tax on dividends is paid. The contributed capital account and consolidated net tax income account as of December are:

2013 2012Contributed capital account $ 1,819,842 $ 1,750,353Net tax income account 5,882,354 5,187,009

Total $ 7,702,196 $ 6,937,362

22. Related party transactions

a. Transactions with investments in equity method investees and other realted parties, carried out in the ordinary course of business, were as follows:

Revenue: 2013 2012Shopping mall management fees $ 4,779 $ 4,655Administrative services income $ 7,557 $ 6,308Commissions $ 66 $ 1,517Interests $ 2,137 $ 2,375



b. The Entity carried out transactions with other related parties as follows:

2013 2012Revenue:

Management and directors: Housing sale to employees $ 1,270 $ 16,918

Costs: Management and directors:

Direct benefits $ 83,427 $ 92,789Members of the board of directors:

Fees $ 2,478 $ 2,568Emoluments $ 2,090 $ 2,617

Offices leasing $ 563 $ 501Publicity $ 626 $ 626

23. Information by business activity

The information for business activities are presented based on the managerial approach and additional provides infor-mation by business line and geographic area:

a. Information by business activities

The Entity operates as a developer and a lessor solely in Mexico, as mentioned in note 1. Certain information on rev-enues and costs relative to these activities is as follows:

2013 2012Revenues:

As developer $ 5,594,498 $ 6,388,843As service provider 17,560 18,202Land sales 91,483 86,707As lessor (1) 32,186 20,901

$ 5,735,727 $ 6,514,653

2013 2012Costs:

As developer $ 4,084,929 $ 4,558,356As service provider 12,585 13,195Land sales 65,579 58,494As lessor 22,303 21,096

$ 4,185,396 $ 4,651,141

(1) The rental revenue is derived from operating leases of commercial facilities and mini-supermarkets, which have one-year terms, and are increased in line with inflation year, renewable annually.



Revenues and costs by mortgage lender are as follows:

2013 2012Revenues:

INFONAVIT (Including cofinancing) $ 2,198,067 $ 2,872,654FOVISSSTE, SHF and commercial banks 3,396,431 3,516,189

$ 5,594,498 $ 6,388,843

2013 2012Costs:

INFONAVIT (Including cofinancing) $ 1,629,342 $ 2,071,968FOVISSSTE, SHF and commercial banks 2,455,587 2,486,388

$ 4,084,929 $ 4,558,356

Revenues as developer, service provider and lessor, are obtained solely within Mexico.

There are no material intersegment transactions.

b. General information for business line

2013 2012Revenues:

Progresiva $ 876,961 $ 1,206,856Social interest 1,552,723 1,709,439Middle 1,999,353 2,441,581Residential 1,165,461 1,030,967Other real-estate projects 141,229 125,810

$ 5,735,727 $ 6,514,653



c. General information for geographic area

2013 2012Revenues:

Estado de México $ 2,487,358 $ 2,770,142Morelos 550,522 611,049Nuevo León 336,182 365,058Quintana Roo 299,139 290,995Querétaro 288,022 305,607Guerrero 267,019 279,601Veracruz 253,377 147,761Puebla 244,940 341,291Jalisco 224,413 106,731Nayarit 204,311 189,566Baja California 163,596 211,285Hidalgo 99,768 154,090Distrito Federal 87,025 394,838Sonora 69,194 70,665Chihuahua 10,332 8,376Guanajuato 8,644 105,900Tamaulipas 656 2,215Michoacán — 33,673 5,594,498 6,388,843 Other real-estate projects 141,229 125,810 Total $ 5,735,727 $ 6,514,653

24. Commitments

a. Guarantee and management trust – In October 2003, the Entity executed a guarantee and management trust contract to develop and market a housing complex of 2,308 units for Michoacán government’s employees and retail stores in Capula, Morelia. The development is divided into the ARA project and SARE project, a commercial area and free land. The principal characteristics of the trust are:

Participants – The participants are Instituto de Vivienda del Estado de Michoacán de Ocampo (Trustor and Benefi-ciary A) “IVEMO”; Consorcio de Ingeniería Integral, S. A. de C. V. (Trustor and Beneficiary B) “CIISA”; FISARE, S. A. de C. V. (Trustor and Beneficiary C and a Entity subsidiary) “FISARE” and Banco Azteca, S. A. (Trustee) “Banco Azteca”.

Contributions – The contributions to the trust of each participant are: IVEMO to contribute with Capula, Morelia land and the water rights concession, CIISA and SARE each contribute 50% of the development and internal works of the ARA and SARE projects, respectively.

Benefits – For the sale or transfer of each housing unit in the ARA and SARE projects, IVEMO receives 8% of the selling price while CIISA and SARE will receive the remaining 92% of in the sales proceeds of the ARA and SARE projects, respectively.



The commercial area and free land will be returned to IVEMO.

Effective duration of contract – El Fideicomiso tendrá la duración necesaria para el cumplimiento de sus finalidades. IVEMO se reserva la facultad para revertir parte o la totalidad del inmueble siempre y cuando este no haya sido com-prometido con terceros adquirentes y restituir los gastos en inversiones que CIISA y SARE hubieren realizado en las obras de urbanización. Al 31 de diciembre de 2013 se han registrado 2,061 viviendas escrituradas por un importe de $291 por vivienda.

b. The Entity leases offices under an operating lease that is renewable annually. The rental expense was $34,924 and $37,682 for the years ended December 31, 2013 and 2012, respectively. During 2013, the Entity signed a leasing con-tract in U.S. dollars for 2 years for which the annual rent will be 2,000,000 U.S. dollars.

c. On August 18, 2004, CIISA executed a trust administration contract with a shopping mall and Banco J.P. Morgan, S. A. Institución de Banca Múltiple, J.P. Morgan Grupo Financiero, Trust Division, transferring part of the plot of land known as “las Américas” on which the “las Américas shopping mall” was developed.

CIISA obligations or the Americas Regional Center, S. de R. L. its affiliate, are among others, a) the obligation to carry and charge your account out the construction and improvement of the mall (except department store) , including parking lot of the department store, according to the executive project; b) and operate the mall (except for warehouse department store).

d. PDCC enter into a “Framework Agreement” with a third party, which establishes processes and procedures related to the investment in future construction projects and operation of malls.

e. Guarantee and management trust – In July 2006, the Entity celebrated an agreement with Fomento Metropolitano of Monterrey (“Fomerrey”). Fomerrey maintains documentation of consents evidencing its rights for the substantiation and settle for the expropriation of the land.

The Entity gave to Fomerrey $5,000 at the signing of this agreement. Fomerrey will receive $25,749 if the following conditions occur:

a) Fomerrey becomes the legitimate owner of the land located in Nuevo León.b) The Entity develops social interest housing with a minimal density of 50 housings by hectare on the land.c) Water feasibility, sanitary drainage and electrical energy are obtained.d) Fomerrey Committee authorizes this agreement.

The Entity will pay to Fomerrey 2% of the total value for the sale of houses that are built on the land.

During 2009, the conditions established in the agreement were fulfilled and the Entity was obligated to liquidate the amount in accordance with the agreement. However Fomerrey did not honor the agreement. As of the date of issuance of these financial statements the Entity initiated a lawsuit in order to force Fomerrey to comply with their commitment under the agreement.



f. The Entity is party to various legal actions in the normal course of its business. According to the Entity’s legal advi-sors, it is not involved in or threatened by proceedings for which the Entity believes it is not adequately insured or indemnified or which, if determined adversely, would have a material adverse effect on its financial position, results of operations or cash flows.

g. CIISA executed a master agreement on August 10, 2010 with Crystal Lagoons Corporation, LLC, a corporation legally established in the State of Delaware, United States, for the licensing and use of technology for the development and construction of lagoons. Consequently, CIISA has an urgent need for the technological support of a Entity highly specialized in this field.

Participants – Crystal Lagoons Corporation, LLC. (CL) and Consorcio de Ingeniería Integral, S. A. de C. V. (CIISA)

Commitment – CL grants CIISA an exclusive right to sign technology license agreements for use in projects within certain geographical areas determined by CIISA. The objective of this agreement is to determine the terms, conditions, and requirements that CIISA must fulfill to maintain the exclusive rights in those geographical areas, for purposes of executing license agreements with CL in the future for the use of technology.

Similarly, CL will not be able to license the technology to any third party for the duration of the exclusivity in the geo-graphical areas, without prior authorization by CIISA.

A license agreement for the use of technology will be executed for each additional project.

Effective duration of contract – The agreement will be in effect for 24 months from its execution date. The termina-tion of the agreement will not affect the duration of the license agreements executed thereunder or the exclusivity granted for the period stated in the exclusivity term for each particular geographical area. Once the exclusivity term concludes, and having executed the respective technology license agreement for the development of a project in ac-cordance with the “Business Plan”, CIISA will maintain exclusive rights only in the exclusion area of the project for a four-year period as of the end of the exclusivity term.

25. Subsequent event

The Entity is evaluating the disposal of four of its principal shopping mall centers: Centro Las Americas, San Miguel Centro, Centro San Buenaventura and Plaza Oasis.

Morgan Stanley was hired as strategic advisor and will continue contacts with interested buyers.

We will continue with the construction and management of new shopping mall centers.

26. Authorization to issue the financial statements

On March 26, 2014, the issuance of the consolidated financial statements was authorized by C. P. J. Sacramento Soto Solís Director of Administration and Finance of the Entity. These consolidated financial statements are subject to the approval of the Entity’s general ordinary stockholders’ meeting, who may modify the financial statements, based on provisions set forth by the General Corporate Law.

In Consorcio ARA we maintain a solid commitment to our clients; we know that the homes we offer are a patrimony to share with the family, the fulfillment of a dream and a just reward for many years of hard work and dedication. This is why we work every day to fulfill our mission to develop homes and commu-nities where people can be proud to live.

In our 37 years of experience, we have built and sold over 298 thousand houses, which are home to 1.2 million Mexicans. This is a source of pride and also a challenge to continue maximizing the value proposi-tion for our clients.

Our range of products includes the construction and marketing of progresiva, affordable entry level, middle income and residential housing. We have also successfully diversified our activities through the development and operation of six shopping malls.

We have a healthy financial structure and a mod-erate level of debt. For eight consecutive years we have maintained the best credit ratings for the Mexican housing sector: “mxA” by Standard & Poor’s and “A2.mx” by Moody´s, both with a sta-ble outlook. Since 1996, we have been listed on the Mexican Stock Exchange under the symbol ARA*, and our ADRs are quoted on the New York Stock Exchange.

MISSIONTo develop homes and communities for Mexican lifestyles, where people can be proud to live.

VISIONTo be the most reliable, profitable and innovative real estate developer in Latin America.

Investor Relations

Alicia Enriquez Pimentel [email protected](52.55) 5596 8803(52.55) 5246 3100 Ext. 4096

Independent Auditor

Galaz, Yamazaki, Ruiz Urquiza, S.C.Member of Deloitte Touche Tohmatsu Limited

FOUNDING MEMBER OF

VIVIENDA Y ENTORNO

SUSTENTABLE, A.C.

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CONTENTSFINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . 1

PRESENCE ANDLAND BANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

MESSAGE TO OURINVESTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

RESULTS 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

HOUSING SECTOR IN MEXICO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

HOUSING PRODUCTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

STRATEGY AND INTEGRATION . . . . . . . . 22

SUSTAINABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

CORPORATE GOVERNANCE . . . . . . . . . . . . . . 36

BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . 38

ABOUT THIS REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 49

Arcos Bosques Marco IIPaseo de Tamarindos 90, Tower 1

25th, Bosques de las LomasC.P. 05120, Mexico City, Mexico

consorcioara.com.mxara.com.mx

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2013STRENGTH IN OUR STRATEGY, CLARITY IN OUR DIRECTION.

ANNUAL AND SUSTAINABILITY REPORT

Documents

STRENGTH IN OUR STRATEGY