Criteria CaixaCorp, SA. Special Report on Pro forma Financial Information for 2010

Transcription

1 Criteria CaixaCorp, SA Special Report on Pro forma Financial Information for 2010

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4 Translation of pro forma consolidated financial information originally issued in Spanish and prepared in accordance with European Commission Regulation (EC) No 809/2004 and CESR/05-054b. In the event of a discrepancy, the Spanish-language version prevails. CRITERIA CAIXACORP GROUP PRO FORMA CONSOLIDATED FINANCIAL INFORMATION EXPLANATORY NOTES ON THE BASES OF PREPARATION OF THE PRO FORMA CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2010 AND THE PRO FORMA CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER INTRODUCTION The pro forma consolidated financial information of the group headed by Criteria CaixaCorp, SA ( Criteria ) has been prepared solely for the purpose of providing information on how the following transactions: - Caixa d Estalvis i Pensions de Barcelona la Caixa ( la Caixa ) spins off to Microbank de la Caixa ("Microbank") the assets and liabilities making up the banking business of la Caixa ( the spin-off ). The spin-off of the banking business includes the investment in Caixa de Barcelona Seguros de Vida, de Seguros y Reaseguros, SA ( CaixaVida ) - On completion of the spin-off, la Caixa contributes to Criteria the shares representing the whole of the share capital of Microbank and Criteria contributes to la Caixa certain investments and newly-issued shares (the contributions ). - Subsequently, Microbank is merged into Criteria by way of absorption. - Also, in January 2011 la Caixa and Criteria entered into an agreement with Mutua Madrileña to develop a strategic alliance in the non-life insurance business. This agreement involves the acquisition by Mutua Madrileña of a 50% ownership interest in VidaCaixa Adeslas Seguros Generales, SA ( VidaCaixa Adeslas") and an exclusive non-life bancassurance distribution agreement. - Criteria will issue debentures mandatorily convertible into shares of EUR 1,500 million. (jointly, the transactions ) would have affected the Criteria Group's consolidated balance sheet at 31 December 2010 and consolidated income statement for Since this pro forma consolidated financial information has been prepared to reflect a hypothetical situation, it is not intended to represent, and it does not represent, the actual equity or financial position of the Criteria Group, la Caixa, CaixaVida or Microbank at 31 December 2010, or the actual results of their operations for the year then ended. The bases defined by Criteria's directors for the preparation of the accompanying pro forma consolidated financial information are detailed below and comprise the bases and sources of information and the assumptions used indicated in sections 3 and 4 below. 1

5 2. DESCRIPTION OF THE TRANSACTION On 29 November 2010, the Extraordinary General Assembly of la Caixa approved the amendment of its Bylaws in order to adapt them, inter alia, to the Consolidated Catalan Savings Banks Law approved by Decree-Law 5/2010, which adapts the Catalan Savings Banks regulations to the amendments introduced in State law by Royal Decree-Law 11/2010. The approved amendment to the Bylaws empowers the Board of Directors of "la Caixa", inter alia, to propose the transfer of the assets and liabilities assigned to its financial business to another credit institution in exchange for shares of the latter. In order to avail itself of this amendment, in a first stage la Caixa will proceed with a spin-off involving the transfer en bloc to Microbank of certain assets and liabilities assigned to its financial business, through the subscription to a capital increase. Subsequently, la Caixa will contribute to Criteria the shares representing the whole of the share capital of Microbank in exchange for Criteria's investments in Gas Natural SGD, SA; Abertis Infraestructuras, SA; Sociedad General de Aguas de Barcelona, SA; Port Aventura Entertainment, SA and Mediterránea Beach & Golf Community, SA, as well as newly-issued shares, by means of a capital increase. As a result of this transaction, Criteria will own the whole of Microbank's share capital. The transaction provides the necessary human and technical resources to manage the shares transferred to "la Caixa" are handed over together with them. To strengthen capital ratios, Criteria will issue debentures mandatorily convertible into shares of EUR 1,500 million. Additionally, as part of the transaction, it is provided a capital increases in Servihabitat, SA (Real Estate Company "la Caixa") to reduce its leverage ratio, as well as the agreement with Mutua Madrilena to jointly develop part of the insurance business. 2

6 The detail of the assets and liabilities of la Caixa that will not be included in the spin-off, and of the total amounts of the assets and liabilities to be effectively spun-off, is as follows: Thousands of Euros Total assets of "la Caixa" (31/12/10) 269,757,255 (1) Assets not included in the spin-off 13,200,926 (2) Investment in Metrovacesa, SA 90, Investment in Inmobiliaria Colonial, SA 143, Assets assigned to welfare projects 1,278, Tax assets Impairment losses at Servihabitat, SA 207, Impairment losses at Estuimmo 17, Profit lock-in provision 40, Welfare projects tax credit 117, Provision for properties (Servihabitat and Estuimmo) 189, Investment in ServiHabitat, SA (net of impairment losses) 1,375, Cash for capital increase at Servihabitat, SA 1 1,326, Investment in Criteria CaixaCorp, SA 7,055, Hedging derivatives and prepayments and accrued income 505, Loans and advances to credit institutions 643, Investments in Estuimmo, Estuinvest, Estullogimmo and Estuvendimmo (net of impairment losses) 13, Assets assigned to the pawnbrokers' activity 26, Non-current assets held for sale foreclosed assets 97, Other investments 70 Investment in MicroBank de "la Caixa", SA 71, Total assets to be spun-off to Microbank 256,556,329 (3)= (1) - (2) 1 In preparing the pro forma consolidated financial information, a monetary capital increase at Servihabitat, SA amounting to EUR 1,826 million was considered to have been fully subscribed and paid by la Caixa on 1 January This capital increase will be partly used by Servihabitat, SA to repay EUR 1,000 million of the debt with la Caixa and EUR 326 million will be used to purchase certain non-current assets held for sale (assets foreclosed in the collection of loans). In December 2010 la Caixa increased Servihabitat's capital by EUR 500 million, and the remaining capital increase is expected to be completed in the course of

7 Thousands of Euros Total liabilities of "la Caixa" (30/12/10) 257,700,192 (4) Liabilities not included in the spin-off 12,735,845 (5) Liabilities assigned to welfare projects 888, Tax liabilities 47, Provision for properties and other liabilities 632, Financial liabilities at amortised cost 9,070, Profit lock-in provision 1,402, Issue of bonds exchangeable for Criteria shares 691, Liabilities assigned to the pawnbrokers' activity 1, Total liabilities to be spun-off to Microbank 244,964,347 (6)=(4) - (5) Equity to be spun-off 11,591,982 (7)=(3) - (6) The consolidated carrying amount of the business received by Criteria ( Microbank's shares ) and of the business contributed (management of certain investments) amounts to EUR 11,894,481 2 thousand and EUR 7,526,383 thousand, respectively. The table below shows the assets received and contributed by Criteria in the contributions: Thousands of Euros Total assets, net of liabilities, received 11,894,481 Microbank's pro forma equity 11,894,481 Total assets contributed 7,526,383 Investment in Gas Natural, SDG, SA 3 4,848, Investment in Abertis Infraestructuras, SA 1,845, Investment in Hisusa-Holding de Infraestructuras, SA (SGAB) 641, Investment in Port Aventura Entertainment, SA 75, Investment in Mediterránea Beach & Golf Community, SA 116, Net assets received 4,368,098 The impact of the transaction is an increase of EUR 4,368,098 thousand in Criteria's consolidated equity at 31 December 2010 and relates to the difference between the consolidated carrying amounts of the assets received, net of liabilities, and the assets contributed, since this is a transaction among Group companies in which the items involved are businesses. Difference between the economic values provided to Criteria and economic values received will be matched by a capital increase fully subscribed "la Caixa" for a total of 2,044,245 thousand euros. Subsequent to the contributions, Microbank will be merged into Criteria by way of absorption. 2 The difference between the equity spun-off and the consolidated carrying amount of the business received by Criteria is equal to the equity of Microbank, S.A (before the spin-off) and the reserves of the companies within the scope of consolidation of Microbank. 3 Includes EUR 118,884 thousand relating to the dividend receivable at 31 December

8 3. BASES AND SOURCES OF INFORMATION FOR THE PREPARATION OF THE PRO FORMA CONSOLIDATED FINANCIAL INFORMATION The historical financial information used as a basis for compiling the pro forma consolidated financial information was as follows: (i) The audited consolidated financial statements of the Criteria Group for 2010, prepared by the directors in accordance with the measurement bases and accounting principles set forth in the International Financial Reporting Standards adopted by the European Union. (ii) The audited financial statements of la Caixa for 2010, prepared by the directors in accordance with the measurement bases and accounting principles set forth in Bank of Spain Circular 4/2004. (iii) The audited financial statements of Microbank for 2010, prepared by the directors in accordance with the measurement bases and accounting principles set forth in Bank of Spain Circular 4/2004. (iv) The unaudited balance sheet of CaixaVida at 31 December 2010 and the related unaudited income statement for the year then ended, prepared by management in accordance with the measurement bases and accounting principles set forth in the Spanish National Chart of Accounts for Insurance Entities. Since the recognition, measurement and presentation principles and bases used in the preparation of the pro forma consolidated financial information (International Financial Reporting Standards adopted by the European Union) differ from those used by CaixaVida, the required adjustments and reclassifications were introduced in the combination process to unify those principles and bases with those used by the Criteria Group. Also, Bank of Spain Circular 4/2004 constitutes the adaptation of the accounting framework for Spanish credit institutions to the International Financial Reporting Standards adopted by the European Union and, accordingly, no adjustments or reclassifications had to be made in the combination process in order to unify the principles and bases used by la Caixa and Microbank, in their separate financial statements, with those of the Criteria Group. In order to ensure a proper interpretation of the pro forma consolidated balance sheet and pro forma consolidated income statements and of the sections of this document, these should be read in conjunction with the consolidated financial statements of the Criteria Group and with the separate financial statements of la Caixa, Microbank and CaixaVida for The financial information relating to la Caixa and to the Criteria Group will be available to the general public on the Spanish National Securities Market Commission s website from 25 February The financial information of Microbank and CaixaVida, once approved by the shareholders at their Annual General Meetings, will be publicly available at the Mercantile Registry. In the preparation of this pro forma consolidated financial information, the specific rules contained in Recognition and Measurement Standard 21 ( Transactions between Group companies ) of the Spanish National Chart of Accounts were taken as a reference, since the items involved in the transaction constitute a business. This consideration assumes that both the spin-off of the banking business of la Caixa to Microbank and the contribution by la Caixa of the shares of Microbank to Criteria will be carried out at the consolidated carrying amount at la Caixa of the items contributed. As discussed above, the pro forma consolidated financial information is presented solely for illustrative purposes and does not represent the actual equity or financial position of the Criteria Group, la Caixa, Microbank or CaixaVida, or the actual results of these entities, and it is not intended to provide projections of the profit or loss from operations for any future period. 5

9 4. ASSUMPTIONS USED The following assumptions were used in the preparation of this pro forma consolidated financial information: (a) The audited consolidated balance sheet of the Criteria Group and the audited separate balance sheets of la Caixa and Microbank, at 31 December 2010, and the unaudited separate balance sheet of CaixaVida at 31 December 2010, have been combined as if the transaction had taken place on that date. (b) The audited consolidated income statement of the Criteria Group and the audited separate income statements of la Caixa and Microbank, for 2010, and the unaudited income statement of CaixaVida, have been combined as if the transaction had taken place on 1 January Considering that the post-transaction entity will be a credit institution, in order to combine the financial statements indicated above, the required reclassifications have been made to present the financial statements of the Criteria Group and of CaixaVida in accordance with the financial statement formats published by the Bank of Spain for Credit Institutions. (c) It has been considered that the monetary capital increases at Servihabitat, SA, totalling EUR 1,826 million, took place on 1 January 2010 and were partly used to repay EUR 1,000 million of the debt owed by Servihabitat, SA to la Caixa and to purchase certain non-current assets held for sale for EUR 326 million. In this regard, it should be noted that la Caixa increased Servihabitat's capital by EUR 500 million in December 2010 and it plans to complete the remaining capital increase in the course of It has been considered that the liquidity that Criteria will obtain from the repayment of the debt and the sale of the non-current assets held for sale, will be reinvested at an effective interest rate of 4.5%. (d) It has been considered that Criteria s remaining financing agreements with Servihabitat will be tied to 1-month Euribor plus 250 basis points. (e) Also, it has been considered that, in the transactions, Criteria will contribute its entire investment in the investees detailed in the table included in section 2 Description of the Transaction, and that Criteria will receive 100% of the investment in Microbank. (f) In connection with the pro forma consolidated balance sheet at 31 December 2010, it has been considered that Criteria exercises significant influence over its investee Repsol-YPF, SA Accordingly, this investment was accounted for using the equity method at 31 December (g) Furthermore, with respect to the pro forma consolidated income statements, it has been considered that Criteria began to exercise significant influence over its investee Repsol-YPF, SA. on 1 January 2010, and, therefore, this investment has been accounted for using the equity method since 1 January (h) The pro forma consolidated balance sheet at 31 December 2010 includes a EUR 1,500 million issue of debentures mandatorily convertible into shares. It has been considered that the funds obtained were invested in fixed-income securities. For the purposes of preparing the pro forma consolidated income statements, the aforementioned debt was considered to have been issued on 1 January The finance cost of these debentures was estimated for all periods or years at 7%, and the return on the fixedincome financial instruments at 4.5%. (i) It has been considered that 33% of the overhead expenses of Criteria, amounting to EUR 11,350 thousand, required for the management of the investments contributed, will be borne by la Caixa and, therefore, this amount is not included in the pro forma income statement of the Criteria Group. 6

10 (j) As indicated in section 1- Introduction, in January 2011 Criteria reached an agreement with Mutua Madrileña to sell 50% of its ownership interest in VidaCaixa Adeslas, S.A., de Seguros y Reaseguros and to jointly develop a portion of the Group s insurance business. In the pro forma consolidated income statement, it was considered that Criteria has held 50% of VidaCaixa Adeslas since 1 January 2010, and the share of the result of this investee was recognised under <Share of Results of Entities Accounted for Using the Equity Method>. In addition, in the pro forma consolidated balance sheet at 31 December 2010, the investment in VidaCaixa Adeslas was accounted for using the equity method. The estimates and assumptions used for the purpose of preparing the pro forma consolidated financial information are preliminary and, because they reflect a hypothetical situation, they do not intend to represent the actual consolidated equity or financial position of the Criteria Group, la Caixa, Microbank or CaixaVida, or their actual consolidated results, or to project their financial position or the results of their operations at a given date or for any future period. 7

11 5. PRO FORMA ADJUSTMENTS The pro forma adjustments considered in the pro forma consolidated financial information of the Criteria Group were prepared as if the transaction had been performed on 31 December 2010, for balance sheet purposes, and on 1 January 2010, for income statement purposes ADJUSTMENTS ARISING FROM THE SPIN-OFF Following is a description of the main pro forma adjustments included in the consolidated balance sheet and in the consolidated income statement relating to assets and liabilities, or the income and expenses resulting therefrom, that did not form part of the banking business to be spun-off by la Caixa to Microbank and which, therefore, will not be included in the pro forma consolidated balance sheet and income statement of Criteria (see section 2) Elimination of the investments in Metrovacesa, SA and Inmobiliaria Colonial, SA At 31 December 2010, the balance of the investments in Metrovacesa and Inmobiliaria Colonial, totalling EUR 234,116 thousand, was eliminated from <Available-for-Sale Financial Assets Equity Instruments> in the balance sheet. Also, the impairment losses recognised on these investments, amounting to EUR 74,440 thousand, were eliminated from <Impairment Losses on Financial Assets (Net)> in the income statement for the year ended 31 December The related tax effect was eliminated from <Income Tax> in the income statement for Elimination of the assets and liabilities assigned to welfare projects At 31 December 2010, assets assigned to welfare projects amounting to EUR 364,015 thousand and EUR 165,460 thousand were eliminated from <Tangible Assets Investment Property> and <Investments Group Entities>, respectively, in the balance sheet. In addition, as far as the liquid assets of the welfare fund are concerned, a customer deposit amounting to EUR 749,155 thousand was retained on the liability side of the balance sheet. This deposit includes EUR 390,000 thousand corresponding to the 2010 contribution to be made by la Caixa to the welfare fund. The liabilities assigned to welfare projects, amounting to EUR 888,630 thousand, were eliminated from <Welfare Fund> on the liability side of the balance sheet. The amount eliminated from the balance of <Investments Group Entities> in the balance sheet relates mostly to the investment in Arrendament Immobiliari Assequible, SAU, in view of its connection with the welfare projects. The income statement of la Caixa includes an item of tax income for the tax credit relating to 30% of the contribution made to the welfare fund. la Caixa is eligible for this tax credit owing to its status as a savings bank. Since Microbank does not have the legal status of a savings bank, the aforementioned tax credit is not applicable to it and, therefore, in order to remedy this situation, an adjustment of EUR 117,000 thousand was included under Income Tax in the pro forma income statement for the year ended 31 December Elimination of tax assets and tax liabilities At 31 December 2010, the amount of the tax assets and liabilities eliminated from <Tax Assets Current>, <Tax Assets Deferred> and <Tax Liabilities Deferred> in the balance sheet was EUR 8

12 117,000 thousand, 454,711 thousand and EUR 47,936 thousand, respectively. These amounts relate to the tax assets and liabilities associated with, inter alia, the impairment allowances not forming part of the spin-off and the tax credit relating to the contribution made by la Caixa to the welfare fund with a charge to income for 2010 (see section 2) Elimination of the investment in Servihabitat, SA At 31 December 2010, the net investment in Servihabitat, SA ( Servihabitat ), amounting to EUR 1,375,273 thousand, was eliminated from <Investments Group Entities> in the balance sheet. The impairment loss amounting to EUR 429,897 thousand recognised on the investment in Servihabitat in 2010 was eliminated from <Impairment Losses on Other Assets (Net)> in the income statement. As mentioned in section 4.c above, Assumptions Used, a monetary capital increase at Servihabitat totalling EUR 1,826,160 thousand was considered (of which EUR 500,000 thousand were contributed in December 2010). The capital increase will be used in part to repay EUR 1,000,000 thousand of Servihabitat s debt with la Caixa and EUR 326,160 thousand will be used to purchase certain non-current assets held for sale. The repayment of the debt and the acquisition of the non-current assets held for sale were adjusted under <Loans and Receivables Loans and Advances to Customers> and <Non-Current Assets Held for Sale> in the pro forma balance sheet, respectively. The reduction in interest income resulting from the debt repayment referred to in the preceding paragraph was adjusted in the income statement for Additionally, the interest and similar income of Microbank was adjusted to reflect: - the new financing cost to be met by Servihabitat, which was estimated at 1-month Euribor plus 250 basis points. - the return on the liquidity obtained by Microbank through the debt repayment of and the sale of the non-current assets held for sale, which was estimated at 4.5%. The net impact on net interest income of the consideration described in the preceding paragraphs amounts to EUR 79,388 thousand. The related tax effects were eliminated from <Income Tax> in the income statement for Elimination of the provision for properties and other liabilities la Caixa recognises on the liability side of its balance sheet the credit risk provisions made prior to the foreclosure or acquisition by any other means of property assets in settlement of credit transactions. This provision, which is related to the property assets not spun-off held at Servihabitat, Estuimmo, SA, Estuinvest, SL, Estullogimmo, SLU and Estuvendimmo, SLU, is used to the extent that the properties are sold to third parties or the aforementioned companies perform additional write-downs already recognised at la Caixa. Since this provision is linked to property assets which will continue to be assets of la Caixa, this provision does not form part of the spun-off liabilities. In 2010, the amount used of the provision due to property disposals, EUR 157,939 thousand, was eliminated from <Provisions (Net)> in the income statement. The related tax effect was eliminated from <Income Tax> in the income statement for

13 5.1.6 Elimination of the investment in Criteria CaixaCorp, SA At 31 December 2010, the investment in Criteria CaixaCorp, SA ( Criteria ), amounting to EUR 7,055,473 thousand, was eliminated from <Investments Group Entities> in the balance sheet. In addition, the dividends paid by Criteria, totalling EUR 1,075,329 thousand, were eliminated from <Income from Equity Instruments> in the income statement for the year ended 31 December Elimination of financial liabilities at amortised cost At 31 December 2010, certain non-convertible bond and subordinated debt issues retained by la Caixa, amounting to EUR 2,410,000 thousand and EUR 6,217,757 thousand, respectively, were eliminated from <Financial Liabilities at Amortised Cost Marketable Debt Securities> and <Financial Liabilities at Amortised Cost Subordinated Liabilities> in the balance sheet. The hedging derivatives associated with the financial liabilities measured at amortised cost described in the foregoing paragraph were eliminated from the pro forma balance sheet. The assets and liabilities eliminated in connection with hedging derivatives or changes in the fair value of the hedged items in portfolio hedge of the interest risk rate, amount to EUR 414,353 thousand and EUR 406,418 thousand, respectively. Also, the prepayments and accrued income and accrued expenses and deferred income associated with the financial liabilities measured at amortised cost were eliminated. The amounts of prepayments and accrued income and of accrued expenses and deferred income were EUR 91,500 thousand and EUR 36,498 thousand, respectively. Also, the interest accrued in 2010, EUR 199,113 thousand, was eliminated from <Interest Expense and Similar Charges> in the income statement. This amount includes the rectification arising from interest rate hedges. The related tax effect was eliminated from <Income Tax> in the income statement for Elimination of profit lock-in provision The lock-in provision which will remain at la Caixa for the profit from sale transactions performed by la Caixa with entities in its Group is used to the extent that the related assets are sold to third parties. At 31 December 2010, the balance of the profit lock-in provision, EUR 1,402,487 thousand, was eliminated from <Provisions Other Provisions> in the balance sheet Elimination of the issue of bonds exchangeable for Criteria shares The entire issue launched by la Caixa in 2008 and the bonds held by it in its own portfolio do not form part of the business to be spun-off and, therefore, an adjustment of EUR 643,604 thousand was made to <Financial Liabilities at Amortised Cost Marketable Debt Securities> in the pro forma balance sheet. Since this issue matures in the short term, it was decided not to include in the spin-off the monetary assets required for la Caixa to meet its obligations on maturity. This situation gave rise to an adjustment of EUR 643,604 thousand to <Cash> on the asset side of the pro forma balance sheet. In addition, la Caixa has recognised under Other Liabilities on the liability side of the accompanying balance sheet EUR 47,782 thousand relating to the premium associated with the 10

14 embedded derivative of the aforementioned issue, which will be recognised in the income statement when it matures. This premium did not form part of the spin-off. Lastly, the finance cost associated with the bond issue and the income allocable to the liquidity of the monetary assets spun-off, amounting to EUR 13,599 thousand and EUR 5,445 thousand, respectively, were eliminated from the income statement for The related tax effect was eliminated from <Income Tax> in the income statement for Elimination of the investments in Estuimmo, SA, Estuinvest, SL, Estullogimmo, SLU and Estuvendimmo, SLU At 31 December 2010, the net investments in these companies, totalling EUR 13,759 thousand, were eliminated from <Investments Group Entities> in the balance sheet since they did not form part of the spun-off business Elimination of the assets and liabilities assigned to the pawnbrokers activity The loans, credits, customer deposits and other payables arising from the pawnbrokers activity do not form part of the spin-off to Microbank since this activity is exclusive to savings banks. The accrued interest on these transactions, which amounted to EUR 2,700 thousand, was eliminated from <Interest and Similar Income> in the income statement for Similarly, the other income and staff costs associated with this activity, amounting to EUR 800 thousand and EUR 800 thousand, respectively, were eliminated from <Other Operating Income> and <General Administrative Expenses Staff Costs>, respectively, in the income statement for The related tax effect was eliminated from <Income Tax> in the income statement for Non-current assets held for sale Foreclosed properties The foreclosed assets relating to <Non-Current Assets Held for Sale> do not form part of the spin-off, and, accordingly, EUR 97,911 thousand were eliminated from the pro forma balance sheet. The income and expenses related to the properties foreclosed in 2010 were eliminated from <Other Operating Income>, <Other Operating Expenses> and <Gains (Losses) on Non-Current Assets Held for Sale Not Classified as Discontinued Operations>, for a total amount of EUR 9,208 thousand, EUR 4,157 thousand and EUR 6,292 thousand respectively. The related tax effect was eliminated from <Income Tax> in the income statement for

15 5.2 ADJUSTMENTS ARISING FROM THE CONTRIBUTIONS Following is a description of the main pro forma adjustments included in the pro forma consolidated balance sheet and in the pro forma consolidated income statement since they are associated with the assets and liabilities that form part of the contributions (see section 2) Elimination of the investments in associates At 31 December 2010, the balance of the investments held by Criteria in Gas Natural, SDG, SA, Abertis Infraestructuras, SA, Hisusa-Holding de Infraestructuras, SA (SGAB) and Port Aventura Entertainment, SA ( the transferred investments in associates ), totalling EUR 7,291,413 thousand, was eliminated from <Investments Associates> in the consolidated balance sheet, the detail being as follows: Thousands of Euros Investment in Gas Natural, SDG, SA 4,729,218 Investment in Abertis Infraestructuras, SA 1,845,353 Investment in Hisusa-Holding de Infraestructuras, SA (SGAB) 641,027 Investment in Port Aventura Entertainment, SA 75,815 Total 7,291,413 In addition, EUR 118,884 thousand were eliminated relating to the account receivable by Criteria for the dividend declared by Gas Natural, SDG, SA that had not been received at 31 December 2010 and which, in accordance with the framework agreement, will form part of the contributions. Furthermore, the results generated by these investments, amounting to EUR 664,956 thousand, were eliminated from <Share of Results of Entities Accounted for Using the Equity Method> in the pro forma consolidated income statement for the year ended 31 December Elimination of the investment in Mediterránea Beach & Golf Community, SA At 31 December 2010, the assets and liabilities of Mediterránea Beach & Golf Community, SA were eliminated from the consolidated balance sheet at that date. The value of the assets and liabilities effectively eliminated was EUR 408,704 thousand and EUR 292,618 thousand, respectively. Accordingly, the net assets eliminated amounted to EUR 116,086 thousand. The results of Mediterránea Beach & Golf Community, SA were eliminated from the pro forma consolidated income statements Elimination of the gains on disposals of investees The gains obtained on the sale of investments which, since they form part of the contribution, are not included in the new pro forma scope of consolidation, were eliminated from the pro forma consolidated income statement for These gains relate to the sale of the investment in Sociedad General de Aguas de Barcelona, SA, to the appreciation of the historical investment in Compañía de Seguros Adeslas, SA, generated in the process of obtaining control over this investee, and to sales of the investments held in Gas Natural, SDG, SA and Abertis, SA. 12

16 The gains amount to EUR 190,451 thousand, and were eliminated from <Gains (Losses) on Disposal of Assets Not Classified as Non-Current Assets Held for Sale>. The related tax effects, which amounted to EUR 44,000 thousand, were eliminated from <Income Tax> in the corresponding pro forma consolidated income statements. 13

17 5.3 ADJUSTMENTS ARISING FROM THE ASSUMPTIONS CONSIDERED Following is a description of the main pro forma adjustments included in the pro forma consolidated balance sheet and in the pro forma consolidated income statement which arose as a result of the assumptions considered (described in section 4) Consideration of significant influence over Repsol The governing bodies of Criteria and la Caixa have resolved to effectively exercise significant influence over their investee Repsol-YPF, SA through representation on the governing bodies of this company. This significant influence has been strengthened by the amendment introduced to the Spanish Limited Liability Companies Law in 2010, whereby the limits on the exercise of voting rights will be repealed. The bylaws of Repsol-YPF, SA had previously set this limit at 10% of total share capital. The consideration of the investment held in Repsol YPF, SA as an investment in an associate led to the reclassification of EUR 3,229,757 thousand from <Available-for-Sale Financial Assets Equity Instruments> to <Investments Associates> on the asset side of the pro forma consolidated balance sheet at 31 December EUR 284,342 thousand relating to the valuation adjustments and to the deferred tax liability, calculated on the basis of the effective tax rate, were recognised in equity. With regard to the pro forma consolidated income statement for 2010, the dividends received, totalling EUR 137,073 thousand, were eliminated from <Income from Equity Instruments>. At the same time, the share of profit attributable to Criteria s investment and estimated by the directors was recognised under <Share of Results of Entities Accounted for Using the Equity Method> Issue of mandatorily convertible debentures The issue of mandatorily convertible debentures totalling EUR 1,500 million was recognised under <Financial Liabilities at Amortised Cost Subordinated Liabilities> in the pro forma consolidated balance sheet at 31 December The value of the embedded derivative of this issue was not considered to be material and, therefore, no amount was recognised in pro forma consolidated equity in this connection at 31 December The funds obtained from the issue referred to in the preceding paragraph were recognised under <Available-for-Sale Financial Assets Debt Instruments> since they are considered to be invested in fixed-income securities. In addition, the finance cost of the debentures mandatorily convertible into shares, amounting to EUR 105,000 thousand, was adjusted under <Interest Expense and Similar Charges> in the pro forma consolidated income statement, and the income obtained on the investment in fixedincome securities, amounting to EUR 67,500 thousand, was included under <Interest and Similar Income>. The related tax impacts were eliminated from <Income Tax> in the corresponding pro forma consolidated income statements Overhead expenses at Criteria It was considered that 33% of Criteria s overhead expenses required for the management of the investments contributed will be borne by la Caixa and, therefore, they will not be included in 14

18 Criteria s pro forma income statement. The adjustments made in the pro forma income statement were recognised under <General Administrative Expenses Staff Costs> and <General Administrative Expenses Other General Administrative Expenses> and amounted to EUR 3,679 thousand and EUR 7,671 thousand, respectively. The related tax effects were eliminated from <Income Tax> in the corresponding pro forma income statements VidaCaixa Adeslas As indicated in section 1, Introduction, in January 2011 la Caixa, Criteria and Mutua Madrileña entered into an agreement to develop a strategic alliance in non-life insurance business. This agreement entails the acquisition by Mutua Madrileña of, inter alia, 50% of the share capital of VidaCaixa Adeslas. For this reason, assets, liabilities, income and expenditure were eliminated from the consolidated pro-forma balance sheet of 31 December 2010 and the consolidated income statement pro forma for the year ended on that date, respectively, for the participation in VidaCaixa Adeslas, and proceeded to consolidate the 50% following the equity method in that investment. Additionally, we have recorded a 50% stake in Aresa Health Insurance, SA, received as part of the sale of 50% of VidaCaixa Adeslas, valued by the equity method, as well as cash also received from that sale, which is estimated at EUR 1,000 million. These adjustments imply eliminating net assets and liabilities of the consolidated pro-forma balance sheet amounting to EUR 1,679 million and EUR 1,229 million, respectively. In addition, all the related items were eliminated from the consolidated income statement of Criteria, which gave rise to a net elimination of EUR 51,048 thousand from consolidated profit attributable to the Group, and 50% of the attributable profit was recognised under Share of Results of Entities Accounted for Using the Equity Method amounting EUR 30,209 thousand. 15

19 5.4 OTHER PRO FORMA ADJUSTMENTS Lastly, certain other adjustments were made in order to eliminate the intercompany asset, liability, income and expense balances among la Caixa, Microbank, CaixaVida and the companies composing the Criteria Group. Furthermore, the changes due to the equity eliminations relating to capital resulting from the transaction were included, and the required reclassifications were made, as indicated in section 3 above, to bring the financial statements of CaixaVida into line with the established International Financial Reporting Standards. The following table shows the most significant adjustments, the nature of which is described in the foregoing paragraph, which were considered in the preparation of the pro forma balance sheet and income statement. Assets Heading thousands of euros Description Cash and balances with central banks Financial assets held for trading Available-for-sale financial assets Debt Instruments Equity instruments Loans and receivables Loans and advances to credit institutions Loans and advances to customers Debt instruments (1,343,761) Balance between "la Caixa " Group companies eliminated on consolidation (3,376) Reclassification to the portfolio of financial assets available for sale (2,902,024) Elimination of emissions from Group companies 52,402 Reclassification of Investments - Associated Companies (8,607,101) Elimination of deposits taken by Financial Institutions Group Removing funding from Group companies and removal of temporary acquisition of (13,573,479) assets of the insurance group companies with "la Caixa" (2,929,914) Elimination of asset-backed securities in its portfolio Hedging derivatives (1,677,697) Elimination of the value of hedging derivatives contracted between Group companies Non-current assets held for sale 356,046 Non-current assets contributed from other Group businesses Investments - Associates Reclassification of financial assets available for sale and the equity of Group companies 762,333 (Vidacaixa Adeslas and others) Investments - Group entities (888,566) Elimination of capital investment on Group Companies on the consolidation process Insurance contracts linked to pensions (1,782,853) Elimination of insurance contracts between Group companies Reinsurance assets (15,983) Elimination of re-insurance contracts between Group companies Tangible assets Tangible assets disposed by the Group companies (VidaCaixa Adeslas) and (252,235) incorporation of tangible assets other Group companies Investment property Elimination of Mediterranean Beach real estate investments (see Section 5.2.2) and (243,170) incorporation of assets consolidated Group companies Intangible assets - Goodwill (446,191) Adeslas VidaCaixa elimination (see Section 5.3.4) Intangible assets - Other intangible assets Adeslas VidaCaixa elimination (see Section 5.3.4) and intangibles add from companies (593,410) perimeter Tax assets - current (11,789) Current tax asset eliminated on consolidation Tax assets - deferred (104,545) Deferred tax asset eliminated on consolidation Other assets 44,189 Accruals and other assets contributed by the Group companies Heading thousands of euros Description Liabilities Financial liabilities at amortised cost Deposits from credit institutions Elimination of the repurchase agreements of the insurance group with "la Caixa" and (14,782,532) elimination of funding between Group companies Customer deposits Repo between group companies and removal of deposits of securitization funds and (15,622,845) other group companies Marketable debt securities 54,050 Third party financing through Securitization Bonds Other financial liabilities 1,146,990 Indebtedness of other group companies to third parties Hedging derivatives (1,658,449) Value of hedging derivatives contracted by the Group companies Provisions for taxes and other legal contingencies (10,610) Elimination of provisions for taxes VidaCaixaAdeslas (see Section 5.3.4) Provisions for contingent liabilities and commitments 27,058 Provisions contributed by Group companies Liabilities under insurance contracts (3,634,187) Elimination of the Insurance contract liabilities between group companies Tax liabilities - Deferred Fiscal Impact homogenization adjustment in accounting CaixaVida (IFRS 4 p.30) and 139,280 elimination of group deferred Other liabilities (409,122) Other liabilities eliminated by balances between Group companies 16

20 Profit and Loss Interest and similar income Interest expense and similar charges Income from equity instruments Fee and commission income Fee and commission expense Other operating income thousands of euros Other operating expenses 961,370 General administrative expenses Staff costs Other general administrative expenses Depreciation and amortisation charge Heading Description Criteria, Insurance Group and other Group companies financial income generated (419,396) between consolidated Group companies has been eliminated, and income with third party has been included 662,071 Financial expenses paid by "la Caixa " to consolidated group companies (20,278) Elimination of dividends from Group companies Group company fees and commissions to third parties and elimination of fees and (245,917) commissions between Criteria and "la Caixa" group companies. Commissions third group companies included and eliminations of commissions 160,294 between Criteria group companies and "la Caixa" Elimination of fees charged by insurance contract VidaCaixa Adeslas by 1,175 million (1,050,754) (see Section 5.3.4) and other income of consolidated Group companies 67,404 93,549 21,701 Elimination of expenses insurance contract VidaCaixa Adeslas by 965 million (see Section 5.3.4) and other income of consolidated Group companies and incorporation of operating expenses of consolidated Group companies Personal expenses of the consolidated group of companies not included in the Criteria group General expenses of the consolidated group of companies not included in the group eliminations Criteria and Criteria Group companies and "la Caixa" Amortization related to consolidated group companies not included in the Criteria group Provisions (net) (16,038) Impairment of tangible assets and investments, made by companies in the Impairment losses on other assets (net) - Other assets (29,979) consolidated group not included in the Criteria group Gains (losses) on disposal of assets not classified as non-current assets held for sale (8,478) Losses incurred by consolidable Group companies Gains (losses) on non-current assets held for sale not classified as discontinued 20,281 Losses generated by the consolidated group companies operations 17

21 5.5 PRO FORMA EQUITY POSITION The table below shows the items composing the pro forma consolidated equity at 31 December 2010: Thousands of Euros Consolidated equity of the Criteria Group 14,703,012 Net assets contributed (see section 2) (7,526,383) Classification of deferred liabilities in reserves (see section 5.3.1) 284,342 Consolidation adjustments 4 522,270 Gain on sale of 50% holding in Adeslas (see section 5.3.4) 450,000 Assets and liabilities received - Microbank (see section 2) 11,894,481 Total pro forma consolidated equity 20,327,722 The table below shows the pro forma adjustments to pro forma consolidated equity at 31 December 2010: In Thousands of Euros TOTAL EQUITY Criteria Caixacorp Consolidated "la Caixa" MicroBank CaixaVida Pro Forma Adjustments Pro-forma Criteria CaixaCorp 14,703,013 12,057,063 90, ,373 (6,858,921) 20,327,722 Shareholders equity 13,024,556 12,150,112 90, ,070 (6,328,046) 19,580,428 Share capital or endowment fund 3,362,890 3,006 50, ,530 (24,127) 3,737,294 Share premium 7,711, ,669,042 9,381,085 Reserves 841,817 11,298,000 28, ,576 (8,641,429) 3,816,928 Less: Treasury shares (43,466) (2,393) (45,859) Pro forma profit 1,822, ,106 10,777 8,164-2,690,979 Less: dividends (670,861) ,861 - Valuation Adjustments 1,503,142 (93,049) (542) (306,697) (355,560) 747,294 Available-for-sale financial assets 1,452,689 (89,826) - - (601,087) 761,776 Cash flow hedges (62,255) (3,094) (542) (306,697) 285,450 (87,138) Exchange differences 112,708 (129) - - (39,923) 72,656 Non-controlling interests 175, (175,315) - TOTAL LIABILITIES AND EQUITY 50,985, ,757, ,241 5,772,328 (52,332,438) 274,504,987 4 This relates basically to the result of the adequacy test (as required by IFRS 4 p.15 p.19), performed for the insurance group of the la Caixa Group, which will form part of the Criteria Group after the transactions. 18

22 CRITERIA GROUP PRO FORMA CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2010 In Thousands of Euros Criteria Caixacorp Consolidated "la Caixa" MicroBank CaixaVida Pro Forma Adjustments Pro-forma Criteria CaixaCorp Section Cash and balances with central banks 605,030 5,161, (1,987,365) 3,779, , 5.4 Financial assets held for trading - 3,117,719-3,376 (3,376) 3,117, Other financial assets at fair value through profit or loss 201, ,473 Available-for-sale financial assets 26,540,534 11,510,597-3,264,314 (4,813,495) 36,501,950 Debt instruments 19,343,610 11,028,039-3,264,209 (1,402,024) 32,233, , 5.4 Equity instruments 7,196, , (3,411,471) 4,268, , 5.3.1, 5.4 Loans and receivables 8,022, ,095, ,611 2,007,264 (26,137,059) 196,301,032 Loans and advances to credit institutions 7,174,171 8,811, ,007,264 (8,607,101) 9,385, Loans and advances to customers 847, ,565, ,421 - (14,600,044) 185,126, , , 5.4 Debt instruments - 4,718, (2,929,914) 1,788, Held-to-maturity investments - 7,389, ,389,398 Changes in the fair value of hedged items in portfolio hedges of interest rate risk - 45, ,700 Hedging derivatives - 11,718, (2,092,050) 9,626, , 5.4 Non-current assets held for sale - 424, (68,025) 356, , , 5.4 Investments 12,252,914 9,722, (12,797,854) 9,177,976 Associates 12,252, , (3,299,323) 9,067, , 5.3.1, 5.4 Jointly controlled entities - 110, ,940 Group entities - 9,498, (9,498,531) - Insurance contracts linked to pensions - 1,782, (1,782,853) (0) 5.4 Reinsurance Assets 22, (15,983) 6, , 5.1.4, 5.1.6, , 5.4 Tangible assets 761,569 3,388, (859,420) 3,290,582 Property, plant and equipment 441,898 3,267, (616,250) 3,093, , 5.4 Investment property 319, , (243,170) 197, Intangible assets 1,706, , (1,039,601) 1,161,268 Goodwill 827, , (446,191) 731, Other intangible assets 878, , (593,410) 429, Tax assets 551,121 1,931,416 3, ,943 (688,045) 2,199,882 Current 21, , (128,789) 173, , 5.4 Deferred 530,098 1,649,864 3, ,943 (559,256) 2,026, , 5.4 Other assets 321, ,124 4,915 95,431 (47,311) 1,349, , 5.4 TOTAL ASSETS 50,985, ,757, ,241 5,772,328 (52,332,438) 274,504,987 19

23 CRITERIA GROUP PRO FORMA CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2010 In Thousands of Euros Criteria Caixacorp Consolidated "la Caixa" MicroBank CaixaVida Pro Forma Adjustments Pro-forma Criteria CaixaCorp Section Financial liabilities held for trading 1,635 2,597, ,599,075 Trading derivatives - 1,853, ,853,054 Short positions 1, , ,021 Other financial liabilities at fair value through profit or loss 210, ,464 Financial liabilities at amortised cost 14,652, ,011, ,536 1,251,435 (36,228,320) 216,888,775 Deposits from central banks Deposits from credit institutions 13,493,476 18,442, ,623 1,248,397 (14,782,532) 18,581, Customer deposits ,574,479 22,828 - (14,875,466) 142,721, , , 5.2.1, 5.4 Marketable debt securities 865,044 46,404, (1,499,554) 45,769, , 5.1.9, Subordinated liabilities 293,442 12,824, (6,217,757) 6,899, Other financial liabilities - 1,766, ,038 1,146,990 2,916, Changes in the fair value of hedged items in portfolio hedges of interest rate risk - 1,544, (160,159) 1,384, Hedging derivatives 9,365 9,338, (1,904,708) 7,443, , 5.4 Liabilities associated with non-current assets held for sale Liabilities under insurance contracts 19,142, ,631,264 (3,634,187) 19,139, Provisions 53,983 4,738,044 3,886 - (2,019,049) 2,776,864 Provisions for pensions and similar obligations - 2,232,546 3,773 - (53) 2,236, Provisions for taxes and other legal contingencies 10, , (10,610) 134, Provisions for contingent liabilities and commitments - 121, , , Other provisions 43,373 2,249, (2,035,444) 257, , Tax liabilities 1,124, ,032 20, ,990 (145,062) 1,822,531 Current 104,551 3,885-3, ,931 Deferred 1,019, ,147 20, ,496 (145,062) 1,710, , 5.4 Welfare fund - 888, (888,630) Other liabilities 1,088,700 1,299,508 4,453 13,266 (493,402) 1,912, , 5.1.9, 5.4 TOTAL LIABILITIES 36,282, ,700, ,048 5,435,955 (45,473,517) 254,177,266 20