2012 ANNUAL REPORT www…cdn.investorcloud.net/famsa/InformacionFinanciera/Re... · 2015-12-02 ·...

Challenges Transformed in Opportunities2012 Annual Report

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www.grupofamsa.comwww.famsa.com

www.banfamsa.comwww.famsa.us

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Corporate Profile

Financial Highlights

Letter from the Chairman of the Board and the CEO

Business Model

Famsa Mexico

Banco Ahorro Famsa

Famsa USA

Social Responsibility

Corporate Governance

Management’s Discussion and Analysis of the Operating Results and Financial Position of Grupo Famsa

Consolidated Financial Statements

CONTENTS

Corporate Profile

Through the synergies generated between them,

Grupo Famsa’s three operating units drive the Company’s

performance

Since its founding in 1970, Grupo Famsa has consolidated its position as a leading specialty retailer, focusing its efforts on meeting families’ diverse consumption, financing and saving needs.

Over more than four decades, Grupo Famsa has developed a solid portfolio of complementary businesses based on consumer credit and savings. Famsa Mexico, Banco Ahorro Famsa and Famsa USA, our three business units, provide a comprehensive value offer aimed at enhancing the quality of life of a market segment that demands personalized service and credit options that are not provided by the traditional banking sector.

Cash Sales

19%

Credit Sales

81%

Both through their individual operations and through the synergies generated between them, these three operating units serve to strengthen the company’s performance.

Banco Ahorro Famsa’s growing financial service portfolio enhances the services provided at Famsa Mexico’s stores. Likewise, Famsa USA serves the Hispanic segment of the United States, successfully replicating Famsa Mexico’s business model in the states of Texas and Illinois.

Grupo Famsa currently operates an extensive network of 355 stores with 304 bank branches in 26 Mexican states, as well as 25 stores in two of the states with the highest Hispanic population in the United States.

The collective potential of Grupo Famsa’s business platform positions the company to extend its growth and generate value for the stockholder.

Grupo Famsa is continuously evolving to satisfy the needs of our customers and the

changing market trends with an innovative product

and service offering

Grupo Famsa 2012AR2

Contact Information for Stockholders

Paloma E. Arellano BujandaInvestor [email protected]. (0181) 8389 3405

Corporate Offices:Pino Suárez # 1202 nte. Zona Centro C.P. 64000 Monterrey, N. L., Méxicot. (0181) 8389 9000

Stock Market and Ticker Symbol:Mexican Stock Exchange (BMV)GFAMSA

www.grupofamsa.comwww.famsa.comwww.banfamsa.comwww.famsa.us

Grupo Famsa, S.A.B. de C.V.’s annual reports and other written materials may occasionally contain forward-looking statements and disclosures, projected financial results and expectations for Grupo Famsa and its subsidiaries’ future performance which should be considered as estimates made in good faith by Company Management. Investors are cautioned that, although based on publicly available information, any such forward-looking statements and disclosures are subject to inherent risks and uncertainties, as well as to factors that could cause the Company’s results, plans, objectives, expectations, performance and achievements to be totally different at any given time. Such risks and uncertainties include changes in general economic, political, government and/or commercial conditions on a national and/or global level, as well as changes in interest rates, inflation, foreign exchange volatility, product prices, customer demand and competition, among others. All disclosures made by Grupo Famsa should be assessed taking into account these relevant risks and uncertainties. As a result of these risks and uncertainties (as well as those that Grupo Famsa doesn’t acknowledge or currently considers of low relevance), real results may differ substantially from the forward-looking statements and disclosures presented in this document. Grupo Famsa does not assume any responsibility related to variations that these forward-looking statements and disclosures may contain, nor for any other information coming from official sources or third parties.

Disclosures and forward-looking statements solely show Grupo Famsa’s outlook as of the date these disclosures and forward-looking statements are made. Grupo Famsa does not assume any obligation to publicly disclose any updates or changes to such disclosures and information, even if those updates or changes are related to new information that was obtained, to future events or to any other circumstance.

Grupo Famsa 2012AR


Our operations in the United Statescomprise 12% of the Company’s

consolidated revenue

Operating Figures

Total StoresMexicoUnited StatesBanco Ahorro Famsa

Credit Accounts (Millions)

Employees

Financial Results (a)

Net SalesMexico (b)

United StatesOtherInter-segment (c)

Gross ProfitAdjusted EBITDA (d)

Operating IncomeNet Income

Gross MarginAdjusted EBITDA MarginNet Margin

Balance Sheet Accounts (a)

AssetsLiabilitiesStockholders’ Equity

380355

25304

1.88

16,741

$14,123 $12,353

$1,715 $949 -$894

$6,587 $2,379 $1,475

$323

46.6%16.8%

2.3%

$29,070 $20,780

$8,290

401352

49288

1.87

16,267

$13,866 $12,031

$1,731 $1,030

-$926

$6,295 $1,955 $1,078

$227

45.4%14.1%

1.6%

$27,386 $19,372

$8,014

-5.2%0.9%

-49.0%5.6%

1.0%

2.9%

1.9%2.7%

-0.9%-7.9%-3.5%

4.7%21.7%36.8%42.0%

6.1%7.3%3.4%

(a) Millions of Mexican pesos, except percentages(b) Includes Banco Ahorro Famsa(c) Intercompany sales(d) See Note 25.2 to the Consolidated Financial Statements

2012 2011 Variation StoresCAGR: -3.7%

410

401

380

2010 2011 2012

Retail AreaCAGR: -5.1%

541

540

488

2010Thousands of square meters

2011 2012

Credit AccountsCAGR: 3.5%

1.76

1.87

1.88

2010 2011 2012

Total AssetsCAGR: 8.4%

24,

734

27,

386

29,

070

Millions of Mexican pesos

2010 2011 2012

Millions

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Grupo Famsa 2012AR

To our Stockholders:

During 2012, we significantly enhanced the profitability of our operations in Mexico and concluded the refocus process of Famsa USA, allowing us to enrich our value offer and resume the growth strategy that characterizes Grupo Famsa.

Driven by a committed professional team, we reinforced the rollout of commercial initiatives aimed at stimulating demand of diverse core categories, we capitalized the strength of personal loans and we diversified Banco Ahorro Famsa’s credit options.

These actions, together with a strict control of expenses across all of our operations, allowed us to post a historic Ps$2,379 million Adjusted EBITDA as of yearend 2012, 21.7% higher than in 2011. Meanwhile, Adjusted EBITDA margin grew from 14.1% in 2011 to 16.8% in 2012.

Results for 2012 support our strategic business plan, which was executed during the year in a precise and orderly manner across each of the Company’s business units.

Famsa Mexico’s operations reflected a consistent capacity for value creation, strengthened by the constant innovation of our product portfolio, the perfection of our customers’ shopping experience and the continuous improvement of our administrative efficiency. In this context, Famsa Mexico’s Net Sales increased 2.7% to Ps$12,353 million in 2012.

Additionally, the effectiveness of our permanent focus on reactivating sales was reflected in the furniture and motorcycle categories. During 2012, furniture sales rose 10.2%, while motorcycle sales increased 41%.

The actions implemented for consolidating operations in Mexico also translated into an important improvement of 10.9% in Operating Profit, which reached Ps$1,362 million as of yearend 2012.

Banco Ahorro Famsa continued to post outstanding results and stability, sustained by a growing deposit base, a record minimum average cost of funding of 5.17% and a solid Capitalization Index (ICAP) of 13.1%.

Bank Deposits, which have grown steadily year-over-year since 2007, reached 1.1 million accounts with an aggregate balance of Ps$11,999 million during 2012. It is important to note that derived from Banco Ahorro Famsa’s efforts to extend the timeframe of its deposit base, as of the close of 2012, 89.4% of the bank’s deposits corresponded to time deposits.

In addition, as a result of a credit option diversification strategy targeting the dynamic micro, small and medium-sized enterprise (MSME) segment, we have become an attractive alternative for productive credits. As a result, we achieved a 28.3% growth rate in our Commercial Portfolio, as compared to 2011.


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Grupo Famsa 2012AR

The synergies shared by Famsa Mexico and Banco Ahorro Famsa enabled us to maintain our focus on consolidating stable operations without compromising our flexibility to create new business opportunities.

Consequently, in 2012 we resumed our expansion plan by opening 17 branches, including 12 independent bank branches in territories in which we were not present, allowing us to establish a customer base for future store expansions.

After performing a deep analysis, a comprehensive refocus process was implemented to assure the profitability of Famsa USA. Although this decision represented a challenge for the Company, it was necessary to reinforce the Group’s overall position.

While strengthening our operations in Texas and Illinois, we carried out an orderly exit from Arizona, California and Nevada. In the latter three states, the economy showed a downward trend regarding unemployment and consumption, especially in our key population segment, the Hispanic market.

The actions implemented in Arizona, California and Nevada were focused on maximizing the collection of accounts receivable and minimizing the cost of closing the store network in the region. As of December 31, 2012, we achieved a 65.5% reduction in the balance of accounts receivable, compared to 2011. Furthermore, we concluded the process of closing 24 stores and two distribution centers and two warehouses which supplied these states.

Parallel to this divestment process, we strengthened our operations in Texas and Illinois by expanding our product portfolio, improving our personalized service, and re-launching attractive advertising campaigns. These strategies resulted in an increased demand for core categories, such as furniture and household appliances, which contributed to a great extent in the 8.3% growth in Same Store Sales posted during the fourth quarter of 2012, the first positive growth rate since the first quarter of 2011.

We also reinforced our value offer in the Texas region with the origination of personal loans and maintained a leaner operating expense structure. As a result, Famsa USA achieved an outstanding increase in its Operating Profit, which reached Ps$119 million in 2012, compared to a Ps$57 million loss in 2011.

The achievements across Famsa Mexico, Banco Ahorro Famsa and Famsa USA reflect an accurate business model and an efficient profitability platform that, combined with our experience and philosophy of continuous improvement, constitute a solid base for driving Grupo Famsa’s growth.

During 2013, we will seek to consolidate the positive progress accomplished by implementing new and ambitious growth plans at Famsa Mexico, Famsa USA and Banco Ahorro Famsa, which we expect will translate into concrete benefits for Grupo Famsa’s stakeholders.

We appreciate the effort and commitment of our employees, who day after day embrace the Company’s objectives as their own and allow us to develop solutions and initiatives that benefit our operations. We are equally grateful for the preference and reliance of our customers, suppliers and creditors.

Finally, we reiterate our commitment to our stockholders to enhance the product offer and business platform, which will enable us to create value on your investment, compensate your trust and drive the profitable growth that we pursue.

Humberto Garza GonzálezChairman of the Board

Humberto Garza ValdézChief Executive Officer

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Grupo Famsa 2012AR

Our business modelhas its origins and focus

on value creation throughour customers’ total

satisfaction We are dedicatedto providing a comprehensive

value offer in consumption, financing and savings

needs through the close interaction and synergies between Famsa Mexico,

Famsa USA andBanco Ahorro Famsa

Business Model

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Grupo Famsa 2012AR

Banco Ahorro Famsa Famsa USA

-Famsa-to-Famsa sales volumeFamsa USA Famsa Mexico

-Remittance dispatchFamsa USA Banco Ahorro Famsa

-Banking service offering for peoplewho receive remittances

-Credit availability-Banking service offering for customers

Banco Ahorro Famsa Famsa Mexico

-Broad store network and store traffic-Active credit customer base-Brand recognition

-Brand recognition-Successful business model-Infrastructure for Famsa-to-Famsa

Famsa Mexico Banco Ahorro FamsaFamsa Mexico Famsa USA

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Grupo Famsa 2012AR

Famsa Mexico

Grupo Famsa 2012AR

Famsa Mexico

12,0

31

12,3

53

During 2012, Famsa Mexico achieved a year of accurate results with improvements in its profitability, displaying the effort and commitment of its entire team.

The series of initiatives implemented to satisfy consumers’ needs and to stimulate demand for durable goods, as well as the strength of personal loan origination, consolidated these achievements and are the foundations for the future growth of this business unit.

Consequently, Famsa Mexico’s 2012 Net Sales reached Ps$12,353 million, 2.7% above the previous year. This performance, combined with a rigorous control of operating expenses, boosted Famsa Mexico’s Operating Profit, posting a 10.9% year-over-year increase, which totaled Ps$1,362 million as of year-end 2012. Furthermore, this business unit registered an expansion in its Operating Margin of 80 basis points, from 10.2% in 2011 to 11.0% in 2012.

Strong Performance, Solid Profitability

2011

2011



2012

2012

1,22

8

1,36

2

Net Sales

Operating Profit

+2.7%

+10.9%Operating Profit

grew 10.9%year-over-year

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Grupo Famsa 2012AR

10.2%growth in

Furniture in 2012

Among the multiple initiatives implemented during the year to achieve these results, we reinforced the assortment of models and brands of our product portfolio, the mounting of more attractive displays, the excellence of the shopping experience, and the rollout of targeted advertising campaigns to drive credit sales.

Personal Loans25%

Furniture

Electronics

HouseholdAppliances

Mobile Phones

Computers

Motorcycles

Others

14%

12%

11%8%

6%

5%

19%

Sales by Product Category(%)

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Grupo Famsa 2012AR

10%

4Q11

1Q12

2Q12

3Q12

4Q12

5%

0%

-5%

Among our durable goods categories, Mobile Phones and Household Appliances posted some of the strongest results, which, after a period of contraction, were able to modify their trend and drive sales growth rates up to 12.4% and 7.6%, respectively, during the last quarter of the year.

Additionally, the continuous dynamism reflected by the Motorcycles, Furniture and Personal Loans categories raised the quarterly growth in Famsa Mexico’s Same Store Sales, reaching an increase of 3.5% during the fourth quarter of 2012.

Backed by the effectiveness of the initiatives implemented, in 2012 we resumed our expansion plan in Mexico. During the year, we opened five full format stores in diverse cities, reinforcing our commitment to continue expanding our store network which was postponed due to the financial crisis.

This boost to our expansion strategy, coupled with the solid operating performance of 2012, is an excellent foundation to strengthen our value creation path towards the profitable growth that has distinguished Grupo Famsa across its history.

Same Store Salesgrew 3.5% in 4Q12

Our store networkin Mexico resumed

its growth

Same Store Sales Growth (%)

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Grupo Famsa 2012AR

Banco Ahorro Famsa

Grupo Famsa 2012AR

10,4

36 11,9

99


4Q11 1Q12 2Q12 3Q12 4Q12

Bank Deposits

15.0%

Since its founding in 2007, Banco Ahorro Famsa’s operations have grown steadily. As of the close of 2012, Banco Ahorro Famsa is one of Mexico’s 10 largest multiple banking institutions in terms of the balance of its Consumer Portfolio (CNBV, Dec. 2012).

Most notable among Banco Ahorro Famsa´s indicators is its Capitalization Index, which through 2012 remained at an average level of 13.3%, reflecting the strength and stability of our operations.

In addition, its deposit base, distributed across more than 1.1 million accounts, grew 15.0% year-over-year to Ps$11,999 million. Banco Ahorro Famsa has been able to enhance time deposits in order to extend the duration of its deposit base while continuously reducing its average cost of funding. As of December 31, 2012, 89.4% of Banco Ahorro Famsa´s bank deposits correspond to savings instruments with an average term of 152 days and a historic minimum cost of funding of 5.17%.

The solid performance of these indicators reflect the strength of Banco Ahorro Famsa´s market position, underpinning its service and value offer to earn the preference of a growing number of customers in all the segments it serves.

Strength, Diversification and

Growth

In Number ofBanking Branches:

Rank Mexico

10

In Balance of ConsumerLoan Portfolio 9

In Balanceof Deposits

Source: CNBV (December 2012)

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Grupo Famsa 2012AR

Besides complementing our traditional consumer financing business, Banco Ahorro Famsa advances in the development of its Commercial Loan Portfolio. As of the close of 2012, its balance of credits reached Ps$2,393 million, a growth of 28.3% above the previous year.

Key to this growth has been our product and service diversification strategy, which is best exemplified with the credits we offer to support Micro, Small and Medium-sized Enterprises (MSMEs). Banco Ahorro Famsa´s commitment to seek new ways of value creation has now positioned us as an attractive alternative for financing productive loans.

Our success in the incursion of financing this type of credits reflects a series of initiatives we implemented during the year, including the opening of 10 MSME locations in the Mexican cities of Monterrey, San Luis Potosi, Torreon and Saltillo. At these places, our specialized personnel address customers from a wide range of industries, including the construction, financial services and commercial sectors, among others.

89.4% ofBanco Ahorro Famsa´s

deposit base correspond to time savings

instruments

Commercial Loan Portfolio

28.3%

1,86

5 2,39

3


4Q11 1Q12 2Q12 3Q12 4Q12

Cost of Funding

6.5%

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

5.5%

4.5%

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Grupo Famsa 2012AR

Banco Ahorro Famsais an attractive alternative

for productive loans, granting more than 1,670 credits to support small and medium

entrepreneurs

The solid performance of our banking business unit encouraged the opening of five new branches within our stores in 2012, as well as 12 independent branches, most of which were located in territories where we were not present. As of the close of 2012, Grupo Famsa has a total of 304 banking branches.

The implementation of Banco Ahorro Famsa’s new independent bank branch format enables us to focus on consolidating stable and strong operations, with the flexibility to pursue new diversification and growth strategies that will benefit our customers.

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Grupo Famsa 2012AR

Famsa USA

Grupo Famsa 2012AR

Famsa USA

Refocus thatDrives Profitability

Mexico

USA

Consolidated Sales

12%

88%

Precipitated by the economic downturn in the West region of the United States, during 2012 we carried out successfully a comprehensive refocus process to ensure Famsa USA’s profitability and strengthen the Group’s overall position.

The strategy we implemented involved an orderly and efficient exit from the West region, comprised by the states of Arizona, California and Nevada, and the consolidation of our operations in the Texas region, which includes the states of Texas and Illinois. This decision represented a great challenge, but has proven to be the best alternative to face the adverse economic environment and to advance with the recovery of our US operations´ profitability.

The divestment process in the West region of the United States involved the closing of 24 stores and two distribution centers and two warehouses that supplied the region. We also implemented a series of actions to maximize the collection of accounts receivable. These included the installation of kiosks close to our former stores to serve as payment centers, as well as the acceptance of credit- and debit-card payments by telephone and Internet.

As a result of these efforts, the balance of accounts receivable in the West declined 65.5% year-over-year, from US$95 million in December 2011 to US$33 million in December 2012. It is important to note that collection activities will continue during the first half of 2013 in order to recover the remaining balance.

The series of initiatives implemented, accelerated

the recovery trend and drove Famsa USA´s profitability

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Grupo Famsa 2012AR

At the same time, sales volume in the Texas region rose progressively during the second half of the year, reaching a Same Store Sales increase of 8.3% in the fourth quarter of 2012, the first positive growth since the first quarter of 2011.

A series of diverse initiatives implemented, such as enhancing the selection of our product assortment, launching attractive advertising campaigns and promotions, and improving our exhibition spaces, reactivated the demand for certain core categories of durable goods. As a result, Household Appliances and Furniture posted a growth in sales during the fourth quarter of 2012, increasing 34.6% and 23.1%, respectively.

1,73

1

1,71

5

2011

2011



2012

2012

119

Sales

Operating Profit

57

A more profitablesales mix and the

reduction of operating expenses enhanced

the profitability of our operations in Texas

Accounts Receivable

-65.5%95

33

Millions of USD

4Q11 1Q12 2Q12 3Q12 4Q12

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Grupo Famsa 2012AR

Same Store SalesGrowth (%)

4Q11

1Q12

2Q12

3Q12

4Q12

0%

10%

-10%

-20%

-30%

Additionally, we underpinned our product offer by promoting the origination of personal loans and implemented a rigorous program for optimizing operating expenses. Consequently, the rate of recovery accelerated and the profitability of our business in the region of Texas and Illinois was boosted.

Our efforts resulted in a substantial growth in Operating Profit, which at yearend 2012 was Ps$119 million, compared to a loss of Ps$57 million in 2011. The initiatives implemented and the positive results yielded imply a more solid performance for this business unit, which will encourage Grupo Famsa to continue consolidating the presence of Famsa USA in the Hispanic market of the US.

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Grupo Famsa 2012AR

SocialResponsability

Grupo Famsa 2012AR

Since our foundation, and as part of our business philosophy, we maintain a close relationship with the communities we serve and reinforce our commitment to the welfare of society.

During 2012, Grupo Famsa increased the resources assigned to support social institutions that benefit segments of the population who live in underprivileged conditions or have special needs, compared to 2011. We collaborate in multiple programs which promote the education of people living under harsh conditions, the assistance of disabled children and sick patients, among other community development initiatives.

Furthermore, we carry out fund-raising campaigns to support organizations that seek social wellbeing through Banco Ahorro Famsa’s branches, ATMs and on-line banking. In 2012, associations such as EN NUESTRAS MANOS, HOGA, BÉCALOS, Hogar de la Misericordia and Club de Niños y Niñas de Nuevo León were benefited from these campaigns.

299,000hours of training

in 2012

For more than 40 years, our employees have been the foundation of the success and growth of Grupo Famsa. Their capabilities and experience are our most important assets for achieving our goals.

Seeking their continuous development, we offer our employees several improvement programs focusing on customer service, one of Grupo Famsa’s key differentiators, as well as on human development, technical skills and how to enrich the purchasing experience, all of which enhance their professional mobility. In 2012, Grupo Famsa provided 299,000 man-hours of training.

Finally, as a result of the success of the Company’s training programs, 1,495 of our employees were promoted internally in 2012. In this way, we are driving the talent of this great enterprise’s workforce of 16,741 employees as of December 31, 2012.

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Grupo Famsa 2012AR

CorporateGovernance

Grupo Famsa 2012AR


Oziel Mario Garza ValdézVice President of Clothing and Verochi

Luis Gerardo Villarreal RosalesChief Operations Officer

Abelardo García LozanoChief Financial Officer

Martín Urbina VillarrealVice President of Famsa Mexico

Angel Alfonso de Soto HernándezVice President of Banco Ahorro Famsa

Ignacio Ortiz LambretónVice President of Famsa USA

Joaquín Aguirre CarreraVice President of Marketing

Héctor Padilla RamosVice President of Merchandise

Manuel Rodríguez GonzálezChief Information Officer

Héctor Hugo Hernández LeeVice President of Human Resources

Management TeamGrupo Famsa, S.A.B. de C.V. Corporate

Governance Practices

Grupo Famsa’s positive performance rests on sound Corporate Governance practices in compliance with the “Code of Best Corporate Practices” recommended by the Mexican Stock Exchange and the National Banking and Securities Commission. This has resulted in the optimal functioning of the company’s Board of Directors, which, in coordination with the Audit Committee and the Corporate Practices Committee, is responsible for planning, approving and supervising all of the Company’s operations.

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Grupo Famsa 2012AR

Don Humberto Garza GonzálezDirector

Humberto Garza ValdézDirector

Hernán Javier Garza Valdéz Director

Oziel Mario Garza Valdéz Director

Bernardo Guerra Treviño Independent Director

Salvador Kalifa AssadIndependent Director

Horacio Marchand FloresIndependent Director

Jorge Luis Ramos SantosIndependent Director

Alejandro Sepúlveda GutiérrezIndependent Director

Board of DirectorsGrupo Famsa, S.A.B. de C.V.

Officers of Grupo Famsa’sBoard of Directors:

Don Humberto Garza González Chairman

(*) Luis Gerardo Villarreal Rosales Secretary

(*) Ricardo Maldonado Yañez Alternate Secretary

(*) Officers who are not members of the Board of Directors.

Don Humberto Garza González is the founder and Chairman of the Board of Grupo Famsa.

Humberto Garza Valdéz has been with the Company for the past 27 years and is Don Humberto Garza González’ son. He has been our President for the past 16 years, having previously served as Deputy President. He holds a Bachelor’s degree in Business Administration from the University of Monterrey (UDEM) and a Master in Executive Business Administration from the Institute of Executive Business Management (IPADE).

Hernán Javier Garza Valdéz has been with the Company for the past 25 years and is Don Humberto Garza González’ son. He currently serves as Project Director. He holds a Bachelor’s degree in Economics from Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM), an M.B.A. from the University of Notre Dame and a Master in Information Systems from ITESM.

Oziel Mario Garza Valdéz has been with the Company for the past 19 years and is Don Humberto Garza González’ son. He has been our Vice President of Clothing and Verochi for the past 14 years, having previously served as Commercial Director for the Monterrey Region. He holds a Bachelor’s degree in Business Administration from UDEM and a Master in Executive Business Administration from IPADE.

Bernardo Guerra Treviño has been a member of Grupo Famsa’s Board of Directors since 2011. He is a founding member and General Director of Morales y Guerra Capital Asesores (MG Capital) and serves as an independent director of Banco Ahorro Famsa and Axtel, where he is also the President of the Corporate Practices and Auditing committees. He is also a member of the administrative committee and President of the Corporate Practices and Auditing committees of Promotora Ambiental. He holds an Industrial Engineering degree from ITESM.

Salvador Kalifa Assad has been a member of Grupo Famsa’s Board of Directors since 1997. He currently runs his own consulting firm, Consultores Económicos Especializados, and provides economic analysis for several Mexican newspapers. He was Director of Economic Studies at Grupo Alfa for seven years and collaborated with Grupo Financiero GBM-Atlántico. He has also been a member of the Boards of Directors of Grupo IMSA, Verzatec and Banorte. He holds a Bachelor’s degree in Economics from Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM), as well as Master’s and Doctoral degrees in Economics from Cornell University.

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Grupo Famsa 2012AR

Audit Committee

Horacio Marchand Flores has been a member of Grupo Famsa’s Board of Directors since 2006. He has served as Sales Director at Alestra and as Marketing Vice President at Iusacell. He founded the firm Marchand y Asociados, which specializes in strategy and marketing projects. He has also been a member of the Board of Directors and Treasurer of Monterrey’s Chamber of Commerce, a member of the Executive Committee of CONCANACO and a member of CCINLAC. He holds a Bachelor’s degree in Business Administration from ITESM, a Master in Business Administration and Marketing from the University of Texas, and a Doctorate in Deep Psychology and Mythology from Pacifica Graduate Institute.

Jorge Luis Ramos Santos has been a member of Grupo Famsa’s Board of Directors since 2006. He currently represents Heineken Americas in its joint ventures and is a strategic advisor to this company. He has served as Deputy President of Heineken Americas, as CEO of Cervecería Cuauhtémoc Moctezuma as Human Resources Vice President and as Chief Commercial Officer of Femsa Cerveza. He currently sits on the boards of several companies in Latin America, as well as of several business organizations and universities in Mexico. He holds Bachelor’s degrees in Accounting and Business Administration from Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM) and a Master in Business Administration from the Wharton School of the University of Pennsylvania.

Alejandro Sepúlveda Gutiérrez has been a member of Grupo Famsa’s Board of Directors since 2006. He has served as Vice President of Financial Information at Alfa, and as Corporate Controller and Deputy Vice President at Fundidora Monterrey. He is a member of the Committee on Financial Reporting Practices of the Mexican Institute of Finance Executives’ Monterrey Division. He holds a degree in Accounting from ITESM, a Master in Business Administration from Texas Christian University and has completed course studies on executive business management at IPADE.

Alejandro Sepúlveda Gutiérrez Chairman

Salvador Llarena Arriola

Jorge Luis Ramos Santos

Alejandro Sepúlveda Gutiérrez Chairman

Salvador Llarena Arriola

Jorge Luis Ramos Santos

Luis Gerardo Villarreal RosalesDirector

Hernán Javier Garza Valdéz Director

Oziel Mario Garza Valdéz Director

Angel Alfonso de Soto Hernández Director

Bernardo Guerra Treviño Independent Director

Salvador Kalifa AssadIndependent Director

Héctor Medina Aguiar Independent Director

Ernesto Ortiz Lambretón Independent Director

Luis Gerardo Villarreal Rosales Chairman

(*) Ricardo Maldonado Yañez Secretary

(*) Humberto Loza López Alternate Secretary

(*) Officers who are not members of the Board of Directors.

Corporate Practices Committee

Board of DirectorsBanco Ahorro Famsa, S.A.,Multiple Banking Institution

Officers ofBanco Ahorro Famsa´sBoard of Directors:

25

Grupo Famsa 2012AR

Gross margin expanded

basis points to

during 2012

120

46.6%

Management’s Discussionand Analysis of the Operating Resultsand Financial Position

For the year ended December 31, 2012

Income Statement

Net Sales

During the year ended December 31, 2012, Grupo Famsa’s consolidated Net Sales increased by 1.9%, compared to 2011, to Ps$14,123 million. Famsa Mexico reported Net Sales of Ps$12,353 million in 2012, a 2.7% growth from the previous year, mainly as a result of the progressive recovery of core categories and the strength of personal loan origination. Net Sales in the Texas region fell 0.9% to Ps$1,715 million.

Consolidated Same Store Sales, which represent the sales of those of our stores that have been in operation longer than 12 months and isolate the effect of the Peso/U.S. Dollar exchange rate, rose 1.6% compared to 2011. Same Store Sales at Famsa Mexico and Famsa USA grew 2.6% and fell 4.0%, respectively, in 2012.

Cost of Sales and Gross Profit

Several accounts were reclassified as a result of the MFRS to IFRS transition. Among them, interest expense related to bank deposits was reclassified to Cost of Sales and thus, consolidated Cost of Sales for 2012 was Ps$7,536 million, 0.5% below that of 2011.

Consolidated Gross Profit reached Ps$6,587 million, a 4.7% increase above that of the previous year. Gross Margin expanded 120 basis points to 46.6% during 2012, largely driven by Famsa Mexico’s growth in credit sales, combined with the higher participation of personal loans and furniture in the consolidated sales mix.

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Operating Expenses

Consolidated Operating Expenses, which comprise selling and administrative expenses, grew 0.3% during 2012, to Ps$5,183 million. During the year, salaries and employee benefits and leasing expenses represented 59.9% of total Operating Expenses and the remaining amount proceeded from advertising, maintenance and depreciation expenses, among others.

Operating Profit

As of December 31, 2012, consolidated Operating Profit increased 36.8% to Ps$1,475 million. The consolidated Operating Margin expanded from 7.8% in 2011 to 10.4% in 2012, mainly derived from the expansion in Gross Margin and the strict control of Operating Expenses.

Financial Expenses, Net

Derived from the MFRS to IFRS transition, several accounts were reclassified. As a result, financial expenses now comprise interest expense related to bank debt, debt certificates, and factoring. Therefore, the Financial Expenses, net of Grupo Famsa as of yearend 2012 was Ps$658 million, a 15.2% decrease compared to 2011.

The main variation was a foreign exchange loss of Ps$103 million posted in 2011, which changed to a moderate foreign exchange gain of Ps$62 million in 2012, as a result of the increased stability of the foreign exchange market and, more importantly, Grupo Famsa’s reduced asset position in U.S. dollars through the operations of Famsa USA.

Net Income

During the year ended December 31, 2012, consolidated Net Income increased 42.0%, to Ps$323 million. This increase results from a growth of 170.2% in Income Before Income Tax in 2012 as compared to 2011. However, as of the close of 2012, the Company recorded a loss from discontinued operations corresponding to Famsa USA´s divestment process from the West region of Ps$598 million.

1,07

8

1,47

5

2011

Millions of Mexican Pesos

2012

OperatingProfit

+36.8%

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Balance Sheet

Trade Receivables, Net

The balance of Trade Receivables as of December 31, 2012, net of allowance for doubtful accounts, grew 7.4% compared to 2011, totaling Ps$19,215 million. Derived from the MFRS to IFRS transition, this balance was segmen-ted based on the timeframe of credits. Consequently, 96.5% of the total balance of Trade Receivables corresponds to credits with terms of less than one year, totaling Ps$18,546 million. The remaining amount has been reclassified as a non-current asset.

Inventory

The balance of Inventory as of December 31, 2012 was Ps$1,951 million, a 2.9% decrease compared to the same period of 2011. This was primarily as a result of the effective implementation of initiatives aimed at optimizing inventory levels without reducing our standards of service.

Net Debt

Net Debt was Ps$4,619 million as of December 31, 2012, 6.0% less than the balance posted as of December 31, 2011, largely reflecting an increase of 21.2% in the balance of Cash and Cash Equivalents.

Bank Deposits

As of December 31, 2012, Bank Deposits totaled Ps$11,999 million, which was 15.0% above the balance as of December 31, 2011. In addition, BAF’s average cost of funding was 5.17% as of the close of 2012. Bank Deposits continue to offer an optimum source of funding for the credits extended to our Mexican customers. The diverse financing products that make up BAF’s deposit base mitigate the Company’s exposure to conventional credit market volatility and have also contributed significantly to reducing the Company’s consolidated cost of funding.

Stockholders’ Equity

The balance of Stockholders’ Equity as of December 31, 2012 grew by 3.4%, reaching Ps$8,290 million.

Management’s Discussionand Analysis of the Operating Resultsand Financial Position

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Grupo Famsa 2012AR

ConsolidatedFinancial Statements

Grupo Famsa, S. A. B. de C. V.

ÍNDICECONTENTSIndependent Auditors’ Report

Consolidated Financial Statements:

Consolidated Statements of Financial Position

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

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38

35

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Independent Auditors’ Report

Monterrey, N. L., April 15, 2013

To the Stockholders’ Meeting ofGrupo Famsa, S. A. B. de C. V.

We have audited the accompanying consolidated financial statements of Grupo Famsa, S. A. B. de C. V., and subsidiaries, which comprise the consolidated statement of financial position as at December 31, 2012 and 2011, and January 1, 2011, and the consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for the years ended December 31, 2012 and 2011, 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 consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial 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 Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated 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 depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the 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 the 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 accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of Grupo Famsa, S. A. B. de C. V. and its subsidiaries at December 31, 2012 and 2011, and January 1, 2011, and their financial performance and their cash flows for the years ended December 31, 2012 and 2011, in accordance with International Financial Reporting Standards.

PricewaterhouseCoopers, S. C.

Juan Gerardo Pérez LaraAudit Partner

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December 31, January 1,Assets Note 2012 2011 2011

Current assets:Cash and cash equivalents 6 Ps. 1,528,727 Ps. 1,261,454 Ps. 937,193Trade receivables, net 8 18,546,393 17,217,837 14,696,688Recoverable taxes 1,135,713 1,279,064 1,253,048Other accounts receivable 9 712,927 508,222 522,102Inventories 10 1,950,663 2,009,750 2,215,957

Total current assets 23,874,423 22,276,327 19,624,988

Non-current assets:Restricted cash 7 254,905 189,901 177,266Trade receivables, net 8 669,065 670,738 732,323Property, leasehold improvements, andfurniture and equipment, net 11 2,370,018 2,486,286 2,561,666Goodwill and intangible assets, net 12 299,572 298,112 309,998Guarantee deposits 53,910 61,952 60,466Deferred income tax 22 1,548,033 1,402,792 1,267,407

Total non-current assets 5,195,503 5,109,781 5,109,126

Total assets Ps. 29,069,926 Ps. 27,386,108 Ps. 24,734,114

Liabilities and Stockholders’ equityDemand deposits and time deposits 13 Ps. 8,382,497 Ps. 7,528,884 Ps. 7,697,144Short-term debt 14 2,583,831 2,426,638 2,743,542Suppliers 1,562,613 1,483,106 1,515,038Accounts payable and accrued expenses 15 603,464 776,468 864,576Deferred income from guarantee sales 239,245 288,379 355,298Income tax payable 26,556 12,679 18,180

Total current liabilities 13,398,206 12,516,154 13,193,778

Non-current liabilities: Time-deposits 13 3,616,767 2,907,190 1,210,154Long-term debt 14 3,563,611 3,750,700 2,423,028Deferred income from guarantee sales 116,387 122,859 165,521Employee benefits 17 85,240 74,689 68,348

Total non-current liabilities 7,382,005 6,855,438 3,867,051

Total liabilities 20,780,211 19,371,592 17,060,829

Stockholders’ equity Capital stock 18 1,458,286 1,458,286 1,458,286Additional paid-in capital 2,778,226 2,778,226 2,778,226Retained earnings 3,836,677 3,536,012 3,305,928Reserve for repurchase of shares 130,000 110,000 110,000Foreign currency translation adjustment 60,395 108,610 -

Total stockholders’ equity attributable to shareholders 8,263,584 7,991,134 7,652,440Non-controlling interest 26,131 23,382 20,845

Total stockholders’ equity 8,289,715 8,014,516 7,673,285

Total liabilities and stockholders’ equity Ps. 29,069,926 Ps. 27,386,108 Ps. 24,734,114

Grupo Famsa, S. A. B. de C. V. and subsidiariesAs of December 31, 2012 and 2011, and January 1, 2011

Thousands of Mexican pesos

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Financial Position



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December 31, Note 2012 2011

Net sales 25 Ps. 10,446,466 Ps. 10,983,168Interest earned from customers 25 3,677,062 2,882,571

Total revenues 14,123,528 13,865,739

Cost of sales 19 (7,536,148) (7,571,078)

Gross profit 6,587,380 6,294,661

Selling expenses 19 (3,226,968) (3,024,001)Administrative expenses 19 (1,956,292) (2,146,188)Other income (expenses), net 20 70,980 (46,253)

(5,112,280) (5,216,442)Operating profit 1,475,100 1,078,219

Financial expenses 21 (722,345) (777,317)Financial income 21 63,970 1,376

Financial expenses, net (658,375) (775,941)

Profit before income tax 816,725 302,278

Income tax 22 107,332 149,459

Profit before discontinued operations 924,057 451,737

Discontinued operations 2 (598,458) (221,776)

Consolidated net income Ps. 325,599 Ps. 229,961

Net income attributable to:Controlling interest Ps. 322,850 Ps. 227,424Non-controlling interest 2,749 2,537


Basic and diluted earnings per share attributable to controlling interest, in Mexican pesos:

Continuing operations Ps. 2.10 Ps. 1.02

Discontinued operations 2 Ps. (1.36) Ps (0.50)

Net income Ps. 0.74 Ps. 0.52

Number of outstanding shares 18 439,188,294 439,188,294

Consolidated Statements of Income Grupo Famsa, S. A. B. de C. V. and subsidiaries

For the years ended December 31, 2012 and 2011Thousands of Mexican pesos




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Other comprehensive income (loss), net of taxes:Actuarial gains and (losses) 17 (2,185) 2,660Foreign currency translation adjustment (48,215) 108,610

Consolidated comprehensive income Ps. 275,199 Ps. 341,231

Consolidated comprehensive income attributable to:Controlling interest Ps. 272,450 Ps. 338,694Non-controlling interest 2,749 2,537

Ps. 275,199 Ps. 341,231


Consolidated Statements of Comprehensive Income

Grupo Famsa, S. A. B. de C. V. and subsidiariesFor the years ended December 31, 2012 and 2011




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Consolidated Statements of Changes in Stockholders’ Equity



Effects Total Additional Reserve for of foreign stockholders Total Total Capital paid-in Retained repurchase currency equity attributable non-controlling stockholders Note stock capital earnings of shares translation to shareholders interest equity

Balances as of January 1, 2011 Ps. 1,458,286 Ps. 2,778,226 Ps. 3,305,928 Ps 110,000 Ps. - Ps. 7,652,440 Ps. 20,845 Ps. 7,673,285

Comprehensive income:Net income - - 227,424 - - 227,424 2,537 229,961Actuarial gains 17 - - 2,660 - - 2,660 - 2,660Foreign currency translation adjustment 3.4 - - - - 108,610 108,610 - 108,610

Total comprehensive income - - 230,084 - 108,610 338,694 2,537 341,231

Balances as of December 31, 2011 18 1,458,286 2,778,226 3,536,012 110,000 108,610 7,991,134 23,382 8,014,516

Transactions with owners of the Company:Increase in the reserve for repurchase of shares 18 - - (20,000) 20,000 - - - -Comprehensive income:Net income - - 322,850 - - 322,850 2,749 325,599Actuarial losses 17 - - (2,185) - - (2,185) - (2,185)Foreign currency translation adjustment 3.4 - - - - (48,215) (48,215) - (48,215)

Total comprehensive income - - 320,665 - (48,215) 272,450 2,749 275,199

Balances as of December 31, 2012 18 Ps. 1,458,286 Ps. 2,778,226 Ps. 3,836,677 Ps. 130,000 Ps. 60,395 Ps. 8,263,584 Ps. 26,131 Ps. 8,289,715

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Effects Total Additional Reserve for of foreign stockholders Total Total Capital paid-in Retained repurchase currency equity attributable non-controlling stockholders Note stock capital earnings of shares translation to shareholders interest equity

Balances as of January 1, 2011 Ps. 1,458,286 Ps. 2,778,226 Ps. 3,305,928 Ps 110,000 Ps. - Ps. 7,652,440 Ps. 20,845 Ps. 7,673,285

Comprehensive income:Net income - - 227,424 - - 227,424 2,537 229,961Actuarial gains 17 - - 2,660 - - 2,660 - 2,660Foreign currency translation adjustment 3.4 - - - - 108,610 108,610 - 108,610

Total comprehensive income - - 230,084 - 108,610 338,694 2,537 341,231

Balances as of December 31, 2011 18 1,458,286 2,778,226 3,536,012 110,000 108,610 7,991,134 23,382 8,014,516

Transactions with owners of the Company:Increase in the reserve for repurchase of shares 18 - - (20,000) 20,000 - - - -Comprehensive income:Net income - - 322,850 - - 322,850 2,749 325,599Actuarial losses 17 - - (2,185) - - (2,185) - (2,185)Foreign currency translation adjustment 3.4 - - - - (48,215) (48,215) - (48,215)

Total comprehensive income - - 320,665 - (48,215) 272,450 2,749 275,199

Balances as of December 31, 2012 18 Ps. 1,458,286 Ps. 2,778,226 Ps. 3,836,677 Ps. 130,000 Ps. 60,395 Ps. 8,263,584 Ps. 26,131 Ps. 8,289,715

Grupo Famsa, S. A. B. de C. V. and subsidiariesAs of December 31, 2012 and 2011 and January 1, 2011



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Operating activities:

Profit before income tax Ps. 816,725 Ps. 302,278Depreciation and amortization 11,12,19 314,397 350,674Allowance for doubtful receivables 19 1,173,362 1,166,828Gain on sale of property, leasehold improvements, furniture and equipment (1,279) (2,473)Estimated liabilities for labor benefits 17 15,731 16,171Interest income (1,757) (1,376)Interest expenses 1,312,145 1,200,540Increase in trade receivables (2,476,844) (2,581,781)Increase in inventories (308,934) (420,122)Increase in other accounts receivable (128,938) (162,583)Increase (decrease) in suppliers 87,437 (40,834)Decrease in accounts payable and accrued expenses (647,281) (856,481)Income tax paid (39,619) (25,873)Demand deposits and time deposits 1,563,190 1,528,776Interests to bank depositors (589,799) (526,450)Exchange gain and losses, net (112,969) 542,882

Net cash flows from operating activities 975,567 490,176

Investing activities:

Acquisition of property, leasehold improvements, furniture and equipment (201,597) (240,024)Proceeds from sale of property, leasehold improvements,furniture and equipment 9,829 5,081Interest received 1,757 1,376Net cash from used in investing activities (190,011) (233,567)

Financing activities:

Interest paid (718,948) (623,595)Proceeds from current and non-current debt and bank loans 300,040 2,607,704Payments of current and non-current debt and bank loans (103,585) (1,927,876)

Net cash flow (used in) from financing activities (522,493) 56,233

Increase in net cash and cash equivalents 263,063 312,842

Adjustments to cash flow as a result of changes in exchange rates 4,210 11,419

Cash and cash equivalents at the beginning of the year 6 1,261,454 937,193

Cash and cash equivalents at the end of the year 6 Ps. 1,528,727 Ps. 1,261,454

Consolidated Statementsof Cash Flows

Grupo Famsa, S. A. B. de C. V. and subsidiariesFor the years ended December 31, 2012 and 2011





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Grupo Famsa, S. A. B. de C. V. and subsidiariesAs of December 31, 2012 and 2011, and January 1, 2011

Thousands of Mexican pesos (except where otherwise indicated)

Notes to the ConsolidatedFinancial Statements

Note 1 - General information:

Grupo Famsa, S. A. B de C. V. and subsidiaries (hereinafter, “Famsa”, “Company” or “Grupo Famsa”) is a leading company in the Mexican retail sector, satisfying families’ different purchasing, financing and savings needs. The Company is controlled by a trust whose beneficiaries are the Garza Valdéz family. The address of the Company and its corporate office is Ave. Pino Suárez No. 1202 Nte., Zona Centro, Monterrey, Nuevo León, Mexico. Grupo Famsa started operations in 1970.

Grupo Famsa has developed a solid portfolio of complementary businesses based on consumer credit and savings, which supports a large part of the financing needs of its operations. As of December 31, 2012, Grupo Famsa operates a network of 355 stores with 304 bank branches in 26 Mexican states, as well as 25 stores in two of the states with the largest Hispanic population in the United States of America (USA), focused on selling various types of electronic appliances, furniture, clothing, household appliances, cellular phones, motorcycles and other consumer durable goods. The sales operations are carried out in cash and by credit, wholesale and directly to the general public. The Company is listed on the Mexican Stock Exchange, and in order to perform its financial activities in Mexico it has obtained the authorization of the Ministry of Finance and Public Credit to operate Banco Ahorro Famsa, S. A. Institución de Banca Múltiple as established by the Mexican Law of Credit Institutions, under the supervision and surveillance of the National Banking and Securities Commission (the Commission) and Banco de México (Banxico).

The consolidated financial statements were authorized for issuance on April 15, 2013, by the Company officers who have signed the consolidated financial statements and the accompanying notes. They are subject to the approval of the ordinary shareholders’ meeting, which is legally empowered to make such changes as it considers necessary.

Note 2 - Significant events:

1. Discontinued operation:

During 2012, the Company closed stores in the states of California, Arizona and Nevada (“Western USA” region) and simultaneously the US operations were concentrated in the stores located in the states of Texas and Illinois (“Eastern USA” region).

Grupo Famsa classified the Western USA region operation as a discontinued operation in accordance with IFRS 5 “Non current assets held for sale and discontinued operations”.

2012 2011

Net sales Ps. 392,105 Ps. 1,267,309

Operating expenses (421,781) (668,769)Allowance for doubtful receivables (368,704) (222,691)Cost of goods sold (189,753) (574,980)Financing expenses (7,417) (11,776)Freights (2,828) (2,180)Other expenses, net (80) (8,689)

(990,563) (1,489,085)

Loss before tax from discontinued operations (598,458) (221,776)

Tax on discontinued operations - -

Loss after tax from discontinued operations (Ps. 598,458) (Ps. 221,776)

The analysis of the results of the discontinued operation for the years ended December 31, 2012 and 2011, is as follows:

The net cash flow from discontinued operations is attributable to operating activities.

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2. Refinancing of debt:

As part of a debt-refinancing program, Grupo Famsa undertook the following actions:

i. On February 15, 2012, the Company issued notes for US$40 million at a rate of 8.50%, under a euro commercial paper program established in 2009 for a total of US$100 million. The net proceeds were used by the Company to refinance the existing debt which matured on February 15, 2013. This program was renewed on the date mentioned above with a maturity on February 4, 2014, and with the amount increased to US$50 million, at a rate of 7.36%.

ii. On March 25, 2011, the Company issued debt certificates for an aggregate principal amount of Ps. 1,000 million at a rate of 280 basis points over the equilibrium interbank interest rate (TIIE for its acronym in Spanish), maturing in 2014. The net proceeds of this issue were used to refinance debt. This commercial paper is guaranteed by the retail, manufacturing and other subsidiaries.

3. New legal entity

In August 2011, through Famsa, Inc. in the United States, a new legal entity entitled Famsa Financial, Inc. was established, aimed at granting personal loans in the state of Texas. In order to perform this operation, 36 licenses were obtained from the Office of the Consumer Credit Commission of the State of Texas (OCCC).

Note 3 - Summary of significant accounting policies:

The most significant accounting policies applied in the preparation of these consolidated financial statements are summarized as follows. These policies have been consistently applied in the reporting years, unless otherwise indicated.

3.1 Basis of preparation

The consolidated financial statements of Grupo Famsa, S.A.B. de C.V. and subsidiaries have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”). The IFRS include all effective International Accounting Standards (“IAS”), and the related interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”), including those issued previously by the Standing Interpretations Committee (“SIC”).

In accordance with the amendments to the Rules for Public Companies and Other Participants in the Mexican Stock Exchange, issued by the Mexican National Banking and Securities Commission on January 27, 2009, the Company is required to prepare its financial statements under IFRS starting in 2012.

For comparison purposes, the consolidated financial statements as of December 31, 2011 and the consolidated statement of financial position as of January 1, 2011, have been prepared in accordance with IFRS.

The Company changed its accounting policies from Mexican Financial Reporting Standards (“MFRS”) to comply with IFRS as of January 1, 2012. The transition from MFRS to IFRS has been recorded in accordance with IFRS 1, setting January 1, 2011 as the transition date. The reconciliation of the effects of the transition from MFRS to IFRS is disclosed in Note 26 to these consolidated financial statements.

The consolidated financial statements have been prepared on a historical cost basis, except for the exemptions applied by the Company disclosed in Note 26.

The preparation of the consolidated financial statements in accordance with IFRS requires the use of certain critical accounting estimates. Additionally, it requires the Company’s management to use judgment in the process of applying the accounting policies of the Company. The areas involving a high degree of judgment or complexity and areas where judgments and estimates are significant to the consolidated financial statements are disclosed in Note 5.

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3.2 Basis for consolidation

a. Subsidiaries

Subsidiaries are all entities over which the Company has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights.

The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are de-consolidated from the date that control ceases.

Inter-company transactions and balances and unrealized gains between Famsa companies are eliminated in the preparation of the consolidated financial statements. Unrealized losses are eliminated unless the transaction provides evidence of impairment in the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Company.

% of ownership

As of As of As of December 31, December 31, January 1, 2012 2011 2011

Retail salesFabricantes Muebleros, S. A. de C. V. 99.93 99.93 99.93Famsa del Centro, S. A. de C. V. 100.00 100.00 100.00Famsa del Pacífico, S. A. de C. V. 100.00 100.00 100.00Famsa Metropolitano, S. A. de C. V. 99.94 99.94 99.94Famsa México, S. A. de C. V. (1) 99.38 - -Impulsora Promobien, S. A. de C. V. 99.04 99.04 99.04Famsa, Inc., a subsidiary organized under the laws of California and headquartered in California, U.S.A. (Famsa USA) 100.00 100.00 100.00

Administrative servicesCorporación de Servicios Ejecutivos Famsa, S. A. de C. V. 100.00 100.00 100.00Corporación de Servicios Ejecutivos, S. A. de C. V. 99.21 99.21 99.21Promotora Sultana, S. A. de C. V. 99.99 99.99 99.99Suministro Especial de Personal, S. A. de C. V. 99.99 99.99 99.99 Manufacturing and otherAuto Gran Crédito Famsa, S. A. de C. V. 99.99 99.99 99.99Expormuebles, S. A. de C. V. 99.90 99.90 99.90Mayoramsa, S. A. de C. V. 99.89 99.89 99.89Verochi, S. A. de C. V. 99.92 99.92 99.92Geografía Patrimonial, S. A. de C. V. 53.75 53.75 53.75 Financial sectorBanco Ahorro Famsa, S. A., Institución de Banca Múltiple (BAF) 99.79 99.79 99.79

(1) Company established on December 21, 2012.

As of December 31, 2012 and 2011, and January 1, 2011, the shareholding ownership percentages are as follows:

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b. Transactions with non-controlling interest

The Company has the policy of recognizing transactions with entities in which it has a non-controlling interest as transactions with the owners of the Company. In purchases of non-controlling interest, the difference between the consideration paid and the interest acquired in the carrying value of the net assets of the subsidiary is recorded in equity. Gains and losses from disposal of non-controlling interest are also recognized in equity.

c. Disposal of subsidiaries

When the Company ceases to have control any retained interest in the entity is remeasured at its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Company had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.

3.3 Business segment information

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision-Maker. The officer responsible for allocating resources and assessing performance of the operating segments has been identified as the Chief Executive Officer.

With respect to the years presented, December 31, 2012 and 2011, and January 1, 2011, the Company has operated on the basis of business segments. These segments have been determined considering the geographical areas. See Note 25. The statement of comprehensive income shows the financial information in the way that management analyzes, conduct and controls the business.

3.4 Foreign currency translation

a. Functional and presentation currency

Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency).

The consolidated financial statements are presented in Mexican pesos, which is the functional currency of the Company’s subsidiaries, except for Famsa, Inc., whose functional currency is the United States dollar.

b. Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or of valuation when the amounts are revalued. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of comprehensive income.

c. Translation of entities with a functional currency different from the presentation currency

The results and financial position of Famsa, Inc., which operates in the USA, are translated into the presentation currency as follows:

- Assets and liabilities for each statement of financial position are translated at the closing rate at the date of such statement of financial position.

- Income and expenses recognized in the statement of comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rates on the dates of the transaction), and;

- The capital stock recognized in the statement of financial position is translated at historical exchange rates. All resulting exchange differences are recognized in other comprehensive income.

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3.5 Cash and cash equivalents

Cash and cash equivalents include cash balances, bank deposits and other highly liquid investments with original maturities of less than three months with minor risk of changes in value. Cash is presented at nominal value and cash equivalents are measured at fair value; the changes in value are recognized in profit or loss of the period. Cash equivalents consist primarily of investments in government securities.

3.6 Restricted cash

Restricted cash represents limited cash in BAF and it comprises: a) deposits required by monetary regulations with Banco de México, which earn a bank funding rate, b) inter-bank short-term loans whose term does not exceed three working days, and c) purchased foreign currency, whose settlement date is agreed subsequently to the transaction date.

3.7 Financial instruments

3.7.1 Financial assets

The Company classifies its financial assets as loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at the date of initial recognition.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Company’s financial assets comprise trade receivables, other accounts receivable, cash and cash equivalents, and restricted cash, in the statement of financial position.

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest rate method, less any impairment allowance.

Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to retain control of the transferred asset, the Company recognizes its interest in the asset and the associated liability for the amounts it would pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a liability for the amounts received.

3.7.2 Accounts payables

Trade payables are obligations to pay for goods or services that have been acquired or received in the ordinary course of business from suppliers. Loans are initially recognized at fair value, net of transaction costs incurred. Loans are subsequently recognized at amortized cost, any difference between the amounts received (net of transaction costs) and the settlement value being recognized in the statement of comprehensive income over the term of the loan using the effective interest method.

Financial liabilities are initially recognized at fair value and are subsequently measured at amortized cost using the effective interest method. Liabilities in this category are classified as current liabilities if they are expected to be settled within the next 12 months, otherwise they are classified as non-current.

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.

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3.7.3. Impairment of financial assets

The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and if that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

For loans and receivables, if impairment exists, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized in the consolidated income statement in the line administrative expenses.

If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the reversal of the previously recognized impairment loss is recognized in the statement of comprehensive income.

3.8 Other accounts receivable

The Company classifies as other receivables all credits or advances to employees and other persons or companies other than the general public. If the receivables are expected to be collected within 12 months of the end of the financial year, they are classified as current, if not they are classified as non-current.

3.9 Advance payments

The Company classifies as advance payments the payments for advertising in mass media, mainly television and press. These amounts are recognized at the value of the related agreements and are charged to income as they are accrued. In no case do the contracted amounts exceed one year.

3.10 Inventories

Inventories are stated at the lower of cost and net realizable value. The cost comprises the cost of goods plus import costs, freight, handling, shipping and warehousing in customs and distribution centers, decreased by the value of respective returns. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. The cost is determined using the average cost method.

3.11 Property, leasehold improvements, and furniture and equipment

Property, leasehold improvements, and furniture and equipment are recognized at cost less accumulated depreciation and any accumulated impairment losses. The cost includes expenses directly attributable to the acquisition of the asset and all the costs associated with the placement of the asset in its location and in the necessary conditions so that it can operate in the manner intended by the management.

Costs for extension, remodeling or improvements representing an increase in the capacity and therefore an extension of the useful life of the assets are also capitalized. The expenses for maintenance and repairs are charged to the statement of comprehensive income in the period they are incurred. The carrying amount of the replaced assets is derecognized when replaced, with all effects being taken to the statement of comprehensive income.

Improvements in process represent stores under construction and include investments and all costs directly attributable to placing them in operating conditions. The reclassification of these investments is made when the store opens and deprecation of the assets commences.

Depreciation on the assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

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Buildings and construction 33 yearsFurniture and equipment 11 yearsTransportation equipment 5 yearsData-processing equipment 4 yearsLeasehold improvements Over the effective period of the leasing agreement Residual values, useful lives and depreciation of assets are reviewed and adjusted, if necessary, at the date of each statement of financial position.

The book value of an asset is written down to its recoverable amount if the asset’s carrying amount is higher than its estimated recoverable amount.

Gains and losses on the sale of assets result from the difference between the proceeds from the transaction and the carrying value of the assets. These are included in the statement of comprehensive income within other income (expenses), net.

3.12 Goodwill and intangible assets

a. Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the interest in the fair value of the net identifiable assets, liabilities and contingent liabilities of the acquire and the fair value of the non-controlling interest in the acquiree.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units, or groups of cash generating units, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of the value in use and the fair value less costs to sell. Any impairment is recognized immediately as an expense and is not subsequently reversed.

b. Systems development and computer software

Intangible assets associated with systems development and computer software programs involve the plan or design and the development of a new or substantially improved software or computer systems. Development costs are capitalized only when the following criteria are met:

- It is technically feasible to complete the software product so that it will be available for use;

- Management intends to complete the software product and use or sell it;

- There is an ability to use or sell the software product;

- It can be demonstrated how the software product will generate probable future economic benefits;

- Adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and

- The expenditure attributable to the software product during its development can be reliably measured.

Acquired licenses for the use of programs, software and other systems are capitalized at the value of costs incurred for the acquisition and preparation for use. Other development costs that do not meet these criteria and research expenses, as well as maintenance, are recognized in the statement of income within administrative expenses as incurred. Development costs previously recognized as an expense are not recognized as an asset in subsequent periods.

These assets are amortized based on their estimated useful life, which is 6 years.

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3.13 Impairment of non-financial assets

Assets that have an indefinite useful life, including goodwill, are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

3.14 Demand deposits and time-deposits

The Company’s funding liabilities include interest-bearing demand deposits (savings deposits and checking accounts) as well as time-deposits (certificates of deposits and promissory notes). These liabilities are recorded at the contracted transaction value plus accrued interest, determined by the days elapsed at the end of each month, which is charged to income on an accrual basis.

3.15 Provisions

Provisions represent present obligations from past events where an outflow of economic resources is probable. These provisions have been recognized under the best estimate made by Management.

3.16 Income taxes

The tax expense for the period comprises current and deferred tax. Tax is recognized in the comprehensive income statement, except to the extent that it relates to items recognized in other comprehensive income or directly in equity.

Current income tax comprises the income tax and the flat rate business tax, which are recognized in profit or loss of the year when they are incurred. The current tax is the higher of income tax and flat rate tax for the year. These taxes are based on taxable income and cash flows for each year, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted at the statement of financial position date in Mexico and in other count where its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation.

To recognize deferred income taxes the Company determines whether, based on its financial projections, the Company will pay income tax or flat tax and recognizes the deferred taxes that correspond to the tax payable each year. Deferred income tax is provided in full, based on the assets-and-liabilities-method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. The deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the statement of financial position date and are expected to apply when the deferred income tax asset is realized or the deferred income tax liability is settled.

The income tax rate for 2013 will be 30% and for 2014 and 2015 will be 29% and 28%, respectively. The flat rate business tax is 17.5%.

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

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3.17 Employee benefits

a. Short-term benefits

The Company provides benefits to employees in the short term, which may include wages, salaries, annual compensation and bonuses payable within 12 months.

b. Pensions and seniority premium

The Company has defined benefit plans. A defined benefit pension plan is a plan that defines the amount of pension benefits to be received by an employee in his or her retirement, usually depending on one or more factors, such as the employee’s age, years of service and compensation.

The liability recognized in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period, together with adjustments for unrecognized actuarial gains and losses and past-service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension obligation.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.

The Company has no plan assets.

The Company early-adopted IAS 19 (revised) “Employee Benefits”. The application of this standard is mandatory from January 1, 2013 but early adoption is allowed.

c. Employee profit sharing and bonuses

The Company recognizes a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the taxable income after certain adjustments. The Company recognizes a provision where contractually obligated or where there is a past practice that has created a constructive obligation.

d. Termination benefits for indemnities established in labor laws

Termination benefits are payable and recognized in the statement of comprehensive income of the period when employment is terminated by the Company before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits.

e. Other employee benefits

The Company grants benefits to its employees who terminate their employment after more than 15 years of service. According to IAS 19 (revised) this practice constitutes an assumed obligation by the Company with its employees which is recognized based on calculations prepared by independent actuaries.

3.18 Stockholders’ equity

Common shares are classified as equity.

The amounts of the capital stock, legal reserve, additional paid-in capital and retained earnings are presented at historical value, modified by the effects of inflation on the financial information recognized as of December 31, 1997. In accordance with the requirements of IAS 29 “Financial reporting under hyperinflationary economies”, the Mexican economy is currently in a non-hyperinflationary environment, maintaining an accumulated inflation for the last three years under 100% (threshold for considering an economy as hyperinflationary), therefore from January 1, 1998 onwards the Company does not recognize the effects of inflation on the financial information.

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Legal reserve and reinvestment reserve

The net income of the year is subject to the legal provision requiring the allocation of 5% of the income for each period to increase the legal reserve until it reaches an amount equivalent to 20% of the capital stock. The reinvestment reserve is intended to be reinvested in the Company under shareholders agreements; 10% of the profit for the year is allocated to this reserve.

Reserve for repurchase of shares

The maximum limit for the acquisition of the Company’s own shares is determined based on stockholders’ resolutions. Shares acquired are held in treasury and their acquisition cost is charged to stockholders’ equity at their purchase price as follows: a portion is charged to capital stock at its modified historical cost and the excess to the reserve for repurchase of shares. These amounts are stated at historical cost.

3.19 Borrowing costs

The Company capitalizes borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets, as part of the cost of such assets. It recognizes other borrowing costs as an expense in the period in which they are incurred.

As of December 31, 2012 and 2011, and January 1, 2011, there were no financial costs capitalized because during these periods there were no qualifying assets in accordance with the Company’s policies. Leasehold improvements require construction periods of less than one year.

3.20 Revenue recognition Revenue represents the fair value of the cash collected or receivable resulting from the sale of goods or services in the normal operating cycle of the Company. Revenues are stated net of discounts and returns granted to customers. The Company obtains revenues from retail operations primarily through the sale of products such as household appliances, furniture, clothing, electronics and mobile phones, and other financial services offered through BAF, such as the granting of personal loans. The Company recognizes revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Company’s activities, as described below:

Revenue from sales of goods is recognized when the customer takes possession of the goods in the stores or when the merchandise is delivered to their domiciles. Approximately 81% of the sales are settled by customers with cards operated by the Company, and the rest is settled in cash or through bank credit and debit cards.

In accordance with IAS 18 “Revenue recognition”; in merchandise sales in installments, the cash receivable is deferred over the time and therefore its fair value may be less than the nominal amount of the sale. In these cases the Company determines the fair value of cash to be received, discounting all future cash flows using an implied interest rate determined by reference to the prevailing market rate for a similar instrument.

The difference between the nominal value of the sale payable in installments and the discounted value according to the previous paragraph is recognized as interest income.

The Company’s policy is to sell certain products with the right of return. Customer returns are normally because of some fault or imperfection in the product. However, in cases where it is clear that the customers wish to return the product, the Company offers its customers the option to credit their account if the purchase was made with a card operated by the Company or to credit their bank card if the purchase was made in cash or with external cards. Experience shows that returns on sales are not significant in relation to total sales, and therefore the Company does not create an allowance for returns.

Other revenues exist for commissions on the sale of life insurance policies which are recognized as income when the policies are sold. Revenues from guarantees granted are recognized by the straight-line method over the period in which this service is offered.

Interest income resulting from sale of products and personal loans is recognized as accrued, using the effective interest rate method.

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3.21 Leases

Leases are classified as finance leases when the terms of the lease transfer to the lessee substantially all the risks and rewards of ownership. All other leases are classified as operating leases. See Note 24.

3.22 Earnings per share

Basic earnings per share is calculated dividing the profit attributable to shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by adjusting the attributable profit and the weighted average number of ordinary shares outstanding to assume conversion of all potentially dilutive ordinary shares. Basic earnings per share is the same as diluted earnings per share because there are no transactions that may potentially dilute the net income.

3.23 Discontinued operations

The Company considers as discontinued operations the operations and cash flows that can be clearly distinguished from the rest of the entity, that either have been disposed of or are classified as held for sale, and:

- Represent a line of business or geographical area of operations.- Are part of a single coordinated plan to dispose of a line of business or geographical area of operations, or- Is a subsidiary acquired exclusively with a view to resale.

3.24 New accounting standards

Standards, amendments and interpretations issued but not yet effective as of December 31, 2012 and which have not been early-adopted by the Company:

• IAS 1 (amended) - “Presentation of Financial Statements”. The amendment requires entities to separate the items presented in other comprehensive income in two groups based on whether they can be recycled to the income statement in the future or not. Items that cannot be recycled will be presented separately from items that can be recycled in the future. Entities that decide to present items of other comprehensive income before taxes should show taxes related to the two groups separately. For the Company, this amendment is effective on January 1, 2013.

• IFRS 9 - “Financial instruments”; addresses the classification, recognition and measurement of financial assets and liabilities. IFRS 9 was issued in November 2009 and October 2010. This standard partially replaces IAS 39 “Financial instruments: recognition and measurement” on issues relating to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified in either of the following two categories: those assets measured at fair value and those measured at amortized cost. The determination must be made at initial recognition of these assets. The classification depends on the business model of the entity used to manage its financial instruments and the contractual characteristics of the cash flows of the instruments. For financial liabilities, the standard retains most of the requirements of IAS 39. The main change is that in the case of the election of the option to use the fair value, the valuation effect related to own credit risk should be recognized as part of comprehensive income, unless it causes an accounting mismatch. The company expects to adopt this standard on January 1, 2015. The IASB intends to expand IFRS 9 during 2011 and 2012 to add new requirements for derecognition of financial instruments, impairment and hedge accounting, so that by the end of 2012 IFRS 9 will be a complete replacement of IAS 39.

• IAS 27 (amended) “Separate Financial Statements”, objective is to establish applicable standards in accounting for investments in subsidiaries, associates and joint ventures, when an entity chooses or is required by local regulations to present non-consolidated financial statements. This standard applies when an entity prepares separate financial statements in accordance with IFRS. Separate financial statements are those presented by a controlling entity, or an investor with joint control or significant influence, in which the investments are carried at cost or in accordance with IFRS 9 Financial Instruments. The revised standard is mandatory from January 1, 2013.

• IAS 28 (amended) “Investments in Associates and Joint Ventures”; objective is to establish the requirements for the application of the equity method for investments in associates and joint ventures. The standard replaces the previous version of IAS 28 “Investments in Associates”; and is mandatory from January 1, 2013.

• IFRS 10 “Consolidated Financial Statements”, objective is to establish the principles for the presentation and preparation of consolidated financial statements when an entity controls one or more entities based on some of the concepts currently considered. This new standard changes the definition of the principle of control and provides additional guidance for

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determining control for more complex situations. The standard is a replacement of IAS 27 “Consolidated and Separate Financial Statements” and SIC 12 “Consolidation - Special Purpose Entities”. The standard is mandatory from January 1, 2013.

• IFRS 11 “Joint Ventures” provides a more realistic reflection, focusing on the rights and obligations under the agreement rather than its legal form. There are two types of joint agreements: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and hence accounts for its interest in assets, liabilities, revenue and expenses. Joint ventures arise where the joint operator has rights to the net assets of the arrangement and hence accounts for its interest by the equity method. Proportionate consolidation in joint ventures is not allowed. The standard is mandatory from January 1, 2013.

• IFRS 12 “Disclosure of Interests in Other Entities” requires disclosure of information that enables users of financial information to evaluate the nature and risk associated with its interest in other entities, including joint arrangements, associates, special purpose entities and other off-balance sheet entities, in addition to the effects of those interests on financial position and performance, and its cash flows. The standard is mandatory from January 1, 2013.

• IFRS 13 “Fair Value Measurement”, objective is to define fair value and establish in a single standard a framework for measuring fair value and disclosure requirements on these measurements. This standard applies when other IFRS require or permit fair value measurement, except for transactions within the scope of IFRS 2 “Share-based Payments”, IAS 17 “Leases”, measurements that have similarities to fair value but are not considered as such, and the net realizable value under the scope of IAS 2 “Inventories” or the value in use in IAS 36 “Impairment of Long-Lived Assets”. The standard is mandatory from January 1, 2013.

• IAS 32 (amended) “Financial instruments: Presentation”, offsetting of assets and liabilities. These amendments are the application guidance of IAS 32 and clarify some of the requirements for offsetting financial assets and financial liabilities in the statement of financial position. The standard is mandatory from January 1, 2014.

As of the date of these financial statements the Company is assessing the impact that these standards might have on its financial reporting, which are estimated to be insignificant.

Note 4 - Risk Management:

An integral risk management process refers to the set of objectives, policies, procedures and actions that are implemented to identify, measure, monitor, limit, control, report and disclose the different types of risk to which the Company is exposed.

Those responsible for risk management and their functions are:

• The Board of Directors, whose responsibility is to approve the objectives, guidelines and policies for risk management.

• Internal Audit, which is responsible for carrying out all the activities necessary in order to comply with the policies defined by the Board of Directors.

The Company has adopted as its main premise carrying out its operations in a conservative framework or profile so as to optimize its resources through the implementation of balanced operations between risk and performance.

The current strategy pursued by the Company is primarily focused on the granting of consumer loans, which will be supported by the funding of resources that will be obtained through deposits, orienting them towards correct placement and profitability, all of this under the operation of BAF.

The criteria, policies and procedures adopted by the Company in terms of risk management are based on internal policies and applicable standards.

The Company is exposed to several market and financial risks.

a) Market Risk

Market risk is defined as the potential loss due to changes in the risk factors that affect the valuation or the expected results from lending/borrowing operations, such as interest rates and exchange rates, among others.

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I. Interest rate risk

The interest rate risk is defined as the risk that the fair value or future cash flows of a financial instrument fluctuate due to changes in market interest rates. Loans and debt certificates with maturities in the short and long term are subject to both fixed and variable interest rates and expose the Company to the risk of variability in interest rates and therefore its cash flows.

Changes in interest rates on long-term debt at fixed rates only affect the results if such debt is recognized at fair value. The Company initially recognizes loans from financial institutions and debt certificates at fair value and subsequently records them at amortized cost, whereby the Company is subject to interest rate risk related to changes in fair value.

The Company’s exposure to changes in interest rates relates primarily to loans and debt certificates in the short and long-term with a variable interest rate. As of December 31, 2012 and 2011, the Company was subject to the volatility of the variable interest rates, such that, an increase in these rates would result in a higher financial cost of the liability.

Based on the Company’s policies, it has not engaged in hedging activities through derivative instruments to hedge the interest rate risk for the years ended December 31, 2012 and 2011.

As of December 31, 2012 and 2011, 14.9% and 15.8%, respectively, of the Company’s debt with financial cost (including deposits) was denominated at variable rates. If hypothetically interest rates on those dates had been increased / decreased 100 basis points and all other variables remained constant, the financial expense of the Company at the end of 2012 and 2011 would have increased / decreased by Ps. 22 million and Ps. 32 million, respectively.

II. Exchange rate risk

The Company’s exposure to exchange rate risk refers to risks associated with movements in the exchange rate of the Mexican peso against the U.S. dollar, with the Mexican peso being the functional currency of the Company. In the past, the value of the Mexican peso has been subject to significant exchange fluctuations against the U.S. dollar. However, it is not considered a significant risk because most of the operations are performed in local currency.

The Company also has exposure to exchange rate risk for its debt denominated in U.S. dollars. As of December 31, 2012 and 2011, 56.7% and 58.5% respectively, of the Company’s debt with financial cost was denominated in U.S. dollars. Based on the Company policies it did not engage in hedging activities through derivative instruments to hedge the exchange rate risk for the years ended December 31, 2012 and 2011. As of December 31, 2012 and 2011, a variation of the Mexican peso against the US dollar of 50 cents, with all other variables remaining constant, would impact the Company’s financial expense by Ps. 13.4 million and Ps. 13.2 million, respectively.

The Company has non-monetary assets denominated in U.S. Dollars which are part of the operating unit in the USA. There is no exchange rate risk because the operations are performed only in the local currency.

b) Liquidity Risk

Liquidity risk is defined as the inability of the Company to have sufficient funds available to meet its obligations. The Company´s Treasury Department is responsible for ensuring liquidity and managing the working capital in order to guarantee payment to suppliers, service debt and fund the costs and expenses of the operation. Furthermore, the Company has the alternative to obtain liquidity through loans drawn down from credit lines, debt and equity issuances, and funds from the sale of assets.

The following table details the contractual maturities of the Company’s debt with financial cost and its principal current liabilities without financial cost. The table has been drawn up based on undiscounted cash flows from the first date on which the Company may be required to pay. The table includes interest and principal cash flows.

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c) Credit Risk

Credit risk refers to the potential loss from the inability of customers to make all required payments. The accounts receivable of the Company represent amounts owed by customers and are generated by sales of goods or services in the normal course of its operations. Since the Company’s sales are made mostly to the general public, there is no risk of concentration in a customer or group of customers.

The Company has a risk management system for the loan portfolio, whose main elements include: 1) the risk of default and loss, which includes the processes of granting credit, authorization of purchase transactions and collections management; 2) operational risk, including security of the information and technologic infrastructure and 3) the risk of fraud, comprising the steps of prevention, analysis, detection, containment, recovery and solution.

The initial credit limits are calculated on an individual basis by the Company systems and are regularly monitored by the credit area to adjust them based on customer history. The Company has processes for reviewing credit quality of its customers for the early identification of potential changes in the ability to pay, taking timely corrective actions and the determination of current and potential losses.

The Company continuously monitors its portfolio recovery considering several factors including historical trends in the aging of the portfolio, history of cancellations and future performance expectations, including trends in the unemployment rates. In addition to this analysis, the Company requires that loans be secured primarily by the goods sold or by a guarantor, principally.

To quantify the credit risk of the Mexico commercial portfolio, the Company uses CREDITRISK+, which considers both the creditworthiness of counterparties and the exposure of each of the customers. CREDITRISK+ models the defaults themselves and is not intended to model or identify any causes underlying the defaults.

The input data primarily considered are the probabilities of default, according to the credit quality of borrowers.

d) Capital Risk

The Company’s objective is to safeguard its ability to continue as a going concern, maintaining a financial structure that maximizes the return to shareholders. The capital structure of the Company comprises debt, which includes financing contracted via bank loans and issuance of debt certificates, cash and cash equivalents and stockholders´ equity. The Company does not have an established policy to declare dividends.

Between 6 Between 1 Between 2 Less than months and year and years and 6 months 1 year 2 years 3 years Total

December 31, 2012Demand deposits and time deposits Ps. 5,344,167 Ps. 3,325,209 Ps. 4,032,623 Ps. - Ps. 12,701,999Short and long term debt 2,288,298 739,322 1,321,842 2,710,010 7,059,472Suppliers and accounts payable and accrued expenses 2,166,077 - - - 2,166,077

Total Ps. 9,798,542 Ps. 4,064,531 Ps. 5,354,465 Ps. 2,710,010 Ps. 21,927,548

December 31, 2011Demand deposits and time deposits Ps. 5,575,014 Ps. 2,197,258 Ps. 3,243,631 Ps. - Ps. 11,015,903Short and long term debt 2,416,185 458,825 400,985 4,305,277 7,581,272Suppliers and accounts payable and accrued expenses 2,259,574 - - - 2,259,574

Total Ps. 10,250,773 Ps. 2,656,083 Ps. 3,644,616 Ps. 4,305,277 Ps. 20,856,749

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The Company’s management annually reviews its capital structure when presenting the budget to the Board of Directors, which reviews the planned level of debt and ensures that it does not exceed the established limit.

The leverage ratio monitored by the Company is calculated by dividing debt with financial cost (excluding demand deposits and time deposits) by the net income (excluding interest, exchange gains and losses, depreciation, amortization and taxes). The maximum leverage ratio established in the debt certificate contract is 3.5, and the actual ratio as of December 31, 2012 and 2011, was 2.58 and 3.16, respectively.

BAF capitalization index

The capitalization rules for financial institutions establish requirements for specific levels of net equity, as a percentage of assets subject to both market and credit risk. The capitalization index required for BAF is a minimum of 8%. As of the 2012 year end, BAF determined a capitalization index of 13.08% (13.08% as of December 31, 2011 and 13.05% as of January 1, 2011), which results from dividing net equity by the assets at risk (including credit, market and operational risk).

Note 5 – Critical accounting estimates and judgments:

In the application of the Company’s accounting policies, which are described in Note 2, the Company’s management needs to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities. Estimates and assumptions are based on historical experience and other factors considered as relevant. Actual results may differ from those estimates.

Estimates and underlying assumptions are continually reviewed. Adjustments to the accounting estimates are recognized in the period evaluated and in future periods if the evaluation affects the current period and subsequent periods.

5.1. Critical accounting judgments

Below are the key judgments, apart from those involving estimates, made by management in the application of the Company’s accounting policies and that have a significant effect on the amounts recognized in the consolidated financial statements.

5.1.1. Revenue recognition, installment sales

Note 3.20 describes the Company’s policy for the recognition of installment sales. This implies that the Company’s management applies its judgment to identify the applicable discount rate to determine the present value of installment sales. To determine the discounted cash flows, the Company uses an imputed interest rate, considering the rate that can be determined better from: i) the prevailing rate in the market for a similar instrument available for the Company’s customers with a similar credit rating or ii) the interest rate that equals the nominal value of the sale, properly discounted to the cash price of the goods sold.

When making its judgment, management considers the interest rates used by the principal financial institutions in Mexico to fund programs of installment sales.

In the event the discount rate had a variation of 10% from that estimated by management, the effect on the present value of installment sales would be Ps. 8,573, Ps. 288 and Ps. 57,578 as of December 31, 2012 and 2011, and January 1, 2011, respectively.

5.2. Key sources of uncertainty in estimates

Following are the key sources of uncertainty in the estimates made at the date of the consolidated statement of financial position, and that have a significant risk of resulting in an adjustment to the carrying amounts of assets and liabilities during the next financial period:

5.2.1. Impairment provisions for loan and receivable portfolios

The methodology applied by the Company to determine the amount of this estimate is described in Note 3.7, see also Note 8.

5.2.2. Determination of income taxes

For purposes of determining the deferred tax, the Company prepares tax projections to determine whether the Company will pay income tax or flat rate tax, and then determines deferred income tax or deferred flax tax, as appropriate.

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Note 6 – Cash and cash equivalents:

Cash and cash equivalents comprised the following:

Note 7 – Restricted cash:

Restricted cash represents limited cash in BAF of Ps. 254,905, Ps. 189,901 and Ps. 177,266 as of December 31, 2012 and 2011, and January 1, 2011, respectively. The restricted cash balance is classified as a non-current asset in the statement of financial position of the Company based on the expiration date of the restriction.

Note 8 – Trade receivables:

December 31, January 1, 2012 2011 2011

Cash at bank and in hand Ps. 461,359 Ps. 405,177 Ps. 285,087Investments 1,067,368 856,277 652,106

Total Ps. 1,528,727 Ps. 1,261,454 Ps. 937,193


Trade receivables:Mexican consumer Ps. 15,612,927 Ps. 13,853,646 Ps. 11,982,661Mexico commercial 2,392,702 1,864,885 1,418,409USA Consumer 2,244,983 3,136,435 2,876,484

20,250,612 18,854,966 16,277,554Less – allowance for doubtful accounts (1,035,154) (966,391) (848,543)

Total, net Ps. 19,215,458 Ps. 17,888,575 Ps. 15,429,011

Current trade receivables Ps. 18,546,393 Ps. 17,217,837 Ps. 14,696,688

Non-current trade receivables Ps. 669,065 Ps. 670,738 Ps. 732,323

5.2.3. Estimates of useful lives and residual values of property, leasehold improvements, and furniture and equipment

As described in Note 3.11, the Company reviews the estimated useful lives and residual values of property, leasehold improvements and furniture and equipment at the end of each annual period. At December 31, 2012 and 2011, it was determined that lives and residual values need not be modified since, in the assessment of management, the existing useful lives and residual values adequately reflect the economic conditions in the Company’s operating environment.

5.2.4 Employee Benefits

The cost of employee benefits that qualify as defined benefit plans in accordance with IAS 19 (revised) “Employee Benefits” is determined using actuarial valuations. The valuations involve actuarial assumptions about discount rates, future salary increases, employee turnover rates and mortality rates, among other things. Any changes in these assumptions will impact the carrying value of the pension obligations. Due to the long-term nature of these plans, such estimates are subject to a significant amount of uncertainty.

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8.1. Movements of the impairment allowance for doubtful accounts:

8.2. Past due receivables

Trade receivables at the end of the year include past due receivables of Ps. 2,086,294, Ps. 2,144,774 and Ps. 2,210,227 as of December 31, 2012 and 2011, and January 1, 2011, respectively, whose maturity was as follows:


1- 30 days Ps. 210,096 Ps. 234,551 Ps. 262,725 31 - 60 days 144,501 181,558 183,063 61 - 90 days 137,158 176,034 138,312 91 - 120 days 132,408 125,457 108,611 120 days or more 1,462,131 1,427,174 1,517,516

Total past due receivable Ps. 2,086,294 Ps. 2,144,774 Ps. 2,210,227

December 31, 2012 2011

Opening balance (Ps. 966,391) (Ps. 848,543) Increases (1,542,066) (1,389,519)Recoveries 1,473,303 1,271,671

Ending balance (Ps. 1,035,154) (Ps. 966,391)

8.3 Credit quality of trade receivables

The credit quality of trade receivables is assessed based on the historical default rates of the counterparties and is analyzed as follows:

Group A - very low risk customers who have regularly met their payment commitments. Group B - low risk customers who have made their payments on dates after the payment deadline. Group C - medium-high risk customers who made their payments inconsistently.

8.4 Fair value of trade receivables

As of December 31, 2012 and 2011, and January 1, 2011, the fair values of the Company’s trade receivable approximated their carrying value.

December 31 January 1Group 2012 2011 2011

A Ps. 14,223,591 Ps. 14,317,230 Ps. 13,634,965B 3,621,844 2,595,278 1,184,715C 2,405,177 1,942,458 1,457,874

Ps. 20,250,612 Ps. 18,854,966 Ps. 16,277,554

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Note 9 - Other accounts receivable:

Note 10 - Inventories:

(1) Bonuses negotiated with suppliers based on volume of sales in the normal course of operations, and promotions receivable. (2) Includes primarily prepayments for advertising, insurance and leasing.(3) Consists primarily of accounts receivable for expenses pending to be checked.(4) Includes primarily commissions receivable, other accounts receivable for money transfers and payments in advance to suppliers.

(*) Comprises all types of electronic products, household appliances, furniture, mobile phones, motorcycles and other consumer products.


Bonuses from suppliers (1) Ps. 265,254 Ps. 144,538 Ps. 147,696Prepaid expenses (2) 186,963 246,091 216,776Employee debtors (3) 27,510 21,952 22,301Other debtors (4) 233,200 95,641 135,329

Total Ps. 712,927 Ps. 508,222 Ps. 522,102


Products (*) Ps. 1,718,694 Ps. 1,782,692 Ps. 1,889,133Clothing, footwear and jewelry 201,571 198,450 309,873Merchandise in transit 30,398 28,608 16,951

Total Ps. 1,950,663 Ps. 2,009,750 Ps. 2,215,957

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Buildings Furniture Trans- Data Improve- and and Leasehold portation processing ments in Land construction equipment improvements equipment equipment process Total

As of January 1, 2011 Cost Ps. 326,252 Ps. 356,840 Ps. 1,107,678 Ps. 2,442,602 Ps. 248,968 Ps. 500,452 Ps. 52,435 Ps. 5,035,227Accumulated depreciation - (116,687) (637,694) (1,067,139) (226,187) (425,854) (2,473,561)

Net book amount 326,252 240,153 469,984 1,375,463 22,781 74,598 52,435 2,561,666

At December 31, 2011Opening net book amount 326,252 240,153 469,984 1,375,463 22,781 74,598 52,435 2,561,666Exchange differences on cost - 10,690 28,433 16,153 7,307 7,521 - 70,104Additions - 58,865 71,847 76,016 20,688 25,612 53,960 306,988Disposals - - (1,498) - (14,763) (1,833) - (18,094)Cancelation of accumulated depreciation on the sale of fixed assets - - 496 - 9,816 15 - 10,327Reclassifications - - - 36,422 - - (36,422) -Movements of discontinuedoperations - - - (14,985) - - - (14,985)Exchange differences on accumulated depreciation - (3,091) (42,005) (32,888) (10,605) (8,317) - (96,906)Depreciation charge - (9,113) (80,325) (201,836) (17,358) (24,182) - (332,814)Closing net book amount 326,252 297,504 446,932 1,254,345 17,866 73,414 69,973 2,486,286

As of December 31, 2011Cost 326,252 426,395 1,206,460 2,571,193 262,200 531,752 69,973 5,394,225Accumulated depreciation (128,891) (759,528) (1,316,848) (244,334) (458,338) - (2,907,939)

Net book amount 326,252 297,504 446,932 1,254,345 17,866 73,414 69,973 2,486,286

At December 31, 2012 Opening net book amount 326,252 297,504 446,932 1,254,345 17,866 73,414 69,973 2,486,286Exchange differences on cost - (10,710) (18,196) (11,259) (4,803) (4,828) (49,796)Additions 26,192 25,933 18,063 25,362 24,837 20,788 65,906 207,081Disposals - - (122,243) (220,949) (26,451) (45,637) - (415,280)Cancelation of accumulated depreciation on the sale of fixed assets - - 114,301 221,895 20,297 43,538 - 400,031Reclassifications 1,277 (1,277) - - - - - -Exchange differences on accumulated depreciation - 937 17,555 11,257 4,727 4,667 - 39,143Depreciation charge - (7,414) (72,979) (179,488) (10,073) (27,493) - (297,447)Closing net book amount Ps. 353,721 Ps. 304,973 Ps. 383,433 Ps. 1,101,163 Ps. 26,400 Ps. 64,449 Ps. 135,879 Ps. 2,370,018

As of December 31, 2012Cost 353,721 440,341 1,084,084 2,364,347 255,783 502,075 135,879 5,136,230Accumulated depreciation (135,368) (700,651) (1,263,184) (229,383) (437,626) - (2,766,212)Net book amount Ps. 353,721 Ps. 304,973 Ps. 383,433 Ps. 1,101,163 Ps. 26,400 Ps. 64,449 Ps. 135,879 Ps. 2,370,018

The depreciation expense is recognized in the income statement within administrative and selling expenses.

Note 11 – Property, leasehold improvements and furniture and equipment,net:

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Note 12 – Goodwill and intangible assets:

Goodwill is not subject to amortization and is tested annually for impairment.

The goodwill arising in business combinations was allocated at the date of acquisition in its entirety to the cash generating unit (CGU) of the Mexico segment. This segment benefited from the synergies of the business combinations.

The recoverable amount of the operating segment has been determined based on value in use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period.

The key assumptions used for value in use calculations as of December 31, 2012 and 2011, were as follows:

In connection with the determination of the value in use of the operating segments, the Company considers that a reasonably possible change in the key assumptions used would not cause the carrying value of the operating segment to exceed its value in use.

December 31, 2012 2011

Estimated gross margin 46.97% 46.37%Growth rate 2.26% 4.58%Discount rate 11.68% 11.68%

Licenses and Goodwill software Total

At January 1, 2011Cost Ps. 241,096 Ps. 277,977 Ps. 519,073Accumulated amortization - (209,075) (209,075)Net book amount 241,096 68,902 309,998

At December 31, 2011Additions - 5,974 5,974Disposals - - -Amortization - (17,860) (17,860)Ending balance 241,096 57,016 298,112

At December 31, 2011Cost 241,096 283,951 525,047Accumulated amortization - (226,935) (226,935)Net book amount 241,096 57,016 298,112

At December 31, 2012Additions - 18,410 18,410Disposals - - -Amortization - (16,950) (16,950)Ending balance 241,096 58,476 299,572

At December 31, 2012Cost 241,096 302,361 543,457Accumulated amortization - (243,885) (243,885)

Net book amount Ps. 241,096 Ps. 58,476 Ps. 299,572

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Note 13 - Demand deposits and time-deposits:

As of December 31, 2012 and 2011, and January 1, 2011, the Company’s deposits with third parties were as follows:


Demand deposits:Saving deposits (interest bearing) Ps. 2,191,438 Ps. 2,830,774 Ps. 4,929,075Checking accounts (non-interest bearing) 314,092 208,453 121,206

Time-deposits:From the general public 9,493,734 7,396,847 3,857,017 Total demand deposits and time-deposits Ps. 11,999,264 Ps. 10,436,074 Ps. 8,907,298


Short-term demand deposits and time-deposits Ps. 8,382,497 Ps. 7,528,884 Ps. 7,697,144Long-term demand deposits and time-deposits 3,616,767 2,907,190 1,210,154

Total demand deposits and time-deposits Ps. 11,999,264 Ps. 10,436,074 Ps. 8,907,298


From 1 to 179 days Ps. 2,731,489 Ps. 2,412,515 Ps. 1,425,810From 6 to 12 months 3,145,478 2,077,142 1,221,053From 1 to 2 years 3,616,767 2,907,190 1,210,154

Total Ps. 9,493,734 Ps. 7,396,847 Ps. 3,857,017


Demand deposits 2.90% 3.92% 5.65%Time-deposits 5.73% 5.79% 6.69%

In accordance with the terms negotiated, the Company’s deposits as of December 31, 2012 and 2011, and January 1, 2011 are presented as follows:

As of December 31, 2012 and 2011, and January 1, 2011, the maturities of time-deposits from the general public were as follows:

Depending on the type of instrument and average balance in the investments, these liabilities bear interest at the average rates indicated below:

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(*) Nominal rates (a) fixed and (b) variable, as of December 31, 2012, except for Banco del Bajío, S. A., whose rate is as of December 31, 2011. Interest is accrued monthly.

Note 14 - Short-term loans and long-term debt:

The total consolidated debt was as follows:

December 31 January 1 Interest 2012 2011 de 2011 rate (*)

Grupo Famsa:

Mexican pesos:

Financial factoring (1):Financiera Bajío, S. A. SOFOM, ER Ps. 30,629 Ps. 46,726 Ps. 99,038 8.86% (b)Arrendadora y Factor Banorte, S. A. de C. V.SOFOM, ER 392,704 237,496 349,981 8.34% (b)IXE Banco, S. A. - 79,032 99,908 8.32% (b)Banco Monex, S. A. 124,845 49,895 - 7.86% (b) 548,178 413,149 548,927

Amounts drawn down from short-termrevolving credit lines:Banco del Bajío, S. A. - 100,000 100,000 8.80% (b)Banco Santander Serfin, S. A. 100,000 100,000 100,000 8.86% (b)Banorte, S. A. 199,795 199,795 149,995 8.06% (a)BBVA Bancomer, S. A. 63,500 - - 7.57% (a)CI Banco, S. A. 50,000 - - 7.59% (b)

Issuance of debt certificates:Short-term (7) 1,000,000 1,000,000 1,671,725 7.49% (b)Long-term (2) and (7) 1,000,000 1,000,000 - 7.65% (b) 2,413,295 2,399,795 2,021,720

U.S. Dollars:Issuance of foreign debt:Senior notes Rule 144A/Reg.S (3) 2,554,036 2,737,540 2,406,600 11.00% (a)Euro–commercial paper (4) 518,632 557,904 - 8.50% (a) 3,072,668 3,295,444 2,406,600

Banco Ahorro Famsa, S. A., Institución de Banca Múltiple:

Mexican pesos:Nacional Financiera, S.N.C. (NAFIN) (5) 9,575 13,160 16,428 8.93% (b)

Famsa USA:U.S. Dollars:Deutsche Bank AG (6) 103,726 55,790 172,895 2.39% (a)

Total debt 6,147,442 6,177,338 5,166,570

Short-term debt (2,583,831) (2,426,638) (2,743,542)

Long-term debt Ps. 3,563,611 Ps. 3,750,700 Ps. 2,423,028

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(1) The Company entered into factoring credit line contracts with suppliers. Interest is calculated applying to the discounted amount the rates that financial institutions apply for this type of operations, according to the discount period. These liabilities are settled in an average period of 110 days. The relevant characteristics of each factoring credit line are presented below:

(2) In 2011, the Company entered into a medium-term note program for up to Ps. 2,000 million of a revolving nature for a five-year term. On March 25, 2011, the Company issued certificates for an aggregate principal amount of Ps. 1,000 million pursuant to such unsecured commercial paper program at a spread of 280 basis points over the TIIE interbank rate and maturing in 2014. The net proceeds of this issue were used to refinance debt maturing in 2011. This commercial paper is guaranteed by the retail, manufacturing and other subsidiaries. The effective interest rate of this issuance as of December 31, 2012 was 8.28%.

(3) On July 2010, the Company issued senior notes for an amount of US$ 200 million, under Rule 144A/Reg. S, in the foreign market, at a rate of 11%, maturing in July 2015. The senior notes are guaranteed by the retail, manufacturing and other subsidiaries. The notes were assigned “B” and “B+” ratings by Standard & Poor’s and Fitch Ratings, respectively. The notes may not be offered or sold within the United States. As of December 31, 2012 and 2011 and January 1, 2011, the fair value of the senior notes was Ps. 2,894,800, Ps. 2,888,766 and Ps. 2,699,463, respectively. The effective interest rate of this issuance as of December 31, 2012 was 12.28%.

(4) On February 15, 2012, the Company issued notes for US$40 million at a rate of 8.50%, from a commercial euro paper program established in 2009 for a total of US$100 million. The net proceeds were used by the Company to refinance the existing debt and it matured on February 15, 2013. This program was renewed on the date mentioned with maturity on February 4, 2014, increasing the amount to US$50 million at a rate of 7.36%.

(5) Loans contracted by BAF with NAFIN for a total amount of Ps. 9.7 million, with an interest rate of 8.93% and maximum maturities on September 2014 and December 2015.

(6) On October 16, 2012, the Company renewed its credit line for a maximum amount of EUR 6.6 million or its equivalent in US dollars. As of December 31, 2012, the Company had drawn down a total of US$8 million; this borrowing bears interest at an annual rate of 2.39% maturing on October 16, 2013.

(7) As of December 31, 2012 and 2011, and January 1, 2011, the fair values of the short-term and long-term debt certificates were Ps. 1,997,570, Ps. 1,992,193 and Ps. 1,670,862, respectively.

As of December 31, 2012 and 2011, and January 1, 2011, the Company had satisfactorily complied with all related covenants and restrictions.

Renewal date of the Interest Financial institution credit line Credit limit rate

Financiera Bajío, S. A. SOFOM, ER September, 2012 Ps. 100,000 TIIE+4.0Arrendadora y Factor Banorte, S. A. de C. V.SOFOM, ER March, 2010 Ps. 400,000 TIIE+3.5Banco Monex, S. A. October, 2012 Ps. 125,000 TIIE+3.0

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(1) Liability for accrued interest on debt.(2) Liability from operations with related parties. See Note 16.(3) Liability for expenses for water service, electricity, telephone, fuel, maintenance and other.(4) Includes liabilities for accrued salaries payable, commission to sales personnel, vacations, vacation premium, savings fund, medical expenses and other.(5) Includes liabilities for accrued expenses for labor taxes and other.(6) Includes self-financing contributions from customers, vehicle insurance and other.

Note 15 - Accounts payable and accrued expenses:

Accounts payable and accrued expenses comprised the following:

Note 16 – Related parties:

As of December 31, 2012 the Company has accounts payable to affiliates of Ps. 213,907 (Ps. 147,317 as of December 31, 2011 and Ps. 47,290 as of January 1, 2011), related primarily to the following expenses:

Related party transactions were carried out at market value.

For the year ended December 31, 2012, salaries and benefits received by the principal executive officers of the Company amounted to Ps. 105,710 (Ps. 103,830 in 2011), consisting of base salary amounts and legal benefits, complemented by a variable compensation program that is basically driven by the Company’s results.

The Company and its subsidiaries declare they have no significant transactions with related parties or conflicts of interest to disclose.


Interest payable (1) Ps. 171,568 Ps. 173,597 Ps. 140,377Accounts payable to affiliated companies (2) 213,907 147,317 47,290Taxes 56,721 122,910 108,714Accrued operating expenses (3) 46,283 118,124 195,705Short-term employee benefits (4) 50,209 81,555 79,062Taxes related to employee payroll (5) 53,778 65,284 86,738Other creditors (6) 10,998 67,681 206,690

Total accounts payable and accrued expenses Ps. 603,464 Ps. 776,468 Ps. 864,576

2012 2011

Rent and administrative expenses (Note 24) Ps. 101,161 Ps. 100,963

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Defined benefit obligations Ps. 6,185 Ps. 5,983 Ps. 5,274Fair value of plan assets - - - Liability in the statement of financial position Ps. 6,185 Ps. 5,983 Ps. 5,274

2012 2011

Pension plans Ps. 744 Ps. 661Seniority premium 10,376 10,281Other employee benefits 4,611 5,229

Ps. 15,731 Ps. 16,171


Pension plans Ps. 6,185 Ps. 5,983 Ps. 5,274Seniority premium 48,125 41,539 39,074Other employee benefits 30,930 27,167 24,000

Ps. 85,240 Ps. 74,689 Ps. 68,348

Note 17 - Employee benefits:

The amount of employee benefit obligations as of December 31, 2012 and 2011 and January 1, 2011 was Ps. 85,240, Ps. 74,689 and Ps. 68,348, respectively, and is analyzed as follows:

The analysis of the net period cost for the years ended December 31, 2012 and 2011, is as follows:

Pension plans

The amounts recognized in the consolidated statements of financial position were determined as follows:

The movement in the defined benefit obligation is as follows:

2012 2011

Opening balance at January 1 Ps. 5,983 Ps. 5,274

Labor cost 337 315Finance cost 407 346Actuarial gains (losses) (542) 48

Ending balance at December 31 Ps. 6,185 Ps. 5,983

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The principal actuarial assumptions used, in nominal and real terms, were as follows:

The net period cost is analyzed as follows:

The movement in the defined benefit obligation was as follows:

In the event of a hypothetical increase or decrease in the discount rate of 0.625% from that estimated by Management, the carrying amount of labor obligations would increase or decrease by Ps. 176.

Seniority premium



Discount rate 6.25% 7.25% 7.00%Salary increase rate 4.00% 5.00% 5.00%


Defined benefit obligations Ps. 48,125 Ps. 41,539 Ps. 39,074Fair value of plan assets - - -

Liability in the statement of financial position Ps. 48,125 Ps. 41,539 Ps. 39,074

2012 2011

Service costs of the year Ps. 337 Ps. 315Finance cost, net 407 346

Net period cost Ps. 744 Ps. 661

2012 2011

Opening balance at January 1 Ps. 41,539 Ps. 39,074Laboral cost 7,651 7,812Finance cost 2,725 2,469Actuarial gains (losses) 2,024 (966)Benefits paid from the reserve (5,814) (6,850)

Ending Balance at December 31, Ps. 48,125 Ps. 41,539

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Defined benefit obligations Ps. 30,930 Ps. 27,167 Ps. 24,000Fair value of plan assets - - -

Liability in the statement of financial position Ps. 30,930 Ps. 27,167 Ps. 24,000


In the event of a hypothetical increase or decrease in the discount rate of 0.625% from that estimated by management, the carrying amount of labor obligations would increase or decrease by Ps. 1,696.

Other employee benefits


The movement in the defined benefit obligation was as follows:

2012 2011

Service costs of the year Ps. 7,651 Ps. 7,812Finance cost, net 2,725 2,469

Net period cost Ps. 10,376 Ps. 10,281

2012 2011

At January 1 Ps. 27,167 Ps. 24,000Laboral cost 2,545 3,389Finance cost 2,066 1,840Actuarial gains (losses) 703 (1,742)Benefits paid from the reserve (1,551) (320)

At December 31 Ps. 30,930 Ps. 27,167

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In the event of a hypothetical increase or decrease in the discount rate of 0.625% from that estimated by Management, the carrying amount of labor obligations would increase or decrease by Ps. 2,570.

Note 18 - Stockholders’ equity:

In the Ordinary General Meeting held on April 25, 2012, the stockholders agreed that the fund created for the purchase and sale of the Company’s own shares will be up to a maximum amount of Ps. 130 million. As of December 31, 2012, the Company had 259,700 shares (259,700 shares in 2011) held in treasury and the market value per share at that date was Ps. 16.10 (Ps. 12.16 in 2011).

As of December 31, 2012 and 2011, and January 1, 2011, the capital stock comprised the following:

As of December 31, 2012 the retained earnings included Ps. 300,839 and Ps. 601,679, applicable to the legal reserve and to the reinvestment reserve, respectively. The movements of the reserves were as follows:

2012 2011

Service costs of the year Ps. 2,545 Ps. 3,389Finance cost, net 2,066 1,840

Net period cost Ps. 4,611 Ps. 5,229

NumberDescription of shares Amount

Fixed capital (minimum): Series “A”, Class “I”, common, nominative shares, without par value 330,097,385 Ps. 660,195

Variable capital: Series “A”, Class “II”, common, nominative shares, without par value 109,090,909 218,182

Accumulated inflation increase as of December 31, 1997 579,909

Capital stock 439,188,294 Ps. 1,458,286

Legal Reinvestment reserve reserve

As of January 1, 2011 Ps. 260,283 Ps. 520,566

Changes in 2011:

Increases 35,281 70,563Utilization - -

As of December 31, 2011 295,564 591,129

Changes in 2012:

Increases 5,275 10,550Utilization - -

As of December 31, 2012 Ps. 300,839 Ps. 601,679

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Dividends paid are not subject to income tax if they are paid from after-tax earnings. Dividends paid in excess of after-tax earnings are subject to a tax equivalent to 42.86% if paid in 2012. The tax is payable by the Company and may be credited against the normal income tax payable by the Company in the year in which the dividends are paid or in the following two years or, if appropriate, against the flat tax of the year. Dividends which are paid from retained earnings previously taxed are not subject to any tax withholding or additional payment.

In the event of a capital reduction, any excess of stockholders’ equity over capital contributed, the latter restated in accordance with the provisions of the Income Tax Law, is accorded the same tax treatment as dividends. At December 31, 2012 and 2011, the inflation-adjusted contributed capital amounted to Ps. 6,808,573 and Ps. 6,518,461, respectively.

Note 19 - Costs and expenses classified by their nature:

Cost of sales and administrative and selling expenses are analyzed as follows:

(1) Includes mainly insurance expenses, travel expenses and training.

December 31 2012 2011

Cost of goods sold Ps. 5,727,672 Ps. 5,838,977Salaries and employee benefits 2,340,493 2,388,599Impairment allowance 1,173,362 1,166,828Leasing 763,195 727,725Interest expense on bank deposits 589,799 526,450Advertising 334,125 279,605Depreciation and amortization 314,397 350,674Energy, water and telephone services 298,788 291,333Maintenance 158,318 176,825Freights 45,315 38,822Other (1) 973,944 955,429

Ps. 12,719,408 Ps. 12,741,267

The salaries and employee benefits are analyzed as follows:

December 31, 2012 2011

Salaries and bonuses Ps. 1,814,309 Ps. 1,839,060Commissions to sales personnel 87,910 84,555Employee benefits 15,731 16,171Other remuneration 422,543 448,813

Ps. 2,340,493 Ps. 2,388,599

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Note 21 - Financial income (expenses):

Financial income and expenses are analyzed as follows:

Note 20 - Other income (expenses):

December 31,Other income: 2012 2011

Recovery of taxes paid in excess Ps. 109,818 Ps. 6,497Gain on sale of fixed assets 5,652 3,001Administrative services 7,551 8,252Other 876 3,647

Total other income Ps. 123,897 Ps. 21,397

Other expenses:

Utilization of tax provisions (Ps. 48,290) (Ps. 47,252)Other (4,627) (20,398)

Total other expenses (Ps. 52,917) (Ps. 67,650)

Other income (expenses), net Ps. 70,980 (Ps. 46,253)

December 31, 2012 2011

Financial expenses:

Interest expense on bank borrowings (Ps. 106,318) (Ps. 96,426)Interest expense on debt certificates (553,578) (524,426)Factoring (46,800) (45,190)Other financing expenses (15,649) (8,047)Foreign exchange loss, net - (103,228)

(Ps. 722,345) (Ps. 777,317)

Financial income:

Financial income Ps. 1,757 Ps. 1,376Foreign exchange gain, net 62,213 -

Ps. 63,970 Ps. 1,376

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December 31, January 1,Deferred tax assets: 2012 2011 2011

Deferred tax assets:

Tax loss carryforwards Ps. 212,788 Ps. 788,964 Ps. 641,220Prepaid expenses and other provisions, net 553,859 - -Allowance for doubtful receivables 279,200 254,200 218,939Installment sales receivable 226,424 243,770 260,872Property, leasehold improvements and furniture and equipment 108,253 81,934 58,143Tax effect of installment sales 32,306 37,674 37,852Provision for labor obligations 25,127 22,407 20,504Employee profit sharing payable 1,140 1,140 785Effect on decrease in income tax rate - - 2,098

1,439,097 1,430,089 1,240,413

Deferred tax liabilities:

Prepaid expenses and other accrued expenses - 63,012 1,823Inventories 5,033 97,040 142,717Effect on decrease in income tax rate 7,535 4,336 -

12,568 164,388 144,540

Deferred income tax before asset tax recoverable 1,426,529 1,265,701 1,095,873

Asset tax recoverable 121,504 137,091 171,534

Total deferred tax asset Ps. 1,548,033 Ps. 1,402,792 Ps. 1,267,407

December 31, 2012 2011

Current income taxes (Ps. 19,045) (Ps. 10,802)Current flat rate business tax (35,591) (8,631)Deferred income taxes 161,968 168,892

Ps. 107,332 Ps. 149,459

Note 22 - Income taxes:

Grupo Famsa determines its taxable income (loss) and employees’ profit sharing on an individual stand-alone company basis. The tax result differs from the accounting result due to the temporary differences arising from comparing the book value and the tax value of each asset and liability account in the balance sheet, as well as items affecting only the net income or the taxable income of the year.

Income taxes are analyzed as follows:

The deferred income tax asset is analyzed as follows:

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Deferred tax assets:

Deferred tax asset to be paid within 12 months Ps. 1,225,996 Ps. 1,233,043 Ps. 1,017,067

Deferred tax assets to be paid after more than 12 months 213,101 197,046 221,248

1,439,097 1,430,089 1,238,315

Deferred tax liabilities:

Deferred tax liability to be paid within 12 months (1,462) (76,381) (43,674)

Deferred tax liability to be paid after more than 12 months (3,571) (83,672) (100,866)

(5,033) (160,053) (144,540)

Asset tax recoverable after more than 12 months 121,504 137,091 171,534

Effect of decrease in income tax rate (7,535) (4,335) 2,098

Deferred tax asset (net) Ps. 1,548,033 Ps. 1,402,792 Ps. 1,267,407

The Company has tax projections that support the earning of future taxable profit against which current tax losses will be applied and also those which would arise resulting from the reversal of deductible temporary differences.

The analysis of deferred tax assets and deferred tax liabilities is as follows:

The movement in deferred income tax assets and liabilities during the year, excluding asset tax recoverable was as follows:

Property Allowance leasehold for improvements, Provision Tax effect of Tax loss doubtful furniture and for labor installment carryforwards receivables equipment obligations sales Inventories Other Total

As of January 1, 2011 Ps. 641,220 Ps. 218,939 Ps. 58,143 Ps. 20,504 Ps. 37,852 (Ps. 142,717) Ps. 261,932 Ps. 1,095,873Amount charged (credited) to the statement of income 147,744 35,261 23,791 1,903 (178) 45,677 (85,306) 168,892Amount charged (credited) toother comprehensive income - - - - - - 936 936

As of December 31, 2011 788,964 254,200 81,934 22,407 37,674 (97,040) 177,562 1,265,701

Amount charged (credited) tothe statement of income (576,176) 25,000 26,319 2,720 (5,368) 92,007 597,466 161,968Amount charged (credited) toother comprehensive income - - - - - - (1,140) (1,140)

As of December 31, 2012 Ps. 212,788 Ps. 279,200 Ps. 108,253 Ps. 25,127 Ps. 32,306 (Ps. 5,033) Ps. 773,888 Ps. 1,426,529

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2012 2011

Before Tax After Before Tax After tax charged tax tax charged tax

Foreign currency translation effects (Ps. 48,215) Ps. - (Ps. 48,215) Ps. 108,610 Ps. - Ps. 108,610Actuarial gains (losses) (3,121) 936 (2,185) 3,800 (1,140) 2,660

Other comprehensive income items (Ps. 51,336) Ps. 936 (Ps. 50,400) Ps. 112,410 (Ps. 1,140) Ps. 111,270

Deferred tax Ps. 936 (Ps. 1,140)

As of December 31, 2012, the Company had tax loss carryforwards, which will be inflation-indexed through the year in which they are applied, as follows:

To determine the deferred income tax at December 31, 2012 and 2011, the Company applied to the temporary differences the applicable tax rates in accordance with their estimated reversal date.

The reconciliation between the statutory and effective income tax rates is as follows:

In 2012 and 2011 certain subsidiaries of Famsa determined a flat rate business tax of Ps. 35,591 and Ps. 8,631 respectively, which exceeded their income tax liability and was therefore paid instead of income tax. The accounting and tax projections of these companies indicate that they will only pay income tax in the future; therefore, deferred income taxes were recognized at December 31, 2012 instead of deferred flat tax.

The tax charged related to the components of other comprehensive income for the years ended December 31, was as follows:

December 31, 2012 2011

Statutory tax rate 30% 30%Add/ (deduct) income tax effect of:Non-deductible permanent items (mainly non-deductible expenses) 8% 34%Inflation (1%)Decrease in income tax rate 1% Other permanent differences (tax effect of cost of sales and other) (26%) (14%)

Effective income tax rate 13% 49%

Tax loss Year of expiration carryforwards

2017 Ps. 4,347 2018 13,311 2019 84,844 2020 212,805 2021 381,692 2022 12,293 Ps. 709,292

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Note 23 - Contingencies:

In the normal course of operations the Company is involved in disputes and lawsuits. The Company believes there are no legal proceedings or threatened claims against or affecting the Company which, in the event of an adverse resolution, could significantly affect, individually or taken together, the Company’s results of operations or financial position.

Note 24 - Commitments:

The majority of the subsidiary companies have entered into long-term lease agreements (some with related parties) covering properties occupied by their stores. Following is a description of the main agreements entered into with related parties:

As of December 31, 2012, the Company had 42 long-term lease agreements in place with the controlling shareholders and various entities controlled by them, with regard to the retail space used by several stores. The terms of all such agreements are substantially identical and are consistent with standard industry practices and real estate market prices.

The Company has entered into various asset management agreements with affiliates and other entities controlled by the principal shareholders, covering account collection services and the management and investment of the proceeds of such collections, in exchange for a commission payable on an annual basis.

Rentals payable under lease agreements are as follows:

In 2012 and 2011 total rental and administrative services expense is as follows:

December 31, 2012 2011

Related parties Ps. 101,161 Ps. 100,963Other 662,034 626,762

Total Ps. 763,195 Ps. 727,725

Related parties Other Total

2013 Ps. 106,219 Ps. 695,136 Ps. 801,3552014 to 2017 424,877 2,780,542 3,205,419

Ps. 531,096 Ps. 3,475,678 Ps. 4,006,774

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2012 Inter- Conso- Mexico USA Other Subtotal segment lidated

Net sales (1) Ps. 9,137,127 Ps. 1,268,662 Ps. 701,908 Ps. 11,107,697 (Ps. 661,231) Ps. 10,446,466Interest earned from customers 3,216,187 446,558 247,064 3,909,809 (232,747) 3,677,062Total revenues Ps. 12,353,314 Ps. 1,715,220 Ps. 948,972 Ps. 15,017,506 (Ps. 893,978) Ps. 14,123,528Cost of sales (6,657,226) (955,504) (847,549) (8,460,279) 924,131 (7,536,148)Gross profit 5,696,088 759,716 101,423 6,557,227 30,153 6,587,380Operating expenses (2) (4,163,573) (641,173) (124,884) (4,929,630) 60,767 (4,868,863)Other income (expenses), net 135,489 3,146 32,130 170,765 (99,785) 70,980Operating profit beforedepreciation and amortization 1,668,004 121,689 8,669 1,798,362 (8,865) 1,789,497Depreciation and amortization (306,171) (3,103) (5,123) (314,397) - (314,397)Operating profit (loss) Ps. 1,361,833 Ps. 118,586 Ps. 3,546 Ps. 1,483,965 (Ps. 8,865) Ps. 1,475,100

Additional disclosures:Total assets Ps. 28,762,550 Ps. 2,558,349 Ps. 412,056 Ps. 31,732,955 (Ps. 2,663,029) Ps. 29,069,926Total liabilities Ps. 20,366,785 Ps. 2,927,370 Ps. 149,085 Ps. 23,443,240 (Ps. 2,663,029) Ps. 20,780,211Capital expenditure Ps. 202,519 Ps. 2,677 Ps. 1,885 Ps. 207,081 Ps. - Ps. 207,081Adjusted EBITDA Ps. 2,257,803 Ps. 121,689 Ps. 8,669 Ps. 2,388,161 (Ps. 8,865) Ps. 2,379,296 2011 Inter- Conso- Mexico USA Other Subtotal segment lidated

Net sales (1) Ps. 9,529,558 Ps. 1,371,513 Ps. 815,897 Ps. 11,716,968 (Ps. 733,800) Ps. 10,983,168Interest earned from customers 2,501,066 359,959 214,135 3,075,160 (192,589) 2,882,571Total revenues Ps. 12,030,624 Ps. 1,731,472 Ps. 1,030,032 Ps. 14,792,128 (Ps. 926,389) Ps. 13,865,739Cost of sales (6,519,777) (1,062,876) (887,456) (8,470,109) 899,031 (7,571,078)Gross income 5,510,847 668,596 142,576 6,322,019 (27,358) 6,294,661Operating expenses (2) (4,084,542) (668,541) (129,366) (4,882,449) 62,934 (4,819,515)Other income (expenses), net 93,570 (2,946) (75,902) 14,722 (60,975) (46,253)Operating profit before depreciation and amortization 1,519,875 (2,891) (62,692) 1,454,292 (25,399) 1,428,893Depreciation and amortization (291,958) (53,846) (4,870) (350,674) - (350,674)Operating profit (loss) Ps. 1,227,917 (Ps. 56,737) (Ps. 67,562) Ps. 1,103,618 (Ps. 25,399) Ps. 1,078,219

Additional disclosures:Total assets Ps. 26,271,733 Ps. 3,591,614 Ps. 394,824 Ps. 30,258,171 (Ps. 2,872,063) Ps. 27,386,108Total liabilities Ps. 18,867,472 Ps. 3,236,776 Ps. 139,407 Ps. 22,243,655 (Ps. 2,872,063) Ps. 19,371,592Capital expenditure Ps. 214,680 Ps. 91,111 Ps. 1,197 Ps. 306,988 Ps. - Ps. 306,988Adjusted EBITDA Ps. 2,046,325 (Ps. 2,891) (Ps. 62,692) Ps. 1,980,742 (Ps. 25,399) Ps. 1,955,343

Note 25 - Information by business segments:

25.1 Segment reporting

The Company manages and evaluates its continuing operations through three business segments: Mexico (national retail stores and financial sector), USA, (foreign retail stores) and other businesses in Mexico (wholesale, manufacturing of furniture and footwear catalog business). The Company controls and evaluates its continuing operations on a consolidated basis. Its activities are carried out through its subsidiary companies.

The Company’s management uses operating income before depreciation and amortization as the measurement of segment performance as well as to evaluate development, make general operating decisions and assign resources. The information by business segment is as follows:

(1) Net sales realized in the respective countries shown above.(2) Excluding depreciation and amortization.

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25.2 Evaluation of operating performance

The Company evaluates operating performance based on a measure denominated “adjusted EBITDA”, which consists of adding to the operating profit, interest expense on bank deposits, and depreciation and amortization. The adjusted EBITDA is not a measure of financial performance under IFRS and should not be considered as an alternative to net income as a measure of operating performance or cash flows as a measure of liquidity.

The reconciliation between Adjusted EBITDA and operating profit for the years ended December 31 is as follows:

Note 26 - Transition to IFRS:

These consolidated financial statements are the Company’s first financial statements in accordance with IFRS.

The accounting policies in Note 3 have been applied in preparing the financial statements as of December 31, 2012, the comparative information presented in the financial statements as of December 31, 2011 and in the preparation of the opening balance sheet under IFRS as of January 1, 2011 (transition date for the Company).

In preparing its opening IFRS balance sheet, based on IFRS 1 “First-time adoption of IFRS”, the Company has adjusted the amounts reported previously in the consolidated and combined financial statements prepared under Mexican FRS. An explanation of how the transition from MFRS to IFRS has affected the Company’s financial position, financial performance and cash flows is set out in the following tables and notes.

25.3 Sales by product

Net sales by product for the year ended December 31 were as follows:

(1) Includes primarily revenues from guarantees granted and sales through the commercial program denominated “Famsa to Famsa”.

December 31, 2012 2011

Operating profit Ps. 1,475,100 Ps. 1,078,219

Interest expense on bank deposits 589,799 526,450Depreciation and amortization 314,397 350,674

Adjusted EBITDA Ps. 2,379,296 Ps. 1,955,343

December 31, 2012 2011

Interest earned from customers Ps. 3,677,062 Ps. 2,882,571Furniture 2,393,908 2,356,315Electronics 1,690,187 1,949,346Appliances 1,394,124 1,530,268Mobile phones 955,514 1,013,712Computer equipment 831,890 952,945Motorcycles 575,611 431,829Clothing and footwear 540,764 624,222Seasonal articles (air conditioners, heaters, etc.) 389,451 398,414Income from commercial banking 175,357 108,316Sport articles 177,849 149,079Small appliances 146,588 149,462Children’s articles and accessories 63,915 74,038Other (1) 1,111,308 1,245,222

Ps. 14,123,528 Ps. 13,865,739

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1. Exemption and exceptions

1.1. Optional exemptions

The following are the IFRS 1 optional exemptions and exceptions applied in the conversion from Mexican FRS to IFRS:

1.1.1. Exemption for business combinations

IFRS 1 provides the option to apply IFRS 3, “Business Combinations”, prospectively from the transition date or from a specific date prior to the transition date. This option provides relief from full retrospective application that would require restatement of all business combinations that occurred prior to the transition date. The Company elected to apply IFRS 3 prospectively to business combinations occurring after its transition date.

1.1.2. Exemption for cumulative translation differences

IFRS 1 permits cumulative translation gains and losses to be reset to zero at the transition date. This provides relief from determining currency translation differences in accordance with IAS 21, “The effects of changes in foreign exchange rates” from the date a subsidiary or equity method investee was formed or acquired. The Company elected to reset to zero all cumulative translation gains and losses against the opening balance of retained earnings under IFRS at its transition date.

1.1.3. Deemed cost exemption

IFRS establishes that at the transition date an entity can choose to measure an item of property, plant and equipment at fair value and use that value as its deemed cost at the transition date. Under Mexican FRS, the Company initially recognized its property, plant and equipment at cost and, until December 31, 2007, this was restated by applying inflation rates from the National Consumer Prices Index (NCPI). At the date of transition to IFRS, the Company elected to apply the option of using the carrying amount under Mexican FRS, adjusted to reflect the effects of inflation through December 31, 2007, as the deemed cost of property, leasehold improvements and furniture and equipment, so there were no adjustments to those items in the opening statement of financial position.

1.1.4. Exemption to eliminate cumulative actuarial gains and losses

IFRS 1 allows not applying IAS 19 “Employee Benefits” retrospectively for the recognition of actuarial gains and losses. In line with this exemption, the Company chose to apply all cumulative actuarial gains and losses that existed at the transition date against retained earnings under IFRS.

1.2 Mandatory exceptions

The following are mandatory exceptions to IFRS 1 applied in the conversion of Mexican FRS to IFRS:

1.2.1 Exception for estimates

Estimates under IFRS as of January 1, 2011 are consistent with the estimates as at the same date made in conformity with Mexican FRS.

1.2.2 Derecognition of financial assets

The Company does not recognize financial assets or liabilities previously derecognized under Mexican FRS.

The following IFRS 1 mandatory exceptions were not applied because they are not relevant for the Company:

• Exception for hedge accounting.• Exception for non-controlling interest.

2. Reconciliation from Mexican FRS to IFRS.

IFRS 1 requires an entity to reconcile equity, comprehensive income and cash flows for prior periods. The Company’s first-time adoption did not have an impact on the total operating, investing or financing cash flows. The following tables represent the reconciliations from Mexican FRS to IFRS for the respective periods noted for equity and comprehensive income.

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RECONCILIATION OF EQUITY AS OF JANUARY 1, 2011Thousands of Mexican pesos

Assets Mexican Conversion Note FRS (*) effects IFRS

Current assets:Cash and cash equivalents Ps. 937,193 Ps. - Ps. 937,193Trade receivables, net 1 15,840,097 (1,143,409) 14,696,688Recoverable taxes 1,253,048 - 1,253,048Other accounts receivable 2 578,344 (56,242) 522,102Inventories 3 2,216,586 (629) 2,215,957Total current assets 20,825,268 (1,200,280) 19,624,988

Non-current assets: Restricted cash 177,266 - 177,266Trade receivables, net 732,323 - 732,323Property, leasehold improvements, and furniture and equipment 2,561,666 - 2,561,666Goodwill and intangible assets, net 309,998 - 309,998Guarantee deposits 60,466 - 60,466Deferred income tax 4 952,812 314,595 1,267,407Deferred employee profit sharing 5 48,256 (48,256) - Total non-current assets 4,842,787 266,339 5,109,126

Total assets Ps. 25,668,055 (Ps. 933,941) Ps. 24,734,114 Liabilities and Stockholders’ equity Current liabilities: Demand deposits and time deposits Ps. 7,697,144 Ps. - Ps. 7,697,144Short-term debt 2,743,542 - 2,743,542Suppliers 1,515,038 - 1,515,038Accounts payable and accrued expenses 864,576 - 864,576Deferred income from guarantee sales 1 - 355,298 355,298Income tax payable 18,180 - 18,180

Total current liabilities 12,838,480 355,298 13,193,778 Non-current liabilities: Time-deposits 1,210,154 - 1,210,154Long-term debt 2 2,486,348 (63,320) 2,423,028Deferred income from guarantee sales 1 - 165,521 165,521Employee benefits 6 146,972 (78,624) 68,348Total non-current liabilities 3,843,474 23,577 3,867,051

Total liabilities 16,681,954 378,875 17,060,829 Stockholders’ equity: Capital stock 8 2,472,600 (1,014,314) 1,458,286Additional paid-in capital 8 3,068,488 (290,262) 2,778,226Retained earnings 7 3,185,306 120,622 3,305,928Reserve for repurchase of shares 110,000 - 110,000Effects of foreign currency translation 9 128,862 (128,862) -Total controlling interest 8,965,256 (1,312,816) 7,652,440Total non-controlling interest 20,845 - 20,845

Total stockholders’ equity 8,986,101 (1,312,816) 7,673,285

Total liabilities and stockholders’ equity Ps. 25,668,055 (Ps. 933,941) Ps. 24,734,114(*) Some items have been reclassified to show them in accordance with the Company’s classification under IFRS.

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RECONCILIATION OF EQUITY AS OF DECEMBER 31, 2011Thousands of Mexican pesos

Assets Mexican Conversion Note FRS (*) effects IFRS

Current assets:Cash and cash equivalents Ps. 1,261,454 Ps. - Ps. 1,261,454Trade receivables, net 1 18,301,745 (1,083,908) 17,217,837Recoverable taxes 1,279,064 - 1,279,064Other accounts receivable 2 551,973 (43,751) 508,222Inventories 3 2,010,065 (315) 2,009,750

Total current assets 23,404,301 (1,127,974) 22,276,327 Non-current assets: Restricted cash 189,901 - 189,901Trade receivables, net 670,738 - 670,738Property, leasehold improvements, and furniture and equipment 2,486,286 - 2,486,286Goodwill and intangible assets 298,112 - 298,112Guarantee deposits 61,952 - 61,952Deferred income tax 4 1,123,628 279,164 1,402,792Deferred employee profit sharing 5 58,789 (58,789) - Total non-current assets 4,889,406 220,375 5,109,781

Total assets Ps. 28,293,707 (Ps. 907,599) Ps. 27,386,108 Liabilities and Stockholders’ equity Current liabilities:Demand deposits and time deposits Ps. 7,528,884 Ps. - Ps. 7,528,884Short-term debt 2,426,638 - 2,426,638Suppliers 1,483,106 - 1,483,106Accounts payable and accrued expenses 776,468 - 776,468Deferred income from guarantee sales 1 - 288,379 288,379Income tax payable 12,679 - 12,679Total current liabilities 12,227,775 288,379 12,516,154

Non-current liabilities: Time-deposits 2,907,190 - 2,907,190Long-term debt 2 3,802,680 (51,980) 3,750,700Deferred income from guarantee sales 1 - 122,859 122,859Employee benefits 6 153,313 (78,624) 74,689Total non-current liabilities 6,863,183 (7,745) 6,855,438

Total liabilities 19,090,958 280,634 19,371,592 Stockholders’ equity: Capital stock 8 2,472,600 (1,014,314) 1,458,286Additional paid-in capital 8 3,068,488 (290,262) 2,778,226Retained earnings 7 3,290,807 245,205 3,536,012Reserve for repurchase of shares 110,000 - 110,000Effects of foreign currency translation 9 237,472 (128,862) 108,610

Total controlling interest 9,179,367 (1,188,233) 7,991,134Total non-controlling interest 23,382 - 23,382

Total stockholders’ equity 9,202,749 (1,188,233) 8,014,516

Total liabilities and stockholders’ equity Ps. 28,293,707 (Ps. 907,599) Ps. 27,386,108

(*) Some items have been reclassified to show them in accordance with the Company’s classification under IFRS.

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RECONCILIATION OF COMPREHENSIVE INCOME FOR THE YEAR ENDED ON DECEMBER 31, 2011 Thousands of Mexican pesos

Consolidated statement of income

Mexican Discontinued ConversionStatement of income Note FRS (*) operations effects IFRS

Net sales 1 Ps. 12,081,396 (Ps. 1,267,309) Ps. 169,081 Ps. 10,983,168Interests earned from customers 2,882,571 - - 2,882,571Total revenues 14,963,967 (1,267,309) 169,081 13,865,739

Cost of sales 3 (8,371,633) 799,851 704 (7,571,078)Gross profit 6,592,334 (467,458) 169,785 6,294,661 Selling expenses (3,439,337) 415,336 - (3,024,001)Administrative expenses 10 (2,396,961) 253,433 (2,660) (2,146,188)Other income (expenses) - net 5 (44,407) 8,689 (10,535) (46,253) (5,880,705) 677,458 (13,195) (5,216,442)Operating profit 711,629 210,000 156,590 1,078,219 Financial expenses 2 (789,857) 11,776 764 (777,317)Financial income 1,376 - - 1,376Financial expenses, net (788,481) 11,776 764 (775,941)

Profit (loss) before income tax (76,852) 221,776 157,354 302,278 Income tax 4 184,890 - (35,431) 149,459Profit before discontinued operations 108,038 221,776 121,923 451,737 Discontinued operations - (221,776) - (221,776)Consolidated net income 108,038 - 121,923 229,961 Net income attributable to non-controlling interest 2,537 - - 2,537Net income attributable to controlling interest Ps. 105,501 Ps. - Ps. 121,923 Ps. 227,424

Statement of comprehensive income

Consolidated net income Ps. 108,038 Ps. 121,923 Ps. 229,961Other comprehensive income, net of taxes: Actuarial gains 10 - 2,660 2,660Foreign currency translation adjustment 108,610 - 108,610Consolidated comprehensive income Ps. 216,648 Ps. 124,583 Ps. 341,231

Consolidated comprehensive income attributable to:

Non-controlling interest Ps. 214,111 Ps. 124,583 Ps. 338,694Controlling interest Ps. 2,537 - Ps. 2,537(*) Some items have been reclassified to show them in accordance with the Company’s classification under IFRS.

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Notes to the reconciliation of statement of financial position as of December 31, 2011 and January 1, 2011, and statements of income and comprehensive income for the year ended December 31, 2011:

Adjustments

1. Under IFRS, the sale price is the present value of the consideration paid, determined by discounting future collections, using an imputed interest rate. As a result, under IFRS, the amount of trade receivables was reduced affecting retained earnings. In the following years, an effect is recognized in the income statement affecting net sales of the period.

2. IFRS establishes that financial liabilities are recognized initially at fair value and subsequently at amortized cost, using the effective interest method which refers to the discount rate that exactly equals the estimated cash flows payable over the expected life of the debt. At the transition date the Company adjusted the value of the debt to its amortized cost, prepaid expenses (other receivables) and retained earnings.

3. IFRS establishes that inventories comprise all costs of acquisition and processing. Importation duties, transportations, trade discounts, rebates and other similar items will affect the acquisition cost. The Company decreased inventories affecting cost of sales.

4. Deferred taxes were recalculated due to changes in the carrying amounts of certain assets and liabilities as a result of the adjustments arising from the adoption of IFRS.

5. Under IFRS the deferred employees’ profit sharing based on the assets and liabilities method is not recognized because that method is applied only for income taxes; therefore, at the transition date, the balance was cancelled, decreasing retained earnings by the same amount.

6. The estimated provision for indemnities based on actuarial calculations required by Mexican FRS is not recognized under IFRS; therefore, the balance at January 1, 2011 was cancelled, adjusting retained earnings by the same amount. Additionally, in accordance with IFRS 1, the Company recognized actuarial gains and losses accumulated in retained earnings at the transition date.

7. This adjustment corresponds to the net effect of all the adjustments specified above.

Reclassifications

8. The effects of inflation are recognized when an entity operates in a hyperinflationary economy, one of whose characteristics is that the accumulated inflation for the last three years is close to or exceeds 100%. In Mexico, inflation exceeded this percentage from 1995 to 1997; therefore, the Company eliminated the effects of inflation from January 1, 1998 to December 31, 2007 recognized under Mexican FRS in the items of capital stock and additional paid-in capital.

9. The company reclassified the balance at January 1, 2011 of the currency translation adjustment to retained earnings for the adoption of the exemption in IFRS 1 “First-time Adoption of International Financial Reporting Standards”.

10. According to IAS 19 (amended) the actuarial gains and losses should be recognized in other comprehensive income as incurred, therefore actuarial gains of 2011 were reclassified reducing administrative expenses and increasing actuarial gains in other comprehensive income by the same amount.

Note 27 - Subsequent events:

In preparing the consolidated financial statements, the Company has evaluated subsequent events and transactions from December 31, 2012 to April 15, 2013 (date of issuance of the financial statements) for their possible recognition or disclosure, and has concluded that there are no subsequent events requiring such recognition or disclosure.



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Challenges Transformed in Opportunities2012 Annual Report

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Corporate Profile



Business Model

Famsa Mexico

Banco Ahorro Famsa

Famsa USA

Social Responsibility

Corporate Governance

Management’s Discussion and Analysis of the Operating Results and Financial Position of Grupo Famsa

Consolidated Financial Statements

CONTENTS

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